FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: October 31, 2000
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from: August 1, 2000 to: October 31, 2000
Commission file number 0-28313
RHINO ECOSYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0939751
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
40 Trowers Road, Woodbridge, Ontario, Canada L4L 7K6
(Address of principal executive offices)
(905) 264-0198
(Issuer's telephone number)
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 |_|
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
At April 30, 2000 there were 6,525,539 shares of common stock, $.0001 par value,
outstanding of a total authorized 25,000,000 shares.
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RHINO ECOSYSTEMS, INC.
Page
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PART I FINANCIAL INFORMATION
Item 1 - Interim Consolidated Financial Statements . . . . . . . . . 3
Interim Consolidated Balance Sheet as of October 31, 2000
(unaudited), . . . . . . . . . . . . . . . . . . . . . . . . 4
Interim Consolidated Statement of Operations
for the three months ended October 31, 2000 (unaudited),. . .5
Interim Consolidated Statement of Shareholder`s Equity
(Deficiency) Comprehensive Loss for the three months ended
October 31, 2000 (unaudited), . . . . . . . . . . . . . . 6
Interim Consolidated Statement of Cash Flows for the three
months ended October 31, 2000 (unaudited), . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . 11
Item 6 - Exhibits and Reports on Form . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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PART I. Financial Information
Item 1. Financial Statements
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted from the following
financial statements pursuant to the rules and regulations of the Securities
Exchange Commission. It is suggested that the following financial statements be
read in conjunction with the year-end consolidated financial statements and
notes thereto included in the Company's registration statement on Form 10-SB for
the year ended July 31, 2000.
The results of operations for the first quarter period (August 1, 2000 to
October 31,2000) are not necessarily indicative of the results to be expected
for the entire fiscal year or for any other period.
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Interim Consolidated Financial Statements
(Stated in United States dollars)
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Three months ended October 31, 2000
(Unaudited)
<PAGE>
<TABLE>
<CAPTION>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Balance Sheet
(Stated in United States dollars)
-----------------------------------------------------------------------------------------------------------------------------
October 31, July 31,
2000 2000
<S> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets:
Cash $ 2,181 $ -
Accounts receivable 21,704 14,896
Goods and services tax recoverable 9,170 11,600
Investment tax credits recoverable - 33,054
Inventory 204,526 202,775
Prepaid expenses and deposits 13,496 14,508
-----------------------------------------------------------------------------------------------------------------------------
251,077 276,833
Fixed assets 84,058 112,718
Patent 96,874 98,159
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$ 432,009 $ 487,710
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Liabilities and Stockholders' Deficiency
Current liabilities:
Bank indebtedness $ - $ 8,806
Accounts payable and accrued liabilities 242,946 344,004
Loans payable 191,672 -
Due to related parties 65,058 120,141
Current portion of deferred revenue 2,404 2,461
Current portion of long-term debt 20,525 21,015
-----------------------------------------------------------------------------------------------------------------------------
522,605 496,427
Deferred revenue 8,213 11,486
Long-term debt 100,917 108,580
Stockholders' deficiency:
Share capital 1,661,704 1,661,704
Deficit accumulated during development stage (1,865,216) (1,787,389)
Accumulated other comprehensive loss 3,786 (3,098)
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(199,726) (128,783)
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$ 432,009 $ 487,710
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</TABLE>
See accompanying notes to interim consolidated financial statements.
