FIFTH AMENDMENT TO THE
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Rhino Enterprises Group, Inc.
(Name of Small Business Issuer in its charter)
Nevada 88-0333844
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification
number)
2925 LBJ Freeway, Suite 188, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (972) 241-2669
Securities to be registered under Section 12(b) of the Act:
Title of each class to be so registered: n/a
Name of exchange on which each class is to be registered: n/a
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
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TABLE OF CONTENTS
Page No.
Part I
Item 1. Description of Business 1
Item 2. Management's Discussion and Analysis 17
Item 3. Description of Property 22
Item 4. Security Ownership of Certain
Beneficial Owners and Management 22
Item 5. Directors, Executive Officers,
Promoters and Control Persons 24
Item 6. Executive Compensation 27
Item 7. Certain Relationships and Related
Transactions 31
Item 8. Description of Securities 33
Part II
Item 1. Market for Common Equity and Related
Stockholder Matters 34
Item 2. Legal Proceedings 35
Item 3. Changes In and Disagreements with
Accountants 35
Item 4. Recent Sales of Unregistered
Securities 36
Item 5. Indemnification of Directors and
Officers 39
Part F/S 39
Part III
Item 1. Index to Exhibits 85
Item 2. Description of Exhibits 85
Signatures 85
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
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Rhino Enterprises Group, Inc. (the "Company" or "Rhino")
was originally incorporated in Nevada on March 3, 1995 as Unique
Fashions, Inc. ("Unique"), with the stated business plan of
producing, marketing and selling children's specialty garments.
Unique's common stock was approved for trading on the Over-the-
Counter Bulletin Board as "UNQF."
On March 25, 1999, the Company effected a tax-free spin-off
transaction of its former wholly-owned subsidiary, Unique Ideas,
Inc. (formerly Unique Products, Inc.), a Texas corporation. The
stock of Unique Ideas, Inc. was distributed on a pro-rata basis
to the stockholders of the Company on March 25, 1999.
On April 30, 1999, the Company effected a one-for-twenty (1
for 20) reverse stock split of its common stock, changed its name
to Rhino Enterprises Group, Inc. and changed its stock symbol to
"RHNO." The Company's web-site is located at www.rhino-inc.com.
On May 13, 1999, the Board of Directors of Rhino approved a
stock-for-stock purchase agreement between Rhino and the
shareholders of Framing Systems, Inc., a Nevada corporation
("Framing"). From May 17, 1999 to December 2, 1999, the majority
of the Framing shareholders exchanged their shares of Framing
common stock into shares of the Company's common stock on a one
share of Rhino common stock for twenty-five shares of Framing
common stock basis, eventually making Framing a 65%-owned
subsidiary of the Company. At December 31, 1999, an aggregate of
6,584,000 shares of Framing had been exchanged for an aggregate
of 263,360 shares of the Company. Three shareholders executed the
stock for stock exchange agreement but have not been able to
produce an original certificate or provide proper documentation
regarding a lost stock certificate to facilitate the exchange of
their Framing Systems shares into the Company's common stock.
These three shareholders hold an aggregate of 310,000 shares of
Framing which will be exchanged into 12,400 shares of the
Company's common stock upon presentment of their original Framing
stock certificate or proper documentation for a lost stock
certificate. When these shares are actually issued by the
Company, the Company will own 68% of Framing. At the time the
Company entered into this transaction, it had a pre-existing
relationship with Framing by virtue of the fact that Framing's
previous president, David H. Carl, was the president of Rhino and
both companies share office space.
On November 12, 1999, Rhino acquired 50% of the outstanding
stock of R&R Foods, Inc., a Texas corporation ("R&R"). Rhino
acquired this 50% ownership for the cash payment price of
$46,000, which was previously paid by a third party. Rhino
entered into a promissory note for the repayment of the $46,000
to the third party. R&R currently operates one Great Outdoors
restaurant location in Arlington, Texas. R&R also has the
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exclusive franchise right to open two additional Great Outdoors
stores in the Dallas-Fort Worth, Texas metroplex area. At the
time of this transaction, there was no pre-existing relationship
with the owners of R&R Foods.
On October 27, 1999, Rhino entered into a letter of intent
to acquire Executive Assistance, Inc., a Nevada corporation
("Executive Assistance"), which transaction closed on November
18, 1999. Executive Assistance is a firm engaged in the business
of providing administrative functions to small businesses. The
terms of the acquisition were based on a stock-for-stock
exchange, whereby the Executive Assistance shareholders exchanged
100% of the outstanding stock (4,000,000 shares) of Executive
Assistance for 80,000 shares of the Company's common stock. This
transaction made Executive Assistance a wholly-owned subsidiary
of the Company. At the time of this transaction, there was a pre-
existing business relationship between Mary Magouirk, the
president of Executive Assistance, and the officers and directors
of the Company. Furthermore, Robert W. Moehler, President of the
Company, was an indirect affiliate of Executive Assistance.
On November 24, 1999, for the cash purchase price of $2,000,
the Company subscribed to 100% of the founder's stock in
Eyesite.com, Inc., a Delaware corporation ("Eyesite" or
"Eyesite.com") the Company incorporated in May of 1999, thus
making Eyesite.com a wholly-owned subsidiary of the Company at
that time. Eyesite.com's corporate headquarters are located at
2925 LBJ Freeway, Suite 188, Dallas, Texas. Since the Company
created the Delaware corporation, Eyesite.com, Inc., there was a
pre-existing affiliation with at the time the Company subscribed
to 100% of the stock of Eyesite.com. Subsequently, on December
29, 1999, Eyesite.com purchased all of the assets related to and
including the registered web site www.eyesite.com from Dr. Gary
Edwards. These assets included all rights, title and interest in
and to the website eyesite.com, customer/marketing files and
information, contract rights, income from the business,
intellectual property and more. These assets are described in
more detail in the Asset Purchase Agreement, which is filed as
exhibit 10.0 to the Second Amendment to the Form 10-SB and the
amendment dated December 27, 1999 to the Asset Purchase Agreement
which is filed as an exhibit 10.0 to this Fifth Amendment to the
Form 10-SB. The purchase price consists of a note payable
totaling $50,000. As an inducement to enter into the 36-month
contract,, Eyesite.com agreed to issue to Dr. Edwards the greater
of 500,000 shares of Eyesite.com common stock or 10% of the
outstanding common stock of Eyesite.com on the date of closing,
after Dr. Edwards completes the first five months of thirty-five
hours per month of web-site consulting services to Eyesite.com.
The first five months were completed by May 31, 2000. The
500,000 shares issuable to Dr. Edwards were issued on June 1,
2000. Further, the Company subscribed to an additional 3,500,000
shares on June 1, 2000. Thus Eyesite.com is now 90% owned by the
Company. Eyesite.com is positioning itself to be a marketing and
buying cooperative to champion the independent eye care
professional and provide business-to-business and consumer e-
commerce, as well as to provide laser vision correction.
On December 17, 1999 Rhino acquired 50% of the outstanding
stock of e-Data Alliance Corp., a Texas corporation ("e-Data").
The purchase price consisted of a cash payment to e-Data of
$200,000 and an obligation to provide $800,000 worth of
advertising/marketing services to e-Data. To facilitate this
obligation to provide $800,000 in marketing/advertising services,
the Company entered into a separate transaction with Money
Business, Inc., dba The Underground Shopper, a corporation owned
by Digital Information & Virtual Access, Inc., a Nevada
corporation ("DIVA"), to obtain $800,000 worth of
advertising/marketing, which will be invoiced to Rhino as actual
usage of services is incurred. e-Data
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currently operates web hosting and off-site data storage. It also
provides Web site design and database services. The servers
operated by e-Data are located in premium telecommunications
facilities located in Dallas. At the time of this stock purchase
of 50% of E-Data, the Company had a previous business (vendor-
type) affiliation with the principals of E-Data. None of the
principals of the non-Rhino owned E-Data shares are affiliates of
the Company.
On December 17, 1999 Rhino sold its 50% ownership of R&R
to Sarwin Family, LLC, a Texas Limited Liability Company, at the
same price for which it was purchased (net cost of zero to the
Company), which was $46,000, payable in the form of a promissory
note. Management of the Company has had, at various times over
the last several years, previous business consulting
relationships with Steve Sarwin, who manages the Sarwin Family,
LLC.
Information regarding the Company's advances to operating
and emerging entities is included in Note E to the Company's
Consolidated Financial Statements. Additionally, the information
regarding the Company's indebtedness is included in Note G to the
Company's consolidated financial statements.
It is the Company's intention to grow by developing business
partnerships and making strategic acquisitions. As part of its
ongoing corporate strategy, the Company will continue to seek
acquisition opportunities which will complement its existing
operations. The largest subsidiary of Rhino is its 90% owned
Eyesite.com, Inc., a Delaware corporation.
Operating decisions for the various subsidiaries are made by
the managers of the business entities. The Company's Board of
Directors makes investment decisions and all other capital
allocation decisions for the Company. Likewise, the respective
subsidiaries' Board of Directors who make those decisions for
their companies.
The Company retained cash and investments at the holding
company level of $152,730.99 at December 31, 1999. Total
liabilities of Rhino at the same date were $3,935,485.73.
The Company will report, as of the end of its 1998 tax year,
aggregate consolidated net operating tax loss carry forwards
("NOLs") for Federal income tax purposes of approximately
$250,000. Management estimates that the 1999 tax operating loss
will be approximately $500,000, thus increasing the carryforward
to approximately $750,000. These losses will expire over the
course of the next 15 years unless utilized prior thereto. See
Note B of the Notes to Consolidated Financial Statements.
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Business of Issuer
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The Company is a holding company engaged in the acquisition,
incubation and development of start-ups and emerging-growth
companies. The Company provides management, consulting services
and financing to these entities. As the entities to which the
Company provides incubation services need funds, the Company
advances funds in the form of unsecured notes, on a short-term
basis, which notes are expected to be repaid or may be converted
into an equity position in the entity in satisfaction of the note
payable to the Company. The terms of such conversion, if any,
would be negotiable each time such notes mature. The Company will
develop a growth-oriented portfolio of companies utilizing
various business strategies. The Company's primary focus for
incubating growth is to develop a subsidiary company through a
consolidation process utilizing a combination of mergers and/or
acquisitions of comparable companies within a specified industry
that is highly fragmented and supports an overall trend towards
consolidation. In simple terms, a consolidation is the process
where multiple companies within a given market segment are merged
or combined through acquisitions and/or buyouts. The resulting
entity is more streamlined and competitive in the marketplace.
The Company identifies a targeted industry by utilizing a
criteria-based screening process that considers the following:
o a non-exploitative industry;
o an industry that has social value;
o revenue of the industry is greater than $200 million;
o industry has more than 40 established, profitable
independent companies with revenue between $500,000 and
$5,000,000;
o industry is not reliant on small number of large
customers; and
o industry creates quality employment.
In each of these selected industries, the Company targets a
company to be acquired that will become the growth platform or
nucleus for that industry. The Company then manages the
consolidation strategy by seeking out and acquiring comparable
companies with revenues of $5 million or less and, through its
management practices, endeavors to facilitate growth to $20 to
$25 million in profitable gross revenue. The Company intends to
use its current businesses as a base to acquire profitable
companies in each of the targeted industries. The Company plans
to then put into place higher level management controls and
accounting services, provide access to professional and
experienced legal counsel, and employ aggressive marketing
resources to enable the combination of these companies to realize
substantially greater growth and profitability than they are able
to achieve under current management. While the option exists to
retain each portfolio company in the family of Rhino companies,
the Company intends at some stage in each portfolio company's
development to seek to sell it off to a larger consolidator or
spin it off in an Initial Public Offering.
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The Company anticipates that its revenue will include fees
and expense reimbursements provided in connection with its
incubation services, interest income on funds advanced in the
form of notes, and the earnings of its subsidiaries and its
equity-method investees. The Company has defined its current
business segments as incubation of start-ups and emerging-growth
companies and e-commerce enterprises. Eyesite.com is currently
the only material e-commerce entity, while Rhino Enterprises
Group, Inc. (the parent), Executive Assistance (a subsidiary) and
e-Data (the equity-method investee) are the only significant
components of the incubation segment.
Eyesite.com
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Eyesite.com is in the process of positioning itself to be
the premier Internet "portal of choice" for all information,
products and services related to vision correction and eye care.
Eyesite.com plans to pursue this objective by responding to the
exploding business opportunities immediately available through
the Internet and through the latest technological advances in the
$25 billion optical market (according to a 1998 Dain Rauscher
Wessels research report) for eye care. By utilizing
state-of-the-art technology, Eyesite.com intends to deliver the
highest quality information, services and products in a cost
effective and efficient manner and is determined to draw on the
vast resources of the Internet to most effectively reach
customers and eye care professionals. Eyesite.com intends to
enhance its existing web site, www.eyesite.com, to enable easy
storage and retrieval of eye care information and provide
innovative and reasonably priced products and services to draw
customers to private practice eye care professionals through its
site. Eyesite.com aims to make its web site the place where
people go for information, products and services in the vision
correction and eye care field.
The Eyesite.com web site will be the driving force of the
enterprise, and its continuously expanding web presence will
serve as the conduit for spreading of its information, products
and services. Eyesite.com anticipates being the vital link that
instantly connects eye care information, opportunities, and
private practice eye care professionals with consumers on a
twenty-four hour basis, seven days a week.
As specified below, the Eyesite.com web site currently
offers a limited number of services to both the consumer and the
private practice eye care professional. The scope of these
products and services will be expanded, as also outlined below,
to target both the consumer, the private practice eye care
professional, as well as vendors to the industry.
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Market for Products or Services
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A vast portion of the nation's population requires
eyeglasses or contact lenses to correct common refractive vision
disorders, and over 97 million Americans purchased eyewear in
1998, according to Jobson Optica Group's U.S. Optical Industry
Handbook 1999. These consumers, with a median age of
approximately 35 years old, spent a total of approximately $16
billion during 1998 on eyeglasses, contact lenses and other
corrective lenses. When professional services are included,
estimates for the total eye care market in North America were
approximately $36 billion. Consumers purchased retail optical
goods through three main retail channels: (1) private practice
ophthalmologists, optometrists and opticians, which accounted for
63% of sales, (2) retail chains, which accounted for 35% of sales
and (3) health maintenance organizations, which accounted for 2%
of sales. These expenditures are made to treat the symptoms of
what has become a fixable disorder. Companies in the optical
industry are meeting rising demand with innovative new products.
The innovations include advanced spectacle lens materials, high
performance sun wear and eyeglass frames, contact lenses,
pharmaceuticals that improve the treatment of eye diseases and
refractive vision correction (RVC).
The Internet has become an important alternative to
traditional media, enabling millions of consumers to seek
information, communicate with one another and execute commercial
transactions electronically. The number of worldwide web users is
expected to grow considerably over the next several years. The
Internet is distinct from traditional media in that it offers 24
hours a day, 7 days a week, real-time access to dynamic and
interactive content and instantaneous communication among users.
These characteristics, combined with the fast growth of Internet
users and usage, have created a powerful, rapidly expanding
direct marketing and sales channel. Advertisers can target very
specific demographic groups, measure the effectiveness of
advertising campaigns and revise them in response to real-time
feedback. Similarly, the Internet offers on-line merchants the
ability to reach a vast audience and operate with lower costs and
greater economies of scale, while offering consumers greater
selections, lower prices and heightened convenience, compared to
conventional retailing. The management team of Eyesite.com
believes that all participants in the eye care industry will
benefit from the Internet because of its unique attributes as an
open, low-cost and flexible technology for the exchange of
information and execution of electronic transactions.
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Portals such as AOL, Excite, The Go Network, Lycos, MSN, and
Yahoo! have established themselves as leading pathways for a
broad variety of information. Users are augmenting these portals
with subject-specific vertical portals (example: drkoop.com for
the healthcare industry), which are becoming a growing segment of
the Internet. These vertical portals are using brand awareness
driven by high quality topical content and significant market
resources to establish them as destinations for highly
concentrated groups of users.
Health and medical information is one of the fastest growing
areas of interest on the Internet. According to Cyber Dialogue,
an industry research firm, during the 12-month period ended July
1998, approximately 17 million adults in the United States
searched on-line for health and medical information, including
eye care information. Cyber Dialogue estimates that approximately
70% of the persons searching for health and medical information
on-line believe the Internet empowers them by providing them with
information before and after they go to a doctor's office.
