<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ........... to ........
Commission file number 33-47921-A
----------
TEXAS EQUIPMENT CORPORATION
(Name of small business issuer in its charter)
NEVADA 62-1459870
(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. Number)
1305 HOBBS HIGHWAY, SEMINOLE, TEXAS 79360
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 1-915-758-3643
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
NONE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period 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
----- ------
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
24,704,886
<PAGE> 2
Part I
ITEM 1. FINANCIAL STATEMENTS.
Financial statements are attached hereto and included herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERALLY
On September 17, 1996, the Company acquired Texas Equipment Co., Inc., an
authorized John Deere dealer with three facilities in southwest Texas and
headquartered in Seminole, Texas. Prior to the acquisition, the operations of
the Company were exclusively those of its multimedia subsidiary, Marinex
Multimedia Corporation. The discussion of results of operations has been
organized to review separately, where appropriate, the Company's Farm Equipment
Operations, the Multimedia Services operations and the consolidated totals.
During the period ending September 30, 1995, the Company was not engaged in
operations except for its search for a suitable acquisition candidate.
Therefore, comparisons to that period would not be meaningful.
RESULTS OF OPERATIONS
CONSOLIDATED BASIS
Compared to the three month period ended versus the same period of 1995, the
Company's revenues declined 3.6% to $5,826,9178 from $6,037,413. Losses for the
quarter increased approximately 25% from $(344,357) as opposed to $(274,547)
for the same period last year. Year to date losses show significant improvement
from last year as the current year to date losses total $(360,294) versus
$(430,370) for the same period last year. Much of these losses are attributable
to the failure of the multimedia operations to generate significant revenues
and its continued negative earnings. Texas Equipment losses from the third
quarter in 1996 contributed $(92,877) after tax benefits as compared to
$(101,843) for the same period of 1995. Third quarter earnings are typically
low as equipment sales suffer since this quarter falls between planting and
harvesting seasons. Revenues for the farm equipment operations in the third
quarter tend to be for smaller items, add on, and maintenance. Revenues were
helped by receipt of a one time cancellation payment of $55,238 received by the
multimedia subsidiary.
<PAGE> 3
Comparison of 3 Months ended September 30 1996 with 3 Months ended
September 30 1995.
For the three month period ending September 30, 1996, the Company showed
revenues of $5,826,918 as opposed to $6,037,413 for 1995, representing a nearly
4% decline. Gross profit declined as well, from $532,812 to $441,556. The loss
for the quarter increased from $(274,547) to $(344,357).
TEXAS EQUIPMENT CO., INC.
Texas Equipment Co., Inc. ("Texas Equipment") is a duly licensed retailer of
John Deere and farm equipment products with its headquarters in Seminole,
Texas. It has smaller facilities in Pecos and Plains, Texas and seeks to add
additional facilities by acquisition. The Company maintains an inventory of
tractors, cultivators, planters, sprayers and other farm equipment, as well as
parts, supplies and expendibles. Servicing is available at all locations.
Financing of equipment is largely conducted through the credit facilities of
John Deere & Company, although some financing is also available through
Agricredit.
The Company has enjoyed its best nine month period ending since its inception.
Current assets have improved to $9,252,385 from $6,917,097 at 1995 year end.
Total assets have improved by 25% to $12,034,614 from the end of last year.
Revenues to date have totaled $19,507,714 as compared to $25,031,608 for all of
1995. Gross profit for the nine month period was $2,557,917 as compared to
$2,244,719 for the same nine month period ending in 1995. The year has been
profitable so far with net income of $431,786 as compared to $253,399 for all
of 1995. The acquisition of the Texas Equipment Co., Inc. subsidiary was
consummated on September 17, 1996.
A Form 8-K has been filed as of November 21, 1996 which sets forth the 1994 and
1995 year end audits of the Texas Equipment Co., Inc. subsidiary and includes
unaudited figures for the nine month period ending September 30, 1996.
Results of Operations - Marinex Multimedia Corporation:
The Company concluded a merger accounted as a pooling of interests in
February 1996, accordingly such operations presented reflect the operations
of Marinex Multimedia Corporation and Hard Funding, Inc.
