UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
REVISED QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2000
Commission file number 0-29403
RHINO ENTERPRISES GROUP, INC.,
a Nevada corporation
2925 LBJ Freeway, Suite 188, Dallas, Texas 75234
(972) 241-2669
IRS Tax ID #: 88-0333844
-1-
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
The revised consolidated financial statements for the quarter
ended March 31, 2000 for Rhino Enterprises Group, Inc. ("Rhino"
or the "Company") follow.
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<PAGE>
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (unaudited) and DECEMBER 31, 1999 (audited)
ASSETS March December
----------- ------------
Current Assets
Cash on hand and in banks $ 81,943 $ 390,071
Receivables 1,740,445 1,584,044
Prepaid expenses and deposits 825,000 805,000
----------- ------------
Total Current Assets 2,647,388 2,779,115
----------- ------------
Property, plant and equipment,
at cost 69,406 87,670
Less -- accumulated depreciation (8,331) (7,453)
Investment in E-DATA ALLIANCE CORP. 170,655 200,000
Intangible assets including goodwill,
at cost 340,669 340,669
Less -- accumulated amortization (31,123) (9,445)
----------- ------------
Total Long-lived Assets 541,276 611,441
----------- ------------
Total Assets $ 3,188,664 $ 3,390,556
=========== ============
CURRENT LIABILITIES
Accounts payable $ 96,191 $ 41,985
Accrued expenses 929,977 839,334
Notes payable 3,372,551 3,082,736
----------- ------------
Total Current Liabilities 4,398,719 3,964,055
----------- ------------
STOCKHOLDERS' EQUITY
Common stock 1,577 1,577
Paid in capital 1,585,295 1,585,295
Accumulated deficit (2,725,876) (2,162,011)
Non-controlling interest 1,640 1,640
Treasury stock, at cost (72,691) 0
----------- ------------
Total Stockholders' Equity (1,210,055) (573,499)
----------- ------------
Total Liabilities and
Stockholders' Equity $ 3,188,664 $ 3,390,556
=========== ============
See Notes to Consolidated Financial Statements.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
March 31, March 31,
2000 1999
------------ ------------
REVENUES $ 7,523 $ 0
COST OF SALES 2,500 0
------------ ------------
GROSS PROFIT 5,023 0
------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs 165,735 691
Personnel costs 253,258 0
Legal and professional fees 66,671 0
Depreciation and amortization 24,656 0
------------ ------------
Total General and
Administrative Expenses 510,320 691
------------ ------------
LOSS FROM OPERATIONS (505,297) (691)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 38,797 0
Interest expense (70,238) 0
Equity in loss of
E-DATA ALLIANCE CORP. (29,345)
Other 2,218 0
------------ ------------
Total Other Income (Expense) (58,568) 0
------------ ------------
LOSS BEFORE INCOME TAX (563,865) (691)
PROVISION FOR INCOME TAX 0 0
------------ ------------
NET LOSS $ 563,865 $ 691
============ ============
LOSS PER SHARE $ (0.36) $ (0.01)
============ ============
See Notes to Consolidated Financial Statements.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
March 31, March 31,
2000 1999
------------ ------------
CASH FROM OPERATING ACTIVITIES
Net Loss $ (563,865) $ (691)
Adjustments to reconcile net
loss to net cash from operating
activities
Depreciation and amortization 24,656 0
Equity in loss of E-DATA
ALLIANCE CORP. 29,345
Changes in working capital 122,749 691
------------ ------------
Net Cash From Operating
Activities (387,115) 0
------------ ------------
CASH USED BY INVESTING ACTIVITIES
Purchase property and equipment (19,605) 0
Sell property and equipment 37,869 0
Increase in notes and advances (611,633) 0
Collection of notes and advances 455,232 0
------------ ------------
Net Cash Used by Investing
Activities (138,137) 0
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES
Borrowings 654,338 0
Repayments (364,523) 0
Purchase treasury stock (72,691) 0
------------ ------------
Net Cash Provided by
Financing Activities 217,124 0
------------ ------------
NET CHANGE IN CASH (308,128) 0
CASH, January 1 390,071 0
------------ ------------
CASH, March 31 $ 81,943 $ 0
============ ============
See Notes to Consolidated Financial Statements.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE A - NATURE OF OPERATIONS
Rhino Enterprises Group, Inc. (the "Company") was formerly known
as Unique Fashions, Inc. (a Nevada C corporation). On April 30,
1999, the Unique Fashions, Inc. effected a one-for-twenty (1 for
20) reverse stock split of its common stock and changed its name
to Rhino Enterprises Group, Inc. Rhino acts as a business
incubator for start-up and emerging enterprises. The Company
performs this function by providing management, consulting
services, and financing to assist established operating entities
to position themselves to enter the capital markets. The Company
and its subsidiaries operate in two business segments - business
incubation and e-commerce. See further discussion in Note L
below.
