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 July 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. [X] Yes [ ] 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.
4,310,709 shares of Common Stock at September 19, 1997
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
July
31, January 31,
1997 1997
----------- -----------
(Unaudited)
Current assets:
Cash $ 32,200 $ 13,000
Accounts receivable (net of allowance) 31,600 125,900
Inventories 71,500 61,400
Other current assets 4,100 11,900
----------- -----------
Total current assets 139,400 212,200
----------- -----------
Furniture, fixtures and leasehold improvements (net) 1,900 2,900
Other assets 15,500 15,500
----------- -----------
17,400 18,400
----------- -----------
$ 156,800 $ 230,600
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 107,500 $ 92,600
Accrued expenses and other liabilities 51,900 37,000
Note payable 35,700 35,700
Due to officer 22,100 71,100
----------- -----------
Total current liabilities 217,200 236,400
----------- -----------
Accrued expenses (non-current) 275,000 271,300
Long-term debt (net of current portion) 92,900 113,700
Excess of purchase price over basis of assets
acquired net of amortization 157,400 159,600
----------- -----------
525,300 544,600
----------- -----------
Stockholders' (deficiency):
Common stock, no par value; 10,000,000 shares
authorized; shares issued and outstanding -
July 31, 1997 and January 31, 1997 - 3,710,709 7,248,900 7,248,900
Accumulated deficit (7,834,600) (7,799,300)
----------- -----------
(585,700) (550,400)
----------- -----------
$ 156,800 $ 230,600
=========== ===========
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 31, July 31,
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 638,600 $ 596,400 $ 336,000 $ 195,200
----------- ----------- ----------- -----------
Cost of sales and operating expenses:
Cost of merchandise sales 390,800 358,500 209,900 108,800
Selling, general and
administrative expenses 273,000 226,900 149,600 105,100
----------- ----------- ----------- -----------
663,800 585,400 359,500 213,900
----------- ----------- ----------- -----------
Income (loss) from operations (25,200) 11,000 (23,500) (18,700)
Other income (expense):
Interest expense (10,200) (9,200) (5,200) (4,200)
----------- ----------- ----------- -----------
Net income (loss) $ (35,400) $ 1,800 $ (28,700) $ (22,900)
=========== =========== =========== ===========
Income (loss) per
share:
Earnings (loss) per
common and common
equivalent share:
Primary $ (01) -- $ (01) $ (01)
Assuming full
dilution -- -- -- --
Shares used in
computing earnings
per common and
common equivalent
share:
Primary 3,710,709 3,710,709 3,710,709 3,710,709
=========== =========== =========== ===========
Assuming full
dilution 6,857,209 6,857,209 6,857,209 6,857,209
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
July 31,
----------------------
1997 1996
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(35,400) $ 1,800
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization (1,100) (1,500)
Change in operating assets and liabilities:
Decrease in accounts receivables 94,300 74,400
(Increase) decrease in inventories (10,100) 27,600
Decrease in prepaid expenses and other assets 7,800 2,500
Increase (decrease) in accounts payable 14,900 (64,000)
Increase in accrued expenses and other liabilities 18,600 (10,900)
-------- --------
Net cash provided by operating activities 89,000 29,900
-------- --------
Cash flows from financing activities:
Increase in loans from officers -- 6,500
Reduction in loans from officers (49,000) --
Reduction in long-term debt (20,800) (37,200)
-------- --------
Net cash (used) by financing activities (69,800) (30,700)
-------- --------
Increase (decrease) in cash 19,200 (800)
Cash at beginning of period 13,000 11,100
-------- --------
Cash at end of period $ 32,200 $ 10,300
======== ========
Supplemental information:
Interest expense paid $ 10,200 $ 9,200
Federal income tax -- --
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 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 July 31, 1997, and the results of its
operations and cash flows for the six months ended July 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 July 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.
The balance sheet and results of operations do not include the
activities of K.O.S. Industries Inc. for the period ended July 31, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
July 31, 1997
Results of Operations
The Company incurred a loss of $35,400 for the 6 months ended July 31, 1997
primarily due to one time professiona1 fees of approximately $30,000 associated
with the acquisition of K.O.S. Industries Inc.
Sales for the three months ended July 31, 1997 were $336,000 as compared
with sales of $195,200 for the comparable period in 1996, an increase of 72.1%.
Cost of sales increased from $108,800 for the three months ended July 31, 1996,
or 55.7% of sales, to $209,900, or 62.5% of sales, for the comparable period in
1997. Selling, genera1 and administrative expenses increased 42.3% to $149,600
from $105,100. For the three months ended July 31, 1997, the Company incurred an
operating loss of $23,500 and a net loss of $28,700 or ($.01) per share, as
compared to an operating loss of $18,700 and a net loss of $22,900 or ($.01) per
share, for the comparable period of 1996.
Interest expense was $5,200 for three months ended July 31, 1997, as
compared to $4,200 during the comparable period of 1996.
Sales for the six months ended July 31, 1997 were $638,6OO as compared with
sales of $596,400 for the comparable period in 1996, an increase of 7%. Cost of
sales increased from $358,500 for the six months ended July 31, 1996, or 60.1%
of sales, to $390,800, or 61.2% of sales, for the comparable period in l997.
Selling, general and administrative expenses increased 20.3% to $273,000 from
$226,900. For the six months ended July 31, 1997, the Company incurred an
operating loss of $25,200 and a net loss of $35,400 or ($.01) per share, as
compared to an operating profit of $11,000 and a net profit of $1,800 or $ - per
share, for the comparable period of l996.
Interest expenses was $10,200 for six months ended July 31, 1997, as
compared to $9,200 during the comparable period of 1996.
Liquidity and Capital Resources
At July 31, 1997, the Company has cash of $32,200 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
(b) Form 8-K - Items 2 and 7; July 29, 1997
<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)
September 22, 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> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1997
<CASH> 32,200
<SECURITIES> 0
<RECEIVABLES> 31,600
<ALLOWANCES> 0
<INVENTORY> 71,500
<CURRENT-ASSETS> 4,100
<PP&E> 1,900
<DEPRECIATION> 0
<TOTAL-ASSETS> 156,800
<CURRENT-LIABILITIES> 217,200
<BONDS> 0
0
0
<COMMON> 7,248,900
<OTHER-SE> (7,834,600)
<TOTAL-LIABILITY-AND-EQUITY> 195,000
<SALES> 638,600
<TOTAL-REVENUES> 638,600
<CGS> 390,800
<TOTAL-COSTS> 390,800
<OTHER-EXPENSES> 273,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,200
<INCOME-PRETAX> (35,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,400)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
