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, 1999
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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.
4,085,709 SHARES OF COMMON STOCK AT APRIL 30, 1999.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
APRIL 30, JANUARY 31,
1999 1999
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<S> <C> <C>
Current assets:
Cash $ 4,700 $ 5,000
Accounts receivable (net of allowance) 22,800 86,800
Inventories 45,100 40,300
Other current assets 1,100 1,100
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Total current assets 73,700 133,200
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Other assets 15,000 15,000
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$ 88,700 $ 148,200
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 113,500 $ 160,500
Accrued expenses and other liabilities 344,500 276,800
Notes payable 86,600 84,900
Due to officers 218,500 196,300
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Total current liabilities 763,100 718,500
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Long-term debt (net of current portion) 75,000 75,000
Excess of purchase price over basis of assets
acquired net of amortization 149,800 150,900
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224,800 225,900
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Stockholders' (Deficiency):
Common stock, no par value; 10,000,000
shares authorized; 4,085,709 shares
issued and outstanding at April 30, and
January 31, 1999 7,276,400 7,276,400
Accumulated deficit (8,175,600) (8,072,600)
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(899,200) (796,200)
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$ 88,700 $ 148,200
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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,
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1999 1998
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Sales $ 90,500 $ 229,400
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Cost of sales and operating expenses:
Cost of merchandise sales 72,600 128,300
Selling, general and administrative expenses 108,300 123,000
Advertising expense 900 --
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Total cost of sales and operating expenses 181,800 251,300
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Operating (loss) (91,300) (21,900)
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Other (expense):
Interest expense (11,700) (8,100)
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Total other (expense) (11,700) (8,100)
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(Loss) from continuing operations (103,000) (30,000)
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Discontinued operations:
(Loss) from discontinued operations -- (25,200)
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(Loss) before provision for income taxes ($ 103,000) ($ 55,200)
Provision for income taxes -- --
Net (loss) ($ 103,000) ($ 55,200)
=========== ===========
Basic (loss) per share from
discontinued operations $ -- ($.01)
Basic (loss) per share from
continuing operations ($.03) ($.01)
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Basic (loss) per share ($.03) ($.02)
=========== ===========
Weighted average number of shares outstanding 4,085,709 4,685,709
=========== ===========
The accompanying notes are an integral part hereof.
3
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
APRIL 30,
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1999 1998
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Cash flows from operating activities:
Net (loss) ($103,000) ($ 55,200)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization (1,100) 1,400
Change in operating assets and liabilities:
(Increase) decrease in accounts receivables 64,000 (23,100)
(Increase) in inventories (4,800) (3,400)
(Increase) decrease in prepaid expenses
and other assets -- (6,800)
Increase (decrease) in accounts payable (47,000) 43,600
Increase (decrease) in accrued expenses
and other liabilities 67,700 (10,600)
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Net cash (used) by operating activities (24,200) (54,100)
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Cash flows from financing activities:
Increase in notes payable 1,700 --
(Decrease) in notes payable -- (69,500)
Increase in loans from officers 22,200 95,600
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Net cash provided by financing activities 23,900 26,100
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(Decrease) in cash (300) (28,000)
Cash at beginning of period 5,000 36,900
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Cash at end of period $ 4,700 $ 8,900
========= =========
Supplemental information:
Interest expense paid $ 9,000 $ 9,900
Federal income tax -- --
The accompanying notes are an integral part hereof.
4
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999
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, 1999, and the results of its operations and cash
flows for the three months ended April 30, 1999 and 1998. 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, 1999, which is included in its Annual Report on Form 10-K
filed in December 1999. The results of operations for the period ended April 30,
1999 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.
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. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors.
The results from continuing operations exclude the results of operations of
K.O.S Industries, Inc. (KOS) a former subsidiary. The Company terminated its
agreement with KOS on December 31, 1998. Reference is made to the Company's
Annual Report on Form 10-K for the year ended January 31, 1999.
Comparison of Three Months Ended April 30, 1998 and 1999.
Sales for the three months ended April 30, 1999 decreased to $90,500 as compared
to sales of $229,400 for the comparable period in 1998, a decrease of 60.5%. The
decrease in sales was primarily due to a decrease in demand for the Company's
nutritional and pet products as well as a decision by the Company to
de-emphasize sales of its existing products and to concentrate its efforts on
the development of a line of products specially designed for women and the
creation of an internet site devoted to women's health. Cost of sales decreased
from $128,300 for the three months ended April 30, 1998, or 55.9% of sales, to
$72,600, or 80.2% of sales, for the comparable period in 1999. This decrease was
mainly attributable to the decrease in sales, which resulted in a corresponding
lowering of the cost of sales. The gross profit percentage decreased from 44% to
19.7% due to an additional one-time cost (approximately $30,000) of merchandise
that was not recognized in the previous period. Selling, general and
administrative expenses decreased 12% to $108,300 from $123,000 due to the
Company's continuing effort to control costs and reduce overhead.
Interest expense was $11,700 for three months ended April 30, 1999 and $8,100
for the comparable period of 1998. Interest expense increased due to an increase
in the rates charged by lending institutions.
For the three months ended April 30, 1999, the Company incurred an operating
loss of $91,300 and a loss from continuing operations of $103,000 or ($.03) per
share, as compared to an operating loss of $21,900 and a loss from continuing
operations of $30,000 or ($.01) per share for the comparable period. In 1998,
the Company's loss from discontinued operations of $25,200 or ($.01) per share
resulted in a net loss of $55,200 as compared to a net loss of $103,000 in 1999.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1999 the Company had cash of $4,700 as compared to cash of $5,000
on January 31, 1999.
During the first quarter, 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, it would require additional capital. No funds were raised during
the quarter ended April 30, 1999. There can be no assurance that the Company
will be successful in raising additional funds and 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. In the event the Company is unable to raise
additional funds it may be forced to discontinue its operations.
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 which 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 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) none
9
<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)
Dated: February 3, 2000
By: /s/ ARNOLD GANS
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Arnold Gans
(President)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000722617
<NAME> MNI GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1999
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1
<CASH> 4,700
<SECURITIES> 0
<RECEIVABLES> 22,800
<ALLOWANCES> 0
<INVENTORY> 45,100
<CURRENT-ASSETS> 73,700
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,700
<CURRENT-LIABILITIES> 763,100
<BONDS> 0
0
0
<COMMON> 7,276,400
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (899,200)
<SALES> 90,500
<TOTAL-REVENUES> 90,500
<CGS> 72,600
<TOTAL-COSTS> 181,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (91,300)
<INTEREST-EXPENSE> (11,700)
<INCOME-PRETAX> (103,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,000)
<EPS-BASIC> (0.03)
<EPS-DILUTED> 0
</TABLE>
