-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJgXs4hg16Fi82SwdiCoVrZ9b+nkISZhEbouNanO/X/i8pvrm50PjZ5ROjwSx1iv KCzgATVecnkDNxdyPzqJnA== /in/edgar/work/0001101809-00-000011/0001101809-00-000011.txt : 20001115 0001101809-00-000011.hdr.sgml : 20001115 ACCESSION NUMBER: 0001101809-00-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RHINO ENTERPRISES GROUP INC CENTRAL INDEX KEY: 0001101809 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 880333844 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-29403 FILM NUMBER: 767461 BUSINESS ADDRESS: STREET 1: 2925 LBJ FREEWAY SUITE 188 CITY: DALLAS STATE: TX ZIP: 75234 BUSINESS PHONE: 9722412669 10QSB 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 Commission file number 0-29403 RHINO ENTERPRISES GROUP, INC., a Nevada corporation 2925 LBJ Freeway, Suite 188, Dallas, Texas 75234 (972) 241-2669 IRS Tax ID #: 88-0333844 -1- PART I: FINANCIAL INFORMATION Item 1. Financial Statements: RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS -2- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000, JUNE 30, 2000 , MARCH 31, 2000 and DECEMBER 31, 1999 (audited)
September June March December ASSETS 2000 2000 2000 1999 - ----------------------------- ----------- ----------- ----------- ----------- Current Assets Cash on hand and in banks $ 14,803 $ 1,559 $ 81,943 $ 390,071 Receivables 2,014,251 1,848,218 1,740,445 1,584,044 Prepaid expenses and deposits 839,621 839,621 825,000 805,000 ----------- ----------- ----------- ----------- Total Current Assets 2,868,675 2,689,398 2,647,388 2,779,115 ----------- ----------- ----------- ----------- Property, plant and equipment, at cost 210,270 125,126 69,406 87,670 Less -- accumulated depreciation (15,944) (10,605) (8,331) (7,453) Investment in E-DATA ALLIANCE CORP. 139,353 155,253 170,655 200,000 Intangible assets including goodwill, at cost 384,308 384,089 340,669 340,669 Less -- accumulated amortization (81,436) (56,122) (31,123) (9,445) ----------- ----------- ----------- ----------- Total Long-lived Assets 636,551 597,741 541,276 611,441 ----------- ----------- ----------- ----------- Total Assets $ 3,505,226 $ 3,287,139 $ 3,188,664 $ 3,390,556 =========== =========== =========== =========== CURRENT LIABILITIES - ----------------------------- Accounts payable $ 138,406 $ 81,703 $ 96,191 $ 41,985 Accrued expenses 1,129,115 1,009,593 929,977 839,334 Notes payable 3,964,937 3,728,415 3,372,551 3,082,736 ----------- ----------- ----------- ----------- Total Current Liabilities 5,232,458 4,819,711 4,398,719 3,964,055 ----------- ----------- ----------- ----------- STOCKHOLDERS' EQUITY - ------------------------------ Common stock 1,637 1,637 1,577 1,577 Preferred stock 334 192 0 0 Paid in capital 2,017,595 1,840,137 1,585,295 1,585,295 Accumulated deficit (3,583,898) (3,304,488) (2,725,877) (2,162,011) Non-controlling interest (90,210) 2,640 1,640 1,640 Treasury stock, at cost (72,690) (72,690) (72,690) 0 ----------- ----------- ----------- ----------- Total Stockholders' Equity (1,727,232) (1,532,572) (1,210,055) (573,499) ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $ 3,505,226 $ 3,287,139 $ 3,188,664 $ 3,390,556 =========== =========== =========== ===========
See Notes to Consolidated Financial Statements. -3- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Quarter Ended Nine Months Ended =========== =========== =========== ============ Sept 30, Sept 30, Sept 30, Sept 30, 2000 1999 2000 1999 ----------- ----------- ----------- ------------ REVENUES $ 193,504 $ 0 $ 224,205 $ 0 COST OF SALES 110,773 0 173,970 0 ----------- ----------- ----------- ------------ GROSS PROFIT 82,731 0 50,235 0 ----------- ----------- ----------- ------------ GENERAL AND ADMINISTRATIVE EXPENSES Operating costs 80,228 106,291 486,774 141,978 Personnel costs 270,748 0 735,417 0 Legal and professional fees 14,222 0 87,094 0 Depreciation and amortization 27,342 2,005 78,815 4,206 ----------- ----------- ----------- ------------ Total General and Administrative Expenses 392,540 108,296 1,388,100 146,184 ----------- ----------- ----------- ------------ LOSS FROM OPERATIONS (309,809) (108,296) (1,337,865) (146,184) ----------- ----------- ----------- ------------ OTHER INCOME (EXPENSE) Interest income 39,071 0 117,434 0 Interest expense (85,739) 0 (233,752) 0 Equity in loss of E-DATA ALLIANCE CORP. (15,900) 0 (60,648) 0 Other 117 12,610 2,715 14,021 ----------- ----------- ----------- ------------ Total Other Income (Expense) (62,451) 12,610 (174,251) 14,021 ----------- ----------- ----------- ------------ LOSS BEFORE INCOME TAX (372,260) (95,686) (1,512,116) (132,163) PROVISION FOR INCOME TAX 0 0 0 0 ----------- ----------- ----------- ------------ NET LOSS $ (372,260)$ (95,686)$ (1,512,116)$ (132,163) =========== =========== =========== ============ LOSS PER SHARE $ 0.23 $ 0.07 $ 0.94 $ 0.12 =========== =========== =========== ============
