UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Transition Period from _____________ to
________________
Commission File Number: 0-18660
M. G. PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
California 33-0098392
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8154 Bracken Creek
San Antonio, Texas 78266
(Address of principal executive offices) (Zip Code)
(210) 651-5288
(Registrant's telephone number, including area code)
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 on
(1); Yes X No on (2).
As of May 10, 1996, the number of shares of the
registrant's Common Stock outstanding was 10,564,078.
M. G. PRODUCTS, INC.
QUARTERLY REPORT FORM 10-Q - MARCH 31, 1996
PART I. Financial Information Page
Item 1.Consolidated Balance Sheets -
March 31, 1996 and
December 31, 1995 1
Consolidated Statement of Operations -
Three months ended March 31,1996
and 1995 3
Condensed Consolidated Statement
of Cash Flows - the three months
ended March 31, 1996 and 1995 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
2PART II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submissions of Matters to a
Vote of Security Holders 12
Item 5. Other information 12
Item 6. Exhibits and Reports on Form 8-K 12
<TABLE>
Part I - Financial Information
Item 1. Financial Statements
M.G. Products, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1996 1995
<S> (unaudited)
Assets
Current assets: <C> <C>
Cash $ 197,622 $1,011,755
Accounts receivable:
Trade, net of allowance for
doubtful accounts of $153,000
and $307,000 in 1996 and
1995, respectively 959,607 1,876,400
Related parties 153,064 250,514
Inventories:
Raw materials 5,189,854 4,506,842
Work-in-process 652,119 688,391
Finished goods 3,654,435 3,669,301
Total inventories 9,496,408 8,864,534
Prepaid expenses and other
current assets 782,930 624,001
Total current assets 11,589,631 12,627,204
Property and equipment at cost:
Machinery and equipment 2,729,651 2,729,651
Vehicles 53,584 53,584
Furniture and fixtures 536,042 534,489
Leasehold improvements 1,192,616 1,196,021
4,511,893 4,513,745
Less accumulated depreciation
and amortization (2,255,597) (2,093,961)
Net property and equipment 2,256,296 2,419,784
Other assets 1,006,812 1,033,792
Investment in joint venture 792,078 810,869
Total assets $15,644,817 $16,891,649
</TABLE>
<TABLE>
M.G. Products, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1996 1995
<S> (unaudited)
Liabilities and Shareholders' <C> <C>
Equity
Current liabilities:
Accounts payable $ 2,923,510 $ 2,994,152
Due to related parties 2,007,396 1,603,091
Deferred revenue 892,422 927,241
Accrued expenses and other current 1,261,278 1,151,943
liabilities
Restructuring reserve 1,292,403 1,292,403
Notes payable 2,447,282 3,161,844
Current portion of capital lease 107,793 103,838
obligations
Current portion of pre-petition 477,070 465,828
liabilities
Subordinated notes payable to 375,478 375,478
shareholders
Total current liabilities 11,784,632 12,075,818
Capital lease obligations, less 9,732 38,209
current portion
Commitments and contingencies
Shareholders' equity:
Common shares, no par value:
Authorized shares - 15,000,000
Issued and outstanding shares - 33,012,793 33,012,793
10,564,078
Accumulated deficit (29,162,340) (28,235,171)
Total shareholders' equity 3,850,453 4,777,622
Total liabilities and
shareholders' equity $15,644,817 $16,891,649
<FN>
Note: The balance sheet at December 31, 1995 has been
derived from the audited financial statements at that date
but does not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. See notes to consolidated
financial statements.