The Company has elected to omit substantially all footnotes to
the consolidated financial statements for the three months ended
March 31, 2000, since there have been no material changes (other
than those included in the footnotes shown below) to the
information previously reported by the Company in their
consolidated financial statements for the fiscal year ended
December 31, 1999 and which was included in the Registration
Statement and amendments thereto filed in Form 10-SB.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Information - The information furnished herein was
taken from the books and records of the Company without audit.
However, such information contains all significant adjustments
which are, in the opinion of management, necessary to properly
reflect the results of the periods presented. The information
presented is not necessarily indicative of the results from
operations expected for the full fiscal year.
Consolidation - These consolidated financial statements contain
the accounts of Rhino Enterprises Group, Inc. and its wholly-
owned subsidiaries - Eyesite.Com, Inc. and Executive Assistance,
Inc., and its 65% - owned subsidiary, Framing Systems, Inc.
The Company's investment in E-Data Alliance Corp. represents a
50% ownership position; consequently, this investee is accounted
for using the equity method. All significant inter-company
transactions and balances have been eliminated in consolidation.
Property, Plant and Equipment - All fixed and depreciable assets
are carried at cost. Depreciation of property, plant, and
equipment was provided using the straight-line method over the
expected useful life of the assets which range from 3 to 7 years.
Allowance for Uncollectible Notes Receivable - Management
believes that a reserve for uncollectible notes receivable was
not necessary at March 31, 2000.
Amortization of Intangible Assets - Intangible assets, which
consist of certain proprietary knowledge and a web-site, are
being amortized over 3 years.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting Estimates - The preparation of consolidated financial
statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions
which affect the reported amounts of assets, liabilities,
revenues and expenses, and disclosures of contingent assets and
liabilities at the date of the consolidated financial statements.
Actual results could differ from those estimates.
Income Tax Accounting - Income taxes are provided for the tax
effects of transactions reported in the consolidated financial
statements and consist of taxes currently due, plus deferred
taxes. Deferred tax assets or liabilities are recognized for
temporary differences between the tax basis of assets and
liabilities for financial statement and income tax purposes.
Deferred tax assets and liabilities represent future tax return
consequences of those temporary differences. At March 31, 2000
there were no significant deferred tax assets or liabilities.
The Company has a tax net operating loss carryforward of
approximately $750,000 which will expire starting in 2010. A
deferred tax asset has not been recognized for this net operating
loss, since management believes that it is not "more likely than
not" that this tax benefit will ever be realized.
Earnings Per Share - Basic loss per share was computed by
dividing the net loss allocable to common shareholders by the
weighted monthly average outstanding common shares during the
year. A reconciliation of the numerator and denominator
associated with this calculation is presented below. Diluted
earnings per share reflect per share amounts that would result if
potentially dilutive securities were converted into common stock.
Advertising - The Company expenses advertising as it is
incurred. $64,858 was expended in the three months ended March
31, 2000.
Comprehensive Income - The Company has no items of "other
comprehensive income". Therefore, net income equals
comprehensive income.
Revenue Recognition - Since reviving the previously dormant
Unique Fashions, Inc. in April, 1999, the Company has not
generated any significant amounts of revenue. The subsidiaries
also did not generate any significant amount of revenue as they
were either dormant when the Company acquired them or were
incorporated late in 1999. The Company will enter into
contractual agreements to provide management, consulting and
financial assistance to start-up and emerging growth companies.
Typical incubation agreements would call for either a flat
monthly fee or hourly rates plus reimbursement for out-of-pocket
expenses. Revenues from these agreements will be recognized as
services are provided. The Company will recognize interest
income on funds advanced in the form of short term notes and will
recognize earnings from its equity method investee. E-commerce
operations will recognize revenue as services are provided.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock - based Compensation - The Company recognizes the
compensation generated by granting stock options to employees and
non-employee directors in accordance with the provisions of APB
No. 25. Disclosure of the amount of expense that would have been
recorded had the Company followed the accounting prescribed by
SFAS No. 123 was based on the fair value of the underlying common
stock using the Black-Scholes options pricing model. The
significant assumptions used to estimate the fair value of the
options granted included setting the volatility at zero, the
discount bond rate at 6%, and the annual dividend rate at zero.
