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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-18349
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THE MNI GROUP INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-2380325
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10 WEST FOREST AVENUE, ENGLEWOOD, NEW JERSEY 07631
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(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 [X].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PAST 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.
4,577,376 SHARES OF COMMON STOCK AT APRIL 30, 2000.
<PAGE>
<TABLE>
<CAPTION>
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
APRIL 30, JANUARY 31,
2000 2000
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<S> <C> <C>
Current assets:
Cash $ 238,000 $ 649,700
Accounts receivable (net of allowance) 60,200 14,000
Inventories 109,400 83,400
Other current assets 91,500 23,000
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Total current assets 499,100 770,100
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Fixed assets, net of accumulated depreciation
of $91,200 and $91,100, respectively 23,600 9,800
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Other assets:
Security deposits 15,200 15,200
Prepaid expenses-non-current 9,700 --
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24,900 15,200
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$ 547,600 $ 795,100
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 278,200 $ 226,100
Notes payable-short term 59,000 61,000
10% Convertible subordinated debentures 1,521,300 1,521,300
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Total current liabilities 1,858,500 1,808,400
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Stockholders' (Deficit):
Common stock, no par value; 10,000,000
shares authorized; 4,577,376 shares
issued and outstanding at April 30, 2000;
4,110,709 issued and outstanding at
January 31, 2000 7,348,900 7,313,900
Accumulated deficit (8,649,400) (8,316,800)
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(1,300,500) (1,002,900)
Less treasury stock (10,400) (10,400)
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(1,310,900) (1,013,300)
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$ 547,600 $ 795,100
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</TABLE>
The accompanying notes are an integral part hereof.
2
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
APRIL 30,
2000 1999
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Sales $ 228,100 $ 90,500
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Cost of sales and operating expenses:
Cost of merchandise sales 112,300 72,600
Selling, general and administrative expenses 231,300 108,300
Web-site development costs 172,300 --
Advertising expense 11,300 900
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Total cost of sales and operating expenses 527,200 181,800
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Operating (loss) (299,100) (91,300)
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Other (expense) income:
Interest expense (39,400) (11,700)
Interest income 5,900 --
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Total other (expense) (33,500) (11,700)
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(Loss) from operations before provision for
income taxes (332,600) (103,000)
Provision for income taxes -- --
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Net (loss) $ (332,600) $ (103,000)
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Per share data:
Basic (loss) per common share ($ .07) ($ .03)
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Weighted average number of shares outstanding 4,507,746 4,085,709
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3
The accompanying notes are an integral part hereof.
<PAGE>
<TABLE>
<CAPTION>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
APRIL 30,
----------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(332,600) $(103,000)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 100 (1,100)
Shares issued for services 33,400 --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivables (46,200) 64,000
(Increase) in inventories (26,000) (4,800)
(Increase) in prepaid expenses and other assets (78,200) --
Increase in accounts payable 52,100 20,700
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Net cash (used) by operating activities (397,400) (24,200)
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Cash flows from investing activities:
Increase in fixed assets (13,900) --
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Net cash (used) by investing activities (13,900) --
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Cash flows from financing activities:
Sale of common stock 1,600 --
Increase in notes payable -- 1,700
(Decrease) in notes payable (2,000) --
Increase in loans from officers -- 22,200
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Net cash provided by financing activities (400) 23,900
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(Decrease) in cash (411,700) (300)
Cash at beginning of period 649,700 5,000
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Cash at end of period $ 238,000 $ 4,700
========= =========
Supplemental information:
Interest expense paid $ 800 $ 9,000
Federal income tax -- --
</TABLE>
The accompanying notes are an integral part hereof.
4
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2000
In the opinion of management, the accompanying unaudited condensed
consolidated 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, 2000, and the results of its operations and cash
flows for the three months ended April 30, 2000 and 1999. 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, 2000, which is included in its Annual Report on Form 10-K
filed in April 2000. The results of operations for the period ended April 30,
2000 are not necessarily indicative of the operating results for the full year.
1. INCOME PER SHARE:
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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. STOCK ISSUANCES:
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On February 1, 2000, the Company issued 400,000 shares of its common stock in
exchange for an obligation of $30,000. In addition, on April 29, 2000 the
Company completed the sale of 66,667 shares of its common stock to an employee
who was formerly a consultant for $5,000.
Through May 11, 2000, the Company has issued additional options to purchase
206,000 shares of its common stock at exercise prices varying between $.10 to
$.875. Of these options, 96,000 expire on November 1, 2004, the remaining
110,000 options expire on November 1, 2009.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Condensed Consolidated
Financial Statements and the related Notes included elsewhere in the report.
