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 March 31, 1997
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 .
Indicated below is the number of shares outstanding of
the registrant's only class of common stock, as of May
1, 1997.
Title of Class Number of Shares Outstanding
Common Stock, $1 Par Value 14,206,154
M. G. PRODUCTS, INC.
QUARTERLY REPORT FORM 10Q - MARCH 31, 1997
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements (Unaudited):
Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996 . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - Three
months ended March 31, 1997 and 1996 . . . . . . . 3
Consolidated Statements of Cash Flows - Three
months ended March 31, 1997 and 1996 . . . . . . 4
Notes to Consolidated Financial Statements . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 10
PART II.OTHER INFORMATION . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .. . 14
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
M.G. PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $42,759 $103,567
Accounts receivable:
Trade, net of allowance for
doubtful
accounts of $52,000 and $71,000 1,442,372 2,171,279
in 1997 and 1996, respectively
Related parties 316,477 379,786
Inventories:
Raw materials 2,124,516 2,471,307
Work-in-process 99,023 94,354
Finished goods 1,759,723 1,904,145
Total inventories 3,983,262 4,469,806
Prepaid expenses and other current 673,798 708,006
assets
Total current assets 6,458,668 7,832,444
Property and equipment at cost:
Machinery and equipment 1,258,441 1,325,560
Vehicles 61,777 54,905
Furniture and fixtures 699,777 702,561
Leasehold improvements 536,270 536,270
2,556,265 2,619,296
Less accumulated depreciation and
amortization (1,265,704) (1,208,416)
Net property and equipment 1,290,561 1,410,880
Inventory 1,129,676 887,179
Other assets 795,036 798,325
Investment in joint venture 857,895 770,789
Total assets $10,531,836 $11,699,617
Liabilities and Shareholders Deficit
Current liabilities:
Accounts payable $2,199,812 $2,594,710
Due to related parties 2,597,099 2,078,831
Accrued expenses and other current
liabilities 838,578 703,133
Reserve for restructuring and other
charges 184,591 613,083
Notes payable 4,106,469 4,064,683
Current portion of capital lease
obligations 9,969 38,209
Pre-petition liabilities 313,420 317,231
Total current liabilities 10,249,938 10,409,880
Revolving credit agreement 1,475,602 2,028,211
Commitments and contingencies
Shareholders deficit:
Common shares, no par value:
Authorized shares D 15,000,000
Issued and outstanding shares
14,206,154 35,015,935 35,015,935
Accumulated deficit (36,209,639) (35,754,409)
Total shareholders deficit (1,193,704) (738,474)
Total liabilities and shareholders
deficit $10,531,836 $11,699,617
<FN>
Note: The balance sheet at December 31, 1996 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>
<CAPTION>
M.G. PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Net sales $4,950,844 $5,665,558
Cost of sales 4,252,834 4,916,497
Gross profit 698,010 749,061
Costs and expenses:
Sales and marketing 214,688 501,882
General and administrative 834,929 1,003,788
1,049,617 1,505,670
Loss from operations (756,609) (351,607)
Other income (expense):
Interest expense, net (190,728) (151,769)
Equity in earnings (loss)
of subsidiary 87,105 (18,791)
(103,623) (170,560)
Net loss $(455,230) $(927,169)
Net loss per share $ (.03) $ (.09)
Number of shares used in
computing per share amounts 14,206,154 10,564,078
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
M.G. PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
March 31, March 31,
1997 1996
<S> <C> <C>
Cash provided by (used in)
operations: $400,599 $(48,546)
Investing activities:
Sale of property and equipment 77,656 -
Purchase of property and equipment - (26,503)
Cash provided by (used in)
investing activities 77,656 (26,503)
Financing activities:
Advances (payments) on notes
payable, net 41,786 (714,562)
Payments on revolving credit
facility, net (552,609) -
Payments on capital lease
obligations (28,240) (24,522)
Cash provided by (used in)
financing activities (539,063) (739,084)
Net decrease in cash (60,808) (814,433)
Cash at beginning of period 103,567 1,011,755
Cash at end of period $42,759 $197,622
<FN>
See notes to consolidated financial statements.