Eyesite.com believes that establishing clear brand identity
as a trusted source of on-line consumer eye care information and
services, should provide a significant opportunity to capitalize
on multiple revenue sources. These include direct-to-consumer
advertising of the value of the laser vision correction procedure
at an affordable price and e-commerce of all types of eyewear.
Products, Sales and Marketing
-----------------------------
Eyesite.com has three principal thrusts for providing
products and services, one or more of which may be pursued
concurrently. In the first phase, Eyesite.com intends to rapidly
expand and enhance its existing web site, www.eyesite.com, in the
first half of the year 2000. The aim is to make this web site the
premier Internet gateway for vision care information and for
value shopping by consumers seeking eye care products and
services through e-commerce on the World Wide Web.
Currently, Eyesite.com offers on its web site: 1) the
ability for online appointment setting with participating
doctors; 2) the ability to get discounted eye exams from
participating doctors; 3) online retrieval of prescriptions for
eyeglasses and contact lenses by patients if their doctor elects
to make them available; 4) general information about eye care to
the consumer; 5) the ability for a consumer to ask an eye care
related question and to have it answered by a doctor via e-mail.
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Eyesite.com plans to offer, and is working on, the following
services: 1) consumer e-commerce for eye care products which will
actually be purchased from participating doctors; 2) business-to-
business e-commerce so that participating doctors can purchase
product and equipment online from vendors; 3) consumer access to
a database of most available eye glass frames to view, and if the
consumer has the ability, to put a digitized picture of
him/herself in to see how he/she would look with a given pair of
frames; 4) referrals for refractive surgery; 5) greatly expanded
eye care information database; 6) continuing education
opportunities for the eye care professional; 7) appointment
reminder service; 8) database mining and marketing for the
participating doctors; 9) and practice management software tools
online.
In the second phase, Eyesite.com intends to recruit a select
number of private practice eye care professionals in each
metropolitan area that it elects to enter to become Eyesite.com,
Inc. licensees. While enabling each eye care professional to
retain his/her independence, Eyesite.com intends to provide
certain benefits, as outlined in the Marketing section below.
These select eye care professionals will further facilitate the
branding of the "Eyesite.com" name. Further, they will become an
eye care professional of choice on the Eyesite.com web site.
In the third phase, Eyesite.com intends to establish laser
centers that lead the market in providing affordable laser eye
surgical procedures, without compromising quality of care. These
vision correction laser procedures will be marketed with the
intent to expand the availability to a greater segment of the
population with an emphasis on "quality and value at an
affordable price." Initially, these centers will be providing the
highly successful, rapidly growing and increasingly accepted
LASIK procedure. Since these centers will offer only these laser
refractive surgical procedures, the surgeons will be some of the
most experienced in the field, thus continuing to enhance the
objective of quality of care. This exclusivity of service offered
with below market pricing may potentially allow each center to
generate excellent cash flow and profits for Eyesite.com.
Additional patient options for corrective eye procedures will be
examined for potential inclusion in the menu of future services
to be provided.
The private practice eye care professional can be viewed as
a key gatekeeper for refractive procedures. These Eyesite.com
private practice eye care professionals will be encouraged to
refer a growing number of candidates for these procedures to each
laser center. Eyesite.com's aggressive cross-media marketing of
its Web Site will cause the Internet to become a strong marketing
tool for these laser centers.
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Eyesite.com will launch the campaign to market and provide
laser vision correction in Dallas/Ft. Worth, Texas area. After
successfully establishing the laser vision market in the
Dallas/Ft. Worth area, the Company will expand its presence to
numerous other metropolitan areas throughout the United States.
Eyesite.com intends to employ a dynamic marketing and
advertising plan to increase awareness of the web site address as
well as the products and services it offers. It aims to utilize
traditional advertising to include print, television and radio;
banner swaps; listings with major Internet search engines;
strategic alliances with leaders in the vision care industry; the
use of the new electronic magazine format, e-zines; and referral
partnerships to create a synergistic blend of influential tools
to drive consumers to our web site.
Eyesite.com intends to pursue three target audiences: (1)
the consuming public; (2) the private practice eye care
professional; and (3) vendors of vision related products. To the
consumer, Eyesite.com intends to provide the capability to:
o access information on any topic related to the eye and
its care;
o go on-line, ask an eye care question, and receive a
response from a qualified eye care professional;
o referrals for quality eye care refractive surgical
procedures at more affordable prices;
o search for an eye care professional in the consumer's
geographical area;
o set an appointment with an Eyesite.com affiliated eye
care professional, in real-time, on-line from anywhere
in the world;
o order discounted quality vision and eye care related
products and services 24 hours a day over the
Internet, such as: prescription glasses and frames,
contact lenses, sunglasses, eye exams, and eyeware
accessories, all of which would be picked up at the
nearest Eyesite.com private practice eye care
professional's location of the consumer's choosing;
o participate in chat rooms regarding vision related
concerns; and
o access a bulletin board for job opportunities in the
eye care industry.
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To the private practice eye care professional, Eyesite.com
intends to provide:
o brand identity as an Eyesite.com professional;
o web page on Eyesite.com's web site;
o intense geographic cross-media marketing;
o doctor listings;
o inexpensive web site hosting;
o e-mail;
o chat rooms;
o MIS assistance for improved profitability;
o patient referrals;
o appointment scheduling;
o product sales;
o better discounts on cost of goods sold;
o continuing education opportunities;
o access to the bulletin board to advertise employment
opportunities;
o opportunities for co-management revenues from Lasik
surgery; and
o retained independence.
To vendors, Eyesite.com intends to provide links to vendor
web sites and the opportunity to advertise vendor products and
services.
A relentless branding and marketing of the web site,
www.eyesite.com, will continually focus on increasing the number,
quality and value of visitors to the site. Eyesite.com intends to
take full advantage of the powerful trend that more than 60% of
the population of the United States requires eye glasses or
contact lenses and that during 1998 more than 100 million
consumers spent a total of some $16 billion on corrective vision
products. Eyesite.com plans to move quickly to reap the benefits
of the predicted expansion of the laser vision correction market
at an average annual pace of 40%-50% over the next several years.
Competition
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Optical retail is a competitive and fragmented industry.
Eyesite.com has a variety of competitors, including
ophthalmologists and optometrists in private practice,
traditional optical retail stores, including national optical
chains such as Sunglass Hut, Pearle Vision Center, Sterling
Optical, LensCrafters and National Vision Association and mass
merchandisers such as Wal-Mart, Sam's and Costco. In addition,
Eyesite.com intends to compete with non-traditional optical
retailers, such as retailers, mail order catalogs, direct
marketers such as 1-800 Contacts, and with other online web-based
optical retailers such as Shades.com and EyeCity.com. Eyesite.com
management recognizes that there will be many more online
competitors in the future, as barriers to entry are minimal, and
new competitors can launch competing websites at a relatively low
cost. These sites offer different services, many of which are
currently offered by, or will be offered by Eyesite.com.
Management has not located any eye care related web site that is
as all-encompassing for both the consumer and the private
practice eye care professional as is planned for Eyesite.com's
web site. Regardless of the services offered, marketing the web
site for brand recognition is critical to long-term success, and
none have done that to date, and management is not aware of any
competitors that exploit this to the fullest as is planned for
Eyesite.com.
In addition to competition, other challenges to the success
of Eyesite.com exist. Maintaining a multi-functional and dynamic
web site that operates as user-friendly and as smoothly as
possible in all of its functional areas demands that the best
technical talent be deployed to ensure minimal technical
problems. Privacy issues relative to patient records are
potential fears both from the consumer and the private practice
eye care professional are currently being addressed. While
internet use continues to grow, the branding of the Eyesite.com
name, causing the public's regular usage of the site is no small
task. Nevertheless, management believes that it is addressing
this task to bring the proper resources to bear to succeed.
The Eyesite.com management team believes that the principal
competitive factors it will have in its online market are brand
recognition, product selection, convenience, price,
accessibility, customer service, quality of search tools, quality
of site content and reliability and speed of fulfillment.
In the laser vision correction niche of Eyesite's industry,
there is intense competition. Individual companies compete with
other entities, including hospitals, individual ophthalmologists,
other laser centers and certain manufacturers of excimer laser
equipment, in offering laser vision correction. Laser centers
compete on the basis of quality of service, reputation and price.
The Company competes in two principal markets: the market for
laser vision correction and the consumer market for vision
correction.
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Within the consumer market for laser vision correction,
Eysesite faces competition from other service providers. As
market acceptance for laser vision correction continues to
increase, competition within this market will grow. The market
for laser vision correction is divided into three major segments:
corporate-owned centers, surgeon-owned centers, and institution-
owned centers. In the United States for the fourth quarter of
calendar 1998, the corporate-owned segment accounted for the
largest percentage of total procedure value with a 42% market
share according to The Market Scope, an industry source. The
surgeon-owned centers, which refer to ophthalmologists who have a
laser and perform laser vision correction procedures, accounted
for 39% of total procedures performed. The remaining 19% of laser
vision correction procedures were performed at institution-owned
centers, such as hospitals or universities.
Although competitors in certain regions may charge less for
laser vision correction than Eyesite.com, the management team
believes that the primary factors affecting competition in the
laser vision correction market are quality of service,
reputation, brand recognition and price, and that competitiveness
is enhanced by a strong network of highly qualified doctors.
In the laser vision correction arena, Eyesite.com competes
in fragmented geographic markets. Eyesite.com's principal
corporate competitors include: TLC, The Laser Centers, Laser
Vision Centers, LCA-Vision, Clear Vision Laser Centers, Omega
Health Systems and Icon Laser Centers. In each specific
geographic market, Eyesite.com will also compete with local
ophthalmologists and institutions.
Current Status of Eyesite.com
-----------------------------
In March 2000, Eyesite.com launched its campaign in the
Dallas/Ft. Worth, Texas market to license private practice eye
care professionals and to commence performing the Lasik
procedure. Currently, Eyesite.com is in discussions with a number
of private practice eye care professionals, with one having
signed on, who have expressed an interest in being part of the
Eyesite.com network. At least eight have received the necessary
applications. Without advertising, Eyesite.com is also receiving
e-mail inquiries from professionals from as far away as Canada
and Mexico who desire further information on how to participate.
Eyesite.com has also entered into an agreement with an
opthalmologist to perform the Lasik procedure, and has opened its
first Eysite Laser Center in Dallas, Texas to perform laser
vision correction on referral patients from optometrists.
Eyesite.com has leased an Autonomous LADARVision Laser for the
Eyesite Laser Center.
-11-
<PAGE>
e-Data
------
e-Data is an internet database and e-commerce hosting
company that offers its product services through its website,
www.edataalliance.com. e-Data began operations in May, 1999.
e-Data provides a wide range of hosting and enhanced Internet
services that enable its customers to publish and manage their
web sites and network-based applications more effectively than
internally developed solutions. e-Data provides hosting for
customers' web sites, software applications, and data on servers
typically housed in their data center so that others on the
Internet can access and interact with its customers' web sites
and network-based applications. e-Data web hosting services
provide a variety of hosting solutions to meet the needs of
businesses of all sizes, as their web sites develop from low-end
marketing brochures to more complex, interactive web sites and
finally to applications integral to their businesses. e-Data's
application hosting services provide its customers remote access
to mission-critical software applications and data 24 hours a
day, 7 days a week, 365 days a year.
Market for Products or Services
-------------------------------
The growth in computer and the World Wide Web usage combined
with enhanced functionality and accessibility have made the
Internet an increasingly attractive medium for businesses to:
O disseminate information;
O engage in e-commerce;
O build customer relationships;
O streamline and automate data-intensive processes; and
O communicate more efficiently with dispersed employees.
In the last several years, businesses have emerged with
operating models that are exclusively dependent on the Internet,
while traditional businesses of all sizes are working quickly to
establish a web presence. Many of these businesses establish
their initial online presence with a simple, static brochure for
marketing purposes. As they become more familiar with the
Internet as a communications platform, an increasing number of
businesses are implementing more complex, mission-critical
applications on the Web including sales, customer service,
customer acquisition and retention, employee communications and
e-commerce between suppliers and business partners.
-12-
<PAGE>
According to Forrester Research, Inc., U.S. firms are now
spending approximately 25% of their overall IT budgets on
outsourcing services. These services include packaged application
software implementation and support, customer support and network
development and maintenance. Reasons for the growth in
outsourcing include:
o the desire of companies to focus on their core
businesses;
o the increased costs that businesses experience in
developing and maintaining their networks and software
applications;
o the fast pace of technological change that shortens
time to obsolescence and increases capital
expenditures as companies attempt to capitalize on
leading-edge technologies;
o the challenges faced by companies in hiring,
motivating and retaining qualified application
engineers and IT employees;
o the desire of companies to reduce deployment time and
risk.
Many businesses, both small and large, lack the resources
and expertise to cost-effectively develop and continually enhance
their web sites with evolving technologies while maintaining a
network infrastructure that remains operational in the event of a
hardware or software failure as well as supports increased
bandwidth capability as their business grows. Small- to medium-
sized businesses typically lack the IT resources, capital and
scale to design their own web sites and install, maintain and
monitor their own web servers and Internet connectivity. Large
businesses typically require state-of-the-art facilities and
networks that are monitored and managed on a 24x7 basis by
experts in Internet technology and that can be upgraded and
scaled to meet the needs of mission-critical Internet
applications that may be integral to their businesses. As a
result, e-Data believes enterprises of all sizes are seeking
outsourcing arrangements to help:
o build effective web sites;
o improve their site's reliability and performance;
o provide continuous monitoring of their Internet
operations; and
o reduce costs.
-13-
<PAGE>
Businesses increasingly face competitive demands to automate
business processes. This problem has been exacerbated by a
shortage of IT professionals. Until recently, implementation of
Internet applications required development of in-house software
applications or the customization of existing packages. This made
each implementation unique and costly. It also made
implementation time frames and costs unpredictable. The
management team of e-Data believes that businesses of all sizes
have a significant need to outsource the hosting of Internet and
other software applications to improve core business processes,
reduce costs and enhance their global competitive position.
Products, Sales and Marketing
-----------------------------
The management team of e-Data believes that a significant
market opportunity exists for a nationally-recognized hosting
solutions provider with the scale and expertise to offer a wide
range of value-priced services to businesses of all sizes. e-Data
currently offers a full range of hosting services that enable
businesses to deploy, use, expand and update their web sites and
applications infrastructures more rapidly and cost-effectively
than internally developed solutions. e-Data's current service
offerings comprise four main areas: web hosting, software
application hosting, consulting and web site design.
e-Data services include the following product offerings:
WEB HOSTING
o Virtual Hosting. Its virtual hosting solution provides
web site hosting on a server that is owned, managed
and housed by e-Data for multiple customers. This is
an economical solution for customers with simple or
moderately accessed sites.
o Dedicated Hosting. Dedicated hosting provides to a
single customer hosting for their web site on a
network server that is managed, housed and owned by
e-Data. This type of service enables a customer to
host complex web sites and applications without the
need to incur significant infrastructure and overhead
costs. This solution provides greater server and
network resources for e-Data customers than virtual
hosting and allows them to configure their
hardware to optimize site performance. Companies with
increasing levels of complexity, traffic or reliance
on their web sites may prefer dedicated hosting.
-14-
<PAGE>
o Co-located Hosting. Its co-located hosting solution
provides web hosting services on servers that are
owned by e-Data customers but which are managed and
housed by e-Data. In general, the co-located servers
are housed separately from e-Data shared and dedicated
servers in its data centers which they monitor on a
24x7 basis and to which they allow customers limited
access.
SOFTWARE APPLICATION HOSTING
Its application hosting solution, through which e-Data
manages software applications for its customers, is designed
to support its customers' Internet, intranet and extranet
projects through a variety of service and support options.
e-Data offers a range of application outsourcing services
which provide its customers with the ability to capitalize
on the latest Internet-enabled technologies while
outsourcing information technology operations such as
deployment strategies and maintenance and upgrades of
software to a third party.
CONSULTING
e-Data provides consulting services to its customers by
helping them bridge the gap between their data and
information and the Internet. e-Data Alliance provides a
complete solution for companies with complex mission-
critical web applications. In addition to providing hosting
services, e-Data helps companies design and develop
solutions to meet their business goals. e-Data also offers a
complete spectrum of business support services:
o Network architecture and design to assist a business
customer's staff in the development of detailed
network specifications and implementation tactics;
o Application development and implementation that
complements the customer's underlying network and
helps it achieve its business goals, minimizing the
high risk traditionally associated with custom
development;
o Strategic technology planning to ensure high
performance, long-term network operations that support
a customer's business objectives while accommodating
the unique needs of its user base; and
-15-
<PAGE>
o Local area network (LAN), wide area network (WAN) and
virtual private network design (VPN) plus
implementation and support of highly complex, highly
resilient LAN, WAN and VPN infrastructures.