Marinex Multimedia Corporation is a digital content provider for the new
electronic media that are transforming today's entertainment and media
industries. Marinex has joined the digital revolution with its episodic
entertainment and on-line properties, developed for global distribution via
the Internet's growing World Wide Web and the expanding base of
CD-ROM-equipped computers. Descriptive information about the Company's core
products are set forth below.
<PAGE> 4
Trouble & Attitude is a CD-ROM-only magazine targeted to the upscale
18-to-44-year-old audience for whom the computer is emerging as a leading
entertainment and information medium. Trouble & Attitude was conceived as
a randomly accessible television- style magazine augmented by music,
speech, and text.
Distributors of Trouble & Attitude have included International Periodical
Distributors and Warner Publisher Services. Warner Publisher Services has
indicated that it no longer intends to distribute the magazine. Trouble &
Attitude was licensed in the United Kingdom by IDG Communications, Ltd. As
of the date of this filing, IDG Communications, Ltd., has terminated the
licensing agreement by payment to the Company of approximately $58,000.
This one time payment represents virtually all of the revenues for the
quarter. IDG has indicated that it no longer intends to be engaged in the
CD-ROM Magazine business. A quarterly publication, Trouble & Attitude is
also available on the Internet through a promotional site, Trouble &
Attitude On-Line (http://www.trouble.com).
The Biz (http://www.bizmag.com) features interviews with entertainment
industry personalities; downloadable movie trailers, celebrity soundbites,
and music videos; press releases from Entertainment Wire; weekly
entertainment columns, features, and reviews; the 24-hour Reuters/Variety
On-line Entertainment Report; and weekly statistics such as box office
grosses and television ratings.
Marinex's primary goal has been to create compelling original
entertainment properties which can be successfully branded and commerically
exploited in more traditional media such as television, books, and film.
Quarter ended September 30, 1996 compared to the Quarter ended September
30, 1995
Net revenue increased 76% to $72,104 in the quarter ended September 30,
1996 (the "1996 Quarter") compared to $40,811 for the quarter ended
September 30, 1995 (the "1995 Quarter"). The increase in revenues is
attributed to the release of the July CD-ROM magazine. During 1995 Quarter
the Company they began developing and promoting their two Internet
properties. Predominately most of the $40,811 in revenues in the 1995
Quarter came from the CD-ROM magazine. The Company has obtained sufficient
capital to fund the production of their on-line entertainment and media
properties as well as the CD-ROM magazine to produce such products on a
consistent basis in the future.
The expenses increased by 82% to $398,589 for the 1996 Quarter from
$218,237 for the 1995 Quarter primarily due to the increase in production
costs relating to The East Village, which is currently updated daily from
bi-weekly and general and administrative costs attributed to the Company
being a public entity and the increased volume of activity associated with
the three product. The Company continues to seek new business venues.
<PAGE> 5
In September 1996, the Company received a $55,238 settlement for the
release from a licensing arrangement with a Company in the United Kingdom
for the use of the Company's interactive media products.
Nine months ended September 30, 1996 compared to the nine months ended
September 30, 1995
Net revenue decreased 37% to $107,637 for the nine months ended September
30, 1996 (the "1996 Period") compared to $169,597 for the nine months ended
September 30, 1995 (the "1995 Period"). The decrease in revenues is
attributed to the lack of acceptance of their on-line entertainment and
media properties and the CD-ROM magazine. The sales of the CD-ROM magazine
have declined from issue to issue. Distributors have indicated a waning
interest in CD-ROM Magazines in general and one distributor has informed
the Company that they are not interested in distributing the next issue.
Predominately most of the $128,786 in revenues in the 1995 Period came from
the CD-ROM magazine. The 1996 Period revenues are primarily revenues from
the CD-ROM magazine and recently a marginal amount from its Internet
properties as advertising.
The expenses increased by 52% to $976,710 for the 1996 Period as compared
to $638,839 for the 1995 Period. The increase in expenses was can be
attributed to; an increase in advertising and marketing of $34,000,
increased production costs of $206,000 due to the hiring of key personnel
to for creating the on-line media/entertainment products and the CD-ROM
magazine on a consistent basis and positioning for growth due to pursuing
an increased number business venues and an increase general and
administrative costs of $100,000, due to being a public entity and
continuing to seek new business venues.
OUTLOOK
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Statements under the "Outlook" heading that are forward looking or relate to
future operating periods are subject to important risks and uncertainties that
could cause actual results to differ materially. Please see the cautionary
language at the end of the section.