</TABLE>
M.G. PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Summary of Significant Accounting Policies
Basis of presentation
The accompanying unaudited 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,
1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
Description of Business
The Company has two wholly owned subsidiaries which operated
manufacturing facilities in Mexico. Productos M.G. S.A. de C.V.
(Productos M.G.) is located in Tijuana, Mexico, and Comercial
Electrica del Norte S.A. de C.V. (Comercial Electrica) is located
in Monterrey, Mexico. In December 1996, the Company ceased
production in its Tijuana manufacturing facility. Much of the
production from the Tijuana facility has been transferred to the
Company's Monterrey facility.
The Company is engaged in a single business segment, the
manufacture and wholesale distribution of lighting fixtures for
retail outlets primarily in the United States. The accompanying
consolidated financial statements include the accounts of the
Company and all wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Substantially all of the products manufactured by Comercial
Electrica were transferred to the U.S. entity for sale in the
United States.
Currently, the Company purchases raw materials from both American
and Mexican vendors. As of March 31, 1997, identifiable assets,
primarily raw materials and machinery and equipment, of
approximately $4,600,000 are located in Monterrey, 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 customerOs financial condition, and
collateral is generally not required.
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.
Pre-Petition Liabilities
During 1990, the Company was approved for reorganization pursuant
to ChapterE11 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
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123 Accounting for Stock Based
Compensation and elected to continue to use the intrinsic value
method in accounting for its stock option plans. The pro forma
effects of fair value accounting for compensation costs related
to options is not considered significant.
Advertising Costs
The Company expenses advertising costs as incurred. For the
first quarter ending March 31, 1997, co-op advertising expense
paid to the Company's customers and charged to sales and
marketing approximated $4,000.
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 as their effect
is anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At this time, the Company will be
required to change the method currently used to compute earnings
per share and to restate all prior periods. The impact of
Statement 128 on the calculation of the Company's earnings per
share for these quarters is not expected to be material.
Reclassification
Certain prior year amounts have been reclassified to conform to
the current year presentation.
2. Going Concern
In the first quarter of 1997, the Company announced that its
principal customer will substantially reduce its orders of the
Company's product. Management believes this decrease in sales
orders will significantly reduce sales revenue and hamper the
Company's efforts to return to profitability. In response to
this anticipated decrease in sales revenue, management is
developing plans to reduce production and administrative
expenses, as well as aggressively pursuing new sales
opportunities.
During the three years ended December 31, 1996, the Company
incurred substantial losses which negatively impacted cash flow
and caused liquidity shortages. Additionally, a significant
portion of the Company's trade payables are past due which caused
intermittent interruption in the receipt of certain raw
materials, having a negative effect on the Company's ability to
meet customers 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 goods inventory and the Company may be liable for
significant additional rent expense.
Due to its cash flow shortages, the Company continues to have
difficulty obtaining long-term financing. In July 1996 the
Company obtained a new revolving credit facility with a different
financing company. Under the revolving credit agreement,
advances are limited to certain portions of the Company's
accounts receivable and inventory. The Company's additional
borrowings consist of a $2,000,000 note to a Mexican bank which
is renewed on a 90 day basis at the discretion of the lender (see
note 5), and a $2,000,000 note to a U.S. bank which is presently
guaranteed by certain interested parties and is due on demand or
if no demand is made, on May 31, 1997. Management does not
expect the guarantees to be renewed and therefore the note is
unlikely to be extended on its due date causing a further
liquidity shortage and potentially affecting the Company's
relationship with its customers.
In addition to the above borrowings, the Company has relied on
advances from its major shareholders and parties related to such
shareholders to provide for financing and working capital. The
Company is continuing to pursue alternative means of financing,
development of new products and alternative markets for certain
inventory and, as described in Note 3, is restructuring its
operations to eliminate excess manufacturing capacity in order to
achieve more efficient distribution and manufacturing processes.