WEB DESIGN
e-Data provides web site design services. To accomplish
this, e-Data developed a new model for the web design
industry. e-Data does not employ a staff of web site
developers and graphic artists who are normally set in their
ways and by definition are generalists. Instead, e-Data
relies on the expertise of a national IT resources group to
contract on a case-by-case basis with an expert in the type
of design its client is requesting.
If a client requests a site with numerous Java applets, e-
Data contracts with a Java applet expert. If the client
wants Flash technology, e-Data contracts with a Flash
technology expert. Using this approach there is no wasted
learning curve and e-Data's clients receive the most
expertise for their money.
e-Data's IT resources group's staff of industry
professionals is focused on recruiting, screening, and
qualifying the best web design experts. Using their virtual
hiring staff, we select the experts necessary to create the
customers's web site. The end result: e-Data's customers'
web site is created by the right expert and in the most
cost-effective manner.
Competition
-----------
The market for web-hosting, data storage and web-design are
all highly competitive. e-Data is relatively new in operating in
these three areas and intends to expand its current customer base
significantly in the coming months. As e-Data is a new venture,
most of e-Data's competitors in these three areas have greater
financial, technical and marketing resources, larger customer
bases, longer operating histories, greater name recognition and
more established relationships in the industry than e-Data does.
Its current and prospective competitors generally may be
divided into the following groups:
o other Web hosting and Internet services companies such
as AboveNet Communications, Inc., Exodus
Communications, Inc., Frontier GlobalCenter, Globix
Corporation and local and regional hosting providers;
-16-
<PAGE>
o national and regional Internet service providers such
as Concentric Network Corporation, MindSpring
Enterprises, Inc., UUNET Technologies, Inc., PSINet
Inc. and Verio Inc.;
o global telecommunications companies including AT&T
Corp., British Telecommunications plc, Telecom Italia
SpA and Nippon Telegraph and Telephone Corp.;
o regional and local telecommunications companies,
including the regional Bell operating companies such
as Bell Atlantic Corporation and US West, Inc.;
o companies that focus on application hosting such as
USinternetworking, Inc. and IBM Global Services;
o multimedia hosting companies such as broadcast.com.
General Information of the Company
----------------------------------
The Company has no trademarks, patents or other licenses
that are material to the conduct of its business. Eyesite.com is
in the process of registering its logo and name.
Neither the Company nor its subsidiaries have material
research and development expenses.
The costs to the Company and its subsidiaries of complying
with environmental regulations are not material.
The Company currently employs approximately nine (9) full-
time employees at the corporate level. The aggregate
total of employees amongst the Company and its subsidiaries is
approximately 14. None of the Company's employees are members
of collective bargaining units. The Company believes its
relationships with its employees is good.
Item 2. Management's Discussion and Analysis
This registration statement includes, without limitation,
certain statements containing the words "believes,"
"anticipates," "estimates," "could," "plans to," and "predicts"
and words of a similar nature, which constitute "forward-looking
statements" meaning actual results could differ from projected or
expected results. In particular, the statements herein regarding
the Company's anticipated increased sales in the year 2000; the
continuity of growth of the Company and its subsidiaries; the
expected increase in wages and professional fees in the year 2000
and the percentage of increase thereof; the anticipated expansion
of the Company's operations in the year 2000; the anticipated
execution of a formal long term lease agreement for office space;
-17-
<PAGE>
the increase or reduction of goodwill; the anticipated increase
in advertising expenses in the year 2000; the Company continuing
to make loans to other businesses as a way to pursue business
opportunities; the increase of interest expense in the year 2000;
the growth of interest income in the year 2000; the possibility
of extraordinary income in the year 2000; the anticipation that a
significant portion of the loans made to other companies will be
repaid in the year 2000; the anticipation that the Company will
be able to secure additional long term debt financing or equity
financing in 2000; the belief that the Company has the financial
resources and commitments needed to meet business requirements in
the foreseeable future; the anticipated significant growth
of its operations in 2000; the assertion that such growth will in
turn cause certain financial and operational areas of the Company
to change; the expected increase in the number of employees of
the Company; the assertion that such expansion of employees 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; and the
anticipation of the increase in expenditures for legal and
accounting services to meet the Company's various compliance
standards are all forward-looking statements. Forward-looking
statements reflect management's current expectations and are
inherently uncertain. The Company's actual results may differ
significantly from management's expectations.
Restatement of 1999 Amounts
---------------------------
The Company has restated the consolidated balance sheet to
reflect purchase accounting for the acquisitions of Framing
Systems, Inc. and Executive Assistance, Inc. This change
resulted in an increase of assets in the amount of $97,891 which
represents goodwill of $100,669 less amortization for 1999 in the
amount of $2,778. Stock holders' equity also changed by this
amount. Consolidated liabilities were not effected by this
restatement.
The consolidated income statement was also restated to
remove the effects of pooling and replace it with purchase
accounting. The effect on income from operations was a reduction
in sales of $4,758, and a reduction of general and administrative
expenses in the amount of $6,186, thereby decreasing the net loss
from operations by $1,428. Net loss was increased by $31,350
which represents the loss on disposition of Unique Products, Inc.
Loss per share increased from 56 cents to 66 cents due to the
modifications just described and because of the revised weighted
average common shares outstanding during 1999.
Results of Operations
---------------------
The Company posted revenues of $5,164 for the year ended
1999 up from $0 in 1998. This increase was due to the acquisition
and development of its subsidiaries (Framing Systems and
Executive Assistance). The Company anticipates increased revenues
in 2000 as the operations of its subsidiaries continue to grow.
The income from our equity investment in e-Data for 1999 was
immaterial.
The Company's total general & administrative expenses
increased by approximately 4,197%, from $17,889 in 1998 to
$750,765 in 1999. This dramatic increase in operating expenses
was attributable to the Company's pursuit of business activity
and acquisition candidates. Personnel costs and professional fees
grew from $0 in 1998 to $416,756 in 1999, as the Company
increased staff to handle the marketing, administrative,
management, legal, accounting and technological demands of its
increased business activity. The Company anticipates personnel
costs and professional fees to continue to grow into 2000, but
-18-
<PAGE>
they should not increase by as large of a percentage based
on 1999's total. Additionally, the Company's operating costs
increased from $17,889 in 1998 to $320,522 in 1999, an increase
of 1,792%. This increase was caused by the Company obtaining
lease space on a month to month basis and incurring marketing,
administrative and other costs related with doing business. With
the anticipated expansion of the Company's operations into 2000,
management anticipates operating costs to increase into 2000 as
we expect to enter into a formal long-term lease arrangement and
significantly increase 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.
Other Income/(Expense) went from ($12,500) in 1998 to $7,663
in 1999. The change was caused by a $21,697 increase in interest
earned by the Company on loans it has made to other Companies,
and a $12,745 profit that was attributable to a non-recurring
item. The change was also attributable to the Company's interest
expense increasing from $12,500 in 1998 to $26,779 in 1999, an
increase of 114%. 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
-------------------
In 1999, the Company financed its operations through debt
and sales of common stock. In March and April of 1999, the
Company raised $67,355 through the sale of common stock. At year
end, cash and cash equivalents were $390,071 as compared to $0 at
December 31, 1998. The ratio of current assets to current
liabilities was .70 to 1 at December 31, 1999.
Operating activities used $616,274 of cash in 1999, whereas
operating activities used $1,884 of cash in 1998. This
change in cash used by operations amounted to $614,390. This was
caused by the expansion of the Company's business activity. The
majority of the cash utilized by operations in 1999 was
attributable to general & administrative costs.
-19-
<PAGE>
Investing activities consumed $1,875,626 during 1999,
compared to $0 in 1998. Capital expenditures rose in 1999
from $0 in 1998 to $76,582 in 1999. These capital expenditures
were investments in property and equipment for the expansion of
the Company and to accommodate possible future growth.
Additionally in 1999, the Company made short-term loans
bearing 8% to 10% interest to various companies totaling
$1,584,044 which is an increase over 1998's total of $0. The
Company anticipates that a significant portion of these loans
will be repaid in 2000, thus providing a source of working
capital for the Company. Additionally, the Company made a
$200,000 equity investment in e-Data and expended $15,000 on
payments for intangibles. Both of these represent increases from
$0 in 1998.
Financing activity provided the Company with $2,881,971 as
of December 31, 1999 as compared to $0 in 1998. During 1999, the
Company received $3,392,949 of financing. There were three
sources of this financing. Digital Information & Virtual Access,
Inc. loaned to the Company a total of $1,342,949 in the form of
an unsecured note at 6% interest that is due upon demand.
Net.Return, Inc. provided $2,000,000 in the form of an unsecured
note at 10% payable by December 31, 2000. Dr. Gary Edwards
provided $50,000 of financing to facilitate the purchase of a
web-site at 0% interest payable in six equal monthly installments
of $8,333.33, beginning in January 2000. This financing
provided, in part, the funding for operations and investment
activities. Management of the Company does not anticipate needing
additional loans during the year 2000. Rather, 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. 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 $3,082,736 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 9
full-time employees and out-sources most 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.
-20-
<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. Even though the acute problems many anticipated relating
to the Y2K challenge did not materialize in any significant way
during the first month of 2000, this project, along with
developing and implementing solutions to the Y2K issue, if any
were to occur, is continuing. Management currently anticipates
that the project will be substantially completed by March 1,
2000, and will not have a material impact on the Company's
consolidated financial results or position.
The Company's consolidated financial results could also be
adversely affected if one or more of the companies in which it
has material investments or will have material investments are
materially adversely affected by the Y2K issue.
Eyesite.com and Executive Assistance rely primarily on
personal computers and popular contemporary business and
operating system software that management believes are year 2000
compliant.
E-Data is highly dependent on electronic data processing,
Internet and server technology and information systems in its
operations. E-Data management believes that its hardware and
operating system software are year 2000 compliant. E-Data has
identified the third parties material to its operations.
Management of E-Data is continuing to monitor and, in the case of
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<PAGE>
certain material third parties, has been able to test its
interface to the external systems of its third-party business
associates and believes that they are year 2000 compliant.
Management of E-Data believes that its electronic data processing
and information systems will be year 2000 compliant. However,
should any material system fail to correctly process information
due to the recent century change, operations could be interrupted
and this could have a material adverse effect on E-Data's results
of operations.
ITEM 3. DESCRIPTION OF PROPERTY
The Company rents from The Strateia Group, Inc., a related-
party shareholder, on a month-to-month basis approximately 4,705
square feet of office space located at 2925 LBJ Freeway, Suite
188, Dallas, Texas 75234, for a monthly rental of $6,496 per
month. This office space is utilized for the Company's corporate
offices and is in good condition and adequate for the Company's
current needs. There is currently unused space available in the
suite for the addition of a few more employees. However, as the
Company's corporate staff grows, the Company may relocate it
offices to a space that better utilizes is square footage. At
this time, the Company is not a party to any lease or other
written agreement for the utilization of its office space.
Eyesite.com leases from a non-affiliated party 3,342 square
feet of office space located at 7515 Greenville Avenue, Suite
220, Dallas, Texas 75231, on a 36 month lease at approximately
$4,874 per month for the first 12 months and approximately $5,292
per month for the remainder of the lease. This office space is
used for Eyesite.com's first laser vision correction center.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of
the date of filing this registration statement (unless otherwise
noted), with respect to the beneficial ownership of the common
stock by each officer and director of the Company, each person
(or group of persons whose shares are required to be aggregated)
known to the Company to be the beneficial owner of more than five
percent (5%) of the common stock, and all such directors and
executive officers of the Company as a group. Unless otherwise
noted, the persons named below have sole voting and investment
power with respect to the shares shown as beneficially owned by
them.
Title of Name and Address Amount & Nature Percent of
Class of Beneficial Owner of Beneficial Owner Class
---------------------------------------------------------------
Common Robert W. Moehler 158,800<F1> 9.7%
2925 LBJ Freeway
Suite 188
Dallas, Texas 75234
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<PAGE>
Common David H. Young 53,780<F2> 3.3%
2925 LBJ Freeway
Suite 188
Dallas, Texas 75234
Common Daniel H. Weaver 230,327<F3> 14.0%
2925 LBJ Freeway
Suite 283
Dallas, Texas 75234
Common David H. Carl 128,710<F4> 7.8%
2925 LBJ Freeway
Suite 188
Dallas, Texas 75234
Common Emmerson Finance, Ltd. 225,000<F5> 13.7%
c/o Belestra AG
Beethovenstr, Switzerland
Common The Strateia Group, Inc. 108,000<F6> 6.6%
2925 LBJ Freeway
Suite 188
Dallas, Texas 75234
----------------------------------------------------------------
Officers and directors
as a group (4 persons) 571,617 34.8%
================================================================
---------------------
<F1> As of July 31, 2000, Mr. Moehler has current ownership of
137,975 shares, which total includes 60,000 shares held in the
name of MFC Group, Inc., a corporation which is controlled by
Mr. Moehler. Mr. Moehler has options to purchase 250,000 shares
of the Company's common stock at $.25 per share, which vest
monthly (beginning November 1, 1999) in fifty-nine
equal increments of 4,165 shares and one final increment of
4,265 shares, expiring five years from the dates of vesting,
seven months of which have been exercised. The above figure
includes 20,825 shares, which represents Mr. Moehler's
right to exercise the options which have vested (or will vest
within the next 60 days).
<F2> As of July 31, 2000, Mr. Young has current ownership
of 24,625 shares. Mr. Young has options to purchase 250,000
shares of the Company's common stock at $.25 per share, which
vest monthly (beginning November 1, 1999) in fifty-nine equal
increments of 4,165 shares and one final increment of 4,265
shares, expiring five years from the dates of vesting, five
months of which have been exercised. The above figure includes
29,155 shares, which represents Mr. Young's right to
exercise the options which have vested (or will vest within the
next 60 days).
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<PAGE>
<F3> As of July 31, 2000, Mr. Weaver has current ownership of
215,767 shares, which total includes 26,500 shares held in an
IRA. Mr. Weaver has options to purchase 125,000 shares of the
Company's common stock at $.25 per share, which vest monthly
(beginning November 1, 1999) in fifty-nine equal increments of
2,080 shares and one final increment of 2,280 shares, expiring
five years from the dates of vesting, five months of which have
been exercised. The above figure includes 14,560 shares,
which represents Mr. Weaver's right to exercise the options
which have vested (or will vest within the next 60 days).
<F4>As of July 31, 2000, Mr. Carl has current ownership
of 103,750 shares. Mr. Carl has options to purchase 125,000
shares of the Company's common stock at $.25 per share, which
vest monthly (beginning November 1, 1999) in fifty-nine equal
increments of 2,080 shares and one final increment of 2,280
shares, expiring five years from the date of vesting, none of
which have been exercised. The above figure includes 24,960
shares, which represents Mr. Carl's right to exercise the options
which have vested (or will vest within the next 60 days).
<F5>The natural person or persons who beneficially own Emmerson
Finance Ltd. is unknown to management of the Company.
Management's "contact person" for Emmerson Finance is Marvin
Sirota, an individual residing in the state of New York. However,
none of the Company's officers, directors, subsidiaries or
affiliates have an interest or ownership in Emmerson Finance Ltd.
<F6>The Strateia Group, Inc., a Nevada corporation, is controlled
by Joe H. Glover. Although Rhino shares office space with The
Strateia Group, Inc., none of its officers and directors exercise
any amount of control over The Strateia Group, Inc.
CHANGES IN CONTROL
The Company has no arrangements which might result in a
change in control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
The following table sets forth the directors and executive
officers of the Company, their ages, and all positions with the
Company.