For stock issued to non-employees in exchange for various
services, the Company recognizes the compensation under the
provisions of SFAS No. 123.
NOTE C - NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTERPRISES
As a vital part of its strategic activities as a business
incubator, the Company makes initial investments in established
operating entities and start-up or emerging enterprises
primarily by advancing funds in the form of short-term unsecured
notes. The following summarizes significant advances outstanding
as of March 31, 2000 -
Unsecured advances to established operating entities -
Emerging Pharmacy Solutions, Inc. $ 300,791
Energy Systems Solutions, Inc. 203,000
Sarwin Family LLC 144,000
Teman Electric (related party) 413,700
---------
1,061,491
---------
Advances to start-up or emerging entities -
Ebzzz, Inc. 10,000
Hart Prince Group, Inc. 25,000
Legend Security 13,500
Target Marketing 47,032
Marathon Capital Group 92,000
Real Talk Network, Inc. (Secured) 200,000
---------
387,532
---------
Other unsecured notes receivable -
Individuals 171,370
Interest income and expense reimbursements 85,052
Stockholders 35,000
---------
291,422
---------
Total Notes Receivable $1,740,445
---------
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE C - NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTITIES,
cont.
Each of these notes is due in less than one year and bear
interest ranging from 6% to 10%. Accrued interest amounting to
50,803 is included in "Receivables." As of the date of the the
consolidated financial statements, none of the notes are
delinquent. The established operating enterprises have track
records of profitability and cash generation and the Company
believes that there is not a significant risk of not collecting
the funds advanced.
The note from Real Talk Network, Inc. is secured by the personal
guarantee of the stockholders of Real Talk Network, Inc. and all
the tangible assets of the company, which consist primarily of
cash and equipment.
The Company anticipates either receiving repayment of the funds
advanced, or taking an equity position when the entity is ready
to either go public or become a subsidiary of the Company. Each
of the entities listed above is an operating enterprise with the
capability to repay the loans. Any exchange of stock in
satisfaction of the notes will be negotiated at the time of
conversion.
NOTE D INDEBTEDNESS
At March 31, 2000, Rhino had short term indebtedness as follows -
Note payable to Digital Information & Virtual
Access, Inc., 6% interest, unsecured, Note
is due on demand $ 829,424
Note payable to Southern Leasing, Inc. 8%
interest, unsecured. Note is due on demand 33,260
Note payable to Southern Leasing, Inc. 8%
interest, unsecured. Note is due on demand 25,000
Note payable to Net.Return, Inc. 10%
interest, unsecured. Note is due on or
before 1-31-01 100,000
Note payable to Net.Return, Inc. 10%
interest, unsecured. Note is due on or
before 1-31-01 200,000
Note payable to Net.Return, Inc. 10%
interest, unsecured. Note is due on or
before 12-31-00 $2,000,000
---------
$3,187,684
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE D - INDEBTEDNESS - continued
At March 31, 2000, Eyesite.Com, Inc. had short term indebtedness
as follows -
Note payable to Southern Leasing, 8% interest,
Unsecured and due March 15, 2001 $ 38,200
Note payable to Southern Leasing, 8% interest,
Unsecured and due March 24, 2001 20,000
Note payable to Southern Leasing, 8% interest,
Unsecured and due March 20, 2001 60,000
Note payable to Net.Return, Inc., 10% interest,
Unsecured and due February 15, 2001 50,000
Note payable to Dr. Gary Edwards, 10% interest,
secured by certain intellectual property and
license rights. Due in six monthly installments
of $8,333 $ 16,667
184,867
---------
Consolidated Debt at 3-31-00 $3,372,551
---------
NOTE E - COMMON STOCK
The Company has 25,000,000 of authorized shares of common stock
at a par value of $0.001 per share. At March 31, 2000, there
were 1,577,075 shares outstanding.
NOTE F - EARNINGS PER SHARE RECONCILIATIONS
The following table summarizes the amounts used to calculate the
basic loss per share as reported in the accompanying consolidated
statement of income. The stock options discussed below were not
included in the calculation of diluted loss per share as their
effect was anti-dilutive.