See Notes to Consolidated Financial Statements. -4- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Quarter Ended Nine Months Ended =========== =========== =========== ============ Sept 30, Sept 30, Sept 30, Sept 30, 2000 1999 2000 1999 ----------- ----------- ----------- ------------ CASH FROM OPERATING ACTIVITIES Net Loss $ (372,260)$ (95,686)$ (1,512,116)$ (132,162) Adjustments to reconcile net loss to net cash from operating activities Depreciation and amortization 30,653 2,005 82,583 2,574 Compensation paid with stock 0 187 0 5,258 Equity in loss of E-Data Alliance Corp. 15,900 0 60,647 0 Changes in working capital 26,192 82,575 90,704 109,685 ----------- ----------- ----------- ------------ Net Cash From Operating Activities (299,515) (10,919) (1,278,182) (14,645) ----------- ----------- ----------- ------------ CASH USED BY INVESTING ACTIVITIES Purchase depreciable assets (85,144) (8,713) (175,984) (8,713) Purchase intangible assets (219) 0 (43,639) 0 Sell property and equipment 0 0 53,384 0 Increase in notes and advances (16,000) (117,574) (655,508) (150,794) Collection of notes and advances 0 0 481,456 0 ----------- ----------- ----------- ------------ Net Cash Used by Investing Activities (101,363) (126,287) (340,291) (159,507) ----------- ----------- ----------- ------------ CASH PROVIDED BY FINANCING ACTIVITIES Issue common stock 0 0 16,094 67,355 Issue preferred stock 177,600 0 417,600 0 Borrowings 236,522 142,854 1,267,570 142,854 Repayments 0 0 (385,369) 0 Issuance costs 0 0 0 (30,000) Purchase treasury stock 0 0 (72,690) 0 ----------- ----------- ----------- ------------ Net Cash Provided by Financing Activities 414,122 142,854 1,243,205 180,209 ----------- ----------- ----------- ------------ NET CHANGE IN CASH 13,244 5,648 (375,268) 6,057 CASH, beginning of period 1,559 409 390,071 0 ----------- ----------- ----------- ------------ CASH, end of period $ 14,803 $ 6,057 $ 14,803 $ 6,057 =========== =========== =========== ============
See Notes to Consolidated Financial Statements. -5- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE A - NATURE OF OPERATIONS Rhino Enterprises Group, Inc. (The "Company") was formerly known as Unique Fashions, Inc. (a Nevada C corporation). On April 30, 1999, the Unique Fashions, Inc. effected a one-for-twenty (1 for 20) reverse stock split of its common stock and changed its name to Rhino Enterprises Group, Inc. Rhino acts as a business incubator for start-up and emerging enterprises. The Company performs this function by providing management, consulting services, and financing to assist established operating entities to position themselves to enter the capital markets. The Company and its subsidiaries operate in two business segments - business incubation and e-commerce. See further discussion in Note L below. The Company has elected to omit substantially all footnotes to the consolidated financial statements for the nine months ended September 30, 2000, since there have been no material changes (other than those included in the footnotes shown below) to the information previously reported by the Company in their consolidated financial statements for the fiscal year ended December 31, 1999 and which was included in the Registration Statement and amendments thereto filed in Form 10-SB. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unaudited Information - The information furnished herein was taken from the books and records of the Company without audit. However, such information contains all significant adjustments which are, in the opinion of management, necessary to properly reflect the results of the periods presented. The information presented is not necessarily indicative of the results from operations expected for the full fiscal year. Consolidation - These consolidated financial statements contain the accounts of Rhino Enterprises Group, Inc. and its wholly- owned subsidiary - Executive Assistance, Inc., its 90% - subsidiary, Eyesite.com, Inc. and its 