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, 1999
|_| 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 0-28313
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 March 30, 2000 there were 6,525,539 shares of common stock, $.0001 par value,
outstanding.
<PAGE>
RHINO ECOSYSTEMS, INC.
Page
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PART I FINANCIAL INFORMATION
Item 1 - Financial Statements........................................1
Balance Sheet as of January 31, 2000 (unaudited),
October 31, 1999 (unaudited) and July 31, 1999..............2
Income Statement for Period August 1, 1999
to January 31, 2000.........................................3
Statement of Shareholder`s Equity (Deficiency)..............4
Statement of Cash Flows for period August 1, 1999
to January 31, 2000.........................................5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................6
PART II OTHER INFORMATION
Item 1 - Legal Proceedings ..........................................7
Item 6 - Exhibits and Reports on Form ...............................8
SIGNATURES ...................................................................9
<PAGE>
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, 1999.
The results of operations for the six month period ended January 31, 2000, are
not necessarily indicative of the results to be expected for the entire fiscal
year or for any other period.
1
<PAGE>
Rhino Ecosystems Inc.
First Six Months Fiscal 2000
Period of August 1, 1999 to January 31, 2000
United States Dollars
Un-audited Statements
<TABLE>
<CAPTION>
Audited Fiscal 2000
Fiscal 3 months 6 months
Y/E 99 ending ending
Balance Sheet July 31'99 Oct 31,99 Jan 31,00
---------- --------- ---------
<S> <C> <C> <C>
Assets
Current Assets
Cash $0 $0 $0
Accounts Receivable - Trade 0 41,745 18,177
Goods & services tax recoverable 6,298 5,386 11,113
Investment tax credits 26,675 26,675 27,729
Inventory 37,917 50,086 103,636
Prepaid Expenses & Deposits 11,402 13,129 13,233
-------- -------- --------
Subtotal Current Assets $82,292 $137,021 $173,888
Fixed assets (net) 277,647 276,005 289,003
Patents 77,691 77,972 90,039
Total Assets $437,630 $490,998 $552,930
-------- -------- --------
Liabilities
Current Liabilities
Bank Indebtedness $34,532 $12,601 $9,305
Accounts payable & accrued liabilities 181,376 62,282 128,173
Current portion L/T Debt 20,746 20,746 21,564
Due to related parties 111,468 123,114 83,498
-------- -------- --------
Subtotal Current Liabilities $348,122 $218,743 $242,540
Long Term Debt 127,935 122,753 132,967
Other Obligations 311,946 223,136 6,454
Shareholders' equity(deficiency)
Share Capital 736,387 1,072,795 1,504,063
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Audited Fiscal 2000
Fiscal 3 months 6 months
Y/E 99 ending ending
Balance Sheet July 31'99 Oct 31,99 Jan 31,00
---------- --------- ---------
<S> <C> <C> <C>
Deficit Accumulated -1,081,316 -1,140,985 -1,315,954
Other accumulated income/(loss) -5,444 -5,444 -17,140
-------- -------- --------
Total Liabilities & Shareholder Equity $437,630 $490,998 $552,930
======== ======== ========
</TABLE>
3
<PAGE>
Rhino Ecosystems Inc.
First Six Months Fiscal 2000
Period of August 1, 1999 to January 31, 2000
United States Dollars
Un-audited Statements
<TABLE>
<CAPTION>
Audited 3 Months 3 Months 6 Months
Income Statement Fiscal Y/E Aug.1'99 to Nov.1'99 to Aug.1'99 to
1999 Oct. 31'99 Jan. 31'00 Jan.31'00
---- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Sales & other income $28,998 $43,619 $40,192 $83,811
-------- ------- -------- --------
Expenses
Cost of Goods Sold $13,384 $5,922 $16,740 $22,662
Sales/Marketing/Trade Show Exp. 156,788 22,117 $47,268 69,385
Professional & consulting 115,454 13,760 $48,462 62,222
Amortization of fixed assets 115,253 22,731 $24,534 47,265
Office salaries, benefits & services 92,502 5,143 $19,801 24,944
Research & development 45,087 740 $16,652 17,392
Rent 37,505 8,593 $10,692 19,285
Travel & Entertainment 25,925 246 $1,950 2,196
Interest on long term debt 15,679 3,276 $14,529 17,805
Bank charges & interest 14,104 601 $1,275 1,876
Office & general expenses 13,667 6,725 $12,130 18,855
Telephone 10,475 4,339 $4,767 9,106
Utilities 3,563 507 $1,156 1,663
Insurance 2,310 121 $351 472
IPO expenses 0 14,914 $3,944 18,858
Exchange (gain)/loss 0 -6447 -$9,090 -15,537
-------- ------- -------- --------
Total Expenses $661,696 $103,288 $215,161 $318,449
Net income/(loss) -$632,698 -$59,669 -$174,969 -$234,638
Loss Per Common Share -$0.11 -$0.01 -$0.02 -$0.03
</TABLE>
4
<PAGE>
Rhino Ecosystems Inc.