FARM EQUIPMENT OPERATIONS
As a John Deere dealer, the fortunes of the Company's farm equipment operations
are necessarily tied to the performance of John Deere and Company, Inc.
("Deere") with respect to products, pricing and overall competitiveness. It is
not surprising, therefore,
<PAGE> 6
that the farm equipment operations have enjoyed its best 9 month period to date
in 1996 since the performance of Deere has been exceptional during that period
as well. According to Deere, growing worldwide demand for agricultural
commodities coupled with the existing low levels of world grain stocks have
resulted in strong prices for grains and oilseeds. Additionally, the new
"freedom to farm" bill has further strengthened United States farm income by
establishing substantial transition payments to participating farmers while
reducing restrictions on farm acreage utilization.
The Company hopes to capitalize on these factors in the Southwest Texas markets
as well. Located in the plains of west Texas, it is uniquely situated in farm
land producing the largest yields of cotton, peanuts, corn, onions, potatoes,
peppers, melons, and leafy vegetables. Management believes that it is the
largest distributor of peanut harvesting equipment in the country. Accustomed
to dry weather conditions, farm land in and around the permian basin is well
irrigated. The permian basin is also the home of much Texas oil and natural gas
production and the local economy is therefore somewhat more independent of the
economic fluctuations that are typical of farming operations. Although the
year has been dry, the timing of the rains alleviated the worst of the
potential problems so that many of the Company's customers are experiencing
bountiful harvests.
The NAFTA Treaty has provided expanding markets in Mexico, allowing Texas
Equipment to explore new markets for farm equipment and parts. As existing
equipment is replaced by newer, technologically advanced equipment, the lease
return and used equipment will become available for resale. The Company's
operations are relatively near the Mexican border and management has had
discussions with Mexican Deere dealers with regards to possible future business
arrangements, although there are no agreements or understandings to date.
In addition, technological changes in farm equipment may lead to a retooling
of the industry. In 1996 Deere's 9000 series combines began the use of a yield
mapping system. This "precision farming" capability links satellite derived
data with respect to "micro" areas (of just a few square yards). Factors such
as moisture content and crop yields are measured against onboard data derived
so that an entire field can potentially be maximized. Yields can and often do
vary widely within the same field. Corn yields, for example, may vary as much
as 100 bushels per acre. The satellite data is assessed and ultimately fed
into onboard computers built into the equipment for precise manipulation of
such factors as moisture, fertilizer and pesticide. Deere has indicated that
the same technology will likely be extended to tractors, planters and sprayers
as well in the near future.
To a lesser extent, management believes that changes in the macroeconomic
outlook for farming will positively affect the business. Farmer income
continues to improve and grain levels are near record lows. It is estimated
that food production will triple over the next thirty years. Pacific rim
incomes are rising at a time that major participants, such as China, are
shifting from a net exporter of grain to a substantial importer.
<PAGE> 7
Finally, management believes that the trends in the retail distribution of farm
equipment will be towards a consolidation of retail dealers as the capital cost
of maintaining inventories of parts and equipment continues to rise. A variety
of new programs, such as John Deere Personal Service (which permits the
customer to search for parts through a computerized database), signal a
substantial change in the historical methods of doing business. The ability of
"corner store" dealerships to effectively compete in these changing markets is
questionable. Management believes that growth opportunities through acquisition
will exist as the retail farm equipment industry consolidates and becomes more
global.
MULTIMEDIA OPERATIONS
All multimedia operations and activities are conducted through the New York
subsidiary, which is engaged in the business of creation of digital content,
including a CD-ROM-only magazine entitled "Trouble & Attitude"; a site on the
world wide web known generally as "The Biz Entertainment CyberNetwork"
(http://www/bizmag.com); and a site on the world wide web known generally as
"The East Village" (http://www/eastvillage.com). The web site properties can
also be accessed through Time-Warner's Pathfinder site.
Essentially, the Company's publishing operations are subject to two distinct
sets of risks: those associated with the publishing industry in general and
those associated with the Company's chosen means of distribution media. The
CD-ROM magazine "Trouble & Attitude" has now distributed three issues and
anticipates a fourth issue by the end of the next quarter. Distributor's
interest in CC-ROM magazines may be declining and at least one distributor,
Time Warner, has indicated that it has no further interest in distributing
Trouble and Attitude.