This discussion contains certain forward-looking statements that involve risks
and uncertainties. Actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors.
Comparison of Three Months Ended April 30, 1999 and 2000.
Sales for the three months ended April 30, 2000 were $228,100 as compared with
sales of $90,500 for the comparable period in 1999, an increase of 152%
primarily due to the introduction of a new line of products developed for the
Womens Health Network, a division of the MNI Group Inc. Cost of sales increased
from $72,600 for the three months ended April 30, 1999, or 80.2% of sales, to
$112,300, or 49.2% of sales, for the comparable period in 2000. The decrease in
cost of sales as a percentage of sales for the quarter ended April 30, 2000 was
due to the greater effect of product mix and inventory adjustments when sales
levels are lower. Selling, general and administrative expenses increased 114% to
$231,300 from $108,300. The increases in expenses for the quarter were primarily
due to salaries and related costs of $15,000; professional fees of $56,000 and
consulting fees of $17,000. These increases were primarily due to the Company's
decision to focus its efforts on the development of its line of women's products
as well as the creation of an Internet site devoted to women's health. Costs
related to Web site development for the quarter were $172,300. For the three
months ended April 30, 2000, the Company incurred an operating loss of $299,100
as compared to an operating loss of $91,300 for the comparable period in 1999.
As a result of these increased operating costs the Company had a loss from
continuing operations of $332,600 or ($.07) per share, as compared to a loss of
$103,000 or ($.03) per share for the comparable period in 1999.
Interest expense was $39,400 and interest income was $5,900 for the three months
ended April 30, 2000, as compared to interest expense of $11,700 during the
comparable period of 1999. The increase in interest expense is primarily due to
interest on the $1,521,250 principal amount of 10% Convertible Subordinated
Debentures outstanding which were issued after April 30, 1999. Interest income
is due to the cash balances maintained by the Company since the sale of the
Debentures.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2000, the Company had cash of $238,000 as compared to cash of
$649,700 on January 31, 2000. During the first quarter of 2000, the Company
determined that in order to sustain its existing business operations and to
successfully implement its plan of developing a line of women's products and an
Internet web site devoted to women's health, additional capital would be
required. During the year ended January 31, 2000, the Company completed the
private placement of $1,521,250 principal amount of 10% Convertible Subordinated
Debentures. The Convertible Subordinated Debentures are convertible into shares
6
<PAGE>
of common stock at $.075 per share. The holders of the Convertible Subordinated
Debentures must automatically convert their debentures at such time as the
Company amends its certificate of incorporation to increase its authorized
common stock (currently 10,000,000 shares) to an amount sufficient to permit the
conversion of the debentures. The Company will require additional funds to
complete the launch of its Internet site and commence marketing of its line of
women's products and intends to raise additional funds during the Company's
second fiscal quarter. There can be no assurance the Company will be successful
in raising such funds and that if additional funds are raised, that the
Company's existing business operations will improve, or that the development of
the line of women's products and the website for women's health will be
successful. The inability to raise additional funds will materially effect the
future business operations of the Company.
Certain statements in this document constitute "forward-looking statements,"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance,
or achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. The important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements include, but are not limited to (i) the information being of a
preliminary nature and therefore subject to further adjustment; (ii) the ability
of the Company to implement its new business plan; (iii) the Company's ability
to obtain new proprietary rights or to protect and retain its existing rights;
(iv) the Company's dependence on single sources of supply for many of the
products it offers; (v) changing conditions in the healthcare information
industry; (vi) government regulatory changes; (vii) competitive actions by other
companies, including the development by competitors of new or superior services
or products or the entry into the market of new competitors; (viii) the ability
of the Company to obtain financing for its future capital needs; (ix) the
uncertainties of litigation; (x) all the risks inherent in the development,
introduction, and implementation of new products and services; and other factors
both referenced and not referenced in this document. When used in this document,
the words "estimate," "project," "anticipate," "expect," "intend," "believe,"
and similar expressions are intended to identify forward-looking statements, and
the above described risks inherent therein.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: Current Report on Form 8-K, dated March
24, 2000 - Item 5. Other Matters; Current Report on Form 8-K,
dated February 16, 2000 - Item 4 - Changes in Registrant's
Certifying Accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report, as amended, to be signed on its
behalf by the undersigned thereunto duly authorized.
THE MNI GROUP INC.
(registrant)
Dated: June 9, 2000
By: /s/ ARNOLD GANS
-----------------------------------
Arnold Gans
(President)
8