68% - owned subsidiary, Framing Systems, Inc. The Company's investment in E-Data Alliance Corp. represents a 50% ownership position; consequently, this investee is accounted for using the equity method. All significant inter-company transactions and balances have been eliminated in consolidation. Property, Plant and Equipment - All fixed and depreciable assets are carried at cost. Depreciation of property, plant, and equipment was provided using the straight-line method over the expected useful life of the assets which range from 3 to 10 years. Allowance for Uncollectible Notes Receivable - Management believes that a reserve for uncollectible notes receivable was not necessary at September 30, 2000. Amortization of Intangible Assets - Intangible assets, which consist of certain proprietary knowledge and a web-site, are being amortized over 3 years. -6- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounting Estimates - The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates. Income Tax Accounting - Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due, plus deferred taxes. Deferred tax assets or liabilities are recognized for temporary differences between the tax basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent future tax return consequences of those temporary differences. At September 30, 2000 there were no significant deferred tax assets or liabilities. The Company has a tax net operating loss carryforward of approximately $750,000 which will expire starting in 2010. A deferred tax asset has not been recognized for this net operating loss, since management believes that it is not "more likely than not" that this tax benefit will ever be realized. Earnings Per Share -- Basic loss per share was computed by dividing the net loss allocable to common shareholders by the weighted monthly average outstanding common shares during the year. A reconciliation of the numerator and denominator associated with this calculation is presented below. Diluted earnings per share reflect per share amounts that would result if potentially dilutive securities were converted into common stock. Advertising - The Company expenses advertising as it is incurred. $29,493 was expended in the three months ended September 30, 2000; while $145,491 was expended in the nine months ended September 30, 2000. Comprehensive Income - The Company has no items of "other comprehensive income". Therefore, net income equals comprehensive income. Revenue Recognition - Since reviving the previously dormant Unique Fashions, Inc. in April, 1999 and prior to July 1, 2000, the Company had not generated any significant amounts of revenue. Also, the subsidiaries had not generated any significant amount of revenue as they were either dormant when the Company acquired them or were incorporated late in 1999. During 2000, the Company implemented contractual agreements to provide management, consulting and financial assistance to start-up and emerging growth companies. Typical incubation agreements call for either a flat monthly fee or hourly rates plus reimbursement for out-of- pocket expenses. Revenues from these agreements are recognized as services are provided. The Company recognizes interest income on funds advanced in the form of short term notes and its earnings from its equity method investee. E-commerce operations recognize revenue as services are provided. -7- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Stock - based Compensation - The Company recognizes the compensation generated by granting stock options to employees and non-employee directors in accordance with the provisions of APB No. 25. Disclosure of the amount of expense that would have been recorded had the Company followed the accounting prescribed by SFAS No. 123 is based on the fair value of the underlying common stock using the Black-Scholes options pricing model. The significant assumptions used to estimate the fair value of the options granted included setting the volatility at zero, the discount bond rate at 6%, and the annual dividend rate at zero. For stock issued to non-employees in exchange for various services, the Company recognizes the compensation under the provisions of SFAS No. 123. NOTE C -- NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTERPRISES As a vital part of its strategic activities as a business incubator, the Company makes initial investments in established operating entities and start-up or emerging