For the Quarter Ended December 31
2000 1999
---------- ----------
Net Loss $ 563,865 $ 691
Weighted average outstanding
shares 1,576,075 213,476
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE G - STOCK OPTIONS
On October 27, 1999, the Company granted certain key employees,
officers and directors non-qualified stock options (which vest
monthly over a period of 5 years) to purchase up to 952,500
shares of common stock at $.25 per share. The fair value of the
Company's common stock on the grant date was $0.25. Because the
Company applies APB No. 25 in accounting for its stock plan, no
compensation costs have been recognized in the accompanying
consolidated statement of income.
If, under the provisions of SFAS No. 123, the Company had
calculated compensation costs based on the fair value at the
grant date for these stock options, net earnings and earnings per
share would not have been materially effected. The estimated per
share weighted average fair value of the stock options granted
during 1999 was $0.06. This amount was determined using the
Black-Scholes option pricing model, which values options based on
the stock price at the grant date, the expected life of the
option, the estimated volatility of the stock, expected dividend
payments, and the risk-free interest rate over the expected life
of the options. The dividend yield was set at zero, since the
Company has not paid any dividends and does not expect to do so
in the forseeable future. Expected volatility was also set at
zero, since the Company's stock is restricted and has had a very
small trading volume. The risk-free interest rate was based on
the Federal Reserve's bond discount rate of 6%.
The following table summarizes options outstanding at March 31,
2000 and the changes during the three months then ended -
Outstanding at December 31, 1999 952,500
Granted 0
Exercised 52,050
Canceled 137,500
-------
Outstanding at March 31, 2000 762,950
-------
Exercisable at March 31, 2000 27,275
=======
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company operates out of sub - leased facilities under the
terms of a month-to-month rental agreement. The primary tenant
is one of the Company's shareholders. Rent expense was $27,871
and $ -0- for the three months ended March 31, 2000 and 1999,
respectively.
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE H - COMMITMENTS AND CONTINGENCIES - (continued)
The Company also has an overhead (expenses related to occupancy,
such as telephone, utilities, etc.) reimbursement agreement which
is based on the square-footage occupied, with this same
stockholder. This arrangement calls for monthly billings. See
the related party footnote disclosures in Note K for a summary of
amounts incurred and paid under this reimbursement agreement.
Management believes that the allocation methods applied to
overhead charges are reasonable.
On November 29, 1999, the Board of Directors approved the buy-
back of up to 200,000 shares of the Company's common shares for a
price not to exceed $5 per share for a period of 180 days from
the date the Company issues a press release to its stockholders
announcing such a buy-back. During the three months ended March
31, 2000, the Company has purchased 72,690 shares of its common
stock back from its shareholders at an average price of $3.70.
On December 22, 1999, Eyesite.Com, Inc. entered into a consulting
contract with Dr. Gary Edwards to maintain and enhance its web
site. Among other things, the agreement provides for 36 monthly
payments of $7,000 which is for 35 hours per month at $200 per
hour for Dr. Edwards services.
On March 7, 2000, the Company entered into a sale-leaseback
transaction with Southwest Leasing, Inc. (an unrelated entity),
for automobiles and equipment. The leases are operating leases
which provide for, among other things, 60 monthly payments in the
amount of $935. At the Company's option, the lease can be
renewed for an additional 24 months at the same monthly rental.
NOTE I - CONCENTRATIONS OF CREDIT RISK
The Company maintains cash in several accounts with financial
institutions, including a money market account with a national
brokerage house. At various times during the three months ended
March 31, 2000, the Company had funds on deposit in excess of
the Federally insured limits of $100,000.
NOTE J - EQUITY IN E-DATA ALLIANCE CORP.
The Company owns a 50% interest in e-Data Alliance Corp. The
following represents unaudited financial information taken from
the books and records of e-Data for the three months ended March
31, 2000 -
Sales $24,490
Gross loss 44,224
Loss from operation 53,318
Net Loss 53,318
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<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
NOTE K - RELATED PARTY TRANSACTIONS
Related Party & Balance at Amounts Amounts Balance at
Relationship Dec 31, 1999 Advanced Collected Mar 31, 2000
---------------- ------------ --------- --------- ------------
Teman Electric(1) $ 333,700 $ 80,000 $ - 0 - $ 413,700
Memorabilia &
Antiquities (2) 355,000 77,500 432,500 -0-
Marathon Group (1) 40,000 52,000 - 0 - 92,000
Joe Glover (1) 10,000 -0- - 0 - 10,000
Dan Weaver (1) 5,000 10,000 - 0 - 15,000
Start-up Entities
Shown in Note C -0- 95,532 - 0 - 95,532
Funds Received Amounts Repaid
from
DIVA (3) $(1,041,069) $ (110,748) $ 322,392 $ (829,425)
Strateia Group (1) (5,864) (30,358) 20,470 (15,752)
Other Transactions With Related Parties
Dan Weaver (1) Cash Payments
for Accounting $ 9,075
e-Data Purchase Web
hosting and
design services $ 18,694
Strateia Rent incurred
Group (1) by the Company $ 19,694
Strateia Overhead
Group (1) Reimbursement $ 10,870
(1) Stockholder
(2)Owned by President of Rhino
(3) Common officers & shareholders
-13-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE L - SEGMENT INFORMATION
The Company organizes its business into two reportable segments -
business incubation and e-commerce entities. As previously
discussed in these notes, the business incubation segment
includes the parent company, Rhino, its subsidiary Executive
Assistance, Inc., and its equity method investee, E-Data Alliance
Corp. This segment provides various forms of assistance (in the
form of management, consulting services, and financing) to assist
start-up and emerging enterprises as well as established
operating companies position themselves to enter capital markets.