</TABLE>
<TABLE>
M.G. Products, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
For the three months ended
March 31, 1996 March 31, 1995
(unaudited)
<S> <C> <C>
Net sales $ 5,665,558 $ 9,980,384
Cost of sales 4,916,497 8,656,886
Gross profit 749,061 1,323,498
Costs and expenses:
Selling and marketing 501,882 1,390,144
General and administrative 1,003,788 1,636,531
1,505,670 3,026,675
Loss from operations (756,609) (1,703,177)
Interest expense, net (151,769) (265,971)
Equity in earnings (loss) of (18,791) 225,000
joint venture
Net loss $ (927,169) $ (1,744,148)
Net loss per share $ (.09) $ (.20)
Number of shares used in
computing share amounts 10,564,078 8,832,010
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
M.G. Products, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
For the three months ended
March 31, March 31,
1996 1995
<S> <C> <C>
Cash used in operations: $ (48,546) $ 39,603
Investing activities:
Purchase of property and equipment (26,503) (13,650)
Cash provided by (used in) (26,503) (13,650)
investing activities
Financing activities:
Payments on notes payable, net (714,562) (1,643,880)
Payments on pre-petition - (43,883)
liabilities
Proceeds from subordinated notes - 1,660,354
payable to shareholders, net
Payments on capital lease (24,522) (4,462)
obligations
Cash provided by (used in) (739,084) (31,871)
financing activities
Net increase (decrease) in cash (814,433) (5,918)
Cash at beginning of period 1,011,755 10,712
Cash at end of period $ 197,622 $ 4,794
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
M.G. Products, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial statement
information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period
ended March 31, 1996, are not necessarily indicative of the
results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in M.G.
Products, Inc. annual report on Form 10-K for the year ended
December 31, 1995.
Description of Business
M.G. Products, Inc. (the Company or M.G.) is engaged in a single
business segment, the manufacture and wholesale distribution of
lighting fixtures for retail outlets primarily in the United
States. The consolidated financial statements include the
accounts of the Company and all wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
The Company has manufacturing plants located in Monterrey and
Tijuana, Mexico. Substantially all of the products produced in
these two factories are transferred to the U.S. entity for sale
in the United States. Currently, the Company purchases raw
materials from both United States and Mexican vendors.
Identifiable assets, primarily raw materials and machinery and
equipment of $7,800,000 are located in Mexico.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Concentration of Credit Risk
The Company sells its products primarily to major national
building material/home improvement retailers. Credit is extended
based on an evaluation of the customer's financial condition, and
collateral is generally not required.
A major shareholder and former Chief Executive Officer of the
Company holds a senior merchandising position with the Company's
single largest customer. The Company's single largest customer
provides advance payments in exchange for prepayment discounts on
its purchases. The Company records such advance payments as
deferred revenue.
Inventories
Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market.
Property and Equipment
Property and equipment is stated at cost and depreciated over
estimated useful lives of five to seven years using the straight-
line method.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies (continued)
Pre-Petition Liabilities
During 1990, the Company was approved for reorganization pursuant
to Chapter 11 of the United States Bankruptcy Code. As part of
its reorganization plan, the Company is obligated to pay certain
adjusted liabilities which are included in the accompanying
balance sheet as pre-petition liabilities.
Revenue Recognition
Product sales revenue is recorded as products are shipped.
Stock-Based Compensation
The Company granted stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock
option grants in accordance with APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and, accordingly, recognizes no
compensation expense for the stock option grants.
Advertising Costs
The Company expenses advertising costs as incurred.
Net Loss Per Share
Net loss per share is computed using the weighted average number
of common shares outstanding during the year. Common stock
equivalents are not considered in the computation of periods with
a loss as their effect is anti-dilutive.
Reclassification
Certain prior period amounts have been reclassified to conform to
the current year presentation.
2. Going Concern
During the three years ended December 31, 1995, the Company
incurred substantial losses which negatively impacted cash flow
and caused liquidity shortages. Due to its cash flow
difficulties, the Company entered into a factoring arrangement
with a financing company, and all eligible accounts receivable
have been factored. At December 31, 1995, and at March 31, 1996,
the Company was not in compliance with certain covenants under
this agreement. Additionally, a significant portion of its trade
payables was outside their stated terms which caused the
intermittent interruption in the receipt of certain raw
materials, having a negative effect on the Company's ability to
meet customer's demands for certain products.