There is a substantial doubt about the Company's ability to
continue if cash shortages continue to exist. The Company must
continue to renegotiate its current borrowing arrangements or
find new sources of financing, must find new markets for much of
its inventory, must successfully negotiate the termination of
certain leases, and must achieve manufacturing and distribution
efficiencies. 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. Certain Related Party Transactions
C&F Alliance LLC
In the second quarter of 1995, the Company moved its corporate
offices to San Antonio, Texas and formed C&F Alliance LLC ("the
Alliance") with Rooster Products International Inc. ("Rooster
Products"), the United States marketing and distribution
subsidiary of Exportadora Cabrera S.A. de C.V. ("Exportadora")
which, in December 1994, became a shareholder of the Company.
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 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. At
MarchE31, 1997, the Company owed the Alliance $1,299,000 for
unreimbursed expenses.
The following presents summary financial information of the
Alliance for the period ending March 31, 1997 and 1996.
<TABLE>
<CAPTION>
March 31,
1997 1996
<S> <C> <C>
Sales and marketing expenses $447,000 $621,000
General and administrative expenses 1,272,000 1,137,000
Less: Amounts billed to M.G. Products, Inc. (745,000) (883,000)
Amounts billed to Rooster Products Int'l (974,000) (875,000)
Net income $ 0 $ 0
</TABLE>
Exportadora and subsidiaries
The Company also purchased goods and services from Exportadora
and several of its subsidiaries totaling approximately $1,408,000
during 1997. The balance owed to Exportadora and these
subsidiaries at March 31, 1997, is approximately $714,000
4. Commitments & Contingencies
In December 1996, production at the Company's manufacturing plant
in Tijuana ceased, concurrent with a strike of the workers union
at this location. The workers were then laid off in a manner
consistent with Mexican law. This facility was operated by the
Company's wholly owned subsidiary, Productos M.G. The decision
was made to close the Productos M.G. plant since the Company has
been unsuccessful in reducing plant overhead to an acceptable
level, and because of reduced sales volumes which reduced the
economic viability of maintaining two separate production
facilities.
Productos M.G. had previously ceased making payments on the lease
for the production facility in 1995 and the lessor of the
facility has filed suit in Mexican courts for non-payment of
rent. The Company has filed a countersuit alleging impropriety
of the dollar-based contract under Mexican law. The Company has
accrued rent totaling $437,000 recorded in accounts payable
related to this matter, and does not expect to have to pay an
amount in excess of the accrual. However, 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.
The legal proceeding in Mexico related to the closing of the
Tijuana plant and the ultimate disposition of its assets and
liabilities has not yet been resolved, and may not be resolved in
the near term. Therefore, uncertainty exists as to whether the
plant and equipment and inventory in the possession of the union
will fully satisfy the payroll related liabilities to the workers
and the union. Their can be no assurances that future claims
will not be made against the Company or Productos M.G., or that
the Mexican courts may not reinstate certain payroll related
liabilities or require additional payments to the workers.
The Company ceased distribution from its Memphis warehouse and is
in negotiations with the lessor and a leasing agent to sub-lease
the warehouse. The Company has accrued rent of $105,000 through
April 1997; however the lease term extends through May 31, 2001,
representing an additional rental contingency of $855,000. The
ultimate resolution of this matter, which is expected to occur
within one year, is not expected to result in a loss in excess of
the Company's accrual which is included in the reserve for
restructuring in other charges. However, there can be no
assurance that the Company will be successful in obtaining a sub-
lease, or that a loss greater than the current accrual will not
be incurred.
In the normal course of business, the Company is named in various
legal actions. The Company does not believe these actions will
have a material adverse effect on the CompanyOs financial
position or results of operations.
5. Notes Payable
The Company renewed a $2.0 million loan from a Mexican bank for
its subsidiary in Monterrey. The loan, which is funded through
an agency of the Mexican government to support Mexican exports,
currently bears interest at an annual rate of 11.875% and is due
June 30, 1997. 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
guaranteed by Alejandro Cabrera Robles, a director of the Company
and Chairman of Exportadora.
In January 1997, Exportadora advanced the Company $315,000 for
working capital purposes. This advance bears interest at 12%,
with principal and accrued interest due December 31, 1997. The
balance of this advance has been included in the balance sheet in
Due to Related Parties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company has incurred substantial losses in the past four
years, including a loss of $455,000 for the quarter ended March
31, 1997. Management is attempting to raise additional capital
to fund its ongoing operations. While management believes it
will be successful, there are no assurances that sufficient funds
will be available to meet the Company's requirements to fund
operations and scheduled repayments of current debt through 1997.