Name Age Positions
---------------------------------------------------------------
Robert W. Moehler 35 Director and President
David H. Young 51 Director, Chief Operating
Officer and Secretary
Daniel H. Weaver 49 Director, Executive Vice
President of Finance and
Treasurer
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<PAGE>
David H. Carl 51 Director
Robert W. Moehler, age 35, is President and Director of the
Company. Mr. Moehler has been a director of the Company since
October, 1999. In December of 1999, he was re-elected as a
director for a one year term. He is also a director of the
Company's 90%-owned subsidiary, Eyesite.com, Inc., a Delaware
corporation. Mr. Moehler has significant experience with start-up
companies and industry consolidations. Mr. Moehler received an
M.B.A. degree in Management in 1996 from Amber University in
Dallas, Texas. He also received a B.B.A. degree in Finance in
1992 and a B.S. degree in Business Control Systems in 1987 from
the University of North Texas in Denton, Texas. From 1987-1989 he
served as a Staff Auditor for Western Union Telegraph Company,
Inc. From 1989-1992 he served in various capacities with The
Thompson Group, Inc. and Dedicated Care Holdings, Inc.,a group of
companies located in Dallas, Texas that were involved in
providing long-term health care services, as well as numerous
other medical-related services including therapy, lab and
pharmacy. During his employment with these companies, he served
as senior accountant from 1989-1990, controller from 1990-1991
and Treasurer from 1991-1992. Since 1992, Mr. Moehler has been
self-employed, providing business consulting services as well as
buying, selling and marketing sports memorabilia. Since November
1995, Mr. Moehler has served in varying capacities with MFC
Group, Inc., a Nevada organized company that provides business
consulting services. From January 1994 to January 1997, Mr.
Moehler served as Secretary and Treasurer of The Strateia Group,
Inc., a business consulting firm located in Dallas that
specializes in providing services to entrepreneurial businesses
and start-ups. Since January 1997, Mr. Moehler has served as
President of Memorabilia & Antiquities, Inc., a development stage
company that sells and markets sports memorabilia, historical
documents and ancient antiquities. From December 1997 to December
1998, Mr. Moehler was President of Enviro-Clean of America, Inc.
(OTCBB: EVCL) and oversaw the financing efforts, acquisition plan
and its obtaining public status. From December 1998 until his
resignation in May, 1999, Mr. Moehler continued to serve as
Secretary/Treasurer and a member of the Board of Directors of
EVCL. Since January 1999, Mr. Moehler has served as President,
Secretary, Treasurer and a director of Framing Systems, Inc., a
majority owned subsidiary of the Company. He was named president
of Rhino Enterprises Group, Inc. in October of 1999.
-25-
<PAGE>
David H. Young, age 51, is the Chief Operating Officer,
Secretary and a Director of the Company. He has been a director
of the Company since October of 1999. In December of 1999, Mr.
Young was re-elected to the board for a one year term. He was
elected to the Board of Directors of Eyesite.com on May 30, 2000.
Further, he serves in the capacity of Secretary and Treasurer of
Eyesite.com. Mr. Young joined The Strateia Group, Inc. in August
of 1998 as an industry specialist after retiring from the United
States Marine Corps as a full colonel. During his tenure at The
Strateia Group, Col. Young obtained training and experience in
the public market, specifically in small public companies. His
most recent effort with Enviro-Clean of America, Inc. (OTCBB:
EVCL), assisted that corporation from the development stage to a
company producing $5 million in gross revenues. While on active
duty, Col. Young had numerous command positions, including the
31st Marine Expeditionary Unit and the 3rd Battalion, 6th
Marines. Col. Young played a significant role as Officer in
Charge of the Mobile Training Team Gold in Colombia, South
America in creating counter drug units. Col. Young is a 1973
graduate of the United States Naval Academy and has an MA from
the Naval War College and is a candidate for an MBA from Regis
University.
Daniel H. Weaver, CPA, age 49, is the Executive Vice
President of Finance, Treasurer and a Director of the Company. He
has been a director of the Company since February of 1999. In
December of 1999, Mr. Weaver was re-elected to the board for a
one year term. He received a Bachelor of Science from the United
States Naval Academy in 1972 and a Master of Business
Administration from George Washington University in 1978. After
service in the U.S. Navy, Mr. Weaver worked for the U.S. House of
Representatives in a staff position. He subsequently worked for
the international accounting firm of Coopers & Lybrand and then
served as the Treasurer and Chief Accounting Officer of a savings
and loan association. From 1984 to 1997, he was an officer and
shareholder in the accounting firm of Solana Kaufman & Weaver. He
formed his own accounting firm, D.H. Weaver & Associates, in
1998. Mr. Weaver is also an officer of Digital Information &
Virtual Access, Inc. (DIVA), a Nevada corporation whose common
stock trades on the OTC Bulletin Board under the symbol DIVA. He
currently serves as a Director for Energy System Solutions, Inc.
(ESUL), a public company traded on the OTC Bulletin Board.
David H. Carl, age 51, is a Director of Rhino Enterprises
Group, Inc. He was a director of the Company from March of 1995
to April of 1997 and has currently been a director of the Company
since February of 1999. In December of 1999, Mr. Carl was
re-elected to the board for a one year term. From February of
1999 to October of 1999, he served as President of the Company.
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<PAGE>
He is a Director of the Company's 90%-owned subsidiary,
Eyesite.com, Inc., a Delaware corporation. Mr. Carl
received a Bachelor of Science degree from the United States
Naval Academy in 1972 and a Bachelor of Business degree from the
University of Maryland in 1982. From 1972 to 1983, Mr. Carl was
a Captain in the United States Marine Corps. After serving as
general manager for several retail bookstores in Dallas, Texas
from 1983 to 1985, Mr. Carl formed a financial partnership that
began a consolidation of small retail bookstores, for which he
served as the managing partner from 1986 to 1988. Subsequently,
from 1989 to 1992, Mr. Carl was the operational partner for a
real estate investment firm, Fidelity Group. From 1992 to
present, Mr. Carl has owned The Bayside Group, Inc., a firm that
consults with start-up and small businesses on operational
matters. During this time, from 1993 to 1997, Mr. Carl started
and provided operational oversight to a residential mortgage
brokerage company, Community Home Mortgage, Inc. with locations
in the Dallas/Ft. Worth area. Mr. Carl has been involved with
several entrepreneurial, start-up companies for the last several
years. He currently serves as a Director of Energy System
Solutions, Inc, a public company traded on the OTC Bulletin Board
(ESUL). Mr. Carl is also Executive Director of the Brownlee-Carl
Foundation.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation received by
the Company's Presidents for the last three fiscal years. None of
the other officers' compensation packages exceeded $100,000 per
year.
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<PAGE>
SUMMARY COMPENSATION TABLE <F1>
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
--------------------------------- ----------------------------
Securities
Name and Other Restricted Underlying
Principal Annual Stock Options/
Position Year Salary Bonus Comp. Awards SARs
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert Moehler 1999<F2> $15,152 $15,000 $2,200<F3> -0- 250,000<F4>
President
David Carl 1999<F5> -0- $10,000 $4,000 $2,000 125,000<F6>
President
Gary Boone 1999<F7> -0- -0- -0- $1,000 -0-
President 1998 -0- -0- -0-
1997 $20,000 -0- -0-
<F1> All columns which are inapplicable have been removed. All
figures have been rounded to the nearest whole amount.
<F2> Mr. Moehler became president of the Company on October 26,
1999.
<F3> Mr. Moehler was paid $2,200 in total consulting fees during
the month of April, 1999.
<F4> Mr. Moehler has options to purchase 250,000 shares of the
Company's common stock at $.25 per share, which vest monthly
(beginning November 1, 1999) in fifty-nine equal increments of
4,165 shares and one final increment of 4,265 shares, expiring
five years from the dates of vesting, five months of which have
been exercised. Mr. Moehler will have the right to exercise
145,775 of the options within three years from the date of
issuance.
<F5> Mr. Carl was president of the Company from February 15, 1999
until October 26, 1999, when Mr. Moehler was appointed as
president.
<F6>Mr. Carl has options to purchase 125,000 shares
of the Company's common stock at $.25 per share, which vest
monthly (beginning November 1, 1999) in fifty-nine equal
increments of 2,080 shares and one final increment of 2,280
shares, expiring five years from the date of vesting, none of
which have been exercised. Mr. Carl will have the right to
exercise 72,800 of the options within three years from the date
of issuance.
<F7> Gary Boone was president of the Company from October 15,
1996 until February 15, 1999, when Mr. Carl was appointed as
president.
</TABLE>
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<PAGE>
OPTIONS/SAR GRANTS
Option/SAR Grants in Last Fiscal Year
Individual Grants
-----------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price Date
-----------------------------------------------------------------------------
Moehler 250,000 33% $.25 Five Years<F1>
Carl 125,000 17% $.25 Five Years<F2>
Boone -0- n/a n/a n/a
<F1>Mr. Moehler has options to purchase 250,000 shares of the
Company's common stock at $.25 per share, which vest monthly
(beginning November 1, 1999) in fifty-nine equal increments of
4,165 shares and one final increment of 4,265 shares, expiring
five years from the dates of vesting.
<F2>Mr. Carl has options to purchase 125,000 shares
of the Company's common stock at $.25 per share, which vest
monthly (beginning November 1, 1999) in fifty-nine equal
increments of 2,080 shares and one final increment of 2,280
shares, expiring five years from the date of vesting.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END
OPTION/SAR VALUE TABLE
Aggregated Option/SAR Exercises
in Last Fiscal Year and FY-End Option/SAR Value
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Moehler -0- -0- 8,330/241,670 $34,361.25/$996,888.75
Carl -0- -0- 4,160/120,840 $17,160/$498,465
Boone -0- -0- -0- -0-
</TABLE>
LONG TERM INCENTIVE PLANS
There are no long term incentive plans in effect and,
therefore, no awards have been given to any executive officer in
the past year.
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<PAGE>
COMPENSATION OF DIRECTORS
The Company has issued to Mr. Carl, a director of the
Company, options to purchase 125,000 shares of the Company's
common stock at $.25 per share, which vest monthly (beginning
November 1, 1999) in fifty-nine equal increments of 2,080 shares
and one final increment of 2,280 shares, expiring five years from
the date of vesting. Although Mr. Carl held the position of
President/CEO of the Company for a short period of time during
the fiscal year end 1999, these options were granted to Mr. Carl
for his role as a director of the Company.
Other than the options granted to Mr. Carl, as stated above,
no other director of the Company has received any compensation
for the sole purpose of serving as a director. The Company does
not, at this time, plan to pay compensation to other or future
members of the Company's Board of Directors for the performance
of their duties as directors, other than reimbursement of
expenses incurred to attend board meetings. The Company has not
established committees of the Board of Directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS
On October 27, 1999, the Company executed an employment
agreement with its President, Robert W. Moehler, for a three year
term. The terms of the employment contract provide, among other
things, that Mr. Moehler shall serve in the position of
President, shall be entitled to minimum annual compensation of
$84,000, shall receive benefits and life insurance as set forth
in the agreement and shall receive options to purchase 250,000
shares of common stock at $.25 per share (vesting monthly).
Further, in the event of a "change of control" of the Company, as
defined in the employment agreement, the Company shall pay to Mr.
Moehler an amount equal to the monthly portion of his minimum
annual compensation multiplied by 36, which shall be paid to Mr.
Moehler in one lump sum no later than 60 days after Mr. Moehler's
termination of employment. The employment agreement with Mr.
Moehler was filed as Exhibit 10.0 to registration statement on
Form 10-SB.
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<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October of 1999, the Company entered into an employment
agreement with Robert W. Moehler, President of the Company.
Pursuant to the employment agreement, which is for a term of
three years, Mr. Moehler will receive minimum annual compensation
of $84,000 along with other benefits as set forth in the
agreement. In addition, Mr. Moehler was granted options to
purchase 250,000 shares of the Company's common stock at an
exercise price of $.25 per share, which vest monthly over five
years and expire five years from the dates of vesting.
In October of 1999, the Company entered into an employment
agreement with David H. Young, Chief Operating Officer of the
Company. Pursuant to the employment agreement, which is for a
term of three years, Mr. Young will receive minimum annual
compensation of $75,000 along with other benefits as set forth in
the agreement. In addition, Mr. Young was granted options to
purchase 250,000 shares of the Company's common stock at an
exercise price of $.25 per share, which vest monthly over five
years and expire five years from the dates of vesting.
In October of 1999, the Company issued to Daniel H. Weaver,
an officer and a director, and to David H. Carl, a director,
options to purchase 125,000 shares each of the Company's common
stock, at an exercise price of $.25 per share, which vest monthly
over five years and expire five years from the dates of vesting.
In March of 1999, the Company issued to Daniel H. Weaver, a
director only at the time, and David H. Carl, a director,
2,000,000 shares of common stock each, which were valued at the
par value of $.001 per share. These shares were subsequently
reverse split into 100,000 shares each. At the same time, the
Company issued to Gary Boone, an officer and director at the
time, 1,000,000 shares of common stock, which were valued at the
par value of $.001 per share. These shares were subsequently
reverse split into 50,000 shares. This stock compensation was
awarded to these three individuals for their services rendered to
the Company prior to its name change to Rhino Enterprises Group,
Inc. and was not for compensation solely for serving as a
director.
The Company loaned approximately $350,000 to Memorabilia &
Antiquities, Inc., a Nevada corporation which is partially owned
and controlled by Robert Moehler, President of the Company. This
loan was made upon the same terms as the loans made to other
corporations and has since been repaid in full, together with
stated interest.
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<PAGE>
Robert Moehler, President of the Company, indirectly held
75% of the outstanding shares of Executive Assistance, Inc., a
Nevada corporation, prior to Executive Assistance being acquired
by the Company. Mr. Moehler abstained from the vote by the board
of directors of the Company to approve this stock for stock
transaction, in which he indirectly received 60,000 shares of the
Company.
On November 3, 1999, the Company issued to Daniel H. Weaver,
an officer and director of the Company, 69,817 shares for
accounting services rendered to the Company by his accounting
practice, which services were valued at $28,625 or $.41 per
share. Although Mr. Weaver was an officer and director at the
time the shares were issued, he was only a director at the time
the services were incurred by his accounting practice. Such
services were not compensated in other form by the Company at the
time they were rendered. Rather, D.H. Weaver & Associates, the
name under which he practiced, invoiced the Company for the
accounting services rendered.
The Company leases, on a month-to-month basis, its office
space and some equipment from The Strateia Group, Inc., a 6.2%
shareholder of the Company. The Strateia Group, Inc. owes
approximately $118,000 to the Company. The Strateia Group, Inc.
is controlled by Joe H. Glover.
On December 3, 1999, the Company paid to Daniel H. Weaver,
an officer and director of the Company, $4,200 for the purchase
of a 1990 Buick Electra Park Avenue. The Company utilized the
web-site of Edmunds.com to get a fair market value, resale price
based upon the year, mileage and general condition of the
vehicle.
On November 25, 1999, the Company paid to Memorabilia &
Antiquities, Inc., a Nevada corporation partially owned and
controlled by Robert W. Moehler, $8,050 for the purchase of a
1994 Chevrolet Blazer. The Company utilized the web-site of
Edmunds.com to get a fair market value, resale price based upon
the year, mileage and general condition of the vehicle.
On November 22, 1999, the Company paid to Memorabilia &
Antiquities, Inc., a Nevada corporation partially owned and
controlled by Robert W. Moehler, $20,650 for the purchase of a
1996 Chevrolet Tahoe. The Company utilized the web-site of
Edmunds.com to get a fair market value, resale price based upon
the year, mileage and general condition of the vehicle.
-32-
<PAGE>
On November 29, 1999, the Company loaned $5,000 to Daniel
H. Weaver at 6% interest per annum, which shall be repaid to the
Company upon demand by the Company.
On May 13, 1999, the Board of Directors of Rhino approved a
stock-for-stock purchase agreement between Rhino and the
shareholders of Framing, which took place between the dates of
May 17, 1999 to December 2, 1999. At the time the Company entered
into this transaction, it had a pre-existing relationship with
Framing by virtue of the fact that Framing's previous president,
David H. Carl, was the president of Rhino and both companies
share office space.
In February of 2000, the Company entered into share lockup
agreements with its four officers and directors. Pursuant to the
agreements, the officers and directors are prevented from selling
or otherwise divesting themselves of any shares beneficially
owned by them for a period of 12 months.
Other than as described above, there have been no material
transactions in the past two years or proposed transactions to
which the Company has been or proposed to be a party in which any
officer, director, nominee for officer or director, or security
holder of more than 5% of the Company's outstanding securities is
involved.