As a result of the inability to meet the demands of certain
customers, the Company has lost some of its customer base,
causing a decline in sales. Some of the Company's product lines
are customer specific, and as a result of the loss of these
customers, certain raw materials are not currently being consumed
in the manufacturing process and new markets have not been
established for much of the Company's finished inventory.
The Company has negotiated with a significant customer to receive
advance payments in exchange for prepayment discounts on orders
to improve cash flow, is in the process of developing a program
to reduce its inventory, has restructured its prior year debt,
and is attempting to increase its borrowing base by pursuing
additional financing through negotiations with asset-based
lenders. The Company believes that the attainment of an asset-
based lending agreement, together with the customer advances
obtained, will improve operating results and financial viability.
There can be no assurance, however, that new financing
arrangements will be satisfactorily completed.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
2. Going Concern (continued)
There is substantial doubt about the Company's ability to
continue if cash shortages continue to exist. The Company must
renew its debt or find new sources of financing, and must find
new markets for much of its inventory. The financial statements
do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from
the outcome of this uncertainty.
3. Restructuring and Relocation
In May 1995, the Company relocated its corporate offices from
Chula Vista, California to San Antonio, Texas pursuant to its
restructuring plan begun in December 1994. During 1995 the
Company defaulted on its lease obligation covering the Chula
Vista, California facility. The Company is a defendant in a
lawsuit filed in December 1995 with respect to this breach of
contract. The Company maintains a reserve for future losses on
the property of approximately $1.3 million at March 31, 1996.
No assurances can be given, however, that the Company can
satisfactorily defend this lawsuit and not incur additional
liability in the near term beyond the Company's accrued amount.
(See note 6)
Concurrent with the move to San Antonio, the Company entered
into an agreement to share certain employees and certain
administrative, selling and marketing expenses with Rooster
Products International, Inc. ("Rooster Products"), the United
States marketing and distribution subsidiary of Exportadora
Cabrera S.A. de C. V. ("Exportadora"), a Mexican corporation
owned by the family of Juan Pablo Cabrera, the Company's
Chairman of the Board and Chief Executive Officer. C&F Alliance
LLC (the Alliance) was created by the Company and Rooster
Products share management and certain sales and marketing and
general and administrative expenses. The Company and Rooster
Products each own 50% of the Alliance, and all expenses incurred
by the Alliance are billed to the owners based on services
provided.
The following table presents summary financial information for
the Alliance for the period ended March 31, 1996:
Sales and marketing expenses $621,000
General and administrative expenses 1,137,000
Less: amounts billed to M.G. Products, Inc. (883,000)
amounts billed to Rooster Products (875,000)
International Inc.
Net income $ -
4. Notes Payable
In April 1995, the Company received a $2.0 million loan from a
Mexican bank for its subsidiary in Monterrey, Mexico. The
current renewal of this loan, which is funded through an agency
of the Mexican government to support Mexican exports, bears
interest at an annual rate of 14.0%, and is due July 1, 1996.
In May 1995, the Company finalized a new credit facility with
Heller Financial, Inc. ("Heller Financial"). Pursuant to an
amendment to this agreement dated in March 1996, Heller
Financial will advance funds, up to a maximum of $3.0 million,
to the Company under an accounts receivable factoring
arrangement based on an 80% advance rate for domestic
receivables and 75% for certain foreign receivables. The
agreement also contains restrictions related to indebtedness,
net worth, income and the payment of cash dividends. The
balance owed under this agreement was approximately $447,000 at
March 31, 1996.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. Notes Payable (continued)
At March 31, 1996, the Company was not in compliance with certain
financial covenants of the credit facility with Heller Financial.
Heller Financial has the right to terminate this agreement and
the obligation shall mature and become due and payable. The
Company and Heller Financial have satisfactorily concluded
discussions for a further amendment to the agreement. No
assurances can be given, however, that the Company will be
successful in executing the amendment. In the event that a new
agreement cannot be obtained, the Company will be unable to
continue operations as currently structured.