enterprises primarily by advancing funds in the form of short-term unsecured notes. The following summarizes significant advances outstanding as of September 30, 2000 - Unsecured advances to established operating entities - Emerging Pharmacy Solutions, Inc. $ 310,791 Energy Systems Solutions, Inc. 213,000 Sarwin Family LLC 144,000 Teman Electric (related party) 413,700 --------- 1,081,491 --------- Advances to start-up or emerging entities - Legend Security (related party) 13,500 Target Marketing (related party) 47,032 Marathon Capital Group 102,000 R&R Foods 6,000 Historic Inns 3,000 Swan River 50,000 Memorabilia & Antiquities (related party) 6,738 Canton Auction House 37,000 Real Talk Network, Inc. (Secured) 200,000 --------- 465,270 --------- Other unsecured notes receivable - Individuals 180,632 Accrued interest income and reimbursements 130,736 Stockholders 13,044 --------- 324,412 --------- Total Notes Receivable $1,871,173 --------- -8- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE C - NOTES RECEIVABLE FROM OPERATING AND EMERGING ENTITIES, cont. Each of these notes is due in less than one year and bears interest at rates ranging from 6% to 10%. Accrued interest amounting to $130,736 is included in "Receivables." As of the date of the the consolidated financial statements, none of the notes are delinquent. The established operating enterprises have track records of profitability and cash generation and the Company believes that there is not a significant risk of not collecting the funds advanced. The note from Real Talk Network, Inc. is secured by the personal guarantee of the stockholders of Real Talk Network, Inc. and all the tangible assets of the company, which consist primarily of cash and equipment. The Company anticipates either receiving repayment of the funds advanced, or taking an equity position when the entity is ready to either go public or become a subsidiary of the Company. Each of the entities listed above is an operating enterprise with the capability to repay the loans. Any exchange of stock in satisfaction of the notes will be negotiated at the time of conversion. NOTE D - INDEBTEDNESS At September 30, 2000, Rhino had short term indebtedness as follows - Note payable to Digital Information & Virtual Access, Inc., 6% interest, unsecured, Note is due on demand $1,032,634 Notes payable to Southern Leasing, Inc. 8% interest, unsecured. Notes are due on demand 143,260 Note payable to Net.Return, Inc., Inc. 10% interest Unsecured. Note is due on or before 5-5-01 50,000 Note payable to Net.Return, Inc., Inc. 10% interest Unsecured. Note is due on or before 5-23-01 50,000 Note payable to Net.Return, Inc., Inc. 10% interest Unsecured. Note is due on or before 6-2-01 17,000 Note payable to Net.Return, Inc. 10% interest, unsecured. Note is due on or before 1-31-01 100,000 -9- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE D - INDEBTEDNESS - continued Note payable to Net.Return, Inc. 10% interest, unsecured. Note is due on or before 1-31-01 200,000 Note payable to Net.Return, Inc., 10% interest, Unsecured and due February 15, 2001 50,000 Note payable to Net.Return, Inc., 10% interest, Unsecured and due July 12, 2001 40,000 Note payable to Hart Prince, Inc., 10% interest, Unsecured and due September 13, 2001 25,000 Note payable to Media Star Productions, Inc., 10% Interest, unsecured and due September 22, 2001 10,000 Note payable to Net.Return, Inc. 10% interest, unsecured. Note is due on or before 12-31-00 $2,000,000 --------- $3,717,894 --------- At September 30,2000, Eyesite.Com, Inc. had short term indebtedness as follows - Note payable to Southern Leasing, 8% interest, Unsecured and due March 15, 2001 $ 38,200 Note payable to Southern Leasing, 8% interest, Unsecured and due March 24, 2001 20,000 Note payable to Southern Leasing, 8% interest, Unsecured and due March 20, 2001 60,000 Note payable to Southern Leasing, 10% interest, Unsecured and due April 7, 2001 15,000 Note payable to Southern Leasing, 10% interest, Unsecured and due April 26, 2001 10,000 Note payable to Southern Leasing, 10% interest, Unsecured and due May 3, 2001 10,000 -10- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE D - INDEBTEDNESS - continued Note payable to Southern Leasing, 10% interest, Unsecured and due May 15, 2001 10,000 Note payable to Hart Prince, Inc., 10% interest, Unsecured and due August 23, 2001 10,000 Note payable to Hart Prince, Inc., 