The Company has no promoters other than its executive
officers and directors. There have been no transactions which
have benefitted or will benefit its executive officers and
directors either directly or indirectly.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is presently authorized to issue up to
20,000,000 shares of common stock, $.001 par value per share, and
up to 5,000,000 shares of preferred stock, $.001 par value per
share. No shareholder of the Company has a preemptive right to
acquire the Company's unissued shares. There are no provisions,
other than the articles of incorporation and by-laws of the
Company and the Nevada Revised Statutes, that govern the voting
of the Company's shares. The Company has not to date paid any
dividends on its common stock or preferred stock. There are no
provisions, other than as may be set forth in the Nevada Revised
Statutes, that prohibit or limit the payment of dividends. There
are no provisions in the Company's articles of incorporation or
by-laws that would delay, defer or prevent a change in control of
the Company.
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<PAGE>
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company is voluntarily filing this Registration
Statement on Form 10-SB to maintain the eligibility requirements
for its listing on the OTC Bulletin Board, which requires all
listed companies to be registered with the Securities and
Exchange Commission (the "SEC") under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and to be current in
its required filings once so registered. Further, these
eligibility requirements mandate that the Company obtains a "no
further comment" position from the SEC with regard to this
Registration Statement on Form 10-SB, prior to the Company's May
3, 2000 phase-in date. If the Company should fail, for any
reason, to reach this position with the SEC, the Company's common
stock will be removed from eligibility to trade on the OTC
Bulletin Board, or delisted. Should this occur, the Company's
common stock could only be able to trade via the Pink Sheets, if
the Company is able to locate a market maker willing to make a
market in its stock, until such time as it has been re-approved
for trading on the OTC Bulletin Board or other exchange.
The Company's common stock was originally approved for
trading on the OTC Bulletin Board under the symbol "UNQF." When
the Company's name changed to Rhino Enterprises Group, Inc. on
April 30, 1999, its symbol changed to "RHNO," under which it
currently trades. The range of high and low bid information for
the Company's common stock for each quarter that it has traded
within the last two fiscal years is set forth below.
Quarter High/Ask Low/Bid
--------------------------------------------------
4th Quarter 1999 $5.50 $0.25
3rd Quarter 1999 no trades no trades
2nd Quarter 1999 $0.50 $0.125
1st Quarter 1999 no trades no trades
4th Quarter 1998 no trades no trades
3rd Quarter 1998 no trades no trades
2nd Quarter 1998 no trades no trades
1st Quarter 1998 no trades no trades
The above historical trading information was received from
Prophet Financial Systems via American Online's historical quote
function. These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent
actual transactions.
-34-
<PAGE>
There are currently unexercised options outstanding that
allow the optionholders to purchase up to an aggregate of
779,620 shares of the Company's common stock at varying
exercise prices, vesting dates and expiration dates. Please see
Part II, Item 4, Recent Sales of Unregistered Securities, for a
more detailed description of these options.
The Company has not agreed to register any shares of
its common stock for any shareholder. There are presently
987,795 shares of common stock which are restricted and which
may, subject to eligibility, be sold in reliance upon Rule 144 of
the Securities Act of 1933, as amended.
STOCKHOLDERS
There are approximately 288 shareholders of record for
the Company's common stock.
DIVIDENDS
To date, the Company has not paid any dividends on its
common stock. The payment of dividends, if any, in the future is
within the discretion of the Board of Directors and will depend
upon the Company's earnings, its capital requirements and
financial condition, and other relevant factors. There are no
provisions in the Company's articles of incorporation or by-laws
that prevent or restrict the payment of dividends. Dividend
payments, if any, would be subject to the provisions of the
Nevada Revised Statutes as well.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened. None of the
Company's officers, directors or beneficial owners of five
percent (5%) or more of the Company's outstanding securities is a
party adverse to the Company, nor do any of the foregoing
individuals have a material interest adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company used the same accountant for auditing of the
Company's financial statements for the last two fiscal years and
has not had any disagreements with said accountant.
-35-
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On December 31, 1997, the Company issued an aggregate of
60,000 shares of common stock to one individual and his company
based upon a conversion of an aggregate of $15,000 in convertible
debentures of the Company's subsidiary at that time and $15,000
in loans to the Company. These securities were issued in reliance
upon 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.
On March 26, 1999, the Company issued to three of its
officers and directors an aggregate of 5,000,000 shares of common
stock, valued at the par value of $.001 per share, for services
rendered to the corporation. These securities were issued in
reliance on both Section 4(2) of the Securities Act of 1933, as
amended, and Article 581-5(I) of the Texas Securities Act, as
such stock was issued to Texas residents under a stock purchase
program for the benefit of employees and directors of the
Company.
From March 26, 1999 to April 7, 1999, the Company sold an
aggregate of 13,719,817 shares of its common stock to a total of
33 investors at a sales price of $.005 per share pursuant to an
exemption from registration provided by Regulation D, Rule 504.
In accordance with the terms of Rule 504 at the time of this
offering, the Company was neither a reporting company, investment
company nor a blank check company; the Company did not advertise
for or generally solicit investors; and the Company did not raise
more than $1,000,000. These securities were sold for cash. There
were no underwriting discounts or commissions involved in the
sale of these securities.
In April of 1999, the Company issued an aggregate of 123,900
shares of common stock to an aggregate of seven individuals for
conversion of an aggregate of $92,500 of convertible debentures
in the Company's subsidiary at that time. The conversion rate was
set forth in the convertible debenture. These securities were
issued in reliance upon 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.
The Company acquired 65% of the outstanding common stock
of Framing Systems, Inc., a Nevada corporation, by issuing to the
shareholders of Framing Systems one share of the Company's
restricted common stock for each twenty-five shares of common
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<PAGE>
stock of Framing Systems. Between the dates of May 17, 1999 and
December 2, 1999, 41 shareholders of Framing Systems exchanged an
aggregate of 6,584,000 shares of Framing Systems' common stock
for 263,360 shares of the Company's common stock. Three
additional shareholders executed the stock for stock exchange
agreement but have not been able to produce an original
certificate or proper documentation evidencing a lost stock
certificate to facilitate the exchange of their Framing Systems
shares into the Company's common stock. These three shareholders
hold an aggregate of 310,000 shares of Framing which will be
exchanged into 12,400 shares of the Company's common stock. These
securities were issued in reliance on both Section 4(2) of the
Securities Act of 1933, as amended, and Article 581-5(G) of the
Texas Securities Act, as such stock was only issued pursuant to
and in connection with a merger, consolidation or sale of
corporate stock or assets from the Company to another corporation
or the securities holders of such target corporation.
On August 20, 1999, the Company approved the issuance of
1,000 shares of common stock of the Company, valued at $0.1875
per share to an employee of the Company as a bonus for
administrative services rendered to the Company. These securities
were issued in reliance on both Section 4(2) of the Securities
Act of 1933, as amended, and Article 581-5(I) of the Texas
Securities Act, as such stock was issued to Texas residents under
a stock purchase program for the benefit of employees and
directors of the Company.
On August 20, 1999, three individuals who had made loans to
the Company, converted their loans to an aggregate of 10,250
shares of common stock of the Company. The conversion price of
$.50 per share (pre 1 for 20 reverse stock split) was set forth
in the original loan documents executed by each individual. These
securities were issued in reliance upon 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.
On October 27, 1999, the Company issued options to purchase
an aggregate of 950,000 shares of common stock to officers,
directors and other employees of the Company. On an aggregate
basis, these options vest in 59 equal monthly increments of
15,820 shares on the first day of each month beginning in
November of 1999 and ending with September of 2004 and one final
monthly increment of 16,620 shares on the first day of October of
2004. These options expire five years from the dates of vesting
and the exercise price is $.25 per share. These securities were
issued in reliance on both Section 4(2) of the Securities Act of
1933, as amended, and Article 581-5(I) of the Texas Securities
Act, as such options were issued to Texas residents under a stock
purchase program for the benefit of employees and directors of
the Company.
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<PAGE>
Between November 1, 1999 and November 19, 1999, four
individuals who had made loans or held debentures with the
Company, converted these instruments into an aggregate of 8,000
shares of common stock of the Company. The conversion price of
$.50 per share (pre 1 for 20 reverse stock split) was set forth
in the original loan documents executed by each individual. These
securities were issued in reliance upon 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.
On November 3, 1999, the Company approved the issuance to
one of its officers/directors, 69,817 shares for accounting
services rendered to the Company by this individual's accounting
practice, which services were valued at $28,625 or $.41 per
share. These securities were issued in reliance on both Section
4(2) of the Securities Act of 1933, as amended, and Article 581-
5(I) of the Texas Securities Act, as such stock was issued to
Texas residents under a stock purchase program for the benefit of
employees and directors of the Company.
The Company acquired 100% of the outstanding common stock
of Executive Assistance, Inc., a Nevada corporation, by issuing
to the shareholders of Executive Assistance, one share of the
Company's restricted common stock for each fifty shares of common
stock of Executive Assistance. On November 17, 1999, 3
shareholders of Executive Assistance exchanged an aggregate of
4,000,000 shares of Executive Assistance's common stock
for 80,000 shares of the Company's common stock. These securities
were issued in reliance on both Section 4(2) of the Securities
Act of 1933, as amended, and Article 581-5(G) of the Texas
Securities Act, as such stock was only issued pursuant to and in
connection with a merger, consolidation or sale of corporate
stock or assets from the Company to another corporation or the
securities holders of such target corporation.
On November 17, 1999, the Company issued to an employee of
its subsidiary, Executive Assistance, options to purchase a total
of 2,500 shares of common stock. These options vest in 59 equal
monthly increments of 41 shares on the first day of each month
beginning in December of 1999 and ending with October of 2004 and
one final monthly increment of 81 shares on the first day of
November of 2004. These options expire five years from the dates
of vesting and the exercise price is $.50 per share. These
securities were issued in reliance on both Section 4(2) of the
Securities Act of 1933, as amended, and Article 581-5(I) of the
Texas Securities Act, as such options were issued to Texas
residents under a stock purchase program for the benefit of
employees and directors of the Company.
-38-
<PAGE>
On December 1, 1999, the Company issued to one individual,
options to purchase up to 25,000 shares of common stock of the
Company at $5.00 per share, for an aggregate of $125,000,
expiring on December 1, 2001. These securities were issued in
reliance on Section 4(2) of the Securities Act of 1933, as
amended, as such options were issued to an accredited investor in
an isolated transaction.
On March 24, 2000, the Company issued an aggregate of
52,050 shares to three (3) of its officers and directors upon
exercise of vested options. These securities were issued in
reliance on Section 4(2) of the Securities Act of 1933, as
amended, as such shares were issued to officers/directors of
the Company.
On March 31, 2000, the Company cancelled the non-vested
options to purchase 137,500 shares of common stock of the Company
at $.25 per share that were issued to the Company's former Vice
President of Human Resources, G.W. Flinn. Upon Mr. Flinn's
departure from the Company, his vested options totaled 12,500.
These cancelled non-vested options and the vested options
represent 150,000 of the 950,000 options referenced above that
were issued on October 27, 1999.
On June 12, 2000, the Company issued an aggregate of 8,330
shares to one of its officers and directors upon exercise of
vested options. These securities were issued in reliance on
Section 4(2) of the Securities Act of 1933, as amended, as such
shares were issued to one officer/director of the Company.
On June 16, 2000, one individual who held a Promissory Note,
converted that instrument into an aggregate of 750 shares of
common stock of the Company. The conversion price of $1.00 per
share (pre 1 for 20 reverse stock split) was set forth in the
original loan documents executed by the individual. These
securities were issued in reliance upon 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.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Officers and directors of the Company may be indemnified by
the Company for any liability incurred by them while acting
within the scope of their respective duties as officers and
directors of the Company, except for acts of intentional
misconduct. As of the date hereof, the Company has no contracts
in effect providing any indemnity with any specific rights of
indemnification, although the Company's by-laws authorize its
Board of Directors to enter into and deliver such contracts to
provide an indemnity with specific rights of indemnification in
addition to the rights provided in the Company's articles of
incorporation and by-laws to the fullest extent provided under
Nevada law. The Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is
against public policy, and is unenforceable. The Company has no
special insurance against liability of its directors and
officers, although the Company's by-laws provide that the Company
may, unless prohibited by Nevada law, maintain such insurance.
PART F/S
The Company's audited financial statements for the year
ended December 31, 1999, the Framing Systems audited financial
statements for the year ended December 31, 1998, the Framing
Systems interim statements for the period ended March 31, 1999,
and the e-Data interim statements for the period ended November
30, 1999, which are required by this Part F/S are included
herein.
-39-
<PAGE>
RHINO ENTERPRISES GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
-40-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of
RHINO ENTERPRISES GROUP, INC. and SUBSIDIARIES as of December
31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity, and cash flows for the years then
ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of RHINO ENTERPRISES GROUP, INC. and
SUBSIDIARIES as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ M. C. Hunter & Associates
February 26, 2000
Fort Worth, Texas
-41-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
RESTATED
ASSETS 1999 1998
---------------------------------- ----------- ----------
Current Assets
Cash on hand and in banks $ 390,071 $ 0
Notes receivable 1,584,044 0
Prepaid expenses and deposits 805,000 0
----------- ----------
Total Current Assets 2,779,115 0
----------- ----------
Property, plant and equipment, at cost 87,670 0
Less -- accumulated depreciation (7,453) 0
Investment in E-DATA ALLIANCE CORP. 200,000 0
Intangible assets, including goodwill 340,669 96,509
Less -- accumulated amortization (9,445) (54,007)
----------- ----------
Total Long-lived Assets 611,441 42,502
----------- ----------
Total Assets $ 3,390,556 $ 42,502
=========== ==========
CURRENT LIABILITIES
----------------------------------
Accounts payable $ 41,985 $ 89,684
Accrued expenses 839,334 43,884
Notes and debentures payable 3,082,736 556,116
----------- ----------
Total Current Liabilities 3,964,055 689,684
----------- ----------
STOCKHOLDERS' EQUITY
----------------------------------
Common stock 1,577 4,270
Paid in capital 1,585,295 1,196,745
Accumulated deficit (2,162,011) (1,848,197)
Non-controlling interest 1,640 0
----------- ----------
Total Stockholders' Equity 573,499 (647,182)
----------- ----------
Total Liabilities and
Stockholders' Equity $ 3,390,556 $ 42,502
=========== ==========
See Notes to Consolidated Financial Statements.
-42-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
RESTATED
1999 1998
----------- ----------
REVENUES $ 5,164 $ 0
COST OF SALES 0 0
----------- ----------
GROSS PROFIT 5,164 0
----------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs 320,522 17,889
Personnel costs 233,190 0
Legal and professional fees 183,566 0
Depreciation and amortization 13,487 0
----------- ----------
Total General and
Administrative Expenses 750,765 17,889
----------- ----------
LOSS FROM OPERATIONS (745,601) (17,889)
----------- ----------
OTHER INCOME (EXPENSE)
Interest income 21,697 0
Interest expense (26,779) (12,500)
Other 12,745 0
----------- ----------
Total Other Income (Expense) 7,663 (12,500)
----------- ----------
Loss on disposition of subsidiary (31,350) 0
LOSS BEFORE INCOME TAX (769,288) (30,389)
PROVISION FOR INCOME TAX 0 0
----------- ----------
NET LOSS $ 769,288 $ 30,389
=========== ==========
LOSS PER SHARE $ (0.66) $ (0.05)
=========== ==========
See Notes to Consolidated Financial Statements.
