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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: OCTOBER 31, 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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GENDER SCIENCES, INC. F/K/A THE MNI GROUP INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-2380325
----------------------------------------- ---------------------
(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.
6,687,519 SHARES OF COMMON STOCK AT OCTOBER 31, 2000.
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<PAGE>
<TABLE>
<CAPTION>
GENDER SCIENCES, INC.
F/K/A THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
OCTOBER 31, JANUARY 31,
2000 2000
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 201,100 $ 649,700
Accounts receivable (net of allowance) 25,300 14,000
Inventories 101,300 83,400
Other current assets 103,500 23,000
----------- -----------
Total current assets 431,200 770,100
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Fixed assets, net of accumulated depreciation
of $96,700 and $91,100, respectively 82,800 9,800
----------- -----------
Other assets:
Security deposits 15,200 15,200
Trademark (net of amortization) 3,700 --
----------- -----------
18,900 15,200
----------- -----------
$ 532,900 $ 795,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 362,400 $ 226,100
Notes payable-short term 47,000 61,000
10% Convertible subordinated debentures 1,521,300 1,521,300
----------- -----------
Total current liabilities 1,930,700 1,808,400
----------- -----------
Stockholders' (Deficit):
Common stock, no par value; 70,000,000
shares authorized at October 31, 2000;
10,000,000 shares authorized at January 31, 2000;
6,687,519 shares issued and outstanding
at October 31, 2000; 4,110,709 shares issued
and outstanding at January 31, 2000 7,862,300 7,313,900
Accumulated deficit (9,249,700) (8,316,800)
----------- -----------
(1,387,400) (1,002,900)
Less treasury stock (10,400) (10,400)
----------- -----------
(1,397,800) (1,013,300)
----------- -----------
$ 532,900 $ 795,100
=========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
1
<PAGE>
<TABLE>
<CAPTION>
GENDER SCIENCES, INC.
F/K/A THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 489,400 $ 376,500 $ 135,800 $ 158,800
----------- ----------- ----------- -----------
Cost of sales and operating expenses:
Cost of merchandise sales 247,400 214,300 72,100 83,800
Selling, general and administrative expenses 708,000 375,800 289,800 116,100
Web-site costs 347,900 --
70,500 --
Advertising expense 11,700 6,400 1,700 5,500
----------- ----------- ----------- -----------
Total cost of sales and operating expenses 1,315,000 596,500 434,100 205,400
----------- ----------- ----------- -----------
Operating (loss) (825,600) (220,000) (298,300) (46,600)
----------- ----------- ----------- -----------
Other (expense) income:
Interest expense (132,600) (58,900) (50,700) (34,100)
Interest income 11,500 1,800 3,500 1,800
Forgiveness of debt 13,800 337,500 13,800 337,500
----------- ----------- ----------- -----------
Total other income (expense) (107,300) 280,400 (33,400) 305,200
----------- ----------- ----------- -----------
Income (loss) from operations before provision for
income taxes (932,900) 60,400 (331,700) 258,600
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (932,900) $ 60,400 $ (331,700) $ 258,600
=========== =========== =========== ===========
Per share data:
Basic income (loss) per common share $ (.20) $ .02 $ (.07) $ .07
=========== =========== =========== ===========
Weighted average number of shares outstanding 4,654,314 3,960,906 4,879,250 3,712,672
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
2
<PAGE>
<TABLE>
<CAPTION>
GENDER SCIENCES, INC.
F/K/A THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
OCTOBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (932,900) $ 60,400
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 5,700 (3,300)
Shares issued for services and debt 46,800 --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivables (11,300) 35,300
(Increase) in inventories (17,900) (21,800)
(Increase) in prepaid expenses and other assets (80,500) (5,600)
Increase (decrease) in accounts payable and
accrued expenses 136,300 (290,700)
----------- -----------
Net cash (used) by operating activities (853,800) (225,700)
----------- -----------
Cash flows from financing activities:
(Decrease) in long-term debt -- (75,000)
(Decrease) in notes payable (14,000) (21,200)
(Decrease) in loans from officers -- (196,300)
Sale of convertible subordinated debenture 500,000 1,148,700
Purchase of treasury shares -- (100,000)
Sale of treasury shares -- 89,600
Sale of common stock 1,600 --
----------- -----------
Net cash provided by financing activities 487,600 845,800
----------- -----------
Cash flows from investing activities:
Increase in fixed assets (78,600) (120,300)
Increase in trademark (3,800) --
----------- -----------
Net cash used by investing activities (82,400) (120,300)
----------- -----------
Increase (decrease) in cash (448,600) 499,800
Cash at beginning of period 649,700 5,000
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Cash at end of period $ 201,100 $ 504,800
=========== ===========
Supplemental information:
Interest expense paid $ 3,200 $ 38,650
Federal income tax paid -- --
</TABLE>
The accompanying notes are an integral part hereof.
