SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 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-
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
RHINO ENTERPRISES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
-2-
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000, JUNE 30, 2000 , MARCH 31, 2000 and
DECEMBER 31, 1999 (audited)
<TABLE>
<CAPTION>
September June March December
ASSETS 2000 2000 2000 1999
----------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets
Cash on hand and in banks $ 14,803 $ 1,559 $ 81,943 $ 390,071
Receivables 2,014,251 1,848,218 1,740,445 1,584,044
Prepaid expenses and deposits 839,621 839,621 825,000 805,000
----------- ----------- ----------- -----------
Total Current Assets 2,868,675 2,689,398 2,647,388 2,779,115
----------- ----------- ----------- -----------
Property, plant and equipment, at cost 210,270 125,126 69,406 87,670
Less -- accumulated depreciation (15,944) (10,605) (8,331) (7,453)
Investment in E-DATA ALLIANCE CORP. 139,353 155,253 170,655 200,000
Intangible assets including goodwill, at cost 384,308 384,089 340,669 340,669
Less -- accumulated amortization (81,436) (56,122) (31,123) (9,445)
----------- ----------- ----------- -----------
Total Long-lived Assets 636,551 597,741 541,276 611,441
----------- ----------- ----------- -----------
Total Assets $ 3,505,226 $ 3,287,139 $ 3,188,664 $ 3,390,556
=========== =========== =========== ===========
CURRENT LIABILITIES
-----------------------------
Accounts payable $ 138,406 $ 81,703 $ 96,191 $ 41,985
Accrued expenses 1,129,115 1,009,593 929,977 839,334
Notes payable 3,964,937 3,728,415 3,372,551 3,082,736
----------- ----------- ----------- -----------
Total Current Liabilities 5,232,458 4,819,711 4,398,719 3,964,055
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
------------------------------
Common stock 1,637 1,637 1,577 1,577
Preferred stock 334 192 0 0
Paid in capital 2,017,595 1,840,137 1,585,295 1,585,295
Accumulated deficit (3,583,898) (3,304,488) (2,725,877) (2,162,011)
Non-controlling interest (90,210) 2,640 1,640 1,640
Treasury stock, at cost (72,690) (72,690) (72,690) 0
----------- ----------- ----------- -----------
Total Stockholders' Equity (1,727,232) (1,532,572) (1,210,055) (573,499)
----------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $ 3,505,226 $ 3,287,139 $ 3,188,664 $ 3,390,556
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
=========== =========== =========== ============
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES $ 193,504 $ 0 $ 224,205 $ 0
COST OF SALES 110,773 0 173,970 0
----------- ----------- ----------- ------------
GROSS PROFIT 82,731 0 50,235 0
----------- ----------- ----------- ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs 80,228 106,291 486,774 141,978
Personnel costs 270,748 0 735,417 0
Legal and professional fees 14,222 0 87,094 0
Depreciation and amortization 27,342 2,005 78,815 4,206
----------- ----------- ----------- ------------
Total General and Administrative Expenses 392,540 108,296 1,388,100 146,184
----------- ----------- ----------- ------------
LOSS FROM OPERATIONS (309,809) (108,296) (1,337,865) (146,184)
----------- ----------- ----------- ------------
OTHER INCOME (EXPENSE)
Interest income 39,071 0 117,434 0
Interest expense (85,739) 0 (233,752) 0
Equity in loss of E-DATA ALLIANCE CORP. (15,900) 0 (60,648) 0
Other 117 12,610 2,715 14,021
----------- ----------- ----------- ------------
Total Other Income (Expense) (62,451) 12,610 (174,251) 14,021
----------- ----------- ----------- ------------
LOSS BEFORE INCOME TAX (372,260) (95,686) (1,512,116) (132,163)
PROVISION FOR INCOME TAX 0 0 0 0
----------- ----------- ----------- ------------
NET LOSS $ (372,260)$ (95,686)$ (1,512,116)$ (132,163)
=========== =========== =========== ============
LOSS PER SHARE $ 0.23 $ 0.07 $ 0.94 $ 0.12
=========== =========== =========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
=========== =========== =========== ============
Sept 30, Sept 30, Sept 30, Sept 30,
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net Loss $ (372,260)$ (95,686)$ (1,512,116)$ (132,162)
Adjustments to reconcile net loss to
net cash from operating activities
Depreciation and amortization 30,653 2,005 82,583 2,574