-43-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NON--
COMMON PAID IN ACCUMULATED CONTROL TOTAL
SHARES STOCK CAPITAL DEFICIT INTEREST EQUITY
--------- ------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 4,269,528 $ 4,270 $ 1,196,745 $(1,817,808) $ 0 $(616,793)
Net loss - 1998 operations (30,389) (30,389)
BALANCE, December 31, 1998
- Restated 4,269,528 4,270 1,196,745 (1,848,197) 0 (647,182)
Private placement
offering 13,719,817 13,720 53,635 67,355
Debentures converted
to stock 123,900 124 31,226 31,350
Notes payable converted
to stock 17,750 18 177,482 177,500
Stock issued for services 5,070,817 5,071 28,741 33,812
Stock issuance costs (30,000) (30,000)
Reverse split (1 share
for 20 shares) (21,968,596) (21,969) 21,969 0
Shares issued to acquire
subsidiaries 343,360 343 105,497 105,840
Spin-off Unique Ideas, Inc. 455,474 455,474
Net loss -- 1999 Operations (769,288) 1,640 (767,648)
--------- ------- ----------- ---------- --------- --------
BALANCE, December 31, 1999
- Restated 1,576,576 $ 1,577 $ 1,585,295 $(2,162,011) $ 1,640 $(573,499)
========= ======= =========== ========== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
-44-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
RESTATED
1999 1998
---------- ----------
CASH FROM OPERATING ACTIVITIES
Net Loss $ 769,288 $ 30,389
Adjustments to reconcile net loss
to net cash from operating activities
Loss on disposition of subsidiary 31,350 0
Depreciation and amortization 13,487 6,302
Stock issued for services 33,812 0
Changes in working capital 74,365 22,203
---------- ----------
Net Cash From Operating Activities (616,274) (1,884)
---------- ----------
CASH USED BY INVESTING ACTIVITIES
Purchase property and equipment (76,582) 0
Notes receivable (1,584,044) 0
Invest in E-DATA ALLIANCE CORP. (200,000) 0
Payments for intangibles (15,000) 0
---------- ----------
Net Cash Used by Investing
Activities (1,875,626) 0
---------- ----------
CASH PROVIDED BY FINANCING ACTIVITIES
Borrowings 3,392,949 0
Repayments (548,333) 0
Stock sold in private
placement offering 67,355 0
Payment of stock issuance costs (30,000) 0
---------- ----------
Net Cash Provided by
Financing Activities 2,881,971 0
---------- ----------
NET CHANGE IN CASH 390,071 (1,884)
CASH, beginning of year 0 1,884
---------- ----------
CASH, end of year $ 390,071 $ 0
========== ==========
See Notes to Consolidated Financial Statements.
-45-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE A - NATURE OF OPERATIONS
Rhino Enterprises Group, Inc. (The "Company") was formerly known
as Unique Fashions, Inc. (a Nevada C corporation). The Company
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 both
start-up as well as 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 Q
below.
Unique Fashions, Inc. was incorporated on March 3, 1995, to
acquire Unique Ideas, Inc. The acquisition transaction was
consummated on May 1, 1995, with an exchange of one share of the
Company's common stock for each share of Unique Ideas, Inc.'s
outstanding common stock. The transaction was accounted for as a
purchase, effective May 1, 1995. During 1998, the only
activities involved negotiating pay-off settlements with trade
payable vendors, collecting outstanding receivables, and
disposing of assets.
Unique Ideas, Inc. was originally incorporated August 17, 1993,
as Unique Products, Inc. for the purpose of acquiring the assets
and assuming the liabilities of Doodle Art Wear, a Texas general
partnership. The purchase price for the partnership was
allocated to the acquired assets and liabilities. Intangible
assets amounting to $54,007 related to the design, manufacturing
process, and product marketing strategies for children's
outerwear and related accessories were identified and amortized
on a straight-line basis over a period of five years. Unique
Ideas, Inc. accounted for the acquisition transaction as a
purchase effective August 17, 1993. Goodwill amounted to
$42,514. By the end of 1996, operations had ceased. On March
25, 1999, the Company effected a tax-free spin-off transaction of
Unique Ideas, Inc. All of Unique Ideas, Inc.'s outstanding
shares (675,666) were distributed on a pro-rata basis to the
Company's stockholders who had been the shareholders of Unique
Ideas, Inc. The intangibles owned by Unique Ideas, Inc. had been
fully amortized by December 31, 1998. Goodwill arising in this
acquisition transaction was written off at the time of the spin-
off.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
-46-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 December 31, 1999.
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 December 31,
1999 and 1998, there were no significant deferred tax assets or
liabilities.
The Company anticipates having 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.
Amortization of Intangible Assets -- Intangible assets, which
consist of certain proprietary knowledge and a web-site, are
being amortized over 3 years.
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 in Note I 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.
Comprehensive Income - The Company has no items of "other
comprehensive income". Therefore, net income equals
comprehensive income.
-47-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 the year.
The Company will enter into contractual agreements to provide
management, consulting services 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 of out-of-pocket expenses. Revenues
from these agreements would be recognized as services are
provided. With respect to e-commerce activities, web-hosting
services would be billed on a monthly basis and revenues
recognized accordingly; while web site design revenues would be
recognized as the services are performed.
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 included setting 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 - ACQUISITIONS AND FORMATION OF SUBSIDIARIES
On May 13, 1999, the Company consummated a stock-for-stock
purchase of Framing Systems, Inc. --- a start-up enterprise that
intends to develop, produce and market a fully-operational
commercial software package for use in the custom picture framing
industry. The purchase agreement called for the exchange of all
the outstanding stock (10,129,000 shares) of Framing Systems,
Inc. for 405,160 restricted shares of the Company. As of
December 31, 1999, only 6,584,000 shares of Framing Systems, Inc.
had been exchanged for 263,360 shares of the Company resulting in
an ownership position of 65%. The business combination was
accounted for as a purchase with a fair value of $65,840 (based
on $0.25 per share which was the market price of Rhino's stock on
the date that the agreement was consummated). Goodwill in the
amount of $58,185 was associated with this acquisition and is
being amortized over 15 years. The results of operations of
Framing Systems, Inc. are included in the accompanying
consolidated financial statements since the date of acquisition.
On a separate company basis, Framing Systems, Inc. reported
revenues of $-0- which resulted in a net loss of $10,208 for the
year ended December 31, 1998; while revenues were $-0- resulting
in a net loss of $1,276 for the four months and 13 days ended May
13, 1999.
-48-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, AND 1998
NOTE C - ACQUISITIONS AND FORMATION OF SUBSIDIARIES, continued
On November 11, 1999, the Company consummated an agreement to
acquire Executive Assistance, Inc., which is engaged in the
business of providing various administrative functions to small
businesses. The terms of the acquisition called for a stock-for-
stock exchange whereby shareholders of Executive Assistance, Inc.
exchanged 100% of the outstanding common shares (4,000,000
shares) for 80,000 restricted shares of the Company's common
stock. This business combination was accounted for as a
purchase. The fair value of the transactions was $40,000, which
was based on the fair market price of the Company's common stock
($0.50 per share) on the date of the acquisition. Goodwill in
the amount of $42,485 was recognized and is being amortized over
a period of 15 years.
The results of operations of Executive Assistance, Inc. are
included in the accompanying consolidated financial statements
since the date of acquisition. On a separate company basis,
Executive Assistance, Inc. reported revenues of $ -0- resulting
in a net loss of $3,555 for the year ended December 31, 1998; and
revenues of $4,759 resulting in a net loss of $2,929 for the ten
months and 11 days ended November 11, 1999.
The following summarized pro forma (unaudited) information
assumes that the aforementioned acquisitions had occurred on
January 1, 1998.
1999 1998
-------- --------
Net Sales $ 9,922 $ -0-
Loss from operations 753,741 31,652
Net loss 777,427 44,152
Net loss per share $ 0.58 $ 0.08
The above amounts reflect adjustments for amortization of
goodwill arising in consolidation.
On November 24, 1999, the Company subscribed to 100% of the
founder's stock of EYESITE.COM, Inc., a Delaware corporation,
which the Company incorporated on October 31, 1999. The
Company's investment in this wholly-owned subsidiary was $2,000.
On December 22, 1999, EYESITE.COM, Inc. purchased a registered
and partially-constructed web site (www.eyesite.com) from Dr.
Gary Edwards for $50,000 using a seller-financed note. See Note
G below. EYESITE.COM, Inc. is positioning itself to be a
marketing and buying cooperative to champion independent eye care
professionals, provide business-to-business and consumer e-
commerce service related to the eye-care industry, and to
provide information about and perform LASIK vision correction
through laser surgery. See Note J also regarding contingently-
issuable shares.
-49-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE C - ACQUISITIONS AND FORMATION OF SUBSIDIARIES, (continued)
As part of its ongoing corporate strategy, the Company will
continue to seek investment opportunities which complement its
existing operations. Operating decisions for the various
subsidiaries are made by the managers of those business entities.
The Company's Board of Directors make investment decisions and
all other capital resource allocations. Likewise, the Boards of
each subsidiary make similar decisions for their entities.
NOTE D - INVESTMENT IN E-DATA ALLIANCE CORP.
On December 17, 1999, the Company acquired 50% of the outstanding
shares of E-DATA Alliance Corp., a Texas corporation, which
provides web hosting and off-site data storage. Additionally E-
DATA offers web site design and data base services. The servers
operated by E-DATA are located in premium telecommunications
facilities in Dallas. E-Data was incorporated in 1999 and had
revenues of $15,000 (an inter-segment sale from Eyesite.Com, Inc.
in connection with the development of their web site) resulting
in a net income of $2,553 for the eleven months ended November
30, 1999.
Un-audited condensed financial statement information of E-Data
Alliance Corp. for the year ended December 31, 1999 is shown as
follows -
Balance Sheet
Cash $ 153,319
Prepaid expenses 5,496
Other current assets 21,160
--------
Total Current Assets 179,975
Property, plant and equipment, net 44,892
--------
Total Assets $ 224,867
Current Liabilities $ 14,742
Stockholders' Equity 210,125
--------
Total Liabilities and
Stockholder's Equity $ 224,867
--------
Statement of Income
Revenues $ 29,252
Operating Expenses 29,127
--------
Net Income $ 125
-50-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE D - INVESTMENT IN E-DATA ALLIANCE CORP. (Continued)
Among other things, the acquisition agreement with e-DATA
provides that the Company enter into a contract with a national
media marketing enterprise to purchase $800,000 of advertising in
various forms such as Internet and print media. Rhino will be
billed monthly for any advertising placed by the marketing
company. Such obligations will be treated under standard
commercial terms of net 30 days. Rhino and the marketing entity
will jointly determine the mix of advertising in the various
forms of media.
NOTE E - 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
December 31, 1999 -
Unsecured advances to established operating entities -
Emerging Pharmacy Solutions, Inc. $ 252,849
Energy Systems Solutions, Inc. 179,016
Memorabilia and Antiquities, Inc. (related party) 365,051
Sarwin Family LLC 154,584
Teman Electric (related party) 342,884
---------
1,294,384
---------
Secured advances to start-up or emerging entities
Real Talk Network, Inc. 100,466
---------
Other unsecured notes receivable -
Individual 110,955
Stockholders 78,239
---------
189,194
---------
Total Notes Receivable $1,584,044
---------
Each of these notes is due in less than one year and bear
interest ranging from 6% to 10%. The total shown above includes
$16,284 of accrued interest receivable. As of the date of the
auditor's report to 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.
-51-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE E - NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTERPRISES
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.
With respect to the start-up and emerging entities, 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. (See Note M below which indicates
that Memorabilia & Antiquities, Inc. repaid its advance in
January, 2000). Any exchange of stock in satisfaction of the
notes will be negotiated at the time of conversion.
NOTE F - CONTINGENCY FOR CONVERTIBLE DEBENTURES
At various times during 1995 and 1996, Unique Ideas, Inc. raised
$1,379,916 of working capital by issuing short-term convertible
promissory notes bearing interest at 10%. These notes were
originally expected to be repaid within six months of issue.
However, due to continuing cash constraints, no repayments were
ever made. The principal amount (not including interest) of
these notes is convertible into shares of common stock at
exchange rates ranging from $0.10 to $1.00 per share. As of
December 31, 1999, $1,183,812 of debentures had been converted to
common stock. During 1999, $92,500 of debentures were
surrendered for conversion resulting in issuance of 123,900
restricted shares of the Company's common stock and a charge of
$31,350 against the Company's results of operations. The Board
of Directors approved an extension of time until December 31,
2000 for the remaining debenture holders to convert their
instruments into restricted common shares of the Company. At
December 31, 1999, there were 30 debenture holders representing
$196,104 who could ultimately elect to convert their debentures
that would result in the issuance of 19,610 shares of the
Company's common stock.
NOTE G - INDEBTEDNESS
At December 31, 1999, the Company had short term indebtedness as
follows -
Note payable to Digital Information & Virtual
Access, Inc., 6% interest, unsecured, including
accrued and unpaid interest of $14,341. Note
is due on demand $1,041,069
Note payable to Net.Return, Inc.10% interest,
unsecured. Note is due on or before 12-31-00 $2,000,000
---------
$3,041,069
---------
-52-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE G - INDEBTEDNESS, continued
At December 31, 1999, the Subsidiaries had short term
indebtedness as follows -
Note payable to Dr. Gary Edwards, 10% interest,
secured by certain intellectual property and
license rights. Due in six monthly
installments of $8,333 $ 41,667
Consolidated debt at 12-31-99 $3,082,736
---------
The Company had outstanding debt at December 31, 1998 as
follows -
Note payable to an individual, 50% interest,
past due, unsecured $ 25,000
Notes payable to five individuals, non-interest
bearing, past due, unsecured 152,500
Total for Unique Fashions, Inc. $ 177,500
---------
On June 15, 1999, the Board of Directors approved conversion of
the $177,500 notes into restricted common stock at $.50 per
share. Taking into account the 1 for 20 reverse split discussed
below, the conversion rate was $10.00 per share of restricted
common stock, which resulted in the issuance of 17,750 shares of
the Company's restricted common stock.
Debt of Unique Ideas, Inc. at December 31, 1998 consisted of the
following -
Note payable to Capital Funding & Consulting
Group, 11% interest, past due, unsecured.
Unpaid accrued interest at December 31, 1998
is $12,131. $ 30,000
Note payable to an individual, 9% interest,
past due, unsecured. Unpaid and accrued
interest at December 31, 1998 is $9,024 36,799
Notes payable to six individuals, various
rates of Interest, past due, unsecured 22,965
--------
Total for Unique Ideas, Inc. $ 89,764
--------
Consolidated debt at 12-31-98 $ 267,264
========
The indebtedness of Unique Ideas, Inc. was not affected by the
spin-off described above and is still outstanding. The Company
has no contingent or any other form of continuing obligation for
the repayment of Unique Ideas, Inc. debt.
-53-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE H - COMMON STOCK
The Company has 25,000,000 of authorized shares of common stock
at a par value of $0.001 per share.
On March 30, 1999, the Company authorized a securities offering
of 15,000,000 shares of common stock at an offering price of
$.005 per share, on a best efforts basis pursuant to an exemption
from registration with the Securities and Exchange Commission
provided by Rule 504 of Regulation D and Section 3(b) of the
Securities Act of 1933, and pursuant to exemptions from
registration in the various states in which the securities were
offered as deemed appropriate by the Board of Directors and
offered under the terms and conditions set forth in the offering
memorandum or offering circular. $67,355 was raised from this
offering and 13,719,817 (685,991 post-reverse split) shares were
issued. The Company incurred offering costs of $30,000 which
were netted against the proceeds and recorded as reduction of
paid in capital in the accompanying Consolidated Statement of
Stockholders' Equity.
On April 30, 1999, the Company issued 250,000 shares of common
stock to certain non-employee shareholders as compensation for
various professional services rendered to the Company. An
expense of $4,950 was booked. In November, 69,817 shares were
issued to a non-employee stockholder and officer of the Company
as payment for certain accounting and tax services that were
rendered when this stockholder was only a director. An expense
of $28,625 was recorded, which reflects the fair value of the
services rendered.
NOTE I - 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.
For the Year Ended December 31
1999 1998
--------- ---------
Net Loss $ 769,288 $ 30,389
Weighted average outstanding shares 1,168,403 213,476
Basic Loss per Share $0.66 $0.05
The stock options discussed in Note K were not included in a
calculation of diluted loss per share as their effect was anti-
dilutive. The weighted average number of outstanding shares has
been calculated by giving consideration to the acquisitions
described above.
-54-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE J - COMMITMENTS AND CONTINGENT LIABILITIES
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 $43.984
and $0 for 1999 and 1998, 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. Management believes that
the allocation method used for overhead reimbursements is
reasonable. See the related party footnote disclosures in Note L
for a summary of amounts incurred and paid under this
reimbursement agreement.
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. See Note M for discussion of
subsequent events.
On December 22, 1999, the Company entered into a consulting
contract with Dr. Gary Edwards (the person from whom the web site
described in the EYESITE.COM, Inc. acquisition Note C was
purchased) to maintain and enhance the 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. In addition, as an inducement to enter into the web-
site consulting services agreement, the Company agreed to issue
500,000 shares of EYESITE.COM, Inc.'s common stock to Dr.
Edwards, after completion of the first five months of the
contract.
NOTE K - STOCK OPTIONS
The Company has an employment agreement with its president and
its chief operating officer which provides, among other things,
for the payment of base salary, car allowance, life insurance
premiums, and non-qualified stock options (granted October 27,
1999) to purchase 250,000 shares of common stock at $.25 per
share. The fair value of the common stock on the grant date was
$0.25. The options vest monthly over a period of 5 years.