Although both distribution media, CD-ROM and the World Wide Web, are relatively
new and unproven means of distributing proprietary content based entertainment,
management believes that its products carry the obvious advantages of video
clip enhancement to articles, audio sampling of recent releases of established
recording artists, capability of downloading, hyperlinks to other sites of
interest, and immediate update. Also, these methods of delivery are
environmentally friendly and relatively inexpensive to produce and deliver to
vast numbers.
The approach used by the Company was to create Web delivered entertainment and
information. The East Village is a "cyber soap opera" through which it was
hoped that a regular audience could be cultivated. These persons would access
the site on an ongoing basis to obtain updates as to the story line and
characters. Unlike many Web applications, the content would be evolving and
dynamic from week to week. Once the audience was cultivated, its demographics
could then be used to sell advertising, products or services, or even
subscriptions. Management believes that such an audience is developing,
although at a slower than hoped for pace. Notwithstanding, recent newspaper
articles,
<PAGE> 8
including the Wall Street Journal, have questioned the near term viability of
the entire Internet advertising model.
Even allowing for the slow incubation of this market, revenues from the
Pathfinder site for the past quarter have been disappointing. Management of the
subsidiary has sought alternatives to the present arrangements but has not
obtained a satisfactory replacement. While web oriented business endeavors have
mushroomed over the past year, management is unaware of any content based
business, which is exclusively distributed through the world wide web, that is
presently profitable. Although the vast reach of the web obviously holds the
promise for practically limitless reach, it is uncertain as to when, or if,
content based website businesses in general or the Company's website
businesses in particular, will achieve profitability. The Company now is
considering ways to reallocate resources to more traditional and proven
entertainment and media business activities.
SAFE HARBOR CAUTIONARY STATEMENT
The Company's businesses include Farm Equipment sales and servicing in a
very limited and typically dry geographical area of Southwest Texas and
Multimedia Services including content based business including a CD-ROM
Magazine and content over the world wide web. Forward-looking statements
relating to the farm equipment business involve certain factors that are
subject to change, including: the many interrelated factors that affect
farmers' confidence, including demand for agricultural products, world grain
stocks, commodities prices, weather, animal diseases, crop pests, harvest
yields, real estate values and government farm programs; general economic
conditions; legislation relating to agriculture, products, the environment,
commerce and infrastructure; actions of competitors in the various industries
in which the Company competes; the ability to obtain adequate sources of supply
from John Deere & Company; the general competitiveness of John Deere & Company
with respect to new products, competitive pricing, and availability of parts
and supplies; ability to finance new and used equipment; interest and currency
exchange rates; accounting standards; and other risks and uncertainties. In
addition, the multimedia businesses are subject to many additional risks such
as the uncertainty of consumer acceptance of the Company's multimedia
properties or of world wide web oriented businesses in general; the expense of
maintenance of the businesses without present profitability or any assurance of
profitability at any time in the future; the risk that the content provided by
the Company will fall from favor by reason of shifting preferences, trends, or
fashions; the relatively unlimited potential for new multimedia, CD-ROM, or
world wide web entrants and new competitors for content based and non-content
based applications of multimedia on CD-ROM or the world wide web; the unproven
ability to generate advertising revenues or subscription, click through, or
visit revenues from the Company's products; the competitiveness of any content
based endeavor from existing and well financed print, radio, and television
media; the ongoing difficulty in procuring sufficient bandwidth, compression or
delivery of data over the world wide web; the uncertainty of the ability of
<PAGE> 9
the world wide wide to deliver prompt service as additional users load the
system; the abilities of management to adjust to and predict the shifting
trends in this new, uncertain and unproved industry; and the typical
uncertainties associated with any publication business. Further information
concerning the Company and its businesses, including factors that potentially
could materially affect the Company's financial results, is contained in the
Company's filings with the Securities and Exchange Commission.
MULTIMEDIA OPERATIONS
Long term continuation of these projects may require strategic partnerships or
joint venturing arrangements with larger, better established companies. With
the capital available to the Company, it is unrealistic to assume that the
projects could be continued beyond the next year without significant revenue
growth. The Web continues to be plagued by relatively slow transmission, ease
of entry, lack of a demonstrable and commercially viable Internet audience, and
technological limitations The Internet may be completely revamped in the next
few years, including streaming audio and streaming video applications, but
these advances may or may not benefit the traditional subscription and
advertising revenue models upon which the Company's properties and similar
businesses are based.
