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: JULY 31, 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 JULY 31, 1999.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
JULY 31, JANUARY 31,
1999 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 10,600 $ 5,000
Accounts receivable (net of allowance) 39,800 86,800
Inventories 42,100 40,300
Other current assets 1,100 1,100
----------- -----------
Total current assets 93,600 133,200
----------- -----------
Fixed assets (net) 60,500 --
Other assets 15,000 15,000
----------- -----------
$ 169,100 $ 148,200
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 108,200 $ 160,500
Accrued expenses and other liabilities 326,900 276,800
Notes payable 83,100 84,900
Due to officers 31,600 196,300
Loan payable 390,000 --
----------- -----------
Total current liabilities 939,800 718,500
----------- -----------
Long-term debt (net of current portion) 75,000 75,000
Excess of purchase price over basis of assets
acquired net of amortization 148,700 150,900
----------- -----------
223,700 225,900
----------- -----------
Stockholders' (Deficiency):
Common stock, no par value;10,000,000
shares authorized; 4,085,709 shares
issued and outstanding at July 31, and
January 31, 1999 7,276,400 7,276,400
Accumulated deficit (8,270,800) (8,072,600)
----------- -----------
(994,400) (796,200)
----------- -----------
$ 169,100 $ 148,200
=========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
2
<PAGE>
<TABLE>
<CAPTION>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED THREE MONTHS ENDED
JULY 31, JULY 31,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 217,700 $ 354,500 $ 127,200 $ 125,100
----------- ----------- ----------- -----------
Cost of sales and operating expenses:
Cost of merchandise sales 130,500 189,400 57,900 61,100
Selling, general and administrative
expenses 259,700 245,000 151,400 122,000
Advertising expense 900 -- -- --
----------- ----------- ----------- -----------
Total cost of sales and operating
expenses 391,100 434,400 209,300 183,100
----------- ----------- ----------- -----------
Operating (loss) (173,400) (79,900) (82,100) (58,000)
Other (expense):
Interest expense (24,800) (17,400) (13,100) (9,300)
----------- ----------- ----------- -----------
(Loss) from continuing operations (198,200) (97,300) (95,200) (67,300)
----------- ----------- ----------- -----------
Discontinued operations:
(Loss) from discontinued operations -- (38,400) -- (13,200)
----------- ----------- ----------- -----------
(Loss) before provision for income taxes (198,200) (135,700) (95,200) (80,500)
Provision for income taxes -- -- -- --
Net (loss) ($198,200) ($135,700) ($ 95,200) ($ 80,500)
=========== =========== =========== ==========
Basic (loss) per share from
discontinued operations $ -- ($.01) $ -- $ --
Basic (loss) per share from
continuing operations ($.05) ($.02) ($.02) ($.01)
----------- ----------- ----------- -----------
Basic (loss) per share ($.05) ($.03) ($.02) ($.01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 4,085,709 4,685,709 4,085,709 4,685,709
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
3
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JULY 31,
----------------------
1999 1998
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Cash flows from operating activities:
Net (loss) ($198,200) ($135,700)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization (2,200) 2,800
Change in operating assets and liabilities:
(Increase) decrease in accounts receivables 47,000 (12,000)
(Increase) in inventories (1,800) (2,700)
(Increase) decrease in prepaid expenses
and other assets -- (11,300)
Increase (decrease) in accounts payable (52,300) 25,800
Increase in accrued expenses
and other liabilities 50,100 43,200
--------- ---------
Net cash (used) by operating activities (157,400) (89,900)
--------- ---------
Cash flows from financing activities:
Decrease in notes payable (1,800) (70,400)
Increase (decrease) in loans from officers (164,700) 131,000
Increase in loans payable 390,000 --
--------- ---------
Net cash (used) by financing activities 223,500 60,600
--------- ---------
Cash flows from investing activities:
Increase in fixed assets (60,500) --
--------- ---------
Net cash provided by investing activities (60,500) --
--------- ---------
Increase (decrease) in cash 5,600 (29,300)
Cash at beginning of period 5,000 36,900
--------- ---------
Cash at end of period $ 10,600 $ 7,600
========= =========
Supplemental information:
Interest expense paid $ 20,800 $ 21,000
Federal income tax -- --
The accompanying notes are an integral part hereof.
