United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-18349
The MNI Group Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-2383025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 West Forest Avenue, Englewood, New Jersey 07631
(Address of principal executive offices) (Zip Code)
(201) 569-1188
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ ] Yes [X] No
Applicable Only to Issuers Involved in Bankruptcy
Proceeding During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
4,528,643 shares of Common Stock at December 12, 1997
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
October
31, January 31,
1997 1997
----------- -----------
(Unaudited)
Current assets:
Cash $ 37,900 $ 13,000
Accounts receivable (net of allowance) 124,700 125,900
Inventories 141,400 61,400
Other current assets 4,100 11,900
----------- -----------
Total current assets 308,100 212,200
----------- -----------
Furniture, fixtures and leasehold improvements (net) 1,200 2,900
Goodwill, net of amortization 349,800 --
Other assets 15,700 15,500
----------- -----------
366,700 18,400
----------- -----------
$ 674,800 $ 230,600
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 295,400 $ 92,600
Accrued expenses and other liabilities 22,900 37,000
Loan payable 18,700 --
Note payable 35,700 35,700
Due to officer 140,000 71,100
----------- -----------
Total current liabilities 512,700 236,400
----------- -----------
Accrued expenses (non-current) 279,800 271,300
Long-term debt (net of current portion) 83,900 113,700
Excess of purchase price over basis of assets
acquired net of amortization 156,300 159,600
----------- -----------
520,000 544,600
----------- -----------
Stockholders' (deficiency):
Common stock, no par value; 10,000,000 shares
authorized; shares issued and outstanding -
October 31, 1997 - 4,528,643 and January 31,
1997 - 3,928,643 7,248,900 7,248,900
Accumulated deficit (7,606,800) (7,799,300)
----------- -----------
(357,900) (550,400)
----------- -----------
$ 674,800 $ 230,600
=========== ===========
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
October 31, October 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 1,352,200 $ 1,287,300 $ 375,400 $ 264,800
----------- ----------- ----------- -----------
Cost of sales and operating
expenses:
Cost of merchandise sales 885,700 845,400 259,100 171,500
Selling, general and
administrative expenses 569,000 507,500 178,200 152,000
----------- ----------- ----------- -----------
1,454,700 1,352,900 437,300 323,500
----------- ----------- ----------- -----------
(Loss) from operations (102,500) (65,600) (61,900) (58,700)
Other income (expense):
Interest expense (19,200) (18,900) (6,300) (6,800)
----------- ----------- ----------- -----------
Net (loss) $ (121,700) $ (84,500) $ (68,200) $ (65,500)
=========== =========== =========== ===========
Income (loss) per
share:
Earnings (loss) per
common share:
Primary $ (.03) $ (.02) $ (.02) $ (.02)
=========== =========== =========== ===========
Shares used in
computing earnings
per common share 4,130,841 3,710,709 4,528,643 3,710,709
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
----------------------
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(121,700) $ (84,500)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 600 (2,200)
Change in operating assets and liabilities:
Decrease in accounts receivables 139,500 97,700
(Increase) decrease in inventories 37,700 (43,300)
Decrease in prepaid expenses and other assets 7,900 3,600
Increase (decrease) in accounts payable (20,700) (2,500)
Increase (decrease) in accrued expenses and other
liabilities (11,300) (7,000)
--------- ---------
Net cash provided (used) by operating activities 32,000 (38,200)
--------- ---------
Cash flows from financing activities:
Increase in loans payable 18,700 --
Increase in loans from officers -- 52,800
Reduction in loans from officers (3,000) --
Reduction in long-term debt (29,800) (26,800)
--------- ---------
Net cash (used) by financing activities (14,100) 26,000
--------- ---------
Increase (decrease) in cash 17,900 (12,200)
Cash at beginning of period 20,000 17,100
--------- ---------
Cash at end of period $ 37,900 $ 4,900
========= =========
Supplemental information:
Interest expense paid $ -- $ --
Federal income tax -- --
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the financial position of the company as of October 31, 1997, and
the results of its operations and cash flows for the nine months ended
October 31, 1997 and 1996. Such financial statements have been condensed
in accordance with the applicable regulations of the Securities and
Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
audited financial statements for the year ended January 31, 1997, which is
included in its Form 10K filed in May 1997. The results of operations for
the period ended October 31, 1997 are not necessarily indicative of the
operating results for the full year.