The Company generated an increase in cash of $793,000 for the 1996 Period
as compared to as decrease in cash of $15,000 for the 1995 Period. The
primary reason for the increase in cash for the 1996 Period was the
proceeds from sale of common stock.
The working capital position improved for the 1996 Quarter to $956,000 from
a working capital deficit for the 1995 Quarter of $167,000. The improvement
of the working capital position is primarily a result of the sale of common
stock as described hereafter.
In February 1996, the Company entered into a Reg S agreement for the sale
of 2,525,000 shares of common stock for $2,525,000 in installments through
May 1996. In addition, the Company received another $700,000 of funds from
the sale of 507,246 shares of common stock as of July 1996, pursuant to
different Reg S agreement.
During September 1996, the Company merged with Texas Equipment Co., Inc.,
through the issuance of common stock, which is accounted for as a pooling
of interest. The Company advanced $927,000 for TEC to actively pursue the
acquisition of other John Deere dealerships. The management discussion and
analysis will be updated for the financial information relating to TEC by
the filing of an amendment to this Form-10QSB.
The Company deems its present facilities and equipment adequate for its
immediate needs and it has no material commitments for capital
expenditures. The Company
<PAGE> 10
believes its present liquidity and cash flow are adequate for its current
needs. There can be no assurance, however, that additional financing,
whether from debt or equity, will be available to the Company when needed
on commercially reasonable terms, or at all.
The Company's management believes that inflation has not had a significant
impact on its business during the past two years.
Part II
ITEM 1. LEGAL PROCEEDINGS.
No legal proceedings to which the Company (or any of its officers or directors
in their capacities as such) is a party or to which the property of the Company
is subject is pending, and no such legal proceedings are known by Management to
be contemplated.
ITEM 2. CHANGES IN SECURITIES.
On September 17, 1996, the Company issued 16,850,000 shares of its authorized
but previously unissued common voting stock to the three pro rata shareholders
of Texas Equipment Co., Inc. in exchange for all of the issued and outstanding
shares of that company. In addition, the Company authorized an option to
purchase up to 250,000 common voting shares to its counsel, Charles Barkley,
for legal services in connection with the acquisition and confirmed an
agreement for the adoption of an Employee Stock Option Plan, reserving up to
475,000 shares of common voting stock to the employees of its subsidiary
Marinex Multimedia Corporation of New York, New York.
The Company also agreed to issue original issue of 507,246 shares of common
voting stock from its authorized but unissued shares to Varna Management, Inc.
to complete the purchases made by Varna Management, Inc. under a Subscription
Agreement which dated February 12, 1996 and which was amended on July 11, 1996.
As a result of these transfers, there are presently issued and outstanding
24,704,886 shares with an additional 725,000 shares committed for future
issuance. Since the authorized capital of the Company is 25,000,000 shares, an
increase in authorized capital will be required before such issuance will be
permitted.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
<PAGE> 11
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Company changed its name from "Marinex Multimedia Corporation" to
"Texas Equipment Corporation" on October 7, 1996 following the acquisition of
Texas Equipment Co., Inc. on September 17, 1996. The symbol on the NASD
Bulletin Board was also changed from "MRNX" to "TEXQ." As a result of the
acquisition, the Company now has two wholly owned subsidiaries: Marinex
Multimedia Corporation, a New York corporation with its offices at 110 Greene
Street, Suite 800, New York, New York, 10012 and Texas Equipment Co., Inc., a
Texas corporation, with its offices at 1305 Hobbs Highway, Seminole, Texas,
79360. A copy of the Acquisition Agreement has been included herewith as an
exhibit to this filing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Company caused a report to be filed on Form 8-K on or about September
25, 1996 and an amendment thereto on or about September 21, 1996.
<PAGE> 12
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.