In the first quarter of 1997, the Company announced that its
principal customer will substantially reduce its orders of the
Company's product. Management believes this decrease in sales
orders will significantly reduce sales revenue and hamper the
Company's efforts to return to profitability. In response to
this anticipated decrease in sales revenue, management is
developing plans to reduce production and administrative
expenses, as well as aggressively pursuing new sales
opportunities. The full effect in the reduction of this
customer's orders will not be known until all remaining orders
have been filled and shipped.
Results of Operations
The following are the Company's financial and operating
highlights for the three months ended March 31, 1997 and 1996.
The 1996 amounts of operating revenues and operating income
(loss) have been restated to conform to the 1997 presentation.
The items in the table are expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
For the three months ended
March 31, March 31,
1997 1996
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of sales 85.9% 86.8%
Gross profit 14.1% 13.2%
Costs and expenses:
Selling 4.3% 8.9%
General and administartive 16.9% 17.7%
21.2% 26.6%
Loss from operations (7.1%) (13.4%)
Interest expense, net (3.9%) (2.7%)
Equity in earnings
(loss) of subsidiary 1.8% (0.3%)
Net Loss (9.2%) (16.4%)
</TABLE>
Three months ended March 31, 1997 compared to March 31, 1996
Net sales in the first quarter of 1997 were approximately $5.0
million. This represents a decrease of $715,000, or 12.6%, from
the first quarter of 1996. The decrease in sales is attributable
primarily to a reduction in the size of the Company's customer
base both in terms of number of customers and a decline in the
number of the Company's products placed with remaining customers.
This resulted in decreases in unit volumes of all product
categories sold by the Company. Reductions in sales can also be
attributed to certain customers eliminating purchases of some or
all of the Company's products due to the Company's inability to
ship orders at acceptable fill rates on a timely basis as a
result of continued cash flow and liquidity shortages.
Cost of sales in the first quarter of 1997 were approximately
$4.3 million. This represents a decrease of $664,000 or 13.5%
from the first quarter of 1996. The Company has made changes in
products, is updating bills-of-material, made management changes
in the manufacturing facilities, and is making other changes to
overhead and distribution activities to eliminate inefficiencies
in the production process. The Company continues to improve
gross margins at its Mexican based production facility.
Selling expense in the first quarter of 1997 decreased by
$287,000 to approximately $215,000, or 57.2%, from the first
quarter of 1996. General and administrative expenses in the
first quarter of 1997 decreased by approximately $169,000, to
approximately $835,000, or 16.8% from the first quarter of 1996.
These reductions in expenses are 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.
Interest expense in the first quarter of 1997 increased by
$39,000 to approximately $191,000, or 25.7% from the first
quarter of 1996. This increase is attributable to the Company's
continuing cash flow problems and subsequent need to borrow funds
for the payment of operational expenses.
Income from equity in earnings of subsidiary of $87,000 in 1997
relates to the Company's share of the estimated 1997 earnings of
Crest Fan Industries Taiwan, Ltd., in which the Company acquired
a 49.5% interest in 1993.
As a result of the foregoing operational results, the Company's
net loss decreased to $(455,000), or $(0.03) per weighted average
share during the first quarter of 1997 compared to $(927,000), or
$(0.09) per weighted average share in the first quarter of 1996.
Liquidity and Capital resources
The opinion of the Company's independent auditors which
accompanies the Company's consolidated financial statements for
the period ended December 31, 1996 contains a "going concern"
uncertainty emphasis paragraph due to the Company's continued
losses and concerns for the Company to generate sufficient cash
to provide for its operation in both the near and long-term. As
discussed below, the Company obtained additional debt financing
and finalized a new working capital credit facility during 1996.
The Company initiated a series of restructuring efforts during
1995 and 1996 designed to improve operating results and cash flow
from operations. During 1995, management began to actively seek
prepayment terms in exchange for prepayment discounts from its
customers on new orders. Pursuant to this policy, the Company
was successful in obtaining significant prepayments from its
principal customer. The Company stopped receiving such advances
in April 1996. There can be no assurance, however, that the new
financing arrangements will be sufficient or that the
restructuring plan will be successful in improving operating
results in the long term.