Two officers and a related party to the Company have agreed to the
reclassification of certain amounts that have been owed to them in excess
of one year. Such amounts will not be repaid within one year, unless
converted into common stock of the Company. The balance sheet has been
reclassified to reflect this agreement.
1. Income per Share:
Income per share is computed on the weighted average number of
shares outstanding. The inclusion of common stock equivalents (warrants
and options) in this computation would be antidilutive.
2. Acquisition:
On July 22, 1997, the Company entered into an agreement to acquire
all of the assets of K.O.S. Industries Inc. (effective August 1, 1997) in
exchange for 600,000 shares of the Company's common stock. Reference is
made to this Company's Form 8K filed July 29, 1997. These consolidated
condensed financial statements have been restated to reflect this
transaction. The prior periods have been adjusted to include the
transactions of K.O.S. Industries Inc.
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
October 31, 1997
Results of Operations
This Quarterly Report on Form 10-Q has been prepared on a consolidated basis
which includes the combined results of operations for The MNI Group, Inc. and
K.O.S. Industries, Inc. All periods included herein have been retroactively
restated to reflect such combination.
The Company incurred a loss of $68,200 for the three months ended October 31,
1997 which included one time professional fees of approximately $15,000
associated with the acquisition of K.O.S. Industries Inc.
Sales for the three months ended October 31, 1997 were $375,400 as compared with
sales of $264,800 for the comparable period in 1996, an increase of 41.8%. Cost
of sales increased from $171,500 for the three months ended October 31, 1996 or
64.8% of sales to $259,100, or 69% of sales, for the comparable period in 1997.
Selling, general and administrative expenses increased 17.2% to $178,200 from
$152,000. For the three months ended October 31, 1997, the Company incurred an
operating loss of $61,900 and a net loss of $68,200 or ($.02) per share, as
compared to an operating loss of $58,700 and a net loss of $65,500 or ($.02) per
share, for the comparable period of 1996.
Interest expenses was $6,300 for the three months ended October 31, 1997, as
compared to $6,800 during the comparable period of 1996.
Sales for the nine months ended October 31, 1997 were $1,352,200 as compared
with sales of $1,287,300 for the comparable period in 1996, an increase of 5%.
Cost of sales increased from $845,400 for the nine months ended October 31, 1996
or 65.7% of sales, to $885,700, or 65.5% of sales, for the comparable period in
1997. Selling, general and administrative expenses increased 12.1% to $569,000
from $507,500. For the nine months ended October 31, 1997, the Company incurred
an operating loss of $102,500 and a net loss of $121,700 or ($.03) per share, as
compared to an operating loss of $65,600 and a net loss of $84,500 or ($.02) per
share, for the comparable period of 1996.
Interest expense was $19,200 for the nine months ended October 31, 1997, as
compared to $18,900 during the comparable period of 1996.
<PAGE>
Liquidity and Capital Resources
At October 31, 1997, the Company had cash of $37,900 as contrasted with cash of
$13,000 on January 31, 1997. There is no assurance that the Company will be able
to obtain sufficient cash to fund its operations. Management believes that the
Company requires additional financing to conduct its operations on a profitable
basis and to develop and market additional products and programs. The Company is
continually engaged in an effort to obtain such funding.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MNI GROUP INC.
(registrant)
December 12, 1997 By: /s/ Arnold M. Gans
------------------
Arnold M. Gans
President
(Principal Operating Officer
and Principal Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 37,900
<SECURITIES> 0
<RECEIVABLES> 124,700
<ALLOWANCES> 0
<INVENTORY> 141,400
<CURRENT-ASSETS> 4,100
<PP&E> 1,200
<DEPRECIATION> 0
<TOTAL-ASSETS> 674,800
<CURRENT-LIABILITIES> 512,700
<BONDS> 0
0
0
<COMMON> 7,248,900
<OTHER-SE> (7,606,800)
<TOTAL-LIABILITY-AND-EQUITY> (357,900)
<SALES> 1,352,200
<TOTAL-REVENUES> 1,352,200
<CGS> 885,700
<TOTAL-COSTS> 885,700
<OTHER-EXPENSES> 1,454,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,200
<INCOME-PRETAX> (121,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,700)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