Compensation paid with stock 0 187 0 5,258
Equity in loss of E-Data Alliance Corp. 15,900 0 60,647 0
Changes in working capital 26,192 82,575 90,704 109,685
----------- ----------- ----------- ------------
Net Cash From Operating Activities (299,515) (10,919) (1,278,182) (14,645)
----------- ----------- ----------- ------------
CASH USED BY INVESTING ACTIVITIES
Purchase depreciable assets (85,144) (8,713) (175,984) (8,713)
Purchase intangible assets (219) 0 (43,639) 0
Sell property and equipment 0 0 53,384 0
Increase in notes and advances (16,000) (117,574) (655,508) (150,794)
Collection of notes and advances 0 0 481,456 0
----------- ----------- ----------- ------------
Net Cash Used by Investing Activities (101,363) (126,287) (340,291) (159,507)
----------- ----------- ----------- ------------
CASH PROVIDED BY FINANCING ACTIVITIES
Issue common stock 0 0 16,094 67,355
Issue preferred stock 177,600 0 417,600 0
Borrowings 236,522 142,854 1,267,570 142,854
Repayments 0 0 (385,369) 0
Issuance costs 0 0 0 (30,000)
Purchase treasury stock 0 0 (72,690) 0
----------- ----------- ----------- ------------
Net Cash Provided by Financing Activities 414,122 142,854 1,243,205 180,209
----------- ----------- ----------- ------------
NET CHANGE IN CASH 13,244 5,648 (375,268) 6,057
CASH, beginning of period 1,559 409 390,071 0
----------- ----------- ----------- ------------
CASH, end of period $ 14,803 $ 6,057 $ 14,803 $ 6,057
=========== =========== =========== ============
</TABLE>
<TABLE>
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 nine months ended
September 30, 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 subsidiary - Executive Assistance, Inc., its 90% -
subsidiary, Eyesite.com, Inc. and its 68% - 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 10
years.
Allowance for Uncollectible Notes Receivable - Management
believes that a reserve for uncollectible notes receivable was
not necessary at September 30, 2000.
Amortization of Intangible Assets - Intangible assets, which
consist of certain proprietary knowledge and a web-site, are
being amortized over 3 years.
-6-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 September 30,
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. $29,493 was expended in the three months ended
September 30, 2000; while $145,491 was expended in the nine
months ended September 30, 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 and prior to July 1, 2000,
the Company had not generated any significant amounts of revenue.
Also, the subsidiaries had not generated any significant amount
of revenue as they were either dormant when the Company acquired
them or were incorporated late in 1999. During 2000, the Company
implemented contractual agreements to provide management,
consulting and financial assistance to start-up and emerging
growth companies. Typical incubation agreements call for either
a flat monthly fee or hourly rates plus reimbursement for out-of-
pocket expenses. Revenues from these agreements are recognized
as services are provided. The Company recognizes interest
income on funds advanced in the form of short term notes and its
earnings from its equity method investee. E-commerce operations
recognize revenue as services are provided.
-7-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 is 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 September 30, 2000 -
Unsecured advances to established operating entities -
Emerging Pharmacy Solutions, Inc. $ 310,791
Energy Systems Solutions, Inc. 213,000
Sarwin Family LLC 144,000
Teman Electric (related party) 413,700
---------
1,081,491
---------
Advances to start-up or emerging entities -
Legend Security (related party) 13,500
Target Marketing (related party) 47,032
Marathon Capital Group 102,000
R&R Foods 6,000
Historic Inns 3,000
Swan River 50,000
Memorabilia & Antiquities (related party) 6,738
Canton Auction House 37,000
Real Talk Network, Inc. (Secured) 200,000
---------
465,270
---------
Other unsecured notes receivable -
Individuals 180,632
Accrued interest income and reimbursements 130,736
Stockholders 13,044
---------
324,412
---------
Total Notes Receivable $1,871,173
---------
-8-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE C - NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTITIES,
cont.