5. Certain Related Party Transactions
In the second quarter of 1995, the Company moved its corporate
offices to San Antonio, Texas and formed the Alliance with
Rooster Products. The Company contributed certain office
furniture, fixtures, and equipment with a net book value of
approximately $477,000 to the Alliance. Through the Alliance,
the Company and Rooster share management and certain sales and
marketing and general and administrative expenses. The Company
and Rooster Products each own 50% of the Alliance, and all
expenses incurred by the Alliance are billed to the owners based
on services provided. During 1995, the Company's share of the
expenses incurred by the Alliance was $883,000 of which $347,000
has been included in sales and marketing and $535,000 has been
included in general and administrative expenses in the
consolidated statement of operations. At March 31, 1996, the
Company owed the Alliance $723,000 for unreimbursed expenses.
6. Commitments and Contingencies
During the fourth quarter of 1995, the Company breached its lease
agreement on the Chula Vista facility (see Note 3) by failing to
make the lease payments. As a result of this breach, the Company
is a defendant in a lawsuit. The plaintiff is seeking to recover
compensatory damages, interest, attorney's fees, reconditioning
expenses, utility charges, improvements which may be made for a
new tenant, and miscellaneous other costs of re-leasing the
property. The Company denies the allegations and believes the
plaintiff may not recover due to the plaintiff's failure to
mitigate its damages as required by California law. The
remaining unpaid lease obligation under the terms of the lease is
approximately $4,000,000. At March 31, 1996, the Company has
reserved approximately $1,300,000 against this matter. The
ultimate resolution of the matter, which is expected to occur
within one year, could result in an additional loss up to
approximately $3,000,000 in excess of the amount accrued.
During 1995, a former employee filed suit against the Company
seeking compensatory and punitive damages for breach of contract
and discrimination, among other allegations. The Company is
aggressively defending this matter. The Company expects that the
ultimate resolution of this matter will not have a material
adverse impact on the financial position or results of operations
in the near future.
In connection with the Company's Tijuana facility lease, the
Company ceased payments in 1995 and the lessor of the facility
has filed suit in Mexican courts for non-payment of the rent.
The Company has filed a countersuit alleging impropriety of the
dollar-based contract based on Tijuana law. The ultimate
resolution of the matter, which is expected to occur within one
year, is not expected to result in a loss in excess of the amount
the Company has accrued of approximately $340,000. There can be
no assurance that the Company will be successful in defending
this lawsuit, or that a loss greater than the amount accrued will
not be incurred.
In the normal course of business, the Company is named in various
legal actions. The Company is a defendant in various lawsuits
generally incidental to its business. The amounts sought by the
plaintiffs in such cases are not material and are less than the
stated limits of the Company's insurance policies.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth certain items expressed as a
percentage of net sales.
Percentage of Net Sales
For the three months ended
March 31, 1996 March 31, 1995
Net Sales 10.0% 100.0%
Cost of sales 86.8 % 86.7%
Gross profit 13.2% 13.3%
Costs and expenses:
Selling 8.9% 13.9%
General and 17.7% 16.4%
administrative
Total 26.6% 30.3%
Loss from operations (13.4%) (17.0%)
Interest expense, net (2.7%) (2.7%)
Equity in earnings (0.3%) 2.2%
(loss) of joint venture
Net Loss (16.4%) (17.5%)
Three months ended March 31, 1996 compared to March 31, 1995
Results of Operations
Net sales in the first quarter of 1996 were approximately $5.7
million. This represents a decrease of $4.3 million, or 43%,
from the first quarter of 1995. During late 1994 and early
1995 the Company experienced cash flow shortages that resulted
in the Company's inability to meet production schedules due to
the interruption in the availability of certain raw materials.
This lack of production resulted in the Company's failure
to ship certain orders at acceptable fill rates on a timely
basis and the reduction of purchases by some or all of the
Company's products by certain customers resulting in declining
sales in 1995. Although, in the first quarter of 1996, the Company
has increased its fill rates to an average in excess of 90% and has
regained placement of certain of its products and the Company has
also been successful in implementing a new program to ship product
from the Company's manufacturing facilities directly to customers,
historical sales levels have not as yet recovered to the level of the
prior year period.