During the quarter ended March 31, 1997, the Company's operating
results were negatively impacted by cash flow and liquidity
shortages. At March 31, 1997, the Company had a working capital
deficit of $3.8 million compared to working capital deficit of
$2.6 million at December 31, 1996. The primary cause for the
decrease in working capital was the combined reduction in
accounts receivable and current inventory balances of
approximately $1.2 million .
In January 1997, Exportadora advanced the Company $315,000 for
working capital purposes. This advance bears interest at 12%,
with principal and accrued interest due December 31, 1997.
The Company's current ratio and quick ratio at March 31, 1997
were 0.63:1 and 0.18:1, respectively, compared to 0.98:1 and
0.11:1, respectively, at March 31, 1996. The decreases in the
Company's working capital and working capital ratios during 1997
resulted primarily from continued operating losses incurred
during the year. A portion of its trade payables were outside
their stated terms. This situation has caused an interruption in
the shipment of certain raw materials and has had a negative
effect on the Company's results of operations.
In May 1996, the Company obtained a $2.0 million working capital
loan from Morgan Guaranty Trust. The note is due on demand, or
if no demand is made on May 31, 1997. The interest rate on this
loan is prime (8.50% at March 31, 1997). The loan is guaranteed
by interested third parties. The Company does not expect the
guarantees to be renewed and therefore the note is unlikely to be
extended on its due date causing a further liquidity shortage.
Replacing this financing is critical to the Company's working
capital needs.
In July 1996, the Company finalized a new long-term credit
agreement with The CIT Group, a commercial finance company. The
CIT Group agreed to advance up to $4.5 million to the Company
based on an 80% advance rate for eligible accounts receivable,
and 50% for eligible inventory. Advances are collateralized by
all of the Company's accounts receivable and inventory, as well
as by its equipment. Advances bear interest at an annual rate of
prime plus 1.5% (10.00% at March 31, 1997). The Company's
obligations under this agreement are guaranteed by Rooster
Products and the Alliance. Initial proceeds under the new credit
agreement were utilized to pay-off the outstanding balance due
Heller Financial. Subsequent proceeds received by the Company
were used for working capital purposes. The balance on this
credit facility was $1,476,000 at March 31, 1997. All
outstanding amounts under this facility are due in July 1999.
In July 1996 CIT also finalized a long-term $10 million credit
agreement with Rooster Products which is guaranteed by
Exportadora and the Alliance. Both credit agreements with CIT
contain cross default provisions. Exportadora, Rooster Products,
and the Alliance have subordinated their claims on the Company to
CIT's claims.
In March 1997, the Company renewed a $2.0 million loan from a
Mexican bank for its subsidiary in Monterrey. The loan, which is
funded through an agency of the Mexican government to support
Mexican exports, currently bears interest at an annual rate of
11.875% and is due June 30, 1997. 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.
As part of the cost sharing arrangement with Rooster Products
more fully described in Note 3 to the financial statements, the
Company owes the Alliance approximately $1,299,000 at March 31,
1997. This related entity has been a significant source of the
Company's working capital needs.
The Company is currently in discussion with other potential
lenders to provide for its short and long term working capital
needs. While management believes it will be successful, there
are no assurances that sufficient funds will be available to meet
the Company's requirements to fund operations and scheduled
repayments of current debt through 1997.
Part II - OTHER INFORMATION
Item 1: Legal Proceedings.
None, except as reported in the Company's 1996 10-K.
Item 2: Changes In Securities.
(a) None.
(b)None.
Item 3: Default Upon Senior Securities.
(a)None.
(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 12, 1997) for its Annual Meeting of
Shareholders on June 19, 1997.
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.
(Registrant)
Date: May 14, 1997 By: /s/ Juan Pablo Cabrera
Juan Pablo Cabrera
Chairman of the Board and
Chief Executive Officer
Date: May 14, 1997 By: /s/ Eric Williams
Eric Williams
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
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0
0
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</TABLE>