TEXAS EQUIPMENT CORPORATION
By: /s/ Paul Condit
----------------------------------
President
Date: November 21, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Paul Condit
-------------------------------- President and
Paul Condit Director,
Chief Executive Officer
/s/ John Condit
-------------------------------- Secretary-Treasurer
John Condit and Director
Chief Financial Officer
</TABLE>
<PAGE> 13
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and Temporary Cash Investments $ 2,103,605 $ 338,567
Accounts Receivable
Trade 741,070 213,777
Employees and Other 120,889 14,051
Inventories 7,272,077 6,439,238
------------ ------------
TOTAL CURRENT ASSETS 10,237,641 7,005,633
----------- -----------
LAND, BUILDINGS AND EQUIPMENT, at cost 2,228,375 2,259,221
Less Accumulated Depreciation (837,245) (759,105)
------------ -----------
NET LAND, BUILDINGS AND EQUIPMENT 1,391,130 1,500,116
------------- -----------
OTHER ASSETS
Finance Receivables 839,694 693,674
Cash Surrender Value of Insurance 240,939 228,550
Other Assets 117,165 81,445
Goodwill 139,845 149,380
Related Party Receivables 132,018 117,542
------------- -----------
TOTAL OTHER ASSETS 1,469,661 1,270,591
------------- -----------
TOTAL ASSETS $ 13,098,432 $ 9,776,340
============ ===========
</TABLE>
(Continued)
F-1
<PAGE> 14
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 300,000 $ 300,000
Current Maturities of Long-Term Debt 267,130 371,447
Accounts Payable Trade
John Deere Company 3,769,240 3,096,801
Other 883,261 444,782
Accrued Expenses 423,066 559,118
Customer Deposits 72,035 -
Deferred Tax Liability
377,300 377,300
------------ -----------
TOTAL CURRENT LIABILITIES 6,092,032 5,149,448
LONG-TERM DEBT - net of current maturities 974,430 1,195,378
DEFERRED TAX LIABILITY 152,000 152,000
------------ -----------
TOTAL LIABILITIES 7,218,462 6,496,826
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock 24,692 21,360
Paid In Capital 3,772,412 814,994
Retained Earnings 2,082,866 2,443,160
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 5,879,970 3,279,514
------------ ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 13,098,432 $ 9,776,340
============ ===========
</TABLE>
F-2
<PAGE> 15
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Sept 30, Nine Months Ended Sept 30,
------------------------------ -------------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
REVENUES $5,826,918 $ 6,037,413 $19,615,351 $ 18,301,920
COST OF REVENUES 5,385,362 5,504,601 17,243,475 15,974,773
--------- --------- ---------- ----------
GROSS PROFIT 441,556 532,812 2,371,876 2,327,147
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 877,767 864,794 2,628,814 2,733,719
OTHER INCOME (EXPENSE)
Interest Income 49,289 31,724 137,979 155,595
Interest Expense (41,336) (55,002) (81,042) (187,613)
Licensing Fee Settlement 55,238 - 55,238 -
Other Income (Expense) (14,937) 25,713 15,566 43,220
---------- ---------- ---------- ----------
(LOSS) BEFORE INCOME TAXES (387,957) (329,547) (129,197) (395,370)
INCOME TAX BENEFIT (EXPENSE) 43,600 55,000 (231,097) (35,000)
---------- ---------- --------- ----------
NET (LOSS) $ (344,357) $ (274,547) $(360,294) $ (430,370)
========== ========== ========= ============
</TABLE>
F-3
<PAGE> 16
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------
1996 1995
----------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (Loss) $ (360,294) $ (430,370)
Adjustments to Reconcile Net (Loss)
to Net Cash from Operating Activities
Amortization and Depreciation 121,071 137,382
Increase in Finance Receivable (146,020) (151,977)
Changes in Current Assets and Liabilities
(Increase) in Accounts Receivable (634,131) (618,407)
(Increase) in Inventories (832,839) (479,192)
Increase in Accounts Payable 1,102,898 1,281,177
Increase in Accrued Liabilities 113,831 88,773
Increase in Customer Deposits 72,035 212,194
Increase (Decrease) in Due to Officers (240,000) 192,125
---------- ----------
NET CASH FLOW (USED) PROVIDED BY
OPERATING ACTIVITIES (803,449) 231,705
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Lands, Buildings and Equipment (53,706) (363,136)
Proceeds from Sale of Equipment 46,170 -
Increase in Cash Surrender Value of Insurance (12,389) (20,673)
(Increase) Decrease in Related Party Receivables (14,476) 60,662
(Increase) Decrease in Other Assets (32,975) 14,127
---------- ----------
NET CASH FLOWS (USED) BY
INVESTING ACTIVITIES (67,376) (309,020)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceed from Note Borrowings 410,657 717,839