Certain key employees and two directors were also granted similar
non-qualified stock options on October 27, 1999, to purchase
452,500 shares of Rhino's common stock at $.25 per share. The
options vest ratably over the next 60 months. The fair value of
the common stock on the date of grant was $0.25.
No compensation expense has been recorded for these stock options
as the Company will account for them under APB No. 25. At
December 31, 1999, none of the options had been exercised nor
had any of them lapsed. The pro forma effect of this stock-
based compensation on reported earnings had the Company measured
these stock options by using SFAS No. 123 is not material
(approximately $2,000 additional expense).
-55-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE L - RELATED PARTY TRANSACTIONS
Related Party & Balance at Amounts Amounts Balance at
Relationship Dec 31, 1998 Advanced Collected Dec 31, 1999
---------------- ------------ --------- --------- ------------
Teman Electric (1) $ - 0 - $ 342,884 $ - 0 - $ 342,884
(See Note E)
Memorabilia &
Antiquities (2) - 0 - 405,051 40,000 365,051
(See Note E)
Marathon Group (1) - 0 - 40,158 - 0 - 40,158
(See Note E)
Joe Glover (1) - 0 - 10,000 - 0 - 10,000
Dan Weaver (1) - 0 - 5,000 - 0 - 5,000
Funds Amounts
Received from Repaid
DIVA (3) - 0 - $1,581,069 $ 540,000 $(1,041,069)
Strateia Group (1) - 0 - 98,524 92,562 ( 5,962)
Other Transactions With Related Parties
Dan Weaver (1) Common Stock
for Services $ 28,625
Dan Weaver (1) Sell Auto
to Co. $ 4,200
Strateia Sell Intangibles
Group (1) to the Company $175,000
Stratiea Group (1) Overhead
Reimbursement $ 24,540
(1) Stockholder
(2)Owned by President of Rhino
(3) Common officers & shareholders
-56-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE M - NON-CASH INVESTING AND FINANCING TRANSACTIONS
1999 1998
-------- --------
Spin-off of Unique Ideas, Inc. $ 455,474 $ -0-
Debt converted to common stock 177,500 7,500
Debentures converted to common stock 92,500 30,000
Intangibles purchased with a note 225,000 -0-
Prepaid marketing costs 800,000 -0-
NOTE N - SUBSEQUENT EVENTS
On February 9, 2000, the Company filed a registration statement
on Form 10-SB with the Securities and Exchange Commission. The
effective date of the registration statement, pending the
submission of a pre-effective amendment that addresses comments
of the Commission, is anticipated to be April 9, 2000. A public
offering may commence shortly after this time, if approved by the
Board of Directors.
Since year end and through the date of the independent auditor's
report (February 29, 2000), the Company collected $387,551 of the
outstanding notes receivable and borrowed an additional $300,000
from Net.Return, Inc. and $50,000 from DIVA.
In accordance with the announced plans of management discussed in
Note J above to begin repurchasing some of the outstanding shares
of the Company, $53,532 was expended to repurchase 14,450 shares.
NOTE O - 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 December 31, 1999, the Company had $188,348
funds on deposit with one bank in excess of the Federally insured
limits of $100,000.
-57-
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE P - RESTATEMENT OF 1999 AMOUNTS
The Company has restated the consolidated balance sheet to
reflect purchase accounting for the acquisitions of Framing
Systems, Inc. and Executive Assistance, Inc. This change
resulted in an increase of assets in the amount of $97,891 which
represents goodwill of $100,669 less amortization for 1999 in the
amount of $2,778. Stockholders' equity also changed by this
amount. Consolidated liabilities were not effected by this
restatement.
The consolidated income statement was also restated to remove the
effects of pooling and replace it with purchase accounting. The
effect on income from operations was a reduction in sales of
$4,758, and a reduction of general and administrative expenses in
the amount of $6,186, thereby decreasing the net loss from
operations by $1,428. Net loss was increased by $31,350 which
represents the loss on disposition of Unique Products, Inc. Loss
per share increased from 56 cents to 66 cents due to the
modifications just described and because of the revised weighted
average common shares outstanding during 1999.
NOTE Q - 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, overhead 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
e-commerce 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 years ended December 31, 1999 and 1998.
-58-
<PAGE>
FOOTNOTE FOR SEGMENT DISCLOSURES
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
SEGMENT DATA - 1999
Restated Incubator E-Commerce Eliminations Consolidated
-------------------------- ----------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Asset Information
--------------------------
Current Assets, other than
notes receivable $ 1,194,954 $ 117 $ 0 $ 1,195,071
Notes receivable 1,772,443 110,955 (299,354) 1,584,044
Investment in equity
method investees 200,000 0 0 200,000
Other long-lived assets 315,120 106,270 (9,950) 411,441
----------- -------------- ---------------- --------------
Total Assets $ 3,482,517 $ 217,342 $ (309,304) $ 3,390,556
----------- -------------- ---------------- --------------
Profit and Loss Information
--------------------------
Revenues from external
customers $ 4,103 $ 1,061 $ 0 $ 5,164
Revenues from other
operating segments 0 0 0 0
Interest revenue 16,467 5,230 0 21,697
Other income 12,746 0 0 12,746
Spin off loss (31,350) (31,350)
Operating expenses (549,043) (188,236) 0 (737,279)
Interest expense (26,779) (26,779)
Depreciation and amortization (5,589) (5,120) (2,778) (13,487)
---------- -------------- ---------------- --------------
Net Loss $ (579,445) $ (187,065) $ (2,778) $ (769,288)
---------- -------------- ---------------- --------------
Income tax 0 0 0 0
Equity in net income
of equity method investees 0 0 0 0
</TABLE>
<PAGE>
RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES
FOOTNOTE FOR SEGMENT DISCLOSURES
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
SEGMENT DATA - 1998 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 (11,587) 0 0 (11,587)
Interest expense (12,500) 0 0 (12,500)
Depreciation and amortization (6,302) 0 0 (6,302)
----------- -------------- ---------------- --------------
Net Loss $ (30,389) $ 0 $ 0 $ (30,389)
=========== ============== ================ ==============
Income tax 0 0 0 0
Equity in net income of
equity method investees 0 0 0 0
</TABLE>
<PAGE> -59-
FRAMING SYSTEMS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
-60-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
FRAMING SYSTEMS, INC.
We have audited the accompanying balance sheets of FRAMING
SYSTEMS, INC. (a Nevada C corporation and development stage
company) as of December 31, 1998 and the related statements of
income, stockholders' equity, and cash flows for the year then
ended, and for the period from January 30, 1996 (inception of
operations) to December 31. 1998. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit. The financial statements for the
year ended December 31, 1997 were audited by other auditors and
their report dated March 25, 1998 was unqualified.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of FRAMING SYSTEMS, INC. as of December 31, 1998 and the results
of their operations and their cash flows for the year then ended
and for the period from January 30, 1996 (inception of
operations) to December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ M. C. Hunter & Associates
February 26, 2000
Fort Worth, Texas
-61-
<PAGE>
DAVID E. COFFEY
CERTIFIED PUBLIC ACCOUNTANT
3651 LINDELL RD., SUITE H
LAS VEGAS, NV 90103
(702) 871-3979
To the Board of Directors and Stockholders
of Framing Systems, Inc.
Las Vegas, Nevada
I have audited the accompanying balance sheet of Framing
Systems, Inc. (a development stage company) as of December 31,
1997 and the related statements of operations, cash flows and
changes in stockholders' deficit for the period from Jamuary 30,
1996 (date of inception) to December 31, 1997. These financial
statements are the responsibility of Framing Systems, Inc.'s
management. my responsibility is to express an opinion of these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted
auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement. An
audit includes examining, on test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. I believe that my
audit of the financial statements provide a reasonable basis for
my opinion.
In my opinion, the accompanying financial statements present
fairly, in all material respects, the financial position of
Framing Systems, Inc. as of December 31, 1997 and the results of
operations, cash flows and changes in stockholders' deficit for
the period then ended in conformity with generally accepted
accounting principles.
/s/ DAVID COFFEY C.P.A.
David Coffey C.P.A.
March 25, 1998
-62-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
--------- ---------
Cash in banks $ 313 $ 2,415
Property, plant and equipment 11,088 0
Less -- accumulated depreciation (2,267) 0
Organizational costs 0 3,695
Less -- accumulated amortization 0 (1,416)
--------- ---------
Total Assets $ 9,134 $ 4,694
========= =========
CURRENT LIABILITIES
Accounts payable $ 0 $ 330
Accrued expenses 0 15,000
Due to shareholder 203 1,195
--------- ---------
Total Current Liabilities 203 16,525
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock 10,129 6,272
Paid in capital 29,431 2,318
Deficit accumulated during development
stage (30,629) (20,421)
--------- ---------
Total Stockholders' Equity 8,931 (11,831)
--------- ---------
Total Liabilities and Stockholders' Equity $ 9,134 $ 4,694
========= =========
See Notes to Financial Statements.
-63-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(With Cumulative Amounts from Inception of
Operations -- January 30, 1996)
From
1998 1997 Inception
-------- ------- ----------
REVENUES $ 0 $ 0 $ 0
COST OF SALES 0 0 0
-------- ------- ----------
GROSS PROFIT 0 0 0
-------- ------- ----------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses 5,662 16,005 24,667
Depreciation and amortization 4,546 739 5,962
-------- ------- ----------
LOSS FROM OPERATIONS 10,208 16,744 30,629
-------- ------- ----------
OTHER INCOME (EXPENSE)
Interest income 0 0 0
Interest expense 0 0 0
-------- ------- ----------
TOTAL OTHER INCOME (EXPENSE) 0 0 0
-------- ------- ----------
LOSS BEFORE INCOME TAX 10,208 16,744 30,629
PROVISION FOR INCOME TAX 0 0 0
-------- ------- ----------
NET LOSS $ 10,208 $16,744 $ 30,629
======== ======= ==========
See Notes to Financial Statements.
-64-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
SHARES COMMON PAID IN ACCUMULATED TOTAL
Outstanding STOCK CAPITAL DEFICIT EQUITY
------------- -------- --------- ------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, January 30, 1996 0 $ 0 $ 0 $ 0 $ 0
Issued as compensation for services 6,000,000 6,000 6,000
Net loss -- 1996 operations (3,677) (3,677)
------------- -------- --------- ------------- --------
BALANCE, December 31, 1996 6,000,000 6,000 0 (3,677) 2,323
Private placement sale 272,000 272 2,448 2,720
Stock issuance costs (130) (130)
Net loss -- 1997 operations (16,744) (16,744)
------------- -------- --------- ------------- --------
BALANCE, December 31, 1997 6,272,000 6,272 2,318 (20,421) (11,831)
Private placement sale 3,857,000 3,857 35,613 39,470
Stock issuance costs (8,500) (8,500)
Net loss -- 1998 operations (10,208) (10,208)
------------- -------- --------- ------------- --------
BALANCE, December 31, 1998 10,129,000 $ 10,129 $ 29,431 $ (30,629) $ 8,931
============= ======== ========= ============= ========
</TABLE>
See Notes to Financial Statements.
-65-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
(With Cumlative Amounts from Inception of
Operations -- January 30, 1996)
From
1998 1997 Inception
--------- --------- -------------
CASH USED BY OPERATING ACTIVITIES
Net Loss $ (10,208) $ (16,744) $ (30,629)
Adjustments to reconcile
net loss to cash used
Depreciation and amortization 4,546 739 5,962
Changes in working capital (15,127) 15,330 203
--------- --------- -------------
Cash Used By Operating Activities (20,789) (675) (24,464)
--------- --------- -------------
CASH USED IN INVESTING ACTIVITIES
Purchase property and equipment (11,088) 0 (11,088)
Payments for organization costs 0 0 (695)
--------- --------- -------------
Cash Used By Investing Activities (11,088) 0 (11,783)
--------- --------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Borrowings from shareholders 0 1,000 4,695
Repay shareholder loans (1,195) (500) (1,695)
Stock issuance costs (8,500) (130) (8,630)
Sale of common stock in private
placement offerings 39,470 2,720 42,190
--------- --------- -------------
Cash Provided by Financing
Activities 29,775 3,090 36,560
--------- --------- -------------
NET INCREASE (DECREASE) IN CASH (2,102) 2,415 313
CASH, beginning of year 2,415 0 0
--------- --------- -------------
CASH, end of year 313 2,415 313
========= ========= =============
SUPPLEMENTARY DATA -- NON CASH ITEMS
---------------------------------------
Stock issued as compensation
for services $ 0 $ 0 $ 6,000
See Notes to Financial Statements.
-66-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - NATURE OF OPERATIONS
Framing Systems, Inc. (the "Company") was incorporated on
January 30, 1996 under the corporate statutes of the state of
Nevada. The business purpose of the Company is to develop,
produce and market a fully-operational commercial software and
hardware package for use in the custom framing industry. As of
the date of these financial statements, the Company is still in
the development stage.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organizational Costs and Amortization
The costs associated with establishing the corporation were
capitalized and amortized over a 5 year estimated useful life.
However, effective December 31, 1998, in accordance with the
provisions of the recently adopted Statement of Position 98-5 -
"Start-Up Costs", the Company wrote off the remaining unamortized
balance of previously capitalized organization costs in the
amount of $2,279.
Property, Plant, Equipment and Depreciation
Fixed assets additions are recorded at cost. Maintenance and
repairs are expensed as incurred; while renewals and betterments
are capitalized. Depreciation is computed using accelerated
methods over the estimated useful lives of each asset, which
range from 5 to 7 years.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions about certain reported amounts and
related disclosures. Actual results could differ from these
estimates.
Stock Offering Costs
Offering costs incurred by the Company in connection with a
private placement offering were deducted from the net proceeds
and reported in paid in capital.
-67-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company retained two of its stockholders to assist with the
formation of the corporation and initial start-up activities.
These stockholders were issued 6,000,000 shares of common stock
as compensation for those services. The Company valued those
services at $6,000 or $0.001 per share.
As the Company has had no operations to generate revenues, there
has been a need for working capital. One of the Company's
officers loaned $15,000 during 1997, which the Company repaid in
1998. In addition, two of the stockholders loaned the Company
$1,695 during 1996 and 1997, which were repaid in 1997 and 1998.
NOTE 4 - COMMON STOCK
The Company has an authorized capitalization of 25,000,000 shares
of common stock at $0.001 par value. At December 31, 1998, there
were 10,129,000 shares issued and outstanding. There are no
treasury shares.
NOTE 5 - RECLASSIFICATION OF PRIOR YEAR AMOUNTS
Certain prior year amounts have been reclassified to conform to
the current year presentation.
NOTE 6 - SUBSEQUENT EVENT
On May 13, 1999, the Company's Board of Directors accepted an
offer from Rhino Enterprises Group, Inc. (a business incubator
which provides various forms of management and marketing
expertise to start-up and emerging enterprises) to exchange its
10,129,000 shares of common stock for 405,160 shares of Rhino's
common stock. As of the date of these financial statement,
6,854,000 shares had been exchanged, resulting in Rhino owning
65% of the Company.
NOTE 7 - ADVERTISING COSTS
Any advertising costs would be expensed as incurred.
-68-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 8 - COMPREHENSIVE INCOME
The Company has no items of "other comprehensive income;"
therefore, comprehensive income equals net income.
NOTE 9 - INCOME TAX
Income tax is provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred tax assets and
liabilities are recognized for temporary differences between the
tax basis of assets and liabilities for financial reporting and
income tax purposes. Deferred tax assets and liabilities
represent future tax return consequences of those temporary
differences. At December 31, 1998, there were no significant
deferred tax assets or liabilities that had been recognized in
the financial statements. The Company files a separate tax
return from its new Parent Company (see Note 6 above) and as of
December 31, 1998 has a tax loss carryforward of approximately
$25,000. No deferred tax asset has been recorded for this
temporary difference since management believes that it is not
more likely than not that this future tax benefit will ever be
realized.
-69-
<PAGE>
FRAMING SYSTEMS, INC.
