<PAGE>
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 April 30, 1998
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.
4,685,709 shares of Common Stock at June 15, 1998
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30, January 31,
1998 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 8,900 $ 36,900
Accounts receivable (net of allowance) 154,500 131,400
Inventories 129,500 126,100
Other current assets 14,800 7,800
---------- ----------
Total current assets 307,700 302,200
---------- ----------
Furniture, fixtures and leasehold improvements (net) 1,200 1,500
Goodwill, net of amortization 345,400 347,600
Other assets 15,500 15,700
---------- ----------
362,100 364,800
---------- ----------
$ 669,800 $ 667,000
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 309,800 $ 266,200
Accrued expenses and other liabilities 281,700 292,300
Notes payable 90,700 160,200
Due to officers 243,200 147,600
---------- ----------
Total current liabilities 925,400 866,300
---------- ----------
Long-term debt (net of current portion) 75,000 75,000
Excess of purchase price over basis of assets acquired
net of amortization 154,100 155,200
---------- ----------
229,100 230,200
---------- ----------
Stockholders' (deficiency):
Common stock, no par value; 10,000,000 shares
authorized; shares issued and outstanding -
April 30, 1998 and January 31, 1998 4,685,709
7,576,400 7,576,400
Accumulated deficit (8,061,100) (8,005,900)
---------- ----------
( 484,700) ( 429,500)
---------- ----------
$ 669,800 $ 667,000
========== ==========
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1998 1998
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Sales $ 368,500 $ 302,600
---------- ----------
Cost of sales and operating expenses:
Cost of merchandise sales 240,100 180,900
Selling, general and administrative
expenses 170,800 123,400
Advertising 2,900 -
---------- ----------
413,800 304,300
---------- ----------
(Loss) from operations ( 45,300) ( 1,700)
Other income (expense):
Interest expense ( 9,900) ( 5,000)
---------- ----------
Net (loss) ($ 55,200) ($ 6,700)
========== ==========
Shares used in computing earnings per
common and common equivalent share
Loss per share:
Basic loss per share ($ 01) $ -
===== ====
Weighted average number of shares
outstanding 4,685,709 3,710,709
========== ==========
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1998 1998
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($55,200) ($ 6,700)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 1,400 (700)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivables (23,100) 87,500
(Increase) decrease in inventories ( 3,400) (41,400)
(Increase) decrease in prepaid expenses and other
assets ( 6,800) 1,400
Increase (decrease) in accounts payable 43,600 (10,900)
Increase (decrease) in accrued expenses and other
liabilities (10,600) 27,300
------- -------
Net cash provided (used) by operating activities (54,100) 56,500
------- -------
Cash flows from financing activities:
Decrease in notes payable (69,500) -
Increase in loans from officers 95,600 -
Reduction in loans from officers (32,400)
Reduction in long-term debt - (11,900)
------- -------
Net cash provided (used) by financing activities 26,100 (44,300)
------- -------
Increase (decrease) in cash (28,000) 12,200
Cash at beginning of period 36,900 13,000
------- -------
Cash at end of period $ 8,900 $25,200
======= =======
Supplemental information:
Interest expense paid $ 9,900 $ 1,131
Federal income tax - -
</TABLE>
The accompanying notes are an integral part hereof.
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1998
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 April 30, 1998, and the results of its
operations and cash flows for the three months ended April 30, 1998 and
1997. 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
unaudited consolidated condensed financial statements be read in
conjunction with the Company's audited financial statements and notes
thereto for the year ended January 31, 1998, which is included in its
Form 10K filed in June 1998. The results of operations for the period
ended April 30, 1998 are not necessarily indicative of the operating
results for the full year.
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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
APRIL 30, 1998
RESULTS OF OPERATIONS
The results of operations for the quarter ended April 30, 1998 included the
operations of K.O.S. Industries, Inc. (KOS) 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 first quarter differences between the operating results for 1998 and
1997.
Sales for the three months ended April 30, 1998 increased to $368,500 as
compared with sales of $302,600 for the comparable period in 1997, an increase
of 21.8%. The increase in sales was primarily due to the acquisition of KOS and
its sales for the quarter were approximately $139,000. Cost of sales increased
from $180,900 for the three months ended April 30, 1997, or 59.8% of sales, to
$240,100, or 65.2% of sales, for the comparable period in 1998. This increase
was mainly attributable to KOS' cost of goods sold. Selling, general and
administrative expenses increased 38.4% to $170,800 from $123,400 due to KOS'
expenses of approximately $58,200.
Interest expense was $9,900 for the three months ended April 30, 1998 and $5,000
for the comparable period of 1997. The increase in interest was due to the
inclusion of KOS interest expense in the amount of approximately $1,800, the
cost of obtaining a $50,000 line of credit and additional advances from the
Company's officers.
For the three months ended April 30, 1998, the Company incurred an operating
loss of $45,300 and a net loss of $55,200, or ($.01) per share, as compared to
an operating loss of $1,700 and a net loss of $6,700 or $- per share, for the
comparable period of 1997. The loss was primarily due to a decrease in sales
from one of the Company's major customers. The profit margins have decreased
due to competition from competitive pet products.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1998, the Company had cash of $8,900 as contrasted with cash of
$36,900 on January 31, 1998. 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 engaged in an effort to obtain such funding.
<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)
June 15, 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> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 8,900
<SECURITIES> 0
<RECEIVABLES> 154,500
<ALLOWANCES> 0
<INVENTORY> 129,500
<CURRENT-ASSETS> 14,800
<PP&E> 1,200
<DEPRECIATION> 0
<TOTAL-ASSETS> 669,800
<CURRENT-LIABILITIES> 925,400
<BONDS> 0
0
0
<COMMON> 7,576,400
<OTHER-SE> (8,021,100)
<TOTAL-LIABILITY-AND-EQUITY> 669,800
<SALES> 368,500
<TOTAL-REVENUES> 368,500
<CGS> 240,100
<TOTAL-COSTS> 413,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,900)
<INCOME-PRETAX> (55,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (55,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,200)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