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<TABLE>
<CAPTION>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statement of Operations
(Stated in United States dollars)
Three months ended October 31, 2000 and 1999 and cumulative from inception on
June 7, 1996 to October 31, 2000 (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
Cumulative
total from
inception on
June 7, 1996 to
2000 1999 October 31, 2000
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and other income $ 47,114 $ 43,619 $ 250,054
Expenses:
Cost of goods sold (excluding
amortization of fixed assets) 10,622 5,922 89,716
Marketing 8,704 22,117 545,105
Professional and consulting fees 15,257 22,227 389,978
Amortization of fixed assets 27,941 22,731 263,424
Office salaries, benefits and
services 28,507 5,143 284,705
Rent 9,134 8,593 139,058
Research and product
development 3,309 740 109,071
Telephone 2,833 4,339 38,951
Office and general 4,523 6,725 70,810
Bank charges and interest 5,174 601 47,751
Interest on long-term debt 3,242 3,276 37,099
Travel and promotion 3,474 246 79,278
Utilities 651 507 10,416
Royalties 883 - 4,688
Insurance 687 121 5,220
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124,941 103,288 2,115,270
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Loss for the year $ 77,827 $ 59,669 $ 1,865,216
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Loss per common share $ 0.01 $ 0.01 $ 0.52
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Weighted average number of
common shares outstanding 6,525,539 6,525,539 3,621,167
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</TABLE>
See accompanying notes to interim consolidated financial statements.
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<TABLE>
<CAPTION>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statement of Stockholder's Equity (Deficiency) and Comprehensive Loss
(Stated in United States dollars)
Three months ended October 31, 2000 and 1999 and cumulative from inception on
June 7, 1996 to October 31, 2000 (Unaudited)
Deficit
accumulated Accumulated
Common Shares during other
-------------------------
Number of Stated development comprehensive Comprehensive
Shares value stage income (loss) Total income (loss)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares issued on
incorporation 100 $ 73 $ - $ - $ 73
Loss for the twelve months - - (82,467) - (82,467) $ (82,467)
Foreign currency
translation adjustment - - - 682 682 682
----------------------------------------------------------------------------------------------- ------------
$ (81,785)
Balance, July 31, 1997 100 73 (82,467) 682 (81,712)
Shares issued for:
Cash 4,746,729 609,117 - - 609,117
Services 20,000 14,015 - - 14,015
Cash and conversion
of loans 758,710 157,871 - - 157,871
------------------------------------------------------------------------------------------
5,525,439 781,003 - - 781,003
Less share issue costs - (44,689) - - (44,689)
-------------------------------------------------------------------------------------------
5,525,439 736,314 - - 736,314
-----------------------------------------------------------------------------------------------
Loss for the twelve months - - (366,151) - (366,151) $ (366,151)
Foreign currency
translation adjustment - - - (14,072) (14,072) (14,072)
------------------------------------------------------------------------------------------------ -------------
$ (380,223)
Balance, July 31, 1998 5,525,539 736,387 (448,618) (13,390) 274,379
Loss for the twelve months (632,698) - (632,698) $ (632,698)
Foreign currency
translation adjustment 7,946 7,946 7,946
----------------------------------------------------------------------------------------------- ------------
$ (624,752)
Balance, July 31, 1999 5,525,539 736,387 (1,081,316) (5,444) (350,373)
Loss for the three months (59,669) $ (59,669)
Foreign currency
translation adjustment 586 586
----------------------------------------------------------------------------------------------- ------------
$ (59,083)
Balance, October 31,1999 5,525,539 736,387 (1,140,985) (4,858) 409,456
Loss for the period
November 1, 1999 to
July 31, 2000 - - (646,404) - (646,404) (646,404)
Recapitalization 1,000,000 925,317 - - 925,317
Foreign currency
translation adjustment - - - 1,760 1,760 1,760
----------------------------------------------------------------------------------------------- ------------
$ (644,644)
Balance, July 31, 2000 6,525,539 1,661,704 (1,787,389) (3,098) (128,783)
Loss for the three months - - (77,827) $ (77,827)
Foreign currency
translation adjustment - - - 6,884 - 6,884
------------
$ (70,943)
--------------------------------------------------------------------------------------------------------------
Balance, October 31, 2000 6,525,539 $ 1,661,704 $ (1,865,216) $ 3,786 $ (199,726)
--------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to interim consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Interim Consolidated Statement of Cash Flows
(Stated in United States dollars)
Three months ended October 31, 2000 and 1999 and cumulative from inception on
June 7, 1996 to October 31, 2000 (Unaudited)
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Cumulative