Each of these notes is due in less than one year and bears
interest at rates ranging from 6% to 10%. Accrued interest
amounting to $130,736 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 September 30, 2000, Rhino had short term indebtedness as
follows -
Note payable to Digital Information & Virtual
Access, Inc., 6% interest, unsecured, Note
is due on demand $1,032,634
Notes payable to Southern Leasing, Inc. 8%
interest, unsecured. Notes are due on demand 143,260
Note payable to Net.Return, Inc., Inc. 10%
interest Unsecured. Note is due on or
before 5-5-01 50,000
Note payable to Net.Return, Inc., Inc. 10%
interest Unsecured. Note is due on or
before 5-23-01 50,000
Note payable to Net.Return, Inc., Inc. 10%
interest Unsecured. Note is due on or
before 6-2-01 17,000
Note payable to Net.Return, Inc. 10%
interest, unsecured. Note is due on or
before 1-31-01 100,000
-9-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE D - INDEBTEDNESS - continued
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 and due February 15, 2001 50,000
Note payable to Net.Return, Inc., 10%
interest, Unsecured and due July 12, 2001 40,000
Note payable to Hart Prince, Inc., 10%
interest, Unsecured and due September 13, 2001 25,000
Note payable to Media Star Productions, Inc.,
10% Interest, unsecured and due September 22, 2001 10,000
Note payable to Net.Return, Inc. 10%
interest, unsecured. Note is due on or
before 12-31-00 $2,000,000
---------
$3,717,894
---------
At September 30,2000, 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 Southern Leasing, 10% interest,
Unsecured and due April 7, 2001 15,000
Note payable to Southern Leasing, 10% interest,
Unsecured and due April 26, 2001 10,000
Note payable to Southern Leasing, 10% interest,
Unsecured and due May 3, 2001 10,000
-10-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE D - INDEBTEDNESS - continued
Note payable to Southern Leasing, 10% interest,
Unsecured and due May 15, 2001 10,000
Note payable to Hart Prince, Inc., 10% interest,
Unsecured and due August 23, 2001 10,000
Note payable to Hart Prince, Inc., 10% interest,
Unsecured and due September 20, 2001 15,000
Note payable to Memorabilia & Antiquities, Inc.,
10% interest, unsecured and due
September 27, 2001 23,523
Note payable to The Strateia Group, Inc., 10%
interest, Unsecured and due June 19, 2001 35,320
---------
247,043
---------
Consolidated Debt at 9-30-00 $3,964,937
---------
NOTE E - COMMON STOCK AND PREFERRED STOCK
The Company has 25,000,000 of authorized shares of common stock
at a par value of $0.001 per share. At September 30, 2000,
there were 1,636,956 shares outstanding.
During the nine months ended September 30, 2000, Eyesite.Com,
Inc. (a wholly-owned subsidiary) issued 167,040 shares of
preferred stock with a par value of $0.002. These share were
sold for $2.50 per share. The Company has authorized 5,000,000
shares of preferred stock at $0.002 per share.
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
------------------------
Sept 30, Sept 30,
2000 1999
----------- ----------
Net Loss $ 372,260 $ 95,686
Weighted average outstanding
shares 1,636,955 1,415,508
-11-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE F -- EARNINGS PER SHARE RECONCILIATIONS - Continued
For the Nine Months Ended
---------------------------
Sept 30, Sept 30,
2000 1999
------------ ------------
Net Loss $ 1,512,116 $ 132,163
Weighted average outstanding
shares 1,614,977 1,049,381
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%. Had compensation
been measured under the provisions of SFAS No. 123, the Company
would have recognized an expense of $2,406 for the quarter ended
September 30, 2000, and $7,668 for the nine months ended
September 30, 2000. The following table summarizes options
outstanding at September 30, 2000 and the changes during the nine
months then ended -
Outstanding at December 31, 1999 977,500
Exercised 60,380
Canceled 137,500
-------
Outstanding at September 30, 2000 779,620
-------
Exercisable at September 30, 2000 124,062
=======
-12-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
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 $12,799
and $64,714 for the quarter and nine months ended September 30,
2000. The Company's new laser surgery center operates out of
facilities leased from and unrelated third party. Rent expense
amounted to $9,747 and $14,621 for the three months and nine
months ended September 30, 2000, respectively. For the
corresponding periods in 1999, rent was $12,496 and $18,496,
respectively.