3
<PAGE>
GENDER SCIENCES, INC.
F/K/A THE MNI GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 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 October 31, 2000, and the results of its operations and
cash flows for the nine months ended October 31, 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 October 31,
2000 are not necessarily indicative of the operating results for the full year.
On October 19, 2000 at the Company's annual meeting, the stockholders voted
to change the Company's name to Gender Sciences, Inc. In addition, the
stockholders voted to increase the authorized number of shares to 70,000,000.
This resulted in the second round of debentures and accrued interest to
automatically convert into 2,053,836 shares of common stock. The original
$1,521,300 debenture issue was due on October 1, 2000 and did not automatically
convert on October 19, 2000. Each debenture holder has the right to convert or
seek repayment. It is management's belief that each debenture holder will
convert their debentures and accrued interest into common stock.
1. LOSS PER COMMON 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. STOCK ISSUANCES:
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 November 30, 2000, the Company has issued additional options to
purchase 258,500 shares of its common stock at exercise prices varying
between $.10 to $.875. Of these options, 148,500 expire on November 1, 2004,
the remaining 110,000 options expire on November 1, 2009.
4
<PAGE>
GENDER SCIENCES, INC.
F/K/A THE MNI GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
3. SALE OF ADDITIONAL 10% CONVERTIBLE SUBORDINATED DEBENTURES:
The Company had offered for sale an additional $750,000 of its 10%
Convertible Subordinated Debentures with terms similar to those sold in the
prior fiscal year. These debentures were convertible into the Company's
common stock at a conversion rate of $.25 per share. The debentures were due
on July 31, 2001 or at such time as the Company amends its certificate of
incorporation to permit the issuance of these shares. The Company had sold
$500,000 of these debentures, which with accrued interest of $13,459 were
converted into 2,052,836 shares of common stock, on October 23, 2000.
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 October 31, 1999 and 2000.
Sales for the three months ended October 31, 2000 were $135,800 as compared with
sales of $158,800 for the comparable period in the prior year, a decrease of
14.5%. Cost of sales decreased from $83,800 for the three months ended October
31, 1999, or 52.8% of sales, to $72,100, or 53.1% of sales, for the comparable
period in 2000. Selling, general and administrative expenses increased 149.6% to
$289,800 from $116,100. These expenses consisted primarily of salaries and
related costs of $141,300; professional fees of $42,800; consulting fees of
$20,800 and other costs of $84,900. The increase from the prior year was due to
additional costs related to development of the Company's Internet site devoted
to gender specific health. These increased costs included salaries and related
benefits of approximately $64,600, professional and consulting fees of $74,800,
insurance of $20,000 and other related costs of $14,300. In addition, the
Company expended $70,500 for the development and maintenance of its website and
did not have a comparable cost in the prior period. For the three months ended
October 31, 2000, the Company incurred an operating loss of $298,300 as compared
to an operating loss of $46,600 for the comparable period in the prior year. As
a result of these increased operating costs the Company had a net loss of
$331,700 or ($.07) per share, as compared to income of $258,600 or $.07 per
share for the comparable period in the prior year.
Interest expense was $50,700 and interest income was $3,500 for the three months
ended October 31, 2000, as compared to interest expense of $34,100 and interest
income was $1,800 during the comparable period of the prior year. The increase
in interest expense was primarily due to interest on the $2,021,500 principal
amount of 10% Convertible Subordinated Debentures which were issued after
October 31, 1999, of which $500,000 principle amount, together with accrued
interest, was converted into the Company's common stock during the quarter.
Interest income was due to the cash balances maintained by the Company since the
sale of the Debentures. Forgiveness of debt was $13,800 (as a result of a
settlement of an outstanding loan obligation) for the three months ended October
31, 2000 and $337,500 (see Form 10-K for the year ended January 31, 2000) for
the comparable period of the prior year.
Comparison of Nine Months Ended October 31, 1999 and 2000.
Sales for the nine months ended October 31, 2000 were $489,400 as compared with
sales of $376,500 for the comparable period in the prior year, an increase of
30%. The increase in sales was primarily due to collagen-based products and the
Healthy Nut (soybean) program. Cost of sales increased from $214,300 for the
nine months ended October 31, 1999, or 56.9% of sales, to $247,400, or 50.6% of
sales, for the comparable period in 2000. Selling, general and administrative
expenses increased 88.4% to $708,000 from $375,800. These expenses consisted
primarily of salaries and related costs of $332,300; professional fees of
$120,900; consulting fees of $59,500 and other costs of $195,300. The increase
from the prior year was due to additional costs related to development of its
Internet site devoted to gender specific health. These increased costs included
salaries and related benefits of approximately $94,100, professional and
consulting fees of $176,800, insurance of $20,100 and other related costs of
$41,200. In addition, the Company expended $347,900 for the development and
maintenance of its website and did not have a comparable cost in the prior
period. For the nine months ended October 31, 2000, the Company incurred an
operating loss of $825,600 as compared to an operating loss of $220,000 for the
comparable period in the prior year. This loss was primarily due to the increase
in selling, general and administrative expenses and the construction of its
website. The Company incurred a net loss of $932,900 or ($.20) per share, as
compared to a profit of $60,400 or $.02 per share for the comparable period in
the prior year.