total from
inception on
-----------------------------------------------------------------------------------------------------------------------------
June 7, 1996 to
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 October 31, 2000
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Loss for the period $ (77,827) $ (59,669) $ (1,865,216)
Adjustments to reconcile loss for the year to net cash:
Amortization of fixed assets 27,941 22,731 263,424
Accounts receivable (6,808) (41,745) (21,704)
Goods and services tax recoverable 2,430 912 (9,170)
Inventory (1,751) (12,169) (204,526)
Prepaid expenses and deposits 1,012 (1,727) (13,496)
Accounts payable and accrued liabilities (101,058) (119,094) 242,946
Due to related parties (55,083) 11,646 65,058
Deferred revenue (3,330) - 10,617
Other 4,362 - 4,362
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(210,112) (199,115) (1,527,705)
Financing:
Bank indebtedness repaid (8,806) (21,931) -
Proceeds from loans payable 191,672 - 191,672
Proceeds from long-term debt - - 165,355
Principal payments on long-term debt (8,153) (5,182) (43,913)
Advances from Rhino U.S. - 613,371 925,317
Issuance of share capital - - 710,994
Share issue costs - - (44,689)
Loans payable - - 70,082
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174,713 586,258 1,974,818
Investments:
Expenditures on fixed assets (1,405) (21,089) (449,240)
Expenditures on patent (953) (281) (99,112)
Investment tax credits 33,054 - 99,634
-----------------------------------------------------------------------------------------------------------------------------
30,696 (21,370) (448,718)
Other:
Foreign currency translation adjustment 6,884 586 3,786
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
Increase in cash 2,181 366,359 2,181
Cash, beginning of period - - -
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Cash, end of period $ 2,181 $ 366,359 $ 2,181
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</TABLE>
See accompanying notes to interim consolidated financial statements.
7
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Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Notes to Interim Consolidated Financial Statements
(Stated in United States dollars)
Three months ended October 31, 2000
(Unaudited)
1. Nature of business:
Rhino Ecosystems, Inc. (the "Company") is incorporated under the laws of
the State of Florida. The Company is considered to be a development stage
company, as from inception, the Company and its wholly owned subsidiary
have been primarily engaged in developing the manufacturing process for a
wet waste interceptor and has had no significant revenue derived from
operations.
2. Basis of presentation:
(a) The financial information presented in the interim consolidated
financial statements is unaudited and was prepared in accordance
with accounting principles and practices generally accepted in the
United States of America consistent with those used and described in
the annual financial statements for the year ended July 31, 2000.
However, such financial information reflects all adjustments,
consisting solely of normal recurring adjustments, necessary to a
fair presentation of the period presented.
These unaudited interim consolidated financial statements should be
read in conjunction with the notes to the Company's audited
consolidated financial statements for the year ended July 31, 2000.
(b) Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. Intercompany balances and
transactions are eliminated on consolidation.
(c) Future operations:
These interim consolidated financial statements have been prepared
assuming the Company will continue as a going concern
notwithstanding the Company has suffered recurring losses since
inception and has negative working capital and a net capital
deficiency that raise substantial doubt as to its ability to
continue as a going concern. The application of the going concern
concept which assumes the realization of assets and liquidation of
liabilities in the normal course of business, is dependent on the
Company's ability to attain profitable operations and obtain
sufficient cash from external financing to meet the Company's
liabilities and commitments as they become payable. Management is of
the opinion that sufficient working capital will be obtained from
operations and external financing to meet the Company's liabilities
and commitments as they become payable.
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Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)
Notes to Interim Consolidated Financial Statements (continued)
(Stated in United States dollars)
Three months ended October 31, 2000
(Unaudited)
2. Basis of presentation (continued):
However, no additional financing sources have been contracted to
October 31, 2000 and there can be no certainty as to the
availability of such financing in the future. Failure to identify
additional financing in the near term may require the Company reduce
its operating activities. A failure to continue as a going concern
would then require that stated amounts of assets and liabilities be
reflected on a liquidation basis which could differ from the going
concern basis.