10% interest, Unsecured and due September 20, 2001 15,000 Note payable to Memorabilia & Antiquities, Inc., 10% interest, unsecured and due September 27, 2001 23,523 Note payable to The Strateia Group, Inc., 10% interest, Unsecured and due June 19, 2001 35,320 --------- 247,043 --------- Consolidated Debt at 9-30-00 $3,964,937 --------- NOTE E - COMMON STOCK AND PREFERRED STOCK The Company has 25,000,000 of authorized shares of common stock at a par value of $0.001 per share. At September 30, 2000, there were 1,636,956 shares outstanding. During the nine months ended September 30, 2000, Eyesite.Com, Inc. (a wholly-owned subsidiary) issued 167,040 shares of preferred stock with a par value of $0.002. These share were sold for $2.50 per share. The Company has authorized 5,000,000 shares of preferred stock at $0.002 per share. NOTE F -- EARNINGS PER SHARE RECONCILIATIONS The following table summarizes the amounts used to calculate the basic loss per share as reported in the accompanying consolidated statement of income. The stock options discussed below were not included in the calculation of diluted loss per share as their effect was anti-dilutive. For the Quarter Ended ------------------------ Sept 30, Sept 30, 2000 1999 ----------- ---------- Net Loss $ 372,260 $ 95,686 Weighted average outstanding shares 1,636,955 1,415,508 -11- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE F -- EARNINGS PER SHARE RECONCILIATIONS - Continued For the Nine Months Ended --------------------------- Sept 30, Sept 30, 2000 1999 ------------ ------------ Net Loss $ 1,512,116 $ 132,163 Weighted average outstanding shares 1,614,977 1,049,381 NOTE G -- STOCK OPTIONS On October 27, 1999, the Company granted certain key employees, officers and directors non-qualified stock options (which vest monthly over a period of 5 years) to purchase up to 952,500 shares of common stock at $.25 per share. The fair value of the Company's common stock on the grant date was $0.25. Because the Company applies APB No. 25 in accounting for its stock plan, no compensation costs have been recognized in the accompanying consolidated statement of income. If, under the provisions of SFAS No. 123, the Company had calculated compensation costs based on the fair value at the grant date for these stock options, net earnings and earnings per share would not have been materially effected. The estimated per share weighted average fair value of the stock options granted during 1999 was $0.06. This amount was determined using the Black-Scholes option pricing model, which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-free interest rate over the expected life of the options. The dividend yield was set at zero, since the Company has not paid any dividends and does not expect to do so in the forseeable future. Expected volatility was also set at zero, since the Company's stock is restricted and has had a very small trading volume. The risk-free interest rate was based on the Federal Reserve's bond discount rate of 6%. Had compensation been measured under the provisions of SFAS No. 123, the Company would have recognized an expense of $2,406 for the quarter ended September 30, 2000, and $7,668 for the nine months ended September 30, 2000. The following table summarizes options outstanding at September 30, 2000 and the changes during the nine months then ended - Outstanding at December 31, 1999 977,500 Exercised 60,380 Canceled 137,500 ------- Outstanding at September 30, 2000 779,620 ------- Exercisable at September 30, 2000 124,062 ======= -12- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE H - COMMITMENTS AND CONTINGENCIES The Company operates out of sub - leased facilities under the terms of a month-to-month rental agreement. The primary tenant is one of the Company's shareholders. Rent expense was $12,799 and $64,714 for the quarter and nine months ended September 30, 2000. The Company's new laser surgery center operates out of facilities leased from and unrelated third party. Rent expense amounted to $9,747 and $14,621 for the three months and nine months ended September 30, 2000, respectively. For the corresponding periods in 1999, rent was $12,496 and $18,496, respectively. The Company also has an overhead (expenses related to occupancy, such as telephone, utilities, etc.) reimbursement agreement which is based on the square-footage occupied, with this same stockholder. This arrangement calls for monthly billings. See