Cost of sales for the three months ended March 31, 1996, were
$4.9 million, resulting in gross profit margins of 13.2%
compared to the gross profit margin percentages of 13.3% for
the comparable period in 1995. The Company continues to address
overhead cost reduction and productivity improvement issues, as
well as raw material cost reduction to improve gross margins at
its Mexican based production facilities. The Company often
sells excess inventory items at or below cost in order to
generate needed cash. The Company has provided a reserve to
currently recognize future losses on these sales.
The Company's selling expenses decreased by $888,000 to
approximately $502,000 for the three-month period ended March
31, 1996, compared to the 1995 period. Selling expense as a
percentage of net sales decreased to 8.9% for the three-month
period ended March 31, 1996, from 13.9% in 1995. This decrease
is attributable primarily to the cost sharing arrangement the
Company entered into with Rooster Products during 1995, more
fully described in Note 3 to the financial statements.
Results of Operations (cont.)
General and administrative expenses decreased by approximately
$633,000, to $1,004,000 for the three-month period ended March
31, 1996, from the first period of 1995. This decrease is
attributable primarily to the cost sharing arrangement the
Company entered into with Rooster Products during 1995, more
fully described in Note 5 to the financial statements. General
and administrative expense as a percentage of net sales
increased to 17.7% for the three-month period ended March 31
1996, from 16.4% in 1995. The Company continues to implement
cost cutting measures to compensate for its cash flow shortages.
Interest expense decreased by $114,000 to $152,000 for the three-
month period ended March 31, 1996, compared to $266,000 in 1995.
This decrease is attributable to the repayment in the third
quarter of 1995 of certain short term promissory note agreements
with Exportadora, and the issuance of 1,732,068 shares of the
Company's common stock in exchange for approximately $2.2
million of shareholder notes payable.
Liquidity and Capital resources
The opinion of the Company's independent auditors which
accompanies the Company's financial statements for the year ended
December 31, 1995 contains a "going concern" uncertainty emphasis
paragraph due to the Company's continued losses, negative cash
flow from operations and uncertainties related to the status of
its working capital credit line. In addition, the Company has
implemented a restructuring plan designed to improve operating
results and cash flow from operations. During 1995, management
began to actively seek customer deposits on new orders. Pursuant
to this policy, the Company has been successful in receiving
significant advances from its principal customer. There can be
no assurance, however, that the new financing arrangements and
deposit activity will be sufficient or that the restructuring
plan will be successful in improving operating results.
During the quarter ended March 31, 1996, the Company's operating
results were negatively impacted by cash flow and liquidity
shortages. At March 31, 1996, the Company's working capital was
a negative $(400,000), a decrease of $1.0 million from December
31, 1995. At March 31, 1996, the Company's current and quick
ratios were approximately 0.97 to 1 and 0.11 to 1,
respectively, compared to 1.05 to 1 and 0.26 to 1, respectively,
at December 31, 1995. The Company's working capital, current
ratio, and quick ratio decreased during the first quarter of
1996 primarily as a result of continued operating losses during
the quarter.
In May 1995, the Company finalized a new credit facility with
Heller Financial. Pursuant to the terms of the credit
agreement, Heller Financial will advance funds, up to a maximum
of $7.5 million, to the Company under an accounts receivable
factoring arrangement based on an 80% advance rate for domestic
receivables and 75% for certain foreign receivables. The
Company will incur interest charges on outstanding advances
based on an annual rate of prime plus 2%, and will be charged a
factoring commission of 0.75% of net sales. Initial proceeds
received under the new credit facility were used to repay all
outstanding principal and interest amounts due in connection
with the Company's previous working capital credit line which
expired on May, 1, 1995. Additional proceeds received by the
Company were used primarily for working capital purposes.
Pursuant to an amendment to the original agreement dated in
March 1996, Heller Financial will advance funds, up to a maximum
of $3.0 million, to the Company under an accounts receivable
factoring arrangement based on an 80% advance rate for domestic
receivables and 75% for certain foreign receivables. At March
31, 1996, the Company is not in compliance with certain
financial covenants of the amended credit facility with Heller
Financial. Heller Financial has the right to terminate this
agreement and the obligation shall mature and become due and
payable. The Company and Heller Financial have satisfactorily
concluded discussions for a further amendment to the agreement.