Segment revenues consist of fees, expense reimbursements,
interest income on funds advanced in the form of short term
notes, earnings of subsidiaries and equity method investees.
The e-commerce segment represents the subsidiaries (Framing
Systems, Inc. and Eyesite.Com) that are entering the tremendous
markets available through the Internet. All operations, at
present, are located within the United States. Revenues arise
from sales primarily to unrelated third parties.
The segments' accounting policies are the same as those of the
Company described in the summary of significant accounting
policies. A summary, by segment, of the Company's significant
assets, liabilities, revenues and expenses is presented on the
ensuing schedules for the three months ended March 31, 2000 and
1999.
NOTE M - SUPPLEMENTAL DISCLOSURES FOR THE CASH FLOW STATEMENT
Interest paid $27,148
Income taxes paid - 0 -
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
SEGMENT DATA - 2000 Incubator E-Commerce Eliminations Consolidated
-------------------------- ----------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Asset Information
--------------------------
Current Assets, other than
notes receivable $ 850,268 $ 56,675 $ 0 $ 906,943
Notes receivable 1,966,493 181,506 407,554 1,740,445
Investment in equity
method investees 170,655 0 0 170,655
Other long-lived assets 280,205 102,043 (11,627) 370,621
----------- -------------- ---------------- --------------
Total Assets $ 3,267,621 $ 340,224 $ (419,181) $ 3,188,664
=========== ============== ================ ==============
Profit and Loss Information
--------------------------
Revenues from external
customers $ 1,500 $ 6,023 $ 0 $ 7,523
Revenues from other operating
segments 0 0 0 0
Interest revenue 35,255 3,542 0 38,797
Other income 2,218 0 0 2,218
Loss in E-Data Alliance Corp. (29,345) 0 (29,345)
Operating expenses (295,261) (192,903) 0 (488,164)
Interest expense (69,413) (825) (70,238)
Depreciation and amortization (15,988) (6,990) (1,678) (24,656)
----------- -------------- ---------------- --------------
Net Loss $ (371,034) $ (191,153) $ (1,678) $ (563,865)
=========== ============== ================ ==============
Income tax 0 0 0 0
Equity in net loss of equity
method investees 29,345 0 0 29,345
</TABLE>
-14-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
SEGMENT DATA - 1999 Incubator E-Commerce Eliminations Consolidated
-------------------------- ----------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Asset Information
--------------------------
Current Assets, other than
notes receivable $ 0 $ 0 $ 0 $ 0
Receivables 0 0 0 0
Investment in equity method
investees 0 0 0 0
Other long-lived assets
(Goodwill) 0 0 42,502 42,502
----------- -------------- ---------------- --------------
Total Assets $ 0 $ 0 $ 42,502 $ 42,502
=========== ============== ================ ==============
Profit and Loss Information
----------------------------
Revenues from external
customers $ 0 $ 0 $ 0 $ 0
Revenues from other
operating segments 0 0 0 0
Interest revenue 0 0 0 0
Other income 0 0 0 0
Operating expenses (691) 0 0 (691)
Interest expense 0 0 0 0
Depreciation and amortization 0 0 0 0
----------- -------------- ---------------- --------------
Net Loss $ (691) $ 0 $ 0 $ (691)
=========== ============== ================ ==============
Income tax 0 0 0 0
Equity in net income of equity
method investees 0 0 0 0
</TABLE>
-15-
<PAGE>
Item 2. Management's Discussion and Analysis
The following discussion of the financial condition and
results of operations of Rhino Enterprises Group, Inc. and its
subsidiaries should be read in conjunction with the Management's
Discussion and Analysis and the consolidated financial statements
and the notes thereto included in the Company's registration
statement on Form 10-SB, and the amendments thereto. This
quarterly report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements using
terminology such as "anticipates," "expect," "will," "believes,"
"foresees," "could," "may" or the negative thereof or other
comparable terminology regarding beliefs, plans, expectations or
intentions regarding the future. Forward-looking statements
include statements regarding increased revenue, continued rising
expenses, an increase in the staff of the Company or its
subsidiaries, increased business activity, expansion of the
Company's operations, increased operating costs, the execution of
formal long-term lease arrangements, an increase in the Company's
advertising budget, promotion of the products and services of the
Company's subsidiaries and other equity investments, future loans
to other companies as a way to pursue business opportunities,
increased interest expense, expanded operations, increased
interest income, source of potential extraordinary income,
payments on or collection of notes receivables, sources of