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 M 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 nine months ended
September 30, 2000, the Company has purchased 19,650 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. As an inducement to perform the
web-site consulting services, the Company promised to issue
500,000 shares of EYESITE.COM, Inc.'s common stock to Dr. Edwards
upon completion of five months of the 36-month agreement. As of
June 30, 2000 the performance obligation had been satisfied and
the 500,000 shares were issued resulting in compensation expense
of $1,000.
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 nine months ended
September 30, 2000, the Company had funds on deposit in excess
of the Federally insured limits of $100,000.
-13-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
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 quarter and nine months
ended September 30, 2000 -
Quarter Six Months
--------- ------------
Sales $ 4,094 $ 36,183
Gross loss 27,493 99,814
Loss from operations 31,614 115,925
Net Loss 31,614 115,925
NOTE K - SUPPLEMENTAL DISCLOSURES FOR THE CASH FLOW STATEMENT
Quarter Nine Months
Ended Ended
Sept 30, 2000 Sept 30, 2000
-------------- --------------
Interest paid $ - 0 - $ - 0 -
Income taxes paid $ - 0 - - 0 -
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
schedules below for the quarter and nine months ended September
30, 2000 and 1999.
-14-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NOTE M -- RELATED PARTY TRANSACTIONS
Related Party & Balance at Amounts Amounts Balance at
Relationship Dec 31, 1999 Advanced Collected Sept 30, 2000
<S> <C> <C> <C> <C>
Teman Electric(1) $333,700 $ 80,000 $ - 0 - $413,700
Memorabilia &
Antiquities (2) 365,051 101,066 431,546 34,571
Marathon Group (1) 40,000 62,000 - 0 - 102,000
Joe Glover (1) 10,000 -0- - 0 - 10,000
Dan Weaver (1) 5,000 10,000 13,694 1,306
Start-up Entities
Shown in Note C -0- 85,532 25,000 60,532
Funds Received Amounts Repaid
from
DIVA (3) $(1,041,069) $(372,104) $350,708 $(1,062,465)
Strateia Group (1) ( 5,864) ( 86,283) 79,726 ( 12,421)
Other Transactions With Related Parties
Dan Weaver (1) Cash Payments
for Accounting $ 16,375
e-Data Purchase Web
hosting and
design services $ 21,986
Strateia Group (1) Rent incurred by
the Company $ 64,714
Stratiea Group (1) Overhead
Reimbursement $ 21,155
(1) Stockholder (2)Owned by President of Rhino (3) Common officers &
shareholders
-15-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
</TABLE>
<TABLE>
<CAPTION>
SEGMENT DATA -- 3rd QUARTER 2000 Incubator E-Commerce Eliminations Consolidated
=================================== ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Profit and Loss Information
-----------------------------------
Revenues from external customers $ 107,180 $ 86,324 $ 0 $ 193,504
Revenues from other operating segments 101,915 0 (101,915) 0
Interest revenue 35,003 4,068 0 39,071
Other income (expense) 0 (101,915) 101,915 0
Loss in E-Data Alliance Corp. (15,900) 0 (15,900)
Operating expenses (179,007) (296,847) 0 (475,854)
Interest expense (80,851) (4,888) (85,739)
Depreciation and amortization (14,690) (10,974) (1,678) (27,342)
------------ ------------ ------------- ------------
Net Loss $ (46,350) $ (324,232) $ (1,678)$ (372,260)
============ ============ ============= ============
SEGMENT DATA -- 3rd QUARTER 1999
===================================
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 12,610 0 0 12,610
Loss in E-Data Alliance Corp. 0 0 0 0
Operating expenses (95,311) (10,980) 0 (106,291)
Interest expense 0 0 0 0
Depreciation and amortization (858) 0 (1,147) (2,005)
------------ ------------ ------------- ------------
Net Loss $ (83,559) $ (10,980) $ (1,147)$ (95,686)
============ ============ ============= ============
Income tax $ 0 $ 0 $ 0 $ 0
Equity in net loss of equity
method investees 15,900 0 0 15,900
</TABLE>
-16-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
SEGMENT DATA -- 2000 Incubator E-Commerce Eliminations Consolidated
=================================== ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Asset Information
-----------------------------------
Current Assets, other than
notes receivable $ 831,854 $ 22,571 $ 0 $ 854,425
Notes receivable 2,421,999 198,844 (606,592) 2,014,251