INTERIM FINANCIAL STATEMENTS
MARCH 31, 1999
-69-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
March 31, Dec. 31,
ASSETS 1999 1998
-------------- --------------
<S> <C> <C>
Cash in banks $ 289 $ 313
Property, plant and equipment 11,088 11,088
Less -- accumulated depreciation (3,125) (2,267)
Organizational costs 0 0
Less -- accumulated amortization 0 0
-------------- --------------
Total Assets $ 8,252 $ 9,134
============== ==============
CURRENT LIABILITIES
Accounts payable $ 0 $ 0
Accrued expenses 0 0
Due to shareholder 203 203
-------------- --------------
Total Current Liabilities 203 203
-------------- --------------
STOCKHOLDERS' EQUITY
Common Stock 10,129 10,129
Paid in capital 29,431 29,431
Deficit accumulated during development stage (31,511) (30,629)
-------------- --------------
Total Stockholders' Equity 8,049 8,931
-------------- --------------
Total Liabilities and Stockholders' Equity $ 8,252 $ 9,134
============== ==============
</TABLE>
See Notes to Interim Financial Statements.
-70-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1999 AND 1998
(With Cumulative Amounts from Inception of
Operations January 30, 1996)
<TABLE>
<CAPTION>
March 31, March 31, From
1999 1998 Inception
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0
COST OF SALES 0 0 0
---------- ----------- -----------
GROSS PROFIT 0 0 0
---------- ----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses 24 3,407 24,691
Depreciation and amortization 858 412 6,820
---------- ----------- -----------
LOSS FROM OPERATIONS 882 3,819 31,511
---------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 0 0 0
Interest expense 0 0 0
---------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 0 0 0
---------- ----------- -----------
LOSS BEFORE INCOME TAX 882 3,819 31,511
PROVISION FOR INCOME TAX 0 0 0
---------- ----------- -----------
NET LOSS $ 882 $ 3,819 $ 31,511
========== =========== ===========
</TABLE>
See Notes to Interim Financial Statements.
-71-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
SHARES COMMON PAID IN ACCUMULATED TOTAL
Outstanding STOCK CAPITAL DEFICIT EQUITY
----------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
BALANCE, January 30, 1996 0 $ 0 $ 0 $ 0 $ 0
Issued as compensation for services 6,000,000 6,000 6,000
Net loss -- 1996 operations (3,677) (3,677)
----------- --------- ---------- ------------ --------
BALANCE, December 31, 1996 6,000,000 6,000 0 (3,677) 2,323
Private placement sale 272,000 272 2,448 2,720
Stock issuance costs (130) (130)
Net loss -- 1997 operations (16,744) (16,744)
----------- --------- ---------- ------------ --------
BALANCE, December 31, 1997 6,272,000 6,272 2,318 (20,421) (11,831)
Private placement sale 3,857,000 3,857 35,613 39,470
Stock issuance costs (8,500) (8,500)
Net loss -- 1998 operations (10,208) (10,208)
----------- --------- ---------- ------------ --------
BALANCE, December 31, 1998 10,129,000 $ 10,129 $ 29,431 $ (30,629) $ 8,931
Net loss -- First quarter 99
operations (882) (882)
----------- --------- ---------- ------------ --------
BALANCE, March 31, 1999 10,129,000 10,129 29,431 (31,511) 8,049
=========== ========= ========== ============ ========
</TABLE>
See Notes to Interim Financial Statements.
-72-
<PAGE>
FRAMING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1999 AND 1998
(With Cumlative Amounts from Inception of
Operations -- January 30, 1996)
<TABLE>
<CAPTION>
March 31, March 31, From
1999 1998 Inception
------------ ------------ -----------
<S> <C> <C> <C>
CASH USED BY OPERATING ACTIVITIES
Net Loss $ (882) $ (3,819) $ (30,629)
Adjustments to reconcile net loss to cash used
Depreciation and amortization 858 412 5,962
Changes in working capital 0 (15,200) 203
------------ ------------ -----------
Cash Used By Operating Activities (24) (18,607) (24,464)
------------ ------------ -----------
CASH USED IN INVESTING ACTIVITIES
Purchase property and equipment 0 (3,588) (11,088)
Payments for organization costs 0 0 (695)
------------ ------------ -----------
Cash Used By Investing Activities 0 (3,588) (11,783)
------------ ------------ -----------
CASH PROVIDED BY FINANCING ACTIVITIES
Borrowings from shareholders 0 0 4,695
Repay shareholder loans 0 (1,195) (1,695)
Stock issuance costs 0 (8,630) (8,630)
Sale of common stock in private placement offerings 0 39,470 42,190
------------ ------------ -----------
Cash Provided by Financing Activities 0 29,645 36,560
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH (24) 7,450 313
CASH, beginning of year 313 2,415 0
------------ ------------ -----------
CASH, end of year $ 289 $ 9,865 $ 313
============ ============ ===========
SUPPLEMENTARY DATA -- NON CASH ITEMS
----------------------------------------------
Stock issued as compensation for services $ 0 $ 0 $ 6,000
</TABLE>
See Notes to Interim Financial Statements.
-73-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - NATURE OF OPERATIONS
Framing Systems, Inc. (the "Company") was incorporated on
January 30, 1996 under the corporate statutes of the state of
Nevada. The business purpose of the Company is to develop,
produce and market a fully-operational commercial software and
hardware package for use in the custom framing industry. As of
the date of these financial statements, the Company is still in
the development stage.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organizational Costs and Amortization
The costs associated with establishing the corporation were
capitalized and amortized over a 5 year estimated useful life.
However, effective December 31, 1998, in accordance with the
provisions of the recently adopted Statement of Position 98-5
"Start-Up Costs", the Company wrote off the remaining unamortized
balance of previously capitalized organization costs in the
amount of $2,279.
Property, Plant, Equipment and Depreciation
Fixed assets additions are recorded at cost. Maintenance and
repairs are expensed as incurred; while renewals and betterments
are capitalized. Depreciation is computed using accelerated
methods over the estimated useful lives of each asset, which
range from 5 to 7 years.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions about certain reported amounts and
related disclosures. Actual results could differ from these
estimates.
Stock Offering Costs
Offering costs incurred by the Company in connection with a
private placement offering were deducted from the net proceeds
and reported in paid in capital.
Interim Accounting Periods
These interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair
presentation of the financial position and results of operations
for the quarter ended March 31, 1999.
-74-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company retained two of its stockholders to assist with the
formation of the corporation and initial start-up activities.
These stockholders were issued 6,000,000 shares of common stock
as compensation for those services. The Company valued those
services at $6,000 or $0.001 per share.
As the Company has had no operations to generate revenues, there
has been a need for working capital. One of the Company's
officers loaned $15,000 during 1997, which the Company repaid in
1998. In addition, two of the stockholders loaned the Company
$1,695 during 1996 and 1997, which were repaid in 1997 and 1998.
NOTE 4 - COMMON STOCK
The Company has an authorized capitalization of 25,000,000 shares
of common stock at $0.001 par value. At March 31, 1999, there
were 10,129,000 shares issued and outstanding. There are no
treasury shares.
NOTE 5 - RECLASSIFICATION OF PRIOR YEAR AMOUNTS
Certain prior year amounts have been reclassified to conform to
the current year presentation.
NOTE 6 - SUBSEQUENT EVENT
On May 13, 1999, the Company's Board of Directors accepted an
offer from Rhino Enterprises Group, Inc. (a business incubator
which provides various forms of management and marketing
expertise to start-up and emerging enterprises) to exchange its
10,129,000 shares of common stock for 405,160 shares of Rhino's
common stock. As of the date of these financial statement,
6,854,000 shares had been exchanged, resulting in Rhino owning
65% of the Company.
NOTE 7 - ADVERTISING COSTS
Any advertising costs would be expensed as incurred.
-75-
<PAGE>
FRAMING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 8 - COMPREHENSIVE INCOME
The Company has no items of "other comprehensive income;"
therefore, comprehensive income equals net income.
NOTE 9 - INCOME TAX
Income tax is provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred tax assets and
liabilities are recognized for temporary differences between the
tax basis of assets and liabilities for financial reporting and
income tax purposes. Deferred tax assets and liabilities
represent future tax return consequences of those temporary
differences. At March 31, 1999, there were no significant
deferred tax assets or liabilities that had been recognized in
the financial statements. The Company files a separate tax
return from its new Parent Company (see Note 6 above) and as of
December 31, 1998 has a tax loss carryforward of approximately
$25,000. No deferred tax asset has been recorded for this
temporary difference since management believes that it is not
more likely than not that this future tax benefit will ever be
realized.
-76-
<PAGE>
E-DATA ALLIANCE CORP.
INTERIM FINANCIAL STATEMENTS
NOVEMBER 30, 1999
-77-
<PAGE>
E-DATA ALLIANCE CORP.
BALANCE SHEET
NOVEMBER 30, 1999
November 30,
1999
-----------------
ASSETS
--------------------------------------
Cash in banks $ 62,578
Receivables -- trade 10,000
-- stock subscription 9,000
-----------------
Total Current Assets 81,578
Property, plant and equipment 46,205
Less -- accumulated depreciation (1,781)
-----------------
Total Assets $ 126,002
=================
CURRENT LIABILITIES
--------------------------------------
Accounts payable $ 11,199
Accrued expenses 2,250
Short - term note payable 100,000
-----------------
Total Current Liabilities 113,449
-----------------
STOCKHOLDERS' EQUITY
--------------------------------------
Common stock 10,000
Retained earnings 2,553
-----------------
Total Stockholders' Equity 12,553
-----------------
Total Liabilities and Stockholders' Equity $ 126,002
=================
See Notes to Interim Financial Statements.
-78-
<PAGE>
E-DATA ALLIANCE CORP.
STATEMENT OF INCOME
FOR THE PERIOD FROM JULY 2, 1999 (Inception of Operations)
TO NOVEMBER 30, 1999
November 30, From
1999 Inception
-------------- --------------
REVENUES $ 15,000 $ 15,000
COST OF SALES 0 0
-------------- --------------
GROSS PROFIT 15,000 15,000
GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses (3,997) (3,997)
Personnel costs (6,669) (6,669)
Depreciation (1,781) (1,781)
-------------- --------------
INCOME FROM OPERATIONS 2,553 2,553
-------------- --------------
OTHER INCOME (EXPENSE)
Interest income 0 0
Interest expense 0 0
-------------- --------------
TOTAL OTHER INCOME (EXPENSE) 0 0
-------------- --------------
INCOME BEFORE TAX 2,553 2,553
PROVISION FOR INCOME TAX 0 0
-------------- --------------
NET INCOME $ 2,553 $ 2,553
============== ==============
See Notes to Interim Financial Statements.
-79-
<PAGE>
E-DATA ALLIANCE CORP.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 2, 1999 (Inception of Operations)
TO NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Shares COMMON PAID IN RETAINED TOTAL
Outstanding STOCK CAPITAL EARNINGS EQUITY
------------ --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, July 2, 1999 0 $ 0 $ 0 $ 0 $ 0
Issued in organization 10,000 10,000 10,000
Net profit for five months 2,553 2,553
------------ --------- --------- ---------- --------
BALANCE, November 30, 1999 10,000 $ 10,000 $ 0 $ 2,553 $ 12,553
============ ========= ========= ========== ========
</TABLE>
See Notes to Interim Financial Statements.
-80-
<PAGE>
E-DATA ALLIANCE CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 2, 1999 (Inception of Operations)
TO NOVEMBER 30, 1999
November 30, From
1999 Inception
-------------- -------------
CASH USED BY OPERATING ACTIVITIES
Net Profit $ 2,553 $ 2,553
Adjustments to reconcile net
loss to cash used
Depreciation and amortization 1,781 1,781
Increase in accounts payable
and accrued expenses 13,449 13,449
Increase in accounts receivable (10,000) (10,000)
-------------- -------------
Cash Used By Operating
Activities 7,783 7,783
-------------- -------------
CASH USED IN INVESTING ACTIVITIES
Purchase property and equipment (46,205) (46,205)
-------------- -------------
Cash Used By Investing
Activities (46,205) (46,205)
-------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES
Borrowings 100,000 100,000
Sale of common stock in
private placement offerings 1,000 1,000
-------------- -------------
Cash Provided by
Financing Activities 101,000 101,000
-------------- -------------
NET INCREASE IN CASH 62,578 62,578
CASH, beginning of year 0 0
-------------- -------------
CASH, end of year $ 62,578 $ 62,578
============== =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING TRANSACTIONS
---------------------------------------
Interest paid $ 0 $ 0
Common stock issued but
not paid for 9,000 9,000
Income tax paid 0 0
See Notes to Interim Financial Statements.
-81-
<PAGE>
E-DATA ALLIANCE CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 1 - NATURE OF OPERATIONS
E-DATA ALLIANCE CORP. (the "Company") was incorporated on June
2, 1999, under the for-profit corporation statutes of the state
of Texas. The business purpose of the Company is to design and
develop web sites for small business and other organizations.
The Company also provides web hosting services.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property, Plant, Equipment and Depreciation
Fixed assets additions are recorded at cost. Maintenance and
repairs are expensed as incurred; while renewals and betterments
are capitalized. Depreciation is computed using accelerated
methods over the estimated useful lives of each asset, which
range from 5 to 7 years.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions about certain reported amounts and
related disclosures. Actual results could differ from these
estimates.
Revenue Recognition
Revenues from Web site hosting are recognized as they are billed
monthly. Hosting services to third parties and an affiliated
entity began in December 1999. Revenues from Web site design are
recognized as they are billed as work progresses.
Allowance for Uncollectible Accounts Receivable
Management believes that no allowance for uncollectible accounts
receivable is necessary at November 30, 1999.
Advertising
The Company expenses advertising costs as they are incurred.
-82-
<PAGE>
E-DATA ALLIANCE CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 3 - RELATED PARTY TRANSACTIONS
The revenues shown in the accompanying statement of income arose
from designing a web site for an affiliate of Rhino Enterprises
Group, Inc., who, as discussed in Note 8 below, became a 50%
shareholder in December, 1999.
NOTE 4 - COMMON STOCK
The Company has an authorized capitalization of 1,000,000 shares
of common stock at $0.001 par value. At November 30, 1999,
there were 10,000 shares issued and outstanding. There are no
treasury shares.
NOTE 5 - INDEBTEDNESS
The Company has the following short-term notes payable
outstanding at November 30, 1999 -
Digital Information & Virtual Access, Inc.,
note payable, with interest at 10%, due 180
days from September 28, 1999. Note is
unsecured. $ 50,000
Digital Information & Virtual Access, Inc.,
note payable, with interest at 10%, due 180
days from October 22, 1999. Note is unsecured. $ 50,000
---------
$ 100,000
---------
These obligations were forgiven in the transaction described
in Note 6 below; consequently, no interest has been accrued in
the accompanying statement of income.
NOTE 6 - COMPREHENSIVE INCOME
The Company has no items of "other comprehensive income;"
therefore, comprehensive income equals net income.
-83-
<PAGE>
E-DATA ALLIANCE CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 7 - INCOME TAX
Income tax is provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred tax assets and
liabilities are recognized for temporary differences between the
tax basis of assets and liabilities for financial reporting and
income tax purposes. Deferred tax assets and liabilities
represent future tax return consequences of those temporary
differences. At November 30, 1999, there were no significant
deferred tax assets or liabilities that had been recognized in
the financial statements. The Company will file a separate tax
return and for the tax year ended December 31, 1999 and expects
to report nominal taxable income.
NOTE 8 SUBSEQUENT EVENT
On December 17, 1999, the Company issued 10,000 shares of its
common stock to Rhino Enterprises Group, Inc. (a business
incubator which provides various forms of management and
marketing expertise to assist start-up and emerging enterprises).
The consideration received for these shares was an infusion of
$100,000 of cash from Rhino and the forgiveness of the loans made
by Digital Information & Virtual Access, Inc. ("DIVA"). In
addition, the Company will receive $800,000 of advertising and
marketing services from national and local media companies,
including but not limited to DIVA and its subsidiary, Money
Business, Inc. d.b.a. "The Underground Shopper". Rhino
Enterprises Group, Inc. will negotiate for and procure these
advertising and marketing services.
NOTE 9 - ACCOUNTING FOR INTERIM PERIODS
The accompanying interim period financial statements reflect all
adjustments which are, in the opinion of management, necessary to
a fair presentation of the financial position and results of
operations for the five months ended November 30, 1999.
-84-
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION
Exhibit
Number Description
------- -----------------------------------------------------
10.0 Amendment to Asset Purchase Agreement, dated
December 27, 1999
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant has caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
authorized.
Rhino Enterprises Group, Inc.
(Registrant)
Date: August 4, 2000 By:/s/ ROBERT W. MOEHLER
--------------------------------
Robert W. Moehler
President and duly
authorized officer
-85-