working capital, collections on advances, fees earned through
incubation services, reimbursement of expenses, working capital
needs, options for repayment of notes payable, the renewal or
extension of existing debt, the conversion of existing debt into
equity, the location of private financing, an equity placement of
securities to raise funds, methods of meeting business
requirements in the future, the effect the Company's growth will
have on the Company's financial and operational areas, the number
of future employees, an increase in the amount of funds utilized
in the future for advertising/marketing/office space/equipment,
increased expenditures for legal and accounting services and the
future outcome of Year 2000 computer-related problems. These
forward-looking statements involve risks and uncertainties and
actual results could differ materially from those discussed in
the forward-looking statements. These risks and uncertainties
include, but are not limited to, those described under the
headings "Year 2000 Compliance" and "Factors That May Impact
Future Operating Results." All forward-looking statements and
risk factors included in this document are made as of the date
hereof, based on information available to the Company as of the
date thereof, and Rhino assumes no obligation to update any
forward-looking statement or risk factors.
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Results of Operations
---------------------
The Company posted revenues of $7,523 for the quarter ended
March 31, 2000, up from $0 for the same quarter in 1999. This
revenue was derived from $1,500 in Executive Assistance, Inc.,
and $6,023 in Eyesite.com, Inc., both wholly-owned subsidiaries
of the Company. Eyesite.com, Inc. incurred a cost of goods sold
of $2,500 for the quarter ended March 31, 2000. The Company
anticipates increased revenue in the following quarters for
Eyesite.com, Inc., but does not expect additional revenue in
Executive Assistance at this time. Currently, any income from our
equity investment in e-Data is immaterial.
The Company's total general and administrative expenses
increased from $691 in the first quarter of 1999 to $510,320 in
the same period of 2000. Of this expense, $311,705 was
attributable directly to the Company, $196,815 was attributable
to Eyesite.com, $1,222 was attributable to Executive Assistance
and the remaining $578 to Framing Systems, Inc., another wholly-
owned subsidiary of the Company. The Company anticipates these
figures to continue to rise for Rhino and Eyesite.com, as both
companies increase staff to handle the marketing, administrative,
management, legal, accounting and technological demands of its
increased business activity. Personnel costs and professional
fees grew from $0 in the first quarter of 1999 to $319,929 in the
same period of 2000. Again, these figures are attributable to
$228,636 for the Company, $90,221 for Eyesite.com and $1,072 for
Executive Assistance. Additionally, the Company's operating costs
increased from $691 in the first quarter of 1999 to $165,735 in
the first quarter of 2000. Total operations costs for Rhino
itself was $65,404, Eyesite.com was $100,063, Executive
Assistance was $150 and Framing Systems was $118. This increase
was caused by normal operating costs incurred by the Company,
including office lease on a month to month basis, marketing,
administrative and other costs related to doing business. The
Company was not doing business during the first quarter of 1999.
With the anticipated expansion of the Company's operations during
2000, management anticipates operating costs to increase as we
expect to enter into formal long-term lease arrangements for both
Rhino and Eyesite.com and a significant increase in the Company's
advertising budget in 2000. This is due to the Company's need to
promote the products and services of its subsidiaries and other
equity investments.
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<PAGE>
Other Income/(Expense) went from $0 in the first quarter of
1999 to ($58,568) in the first quarter of 2000. The change was
caused by $70,238 in interest expense ($69,413 for Rhino and $825
for Eyesite.com) in the first quarter of 2000, which was offset
by interest income of $38,797 ($35,255 for Rhino and $3,542 for
Eyesite.com). The Company's equity interest in E-Data Alliance
Corp. resulted in a loss of ($29,345). The Company will continue
to make loans to other companies as a way to pursue business
opportunities. The increase in interest expense was caused by the
Company incurring additional debt to finance operations and
acquisitions. The Company anticipates that interest expense will
continue to increase into 2000 as the Company continues to expand
and grow its operations. Therefore, it is anticipated that
interest income for the Company will continue to grow into 2000.
