<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q/A
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period 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 [ ] 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 345,200 -
Other assets 15,700 15,500
---------- ----------
362,100 18,400
---------- ----------
$ 670,200 $ 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 officers 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 7,548,900 7,248,900
Accumulated deficit (7,911,400) (7,799,300)
---------- ----------
(362,500) (550,400)
---------- ----------
$ 670,200 $ 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 $1,014,000 $ 709,700 $ 375,400 $ 113,300
---------- ---------- ---------- ----------
Cost of sales and operating
expenses:
Cost of merchandise sales 649,900 403,000 259,100 44,500
Selling, general and
administrative expenses 459,700 334,900 186,700 108,000
---------- ---------- ---------- ----------
1,109,600 737,900 445,800 152,500
---------- ---------- ---------- ----------
(Loss) from operations (95,600) (28,200) (70,400) (39,200)
Other income (expense):
Interest expense (16,500) (14,400) (6,300) (5,200)
---------- ---------- ---------- ----------
Net (loss) $(112,100) $ (42,600) $ (76,700) $ (44,400)
========= ========= ========= =========
Income (loss) per
share:
Earnings (loss) per
common share: ($ 03) ($ 01) ($ 02) ($ 01)
===== ===== ===== =====
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
Nine Months Ended
October 31,
1997 1996
--------- ---------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net (loss) $ (112,100) $ (42,600)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 700 (2,300)
Change in operating assets and liabilities:
Decrease in accounts receivables 1,200 83,700
(Increase) decrease in inventories (80,000) 5,000
Decrease in prepaid expenses and other assets 7,800 3,600
Increase in accounts payable 202,800 (71,900)
Increase (decrease) in accrued expenses and
other liabilities (5,600) 1,000
--------- ---------
Net cash provided (used) by operating activities 14,800 (23,500)
--------- ---------
Cash flows from investing activities:
Goodwill acquired in acquisition (47,700) -
--------- ---------
Net cash (used) by investing activities (47,700) -
--------- ---------
Cash flows from financing activities:
Increase in loans payable 18,700 -
Increase in loans from officers 68,900 61,200
Reduction in long-term debt (29,800) (46,200)
--------- ---------
Net cash (used) by financing activities 57,800 15,000
--------- ---------
Increase (decrease) in cash 24,900 (8,500)
Cash at beginning of period 20,000 11,100
--------- ---------
Cash at end of period $ 37,900 $ 2,600
========= =========
Supplemental information:
Interest expense paid $ - $ 1,400
Federal income tax - -
Shares used for subsidiary acquisition 300,000 -
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 include the results of operations of K.O.S. Industries
Inc. from the date of acquisition. The goodwill, which is a result of the
KOS acquisition, is being amortized over 40 years. It is anticipated that
the acquisition of KOS will add significant value to the Company and
therefore, there is no reason to consider this an impaired asset.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OCTOBER 31, 1997
RESULTS OF OPERATIONS
The results of operations for the quarter ended October 31, 1997 included the
operations of K.O.S. Industries, Inc. (K.O.S.) which was acquired as a wholly
owned subsidiary on August 1, 1997. The acquisition is being treated as a
purchase. Therefore, comparable results are not presented for the prior
periods. This has resulted in differences between the operating results for
1996 and 1997.
The Company incurred a loss of $76,700 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 of the three months ended October 31, 1997 were $375,400 as compared
with sales of $113,300 for the comparable period in 1996, an increase of
231%. This increase includes sales of K.O.S. Industries, Inc. for the quarter
of $142,300. The remaining increase was primarily due to increased sales to a
major customer. Cost of sales increased from $44,500 for the three months
ended October 31, 1996 or 39.2% of sales to $259,100, or 69% of sales, for
the comparable period in 1997. Due to the acquisition, one time adjustments
were made to the cost of sales. Selling, general and administrative expenses
increased 72.9% to $186,700 from $108,000 primarily due to K.O.S.'s salaries
and related expenses. For the three months ended October 31, 1997, the
Company incurred an operating loss of $70,400 and a net loss of $76,700 or
($.02) per share, as compared to an operating loss of $39,200 and a net loss
of $44,400 or ($.01) per share, for the comparable period of 1996.
Interest expense was $6,300 for three months ended October 31, 1997, as
compared to $5,200 during the comparable period of 1996.
Sales for the nine months ended October 31, 1997 were $1,014,000 as compared
with sales of $709,700 for the comparable period in 1996, an increase of
42.9%. Included in this increase were K.O.S. Industries, Inc. sales of
$142,300. Cost of sales increased from $409,300 for the nine months ended
October 31, 1996 or 57.7% of sales to $649,900, or 64.1% of sales, for the
comparable period in 1997. Selling, general and administrative expenses
increased 37.3% to $459,700 from $334,900. This increase was primarily due to
professional fees incurred for the acquisition of approximately $45,000 and
inclusion of K.O.S. Industries, Inc. selling, general & administrative
expenses of approximately $64,000. For the nine months ended October 31,
1997, the Company incurred an operating loss of $95,600 and a net loss of
$112,100 or ($.03) per share, as compared to an operating loss of $28,200 and
a net loss of $42,600 or ($.01) per share, for the comparable period of 1996.
Interest expense was $16,500 for nine months ended October 31, 1997, as
compared to $14,400 during the comparable period of 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS - 2
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>
SIGNATURES
Pursuant to the requirements of the Securiteis Exchange Act of 1934,
the registrant has duly caused this report to be signed on its gbehalf by the
undersigned thereunto duly authorized.
THE MNI GROUP INC.
(registrant)
May 29, 1998 By: /s/ Arnold M. Gans
--------------------------------
Arnold M. Gans
President
(Principal Operating Officer
and Principal Accounting and
Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<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> 670,200
<CURRENT-LIABILITIES> 512,700
<BONDS> 0
0
0
<COMMON> 7,548,900
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 362,500
<SALES> 1,014,000
<TOTAL-REVENUES> 1,014,000
<CGS> 649,900
<TOTAL-COSTS> 649,900
<OTHER-EXPENSES> 1,109,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,500
<INCOME-PRETAX> 112,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 112,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,100
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