the related party footnote disclosures in Note M for a summary of amounts incurred and paid under this reimbursement agreement. Management believes that the allocation methods applied to overhead charges are reasonable. On November 29, 1999, the Board of Directors approved the buy- back of up to 200,000 shares of the Company's common shares for a price not to exceed $5 per share for a period of 180 days from the date the Company issues a press release to its stockholders announcing such a buy-back. During the nine months ended September 30, 2000, the Company has purchased 19,650 shares of its common stock back from its shareholders at an average price of $3.70. On December 22, 1999, Eyesite.Com, Inc. entered into a consulting contract with Dr. Gary Edwards to maintain and enhance its web site. Among other things, the agreement provides for 36 monthly payments of $7,000 which is for 35 hours per month at $200 per hour for Dr. Edwards services. As an inducement to perform the web-site consulting services, the Company promised to issue 500,000 shares of EYESITE.COM, Inc.'s common stock to Dr. Edwards upon completion of five months of the 36-month agreement. As of June 30, 2000 the performance obligation had been satisfied and the 500,000 shares were issued resulting in compensation expense of $1,000. On March 7, 2000, the Company entered into a sale-leaseback transaction with Southwest Leasing, Inc. (an unrelated entity), for automobiles and equipment. The leases are operating leases which provide for, among other things, 60 monthly payments in the amount of $935. At the Company's option, the lease can be renewed for an additional 24 months at the same monthly rental. NOTE I - CONCENTRATIONS OF CREDIT RISK The Company maintains cash in several accounts with financial institutions, including a money market account with a national brokerage house. At various times during the nine months ended September 30, 2000, the Company had funds on deposit in excess of the Federally insured limits of $100,000. -13- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE J - EQUITY IN E-DATA ALLIANCE CORP. The Company owns a 50% interest in e-Data Alliance Corp. The following represents unaudited financial information taken from the books and records of e-Data for the quarter and nine months ended September 30, 2000 - Quarter Six Months --------- ------------ Sales $ 4,094 $ 36,183 Gross loss 27,493 99,814 Loss from operations 31,614 115,925 Net Loss 31,614 115,925 NOTE K - SUPPLEMENTAL DISCLOSURES FOR THE CASH FLOW STATEMENT Quarter Nine Months Ended Ended Sept 30, 2000 Sept 30, 2000 -------------- -------------- Interest paid $ - 0 - $ - 0 - Income taxes paid $ - 0 - - 0 - NOTE L - SEGMENT INFORMATION The Company organizes its business into two reportable segments - business incubation and e-commerce entities. As previously discussed in these notes, the business incubation segment includes the parent company, Rhino, its subsidiary Executive Assistance, Inc., and its equity method investee, E-Data Alliance Corp. This segment provides various forms of assistance (in the form of management, consulting services, and financing) to assist start-up and emerging enterprises as well as established operating companies position themselves to enter capital markets. Segment revenues consist of fees, expense reimbursements, interest income on funds advanced in the form of short term notes, earnings of subsidiaries and equity method investees. The e-commerce segment represents the subsidiaries (Framing Systems, Inc. and Eyesite.Com) that are entering the tremendous markets available through the Internet. All operations, at present, are located within the United States. Revenues arise from sales primarily to unrelated third parties. The segments' accounting policies are the same as those of the Company described in the summary of significant accounting policies. A summary, by segment, of the Company's significant assets, liabilities, revenues and expenses is presented on the schedules below for the quarter and nine months ended September 30, 2000 and 1999. -14- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 NOTE M -- RELATED PARTY TRANSACTIONS Related Party & Balance at Amounts Amounts Balance at Relationship Dec 31, 1999 Advanced Collected Sept 30, 2000 Teman Electric(1) $333,700 $ 80,000 $ - 0 - $413,700 Memorabilia & Antiquities (2) 365,051 101,066 431,546 34,571 Marathon Group (1) 40,000 62,000 - 