It is possible that the Company will have other extraordinary
income in 2000, but at this time management cannot predict the
source of any potential extraordinary income.
Financial Condition
-------------------
At quarter end, cash and cash equivalents were $81,943 as
compared to $0 at March 31, 1999. The ratio of current assets to
current liabilities was .60 to 1 at March 31, 2000.
Operating activities used $387,115 of cash in the first
quarter of 2000 compared to $0 in the first quarter of 1999. The
majority of the cash utilized by operations in the first quarter
of 2000 was attributable to general & administrative costs.
Investing activities consumed $138,137 during the first
quarter of 2000, compared to $0 in the same period of 1999.
Capital expenditures rose in the first quarter from $0 in 1999 to
$19,605 in 2000. The increase in cash used by investing was due
to the sale of unproductive assets and reinvestment in other
property and equipment for the expansion of the Company.
Additionally, during the quarter ended March 31, 2000, the
Company made short-term loans bearing 8% to 10% interest to
various companies totaling $611,633 which is an increase over
1999's total of $0. The Company also collected outstanding sums
due on notes receivable totaling $455,232. The Company
anticipates that a significant portion of these loans made will
continue to be repaid in 2000, thus providing a source of working
capital for the Company.
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<PAGE>
Financing activity provided the Company with $217,124 net
cash as of March 31, 2000 as compared to $0 in the same period of
1999. During the first quarter, the Company acquired additional
financing in the amount of $654,338, of which $486,138 was for
Rhino and $168,200 was for Eyesite.com. This increase was also
caused by accrued interest on these notes and those outstanding
at year end. During this period, the Company repaid $364,523 of
notes. These payments were made to Dr. Gary Edwards and Digital
Information & Virtual Access, Inc. In accordance with the Board
of Directors' approval for the Company to repurchase its stock,
Rhino expended $72,691 for 19,650 shares of its common stock
purchased in the open market during the first quarter of 2000.
This financing provided, in part, the funding for operations
and investment activities. Management believes that collections
on advances, fees earned through incubation services, interest
income and reimbursement of expenses will be sufficient for the
Company's working capital needs for the whole of the year 2000.
As such, management anticipates that it may only need minimal
working capital loans from time to time during 2000. Management
anticipates collecting on approximately $200,000 to $500,000 of
outstanding notes receivable in the third or fourth quarters of
this year. Management foresees that its options for repaying
$3,372,551 in notes payable are open. The Company could approach
each lender to negotiate the renewal and extension of the debt or
discuss the exploration of converting such debt into equity in
the Company; could locate other private financing to replace the
current financing; or could make an equity placement of
securities to raise funds to repay these outstanding notes. Any
one or more of these options may be used, as the Company is not
committed to any single course of action at this time.
The Company believes that it has the financial resources and
commitments needed to meet business requirements in the
foreseeable future, including capital expenditures and working
capital requirements. The Company anticipates significant growth
of its operations in 2000. This growth will in turn cause certain
financial and operational areas of the Company to change. The
most significant change in operations will be the number of
employees working for the Company. The Company currently has 10
full-time employees and out-sources a large number of projects.
In an effort to bring these projects "in-house" and based on the
expansion, the Company anticipates having 35-50 full or part time
employees by the end of 2000. This expansion will also
significantly increase the funds utilized to provide sufficient
advertising & marketing, office space and equipment for the
increased staff and growth of the Company. Additionally, the
Company will be required to increase its expenditures for legal
and accounting services to meet its various compliance standards.
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Year 2000 Compliance
--------------------
Prior to January 1, 2000, it was widely believed that many
computer systems used today would not be able to interpret data
correctly after December 31, 1999, because such systems allow
only two digits to indicate the year in a date. The Company and
its subsidiaries have been engaged, both before December 31, 1999
and after January 1, 2000, in assessing this Year 2000 ("Y2K")
issue as it relates to their businesses, including their
electronic interactions with banks, vendors, customers and
others. The Company did not encounter any problems with Y2K
issues, nor, based upon a review of its systems, does it expect
to encounter any in the future.