Investment in equity method investees 139,352 0 0 139,352
Other long-lived assets 244,869 274,312 (21,983) 497,198
------------ ------------ ------------- ------------
Total Assets $ 3,638,074 $ 495,727 $ (628,575)$ 3,505,226
============ ============ ============= ============
Profit and Loss Information
------------------------------------
Revenues from external customers $ 108,680 $ 115,524 $ 0 $ 224,204
Revenues from other operating segments 101,915 0 0 101,915
Interest revenue 105,801 11,632 0 117,433
Other income (expense) 2,715 (101,915) 0 (99,200)
Loss in E-Data Alliance Corp. (60,648) 0 0 (60,648)
Operating expenses (744,193) (739,060) 0 (1,483,253)
Interest expense (225,906) (7,846) 0 (233,752)
Depreciation and amortization (45,308) (28,473) (5,034) (78,815)
------------ ------------ ------------- ------------
Net Loss $ (756,944) $ (750,138) $ (5,034)$ (1,512,116)
============ ============ ============= ============
Income tax $ 0 $ 0 $ 0 $ 0
Equity in net loss of equity
method investees 60,648 0 0 60,648
</TABLE>
-17-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30
[CAPTION]
<TABLE>
SEGMENT DATA -- 1999 Incubator E-Commerce Eliminations Consolidated
=================================== ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Asset Information
-----------------------------------
Current Assets, other than
notes receivable $ 221 $ 5,837 $ 0 $ 6,058
Receivables 121,120 33,954 (4,280) 150,794
Investment in equity method investees 0 0 0 0
Other long-lived assets (Goodwill) 79,782 8,713 (16,982) 71,513
------------ ------------ ------------- ------------
Total Assets $ 201,123 $ 48,504 $ (21,262)$ 228,365
============ ============ ============= ============
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 22,746 0 (8,724) 14,022
Operating expenses (130,998) (10,980) 0 (141,978)
Interest expense 0 0 0 0
Depreciation and amortization (2,574) 0 (1,632) (4,206)
------------ ------------ ------------- ------------
Net Loss $ (110,826) $ (10,980) $ (10,356)$ (132,162)
============ ============ ============= ============
Income tax $ 0 $ 0 $ 0 $ 0
Equity in net income of equity
method investees 0 0 0 0
</TABLE>
-18-
<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
and increased expenditures for legal and accounting services.
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.
Results of Operations
---------------------
The following comments discuss the nine-month interim
periods ended September 30, 2000 and 1999.
-19-
<PAGE>
Revenues:
The Company posted revenues of $224,205 in 2000 versus $0 in
1999, which was due primarily to $107,180 from business
incubation activities and $115,524 from the lasik surgery at
Eyesite.com's surgery center.
Cost of Sales:
The Company's cost of sales was $173,970 in 2000 versus $0 in
1999, which represents the direct costs associated with the lasik
surgery operations at Eyesite.com's surgery center.
General and Administrative:
General and administrative expenses increased from $146,184 in
1999 to $1,388,100 in 2000 an increase of $1,241,916 due to
increased personnel and other operating overhead expenses from
increased business activity. Legal and professional fees
increased by $87,094 due to the fact that in 1999 the Company was
just initiating its activities. Also, depreciation increased
by $74,609 due to the acquisition of tangible and intangible
assets mainly at Eyesite.com's surgery center.
Other Income (Expenses):
Interest income increased from $0 in 1999 to $117,434 in 2000
representing interest on notes and advances to emerging and
start-up enterprises. Interest expense increased by $233,752
representing interest on indebtedness incurred by the Company.
The Company's equity interest in E-Data Alliance Corp. reflects
fifty percent of the net loss from their operations.
The following comments discuss the three months ended
September 30, 2000 compared to the same period in 1999.
Revenues:
Revenues increased from $0 to $193,504 in 2000. $107,180
resulted from the Company's business incubation activities while
$86,324 resulted from revenue generated at Eyesite.com's surgery
center.
Cost of Sales:
The Company's cost of sales was $110,773 in 2000 and $0 in 1999.
This increase represents the direct costs associated with the
surgery center operations.