Repayment of Note Borrowings (735,544) (882,721)
Sale of Common Stock 2,960,750 200,000
---------- ----------
NET CASH FLOW PROVIDED
BY FINANCING ACTIVITIES 2,635,863 35,118
---------- -----------
NET INCREASE (DECREASE) IN CASH 1,765,038 (42,197)
CASH AT THE BEGINNING OF THE PERIOD 338,567 555,066
---------- ----------
CASH AT THE END OF THE PERIOD $2,103,605 $ 512,869
========== ==========
</TABLE>
F-4
<PAGE> 17
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-B. They do not include all information and footnotes required by
generally accepted accounting principles. However, except as disclosed herein,
there has been no material change in the information disclosed in the notes to
financial statements included in the Form 10-KSB of Texas Equipment Corporation
and Subsidiaries (formerly Marinex Multimedia Corporation) (the "Company") for
the year ended December 31, 1995 or Form 8-K's dated February 12, 1996 and
October 2, 1996, disclosing the mergers as discussed below. Reference is made
to the Form 8-K's, since the surviving entity included pooled entities not
previously discussed. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for the fair
presentation have been included. Operating results for the nine month period
ended September 30, 1996, is not necessarily indicative of the results that may
be expected for the year ending December 31, 1996.
Note 2: Merger - Marinex
On February 12, 1996, Hard Funding, Inc. ("Hard"), pursuant to a letter of
intent, acquired Marinex Multimedia Corporation by issuing 4,000,000 shares of
its common stock to the shareholders of Marinex in exchange for all the issued
and outstanding shares of Marinex Multimedia Corporation. Subsequent to the
acquisition, Hard changed its name to Marinex Multimedia Corporation. The
merger is being accounted for as a pooling interest, accordingly the December
31, 1995, balance sheet has been restated for the merger.
Note 3: Merger - Texas Equipment
On September 17, 1996, the Company merged with Texas Equipment Co., Inc.
("TEC"), a distributor of John Deere farm machinery equipment in the
southwestern United States. Pursuant to the terms of the merger, the Company
issued 16,850,000 shares of common stock to the shareholders of TEC for all of
the outstanding shares of TEC. TEC is obligated to register the current
outstanding shares of the Company prior to the merger as part of the terms of
the merger. Subsequent to the acquisition of TEC, the Company changes its name
to Texas Equipment Corporation. The merger is being accounted for as a pooling
of interest. The December 31, 1995 financial statements have been restated for
the merger.
F-5
<PAGE> 18
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
(FORMERLY MARINEX MULTIMEDIA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4: Sale of Common Stock
In February 1996, the Company entered into a Regulation S agreement to sell
2,525,000 shares of common stock at $1.00 per share in installments through May
15, 1996. The Company received $2,525,000 for the sale of such common stock.
Such common stock sold pursuant to the Reg S agreement will have a six month
restriction from the date of the final installment sale of common stock for
purposes of reselling the common stock. The Company paid $252,500 in
commissions on the sale of such stock and issued 300,000 shares of common stock
to financial consultants relating to the raising of such equity funds.
The Company entered into another Regulation S subscription agreement for the
sale of 507,246 shares of common stock at $1.38 per share or $700,000. The
Company received $600,000 of such funds through June 30, 1996 and received the
remaining $100,000 in July 1996. Such common stock sold has a 12 month
restriction from the date of the final installment sale of the common stock for
purposes of reselling the stock. A $5,000 commission has been accrued on the
aforementioned transaction.
Note 5: Stock Option Plan
In July 1996, the Company adopted a Stock Incentive Plan ("1996 Plan"), whereby
475,000 shares of common stock have been reserved to be issued pursuant to the
stock option plan. The term of each option is five years. The Company has
proposed to issue 447,250 stock options to employees with an exercise price of
$4.00, except for the individuals owning more than 10% of the Company, whose
exercise price of such stock options would be 110% of noted share fair market
value upon issuance. All of the foregoing is subject to and contingent upon
the approval of the 1996 Plan by the Company's stockholders.