Factors That May Impact Future Operating Results
------------------------------------------------
The Company and its subsidiaries operate in a rapidly
changing environment that involves numerous risks and
uncertainties. The following section lists some, but not all, of
these risks and uncertainties which may have a material adverse
effect on the Company's business, financial condition or results
of operations.
The Company is dependent upon its current management team.
If the Company were to lose any one or more of its management
team, it could face a financial setback or suffer in other ways
related to is planned business. It could take the Company a
significant period of time to locate and train replacements, if
and when necessary. The Company does have employment agreements
with both its President and Chief Operating Officer, which may be
terminated upon certain circumstances. These agreements are filed
as exhibits to the Company's First Amendment to the Form 10-SB
filed with the Securities and Exchange Commission.
Since the Company has very little revenue at the moment, it
is dependent upon outside financing for working capital and to
grow its business. The Company may find it difficult to borrow
additional funds or have access to additional funds via some
other method. If such a situation occurs, the Company may not be
able to make debt service payments, provide the services it has
planned, increase its staff as planned or otherwise grow its
business.
-20-
<PAGE>
The Company has a significant portion of debt which must be
repaid in cash at some point or the Company must explore other
alternatives for repayment, which could be in the form of
conversion of debt to equity, replacement financing and/or an
offering of securities. The Company may find it difficult to
repay the existing debt when due, extend the due date of the
existing debt, reach some agreement with regard to converting the
debt to equity or otherwise satisfy its obligation. Likewise, if
a new source of financing is found to replace the current source,
the Company could face similar risks in the future with regard to
its ability to repay or otherwise take care of any future debt.
Also, any additional issuances of securities, whether in the form
of converting debt to equity or the form of a securities
offering, would dilute the share value of current shareholders.
The Company has made several unsecured loans to other small
companies. The Company faces a risk that these third party
borrowers will not be able to pay the interest and/or principal
on their debt. In the event these borrowers are unable to repay
the interest and/or principal, the Company may seek to convert
the debt into an equity interest in the borrowing entity.
However, the Company may face difficulty in negotiating with such
borrowers with regard to the ability to convert the debt into
equity or the conversion ratio. Likewise, if such debt is
converted into equity of the borrowing entity, there exists a
great possibility that the equity interest in the borrowing
entity will not be a liquid investment or that the value of such
equity interest will not be at or near the original loan to the
borrowing entity. Further, if one or more of these borrowing
entities is unable to make interest and/or principal payments
when due or if the debt is converted into a non-liquid equity
investment, the Company could face a working capital shortage.
The Company's subsidiary, Eyesite.com, has planned its
business in accordance with current legislation. If new
legislation is passed at a local, state or federal level, it
could materially adversely affect Eyesite.com's business plan.
Eyesite.com faces the risks that it might not be able to (1)
continue its business as planned, (2) adjust its business plan in
accordance with any new legislation, or (3) operate in such a
manner that would eventually be profitable.
In order to grow the Company's business as planned, the
Company will have to hire additional personnel for a number of
positions. The current low unemployment rate presents a challenge
for management of the Company to locate and attract qualified
individuals to fill the positions that the Company expects to
have available. The Company faces the risks that it might not be
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able to (1) fill every position as it becomes available in a
timely manner, (2) retain those employees it currently has or
that it hires, or (3) offer an attractive enough compensation
package to attract top quality candidates to its positions.
PART II - OTHER INFORMATION
(Items 1, 3, 4 and 5 have been omitted as there is no information
to report.)
Item 2. Changes in Securities.
During the quarter ended March 31, 2000, the Company issued
1,500 shares of restricted common stock to two former noteholders
for converting their debt into common stock. These securities
were issued in reliance upon transactional exemptions provided by
both Section 4(2) of the Securities Act of 1933, as amended, and
Article 581-5(B) of the Texas Securities Act, as such stock was
issued in the ordinary course of business to liquidate a bonafide
debt.
Also during the quarter ended March 31, 2000, three
officers/directors exercised options to purchase a total of
52,050 shares of common stock. However, these shares have not yet
been issued by the Company's transfer agent.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit No. Description
----------- -------------------------------------------
27.0 Financial Data Schedule
Reports on Form 8-K
------------------------------------------------------------
During the quarter ended March 31, 2000, the Company did not
file any reports on Form 8-K with the Securities and Exchange
Commission.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Rhino Enterprises Group, Inc.
(Registrant)
Date: June 23, 2000 By:/S/ DANIEL H. WEAVER
--------------------------------
Daniel H. Weaver
Chief Financial Officer and duly
authorized officer