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Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
The following discussion and analysis of the Company's consolidated financial
condition and results of operation for the fiscal year ended July 31, 2000, and
quarter ending October 31, 2000, should be read in conjunction with the
Company's consolidated financial statements included elsewhere herein. When used
in the following discussions, the words "believes," "anticipates," "intends,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause results to differ materially from those projected.
General Discussion of the Company
The Company is primarily engaged in the design, development, assembly, marketing
and sale of a unique patented wet waste interceptor plumbing product called the
RINO(TM) System. During the fiscal years July 31, 2000 ("fiscal 2000"), as well
as prior years, the Company's management has concentrated its time and efforts
on ensuring that the Rhino wet waste interceptor product line be designed and
developed into a product line that can be manufactured efficiently and
consistently to meet a wide variety of end users needs.
During fiscal 2000, the Company started aggressive sales and marketing program
throughout North America. The Company has attended hospitality, restaurant and
plumbing related trade shows aimed at increasing the public's awareness of the
Company's patented wet waste interceptor product line and to attract new
dealers/distributors for the product line.
During this time period, the Company attended trade shows in Toronto, Myrtle
Beach, Nashville, Vancouver, Moncton, New York, Boston, and Chicago. The Company
is concentrating on the hospitality and food service market sector as this is a
market area that can realize an immediate savings from the installation of a
Rhino Wet Waste Interceptor.
To aid in qualifying the show attendance at the Rhino booth at these various
trade shows, a telemarketing/sales team within the Company is being used to
promote its product line before and after each show. Rhino dealers/distributors
have been established in the Bahamas, Hawaii, Nova Scotia, British Columbia,
metro Toronto and Montreal, Quebec City, Upstate New York, New Jersey, Bermuda,
Niagara Falls, Florida, Kentucky, and Winnipeg as a result of this sales and
marketing campaign. Additional dealer/distributor locations are in the final
stages of completion.
The Company intends to continue this sales and marketing approach to raise the
general public's awareness of the Rhino wet waste interceptor product line and
to obtain a distribution network of exclusive and non-exclusive dealers. The
Company intends to supply quality, manufactured product line to a professionally
trained and dedicated dealer network.
As of the end of fiscal 2000, the Company has had no significant revenue derived
from operations. The Company's cumulative net loss to the end of the quarter
ended October 31,2000 totals $1,865,216. The Company intends to enlarge the
dealership base and resulting sales throughout the remainder of fiscal 2001.
Liquidity and Capital Resources
During the past three fiscal years, the Company has financed its operations
primarily through cash provided through various short and long term credit
facilities and through the private sale of its securities pursuant to applicable
offering exemptions. Company's management believes that sufficient funds will be
raised from future operations so as to minimize the need for future equity
capitalization.
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In addition, management of the Company believes the needs for additional capital
going forward will be derived somewhat from internal revenues and earnings
generated from the sale of its products and services. If the Company is unable
to begin to generate revenues from its anticipated products, management believes
the Company will need to raise additional funds to meet its cash requirements.
This document and other documents filed by the Company with the Securities and
Exchange Commission (the "SEC") contain certain forward-looking statements under
the Private Securities Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to certain
risks and uncertainties, including those mentioned above, which may cause actual
results to differ significantly from these forward-looking statements. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be necessary to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. An investment in the Company involves various risks,
including those mentioned above and those which are detailed from time to time
in the Company's SEC filings.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no pending or threatened legal proceedings against the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.1 Financial Data Schedule
(b) There were no reports on Form 8-K filed by the registrant for the
quarter ending October 31, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
RHINO ECOSYSTEMS, INC.
Dated: November 30, 2001 By: /s/ Mark Wiertzema
---------------------------
Mark Wiertzema, President
and Chief Financial Officer
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