-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYz7bDMGubop6Z5bjPkcrJ0l5PxItc2Q6nwDHmn/+8eVN5FlxPvd2Lo+LWQhVo45 GMQfuDTM7tJbwhuBlXV/pg== 0000863111-96-000009.txt : 19960517 0000863111-96-000009.hdr.sgml : 19960517 ACCESSION NUMBER: 0000863111-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MG PRODUCTS INC CENTRAL INDEX KEY: 0000863111 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 330098392 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18660 FILM NUMBER: 96564830 BUSINESS ADDRESS: STREET 1: 8154 BRACKEN CREEK CITY: SAN ANTONIO STATE: TX ZIP: 78266-2143 BUSINESS PHONE: 2106515288 MAIL ADDRESS: STREET 1: 8154 BRAKEN CREEK CITY: SAN ANTONIO STATE: TX ZIP: 78266-2143 FORMER COMPANY: FORMER CONFORMED NAME: CREST INDUSTRIES INC DATE OF NAME CHANGE: 19930328 10-Q 1 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 Part I - Financial Information Item 1. Financial Statements M.G. Products, Inc. and Subsidiaries Consolidated Balance Sheets
March 31, December 31, 1996 1995 (unaudited) Assets Current assets: 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
M.G. Products, Inc. and Subsidiaries Consolidated Balance Sheets
March 31, December 31, 1996 1995 (unaudited) Liabilities and Shareholders' 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 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.
M.G. Products, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)
For the three months ended March 31, 1996 March 31, 1995 (unaudited) 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.
M.G. Products, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
For the three months ended March 31, March 31, 1996 1995 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 See notes to condensed consolidated financial statements.
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 EX-27 2
5 3-MOS DEC-31-1996 MAR-31-1996 $ 197,622 0 1,265,671 153,000 9,496,408 11,589,631 4,511,893 2,255,597 $ 15,644,817 11,784,632 0 0 0 33,012,793 (29,162,340) $ 15,644,817 $ 5,665,558 5,665,558 4,916,497 1,505,670 0 0 151,769 (756,609) 0 (756,609) 0 0 0 (927,169) (.09) (.09)
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