4
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 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 July 31, 1999, and the results of its operations and cash
flows for the six months ended July 31, 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 July 31,
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.
2. LOANS PAYABLE AND RELATED PARTY TRANSACTIONS:
During the quarter ended July 31, 1999, the Company received advances
of $390,000 (bearing interest at 10%) in anticipation of a private placement. Of
the $390,000, a total of $137,500 was advanced by Mr. Burstein, a director of
the Company and an entity of which Mr. Burstein is a shareholder, officer and
director.
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 July 31, 1998 and 1999.
Sales for the three months ended July 31, 1999, were $127,200 as compared with
sales of $125,100 for the comparable period in 1998, an increase of 1.7 %. Cost
of sales decreased from $61,100 for the three months ended July 31, 1998, or
48.8 % of sales, to $57,900, or 45.5 % of sales, for the comparable period in
1999. Selling, general and administrative expenses increased 24% to $151,400
from $122,000 due principally to added costs associated with the further
development of the line of women's products and development of a web site for
women's health. For the three months ended July 31, 1999, the Company incurred
an operating loss of $82,100 as compared to an operating loss of $58,000 for the
comparable period in 1998. The Company incurred a loss from continuing
operations of $95,200 or ($.02) per share, as compared to a loss of $67,300 or
($.01) per share for the comparable period in 1998. The Company's loss from
discontinued operations in 1998 was $13,200 resulting in a net loss of $80,500
for 1998 as compared to a net loss of $95,200 in 1999.
Interest expense was $13,100 for the three months ended July 31, 1999, as
compared to $9,300 during the comparable period of 1998 primarily due to
interest on $390,000 of unsecured advances made during this period.
Comparison of Six Months Ended July 31, 1998 and 1999.
Sales for the six months ended July 31, 1999, were $217,700 as compared with
sales of $354,500 for the comparable period in 1998, a decrease of 38.6 %. 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 $189,400 for the six months ended July 31, 1998, or 53.4 % of sales, to
$130,500, or 59.9 % of sales, for the comparable period in 1999 due to the
6
<PAGE>
comparable decrease in sales. Selling, general and administrative expenses
increased 6% to $259,700 from $245,000. For the six months ended July 31, 1999,
the Company incurred an operating loss of $173,400 as compared to an operating
loss of $79,900 for the comparable period in 1998. The Company incurred a loss
from continuing operations of $198,200 or ($.05) per share, as compared to a
loss of $97,300 or ($.02) per share for the comparable period in 1998. The
Company's loss from discontinued operations in 1998 was $38,400 resulting in a
net loss of $135,700 for 1998 as compared to a net loss of $198,200 in 1999.
Interest expense was $24,800 for six months ended July 31, 1999, as compared to
$17,400 during the comparable period of 1998 due to interest on $390,000 of
advances to the Company.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1999, the Company had cash of $10,600 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 that additional capital would be required. During the quarter
ended July 31, 1999, the Company received advances of $390,000 (bearing interest
at 10%) in anticipation of a private placement. Of the $390,000, a total of
$137,500 was advanced by Mr. Burstein, a director of the Company and an entity
of which Mr. Burstein is a shareholder, officer and director. The funds were
advanced on the same terms and conditions as the balance of the funds. 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
-------------------------------------
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> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1999
<PERIOD-END> JUL-31-1999
<EXCHANGE-RATE> 1
<CASH> 10,600
<SECURITIES> 0
<RECEIVABLES> 39,820
<ALLOWANCES> 0
<INVENTORY> 42,100
<CURRENT-ASSETS> 93,600
<PP&E> 60,500
<DEPRECIATION> 0
<TOTAL-ASSETS> 169,100
<CURRENT-LIABILITIES> 939,800
<BONDS> 0
0
0
<COMMON> 7,276,400
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 169,100
<SALES> 217,700
<TOTAL-REVENUES> 217,700
<CGS> 130,500
<TOTAL-COSTS> 391,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (173,400)
<INTEREST-EXPENSE> 24,800
<INCOME-PRETAX> (198,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (198,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (198,200)
<EPS-BASIC> (.05)
<EPS-DILUTED> 0
</TABLE>