6
<PAGE>
Interest expense was $132,600 for the nine months ended October 31, 2000 and
interest income was $11,500, as compared to $58,900 of interest expense and
$1,800 of interest income during the comparable period of the prior year.
Interest expense was primarily attributable to the $2,021,500 principle amount
of 10% Convertible Subordinated Debentures which were issued after October 31,
1999 of which $500,000 principle amount, together with accrued interest, was
converted into the Company's common stock. Forgiveness of debt was $13,800 for
the nine months ended October 31, 2000 and $337,500 for the comparable period of
the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2000, the Company had cash of $201,100 as compared to cash of
$649,700 on January 31, 2000. The Company had a working capital deficit of
approximately $1,500,000 as of October 31, 2000. It is management's belief that
the $1,521,250 of outstanding debentures will be converted into common stock.
This conversion will have a positive material affect upon the Company's working
capital. During the nine month's ended October 31, 2000, the Company used
$853,800 for operations as compared to the use of $225,700 for the comparable
period in the prior year. This increase was due primarily to amounts expended
for the development of the Company's Website.
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 supplements and an Internet website devoted to
Gender-Specific Medicine, 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 of common stock
at $.075 per share. As of September 6, 2000, the Company sold an additional
$500,000 of its 10% Convertible Subordinated Debentures which were convertible
at $.25 per share. (See Note 3 to the financial statements). During the quarter
the Company converted the additional $500,000 principle amount of debentures
with accrued interest of $13,459 into its common stock at a conversion rate of
$.25 per share. The original $1,521,250 debenture issue was due on October 1,
2000 and did not automatically convert on October 23, 2000 (the date the Company
filed an amendment to its Certificate of Incorporation increasing its authorized
capitalization to 70,000,000 shares of common stock). Each debenture holder has
the right to convert or seek repayment. It is management's belief that all of
the debentures and accrued interest will be converted into common stock. At
present the Company does not have the resources to repay the debentures.
The Company still requires additional funds to complete the launch of its
Gender-Specific Health site and commence marketing of its line of women's
supplements and intends to raise additional funds during the Company's fiscal
year. 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
supplements and the website for Gender-Specific Health will be successful. The
inability to raise additional funds will materially effect the future business
operations of the Company.
7
<PAGE>
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.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting ("Meeting") of Shareholders of the Company was held
on October 19, 2000. The 3,735,767 shares of common stock ("Common Stock")
present at the Meeting out of a then total 4,633,683 shares outstanding and
entitled to vote, acted as follows with respect to the following proposals:
Approved, by a vote of: 3,734,767 shares of Common Stock for and
1,000 shares against the election of Arnold M. Gans as a director
of the Company; 3,734,767 shares of Common Stock for and 1,000
shares against the election of Myra D. Gans as a director of the
Company; 3,735,267 shares of Common Stock for and 500 shares
against the election of Lawrence S. Burstein as a director of the
Company; and 3,735,267 shares of Common Stock for and 500 shares
against the election of Alan Gaines as a director of the Company.
In addition, no shares of Common Stock were voted against the
election of all of the nominees.
Approved, by a vote of 3,731,617 shares of Common Stock for and
1,100 shares against an amendment to the Company's Certificate of
Incorporation to change the name of the Company to Gender
Sciences, Inc.
Approved, by a vote of 3,692,260 shares of Common Stock for and
16,041 shares against an amendment to the Company's Certificate of
Incorporation to increase the Company's authorized Common Stock
from 10,000,000 shares to 70,000,000 shares.
Approved, by a vote of 2,528,840 shares of Common Stock for and
18,041 shares against the adoption of the Company's 2000 Long-Term
Incentive Stock Plan.
Ratified, by a vote of 3,733,467 shares of Common Stock for and
15,000 shares against the selection of Goldstein & Ganz, P.C. as
the Company's independent certified public accountants for the
fiscal year ending January 31, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
9
<PAGE>
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.
GENDER SCIENCES, INC. F/K/A THE MNI GROUP INC.
(registrant)
DATED: DECEMBER 8, 2000
By: /s/ ARNOLD GANS
-----------------------------------
Arnold Gans
(President)
10