No assurances can be given, however, that the Company will be
successful in executing the amendment. In the event that a new
agreement cannot be obtained, the Company will be unable to
continue operations as currently structured.
Liquidity and Capital resources (cont.)
In March 1996 the Company renewed a $2.0 million loan from a
Mexican bank for its subsidiary in Monterrey, Mexico. The loan,
which is funded through an agency of the Mexican government to
support Mexican exports, bears interest at an annual rate of
14.0% and is due July 1, 1996. Upon application by the Company,
the bank, at its discretion, may approve a renewal of the loan
for further additional periods. Initial proceeds from the loan
were primarily used to manufacture finished goods for export to
the United States. Payment of principal and interest on the loan
is jointly and severally guaranteed by Alejandro Cabrera Robles,
a director of the Company and Chairman of Exportadora, and
Patrick Farrah, the Company's former Chairman.
As part of the sharing of expenses more fully described in the
discussion of selling general and administrative expenses and in
Note 3 to the financial statements, the Company owes
approximately $723,000 under the cost sharing arrangement with
Rooster Products. This related entity has been a significant
source of the Company's working capital needs.
The Company also purchased goods and services from several
subsidiaries of Exportadora totaling approximately $310,000 during
1996. The balance owed to these subsidiaries at March 31 is
approximately $266,000.
Part II - Other Information
Item 1: Legal Proceedings.
None, except as reported in the Company's 1995 10-K.
Item 2: Changes In Securities.
(a) None.
(b)None.
Item 3: Default Upon Senior Securities.
(a)At March 31, 1996 the Company was not in compliance
with certain financial covenants of the amended credit
facility with Heller Financial. Heller Financial has
the right to terminate this agreement and the obligation
shall mature and become due and payable. In March 1996
the Company was successful in satisfactorily amending
the original agreement. Under the terms of this
amendment, Heller Financial will advance funds up to a
maximum of $3.0 million at the current advance rate, and
selected financial covenants were established at a
mutually agreeable level. The Company and Heller
Financial have satisfactorily concluded discussions for
a further amendment to the agreement. No assurances can
be given, however, that the Company will be successful
in executing the amendment. In the event that a new
agreement cannot be obtained, the Company will be unable
to continue operations as currently structured
(b) None.
Item 4: Submission of Matters to a Vote of Securities Holders.
The Company has solicited proxies pursuant to Regulation
14 of the Securities and Exchange Act (Proxy Statement
dated May 6, 1996) for its Annual Meeting of
Shareholders on June 18, 1996.
Item 5: Other Information.
None.
Item 6: Exhibits and Reports on Form 8-K.
(a) None.
(b)None.
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.
M.G. PRODUCTS, INC.
Date: May 14, 1996 By: /s/ Juan Pablo Cabrera
Juan Pablo Cabrera
Chairman of the Board and
Chief Executive Officer
Date: May 14, 1996 By: /s/Ishmael D. Garcia
Ishmael D. Garcia
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $ 197,622
<SECURITIES> 0
<RECEIVABLES> 1,265,671
<ALLOWANCES> 153,000
<INVENTORY> 9,496,408
<CURRENT-ASSETS> 11,589,631
<PP&E> 4,511,893
<DEPRECIATION> 2,255,597
<TOTAL-ASSETS> $ 15,644,817
<CURRENT-LIABILITIES> 11,784,632
<BONDS> 0
0
0
<COMMON> 33,012,793
<OTHER-SE> (29,162,340)
<TOTAL-LIABILITY-AND-EQUITY> $ 15,644,817
<SALES> $ 5,665,558
<TOTAL-REVENUES> 5,665,558
<CGS> 4,916,497
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<EXTRAORDINARY> 0
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<NET-INCOME> (927,169)
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<EPS-DILUTED> (.09)
</TABLE>