General and Administrative:
General and administrative expenses increased $284,244 from
$108,296 in 1999 to $392,540 in 2000, due to increased personnel
costs from the expanded business operations. Legal and
professional fees increased by $14,222 and depreciation and
amortization increased by $25,337 due to the acquisition of
tangible and intangible assets for the comparable three month
period.
-20-
<PAGE>
Other Income (Expenses):
Interest income increased from $0 in 1999 to $39,071 in 2000
representing interest on notes and advances to emerging and
start-up enterprises. Interest expense increased by $85,739
representing interest on indebtedness incurred by the company.
The Company's equity interest in E-Data Alliance Corp. reflects
fifty percent of the net loss from their operations.
Financial Condition
-------------------
At quarter end, cash and cash equivalents were $14,803 as
compared to $390,071 at December 31, 1999. This change was a
result of using the year-end cash to significantly increase
operations, add personnel and acquire tangible and intangible
assets.
Receivables increased from $1,584,044 to $2,014,251 due to
additional advances to start-up emerging enterprises. Prepaid
expenses and deposits increased insignificantly. Property plant
and equipment increased $122,600 from $87,670 in 1999 to $210,270
in 2000 due to acquisition of equipment for the surgery center.
The investment in E-Data Alliance Corp. decreased by $60,647 due
to recognizing the Company's share of their losses in 2000.
Intangible assets increased by $43,639 primarily due to
additional costs related to developing the website for the lasik
surgery operation.
Accounts payable increased from $41,985 in 1999 to $138,406
in 2000, which reflects the increase in the cost of business
operations over the last nine months. Accrued expenses increased
from $839,334 in 1999 to $1,129,115 in 2000 primarily due to
accrued interest on the Company's indebtedness. Notes payable
increased by $882,201 from $3,082,736 in 1999 to $3,964,937 in
2000 due to additional borrowings to fund operations. Common
stock increased from $1,577 to $1,637 due to the exercise of
management stock options. Preferred stock increased from $0 to
$334 due to the sale and issuance of approximately $418,000 of
preferred stock in Rhino's subsidiary Eyesite.com. The increase
in the accumulated deficit represents the loss through nine
months. Treasury stock increased from $0 to $72,690 because the
Company bought some of its shares in the open market. The
increase in the non-controlling interest reflects the 10%
interest in Eyesite.com, Inc. transferred to Dr. Gary Edwards on
July 1, 2000.
Investing activities consumed $340,291 in cash for the nine
months ended September 30, 2000. $219,623 was used to purchase
depreciable and intangible assets. $655,508 was used to increase
advances and notes to start-up and emerging enterprises. $53,384
was received from the sale and disposition of equipment and
$481,456 was received from collection of notes and advances.
Financing activities provided $1,243,205 for the nine months
ended September 30, 2000. $433,694 was received from the sale of
common and preferred stock and $1,267,570 was provided from
additional borrowings while $385,369 was used to repay
indebtedness. $72,690 was used to purchase treasury stock.
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, revenue generated at Eyesite.com 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 the remainder of 2000. Management
anticipates collecting approximately $200,000 to $500,000 of
outstanding notes receivable in the fourth quarter of this year.
Management foresees that its option for repaying $3,964,937 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 growth of its
operations in fourth quarter of 2000 and on into 2001. This
growth will in turn cause certain financial and operational areas
of the Company to change. The most significant change in
operations would be the number of employees working for the
Company. The Company and its subsidiaries currently have 15
full-time employees, one part-time employee and out-source a
number of projects. In an effort to bring these projects "in-
house" and based on the proposed expansion, the Company
anticipates having 35-50 full or part-time employees by the end
of 2001. This expansion will also significantly increase the
funds needed to provide sufficient advertising and 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.
-21-
<PAGE>
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.
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, Inc. has planned its
business in accordance with current legislation. If new
legislation is passed at a local, state or federal level, it
-22-
<PAGE>
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
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, 2, 3, 4 and 5 have been omitted as there is no
information to report.)
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 September 30, 2000, the Company did
not file any reports on Form 8-K with the Securities and Exchange
Commission.
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: November 14, 2000 By: /s/ DANIEL H. WEAVER
--------------------------------
Daniel H. Weaver
Chief Financial Officer and duly
authorized officer