Note 6: Note Receivable
On September 30, 1996, the Company loaned $100,000 to a business consultant to
the Company. Such money was repaid on October 3, 1996.
F-6
<PAGE> 19
MARINEX MULTIMEDIA CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash $ 882,545 $ 88,914
Accounts receivable 2,711
Note receivable 100,000
-------------- ------------
TOTAL CURRENT ASSETS 985,256 88,914
INVESTMENT 927,613
MACHINERY AND EQUIPMENT, NET 70,702 50,250
OTHER 7,860 10,605
-------------- ------------
$ 1,991,431 $ 149,769
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payab $ 28,842 $ 16,859
Due to officers - 240,000
Payroll taxes payable 1,009 -
-------------- ------------
TOTAL CURRENT LIABILITIES 29,851 256,859
NOTES PAYABLE - SHAREHOLDERS - 100,000
STOCKHOLDERS' EQUITY:
Common shares - $.001 par value , 25,000,000 authorized
7,842,021 and 4,510,115 issued and outstanding 7,842 4,510
Additional Paid-in-Capital 3,189,434 232,016
Deficit (1,235,696) (443,616)
-------------- ------------
TOTAL STOCKHOLDERS' EQUITY 1,961,580 (207,090)
-------------- ------------
$ 1,991,431 $ 149,769
============== ============
</TABLE>
See notes to financial statements.
- 1 -
<PAGE> 20
MARINEX MULTIMEDIA CORPORATION
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
SALES $ 107,637 $ 169,597
EXPENSES
Production expenses 293,678 87,169
Advertising and marketing 49,294 15,575
General and administrative 625,093 531,957
Depreciation and amortization 8,645 4,138
---------- ----------
976,710 638,839
OTHER INCOME
Interest expense (5,250) -
Licensing fee settlement 55,238
Interest income 27,005 4,721
---------- ----------
Loss from continuing operations before taxes (792,080) (464,521)
Provision for income taxes - -
---------- ----------
NET LOSS $ (792,080) $ (464,521)
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,731,272 4,199,270
========== ==========
NET LOSS PER SHARE $ (0.12) $ (0.11)
========== ==========
</TABLE>
See notes to financial statements.
- 2 -
<PAGE> 21
MARINEX MULTIMEDIA CORPORATION
STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
SALES $ 72,104 $ 40,811
---------- ----------
EXPENSES
Production expenses 150,289 43,795
Advertising and marketing 528 14,735
General and administrative 244,854 158,143
Depreciation and amortization 2,918 1,564
---------- ----------
398,589 218,237
OTHER INCOME
Interest expense (1,750)
Licensing fee settlement 55,238
Interest income 21,517 4,721
---------- ----------
Loss from continuing operations before taxes (251,480) (172,705)
Provision for income taxes - -
---------- ----------
NET LOSS $ (251,480) $ (172,705)
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,842,021 4,254,920
========== ==========
NET LOSS PER SHARE $ (0.03) $ (0.04)
========== ==========
</TABLE>
See notes to financial statements.
- 3 -
<PAGE> 22
MARINEX MULTIMEDIA CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (792,080) $ (464,521)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 2,918 1,564
------------- ----------
(789,162) (462,957)
Change in assets and liabilities
(Increase) decrease in notes receivable (100,000) -
(Increase) in accounts receivable (2,711) -
Increase (decrease) in due to officers (240,000) -
Increase (decrease) in accounts payable and accrued liabilities 12,992 192,125
------------- ----------
(329,719) 192,125
NET CASH USED BY OPERATING ACTIVITIES (1,118,881) (270,832)
------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investment (927,613)
Decrease in other assets 2,745 6,128
Acquisition of equipment (23,370) (20,064)
------------- ----------
NET CASH USED BY INVESTING ACTIVITIES (948,238) (13,936)
------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans payable (100,000) 100,000
Sale of common stock 2,960,750 200,000
------------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,860,750 300,000
------------- ----------
NET DECREASE IN CASH 793,631 15,232
CASH AT BEGINNING OF PERIOD 88,914 46,603
------------- ----------
CASH AT END OF PERIOD $ 882,545 $ 61,835
============= ==========
882,545 61,835
</TABLE>
See notes to financial statements.
- 4 -