First Six Months Fiscal 2000
Period of August 1, 1999 to January 31, 2000
United States Dollars
Un-audited Statements
Statements of Shareholders' Equity (Deficiency)
<TABLE>
<CAPTION>
Deficit
accumulated Accumulated
during other
Common developemnt comprehensive
Shares stage income (loss) Total
------ ----- ------------- -----
<S> <C> <C> <C> <C>
Balance, July 31, 1999 $736,387 -$1,081,316 -$5,444 -$350,373
Income (Loss) for period -$59,669 -$59,669
Shares Issued
Shares issued for cash $336,108 $0 $0 $336,108
---------- ----------- ------- --------
Balance, October 31, 1999 $1,072,495 -$1,140,985 -$5,444 -$73,934
---------- ----------- ------- --------
Income (Loss) for period -$174,969 -$174,969
Shares Issued
Shares issued for cash $379,056 $379,056
Shares issued for services $4,562 $4,562
Shares issued for conversion
of debt $47,950 $47,950
Foreign currency translation
adjustment 0 0 -$11,696 -$11,696
---------- ----------- ------- --------
Balance, January 31, 2000 $1,504,063 -$1,315,954 -$17,140 $170,969
---------- ----------- ------- --------
</TABLE>
5
<PAGE>
Rhino Ecosystems Inc.
First Six Months Fiscal 2000
Period of August 1, 1999 to January 31, 2000
United States Dollars
Un-audited Statements
<TABLE>
<CAPTION>
Audited
Fiscal 3 months 3 months
Statement of Cash Flows Y/E '99 Aug. 31'99 to Nov.1'99 to
July 31'99 Oct. 31'99 Jan. 31'00
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows provided by (used in):
Operations:
Loss for the period -$632,698 -$59,669 -$174,969
Adjustments to reconcile loss
for the period to net cash:
Amortization of fixed assets $115,253 $22,731 $24,534
Goods & services tax recoverable 38,837 912 -5,727
Investment tax credits -99 0 -1,054
Inventory -17,434 -12,169 -53,550
Prepaid expenses & deposits 23,941 -1,727 -104
Due from related parties 38,233 0 0
Accounts payable & accrued
liabilities 59,231 -119,094 65,891
Due to related parties 109,445 11,646 -39,616
--------- --------- ---------
subtotal -$265,291 -$157,370 -$184,595
Financing:
Bank Indebtedness $34,532 -$21,931 -$3,296
Principal payments on L/T Debt -16,674 -5,182 -5,390
Other obligations 311,946 -88,810 -216,682
Inssuance of share capital 0 336,408 431,268
Share issue costs 0 -33,641 -43,127
--------- --------- ---------
subtotal $329,804 $186,844 $162,773
Investments:
Due from Le Group De Recuperation $99,213 $0 $0
Expenditures on fixed assets -50,296 -31,746 -5,293
Accounts Receivable Trade Accounts 0 -41,745 23,568
Accounts payable for fixed assets -97,817 44,298 -4,761
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Audited
Fiscal 3 months 3 months
Statement of Cash Flows Y/E '99 Aug. 31'99 to Nov.1'99 to
July 31'99 Oct. 31'99 Jan. 31'00
---------- ---------- ----------
<S> <C> <C> <C>
Expenditures on patent -48,386 -281 -12,067
--------- --------- ---------
subtotal -$97,286 -$29,474 $1,447
Other
Foreign currency translation $7,946 $0 $20,375
--------- --------- ---------
Increase (decrease) in cash -$24,827 $0 $0
Cash, beginning of period 24,827 0 0
--------- --------- ---------
Cash, end of period $0 $0 $0
--------- --------- ---------
Interest paid $18,165 $3,276 $14,529
--------- --------- ---------
Income taxes paid $0 $0 $0
--------- --------- ---------
Total Common Shares Outstanding
Restricted Shares 5,525,539 5,525,539 5,525,539
Free Trading Shares 0 336,108 1,000,000
--------- --------- ---------
Total Common Shares Issued 5,525,539 5,861,647 6,525,539
</TABLE>
7
<PAGE>
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, 1999, and
quarters ended October 31, 1999 and January 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 patent-pending wet waste interceptor plumbing product
called the RINO(TM) System. During the fiscal years July 31, 1999 ("fiscal
1999"), 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 the first six months of fiscal 2000, the Company started an 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 shows in Toronto, Myrtle Beach,
Nashville, and Orlando. Additional trade shows are planned in Vancouver,
Moncton, New York, Boston, Chicago, San Francisco and Anaheim. 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, Canada 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.
8
<PAGE>
As of the end of fiscal 1999, 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, 1999 totals $1,146,429. The Company expects to report positive
results from operations by the end of its next fiscal year ending July 31, 2000
("fiscal 2000"). Such results are intended to be derived from sales of the
Company's products through the establishment of exclusive and non-exclusive
dealerships throughout North America and the Caribbean. The Company intends to
enlarge the dealership base and resulting sales throughout the remainder of
fiscal 2000.
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. The Company intends to complete its first public offering
of shares during fiscal 2000. The Company's management believes that sufficient
funds will be raised from future operations so as to minimize the need for
future equity capitalization.
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.
9
<PAGE>
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, 1999.
10
<PAGE>
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: March 31, 2000 By: /s/ Mark Wiertzema
---------------------------
Mark Wiertzema, President
and Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Rhino
Ecosystems, Inc. and subsidiary financial statements at October 31, 1999 and the
three months then ended and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-END> OCT-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 41,745
<ALLOWANCES> 0
<INVENTORY> 50,086
<CURRENT-ASSETS> 137,021
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 490,998
<CURRENT-LIABILITIES> 218,743
<BONDS> 122,753
0
0
<COMMON> 1,072,795
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 490,998
<SALES> 22,117
<TOTAL-REVENUES> 43,619
<CGS> 5,922
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 59,669
<INTEREST-EXPENSE> 3,276
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