0 - 102,000 Joe Glover (1) 10,000 -0- - 0 - 10,000 Dan Weaver (1) 5,000 10,000 13,694 1,306 Start-up Entities Shown in Note C -0- 85,532 25,000 60,532 Funds Received Amounts Repaid from DIVA (3) $(1,041,069) $(372,104) $350,708 $(1,062,465) Strateia Group (1) ( 5,864) ( 86,283) 79,726 ( 12,421) Other Transactions With Related Parties Dan Weaver (1) Cash Payments for Accounting $ 16,375 e-Data Purchase Web hosting and design services $ 21,986 Strateia Group (1) Rent incurred by the Company $ 64,714 Stratiea Group (1) Overhead Reimbursement $ 21,155 (1) Stockholder (2)Owned by President of Rhino (3) Common officers & shareholders -15- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES FOOTNOTE FOR SEGMENT DISCLOSURES
SEGMENT DATA -- 3rd QUARTER 2000 Incubator E-Commerce Eliminations Consolidated =================================== ------------ ------------ ------------- ------------ Profit and Loss Information - ----------------------------------- Revenues from external customers $ 107,180 $ 86,324 $ 0 $ 193,504 Revenues from other operating segments 101,915 0 (101,915) 0 Interest revenue 35,003 4,068 0 39,071 Other income (expense) 0 (101,915) 101,915 0 Loss in E-Data Alliance Corp. (15,900) 0 (15,900) Operating expenses (179,007) (296,847) 0 (475,854) Interest expense (80,851) (4,888) (85,739) Depreciation and amortization (14,690) (10,974) (1,678) (27,342) ------------ ------------ ------------- ------------ Net Loss $ (46,350) $ (324,232) $ (1,678)$ (372,260) ============ ============ ============= ============ SEGMENT DATA -- 3rd QUARTER 1999 =================================== Profit and Loss Information - ----------------------------------- Revenues from external customers $ 0 $ 0 $ 0 $ 0 Revenues from other operating segments 0 0 0 0 Interest revenue 0 0 0 0 Other income 12,610 0 0 12,610 Loss in E-Data Alliance Corp. 0 0 0 0 Operating expenses (95,311) (10,980) 0 (106,291) Interest expense 0 0 0 0 Depreciation and amortization (858) 0 (1,147) (2,005) ------------ ------------ ------------- ------------ Net Loss $ (83,559) $ (10,980) $ (1,147)$ (95,686) ============ ============ ============= ============ Income tax $ 0 $ 0 $ 0 $ 0 Equity in net loss of equity method investees 15,900 0 0 15,900
-16- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES FOOTNOTE FOR SEGMENT DISCLOSURES AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30
SEGMENT DATA -- 2000 Incubator E-Commerce Eliminations Consolidated =================================== ------------ ------------ ------------- ------------ Asset Information - ----------------------------------- Current Assets, other than notes receivable $ 831,854 $ 22,571 $ 0 $ 854,425 Notes receivable 2,421,999 198,844 (606,592) 2,014,251 Investment in equity method investees 139,352 0 0 139,352 Other long-lived assets 244,869 274,312 (21,983) 497,198 ------------ ------------ ------------- ------------ Total Assets $ 3,638,074 $ 495,727 $ (628,575)$ 3,505,226 ============ ============ ============= ============ Profit and Loss Information - ------------------------------------ Revenues from external customers $ 108,680 $ 115,524 $ 0 $ 224,204 Revenues from other operating segments 101,915 0 0 101,915 Interest revenue 105,801 11,632 0 117,433 Other income (expense) 2,715 (101,915) 0 (99,200) Loss in E-Data Alliance Corp. (60,648) 0 0 (60,648) Operating expenses (744,193) (739,060) 0 (1,483,253) Interest expense (225,906) (7,846) 0 (233,752) Depreciation and amortization (45,308) (28,473) (5,034) (78,815) ------------ ------------ ------------- ------------ Net Loss $ (756,944) $ (750,138) $ (5,034)$ (1,512,116) ============ ============ ============= ============ Income tax $ 0 $ 0 $ 0 $ 0 Equity in net loss of equity method investees 60,648 0 0 60,648
-17- RHINO ENTERPRISES GROUP, INC. AND SUBSIDIARIES FOOTNOTE FOR SEGMENT DISCLOSURES AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30 [CAPTION] SEGMENT DATA -- 1999 Incubator E-Commerce Eliminations Consolidated =================================== ------------ ------------ ------------- ------------ Asset Information - ----------------------------------- Current Assets, other than notes receivable $ 221 $ 5,837 $ 0 $ 6,058 Receivables 121,120 33,954 (4,280) 150,794 Investment in equity method investees 0 0 0 0 Other long-lived assets (Goodwill) 79,782 8,713 (16,982) 71,513 ------------ ------------ ------------- ------------ Total Assets $ 201,123 $ 48,504 $ (21,262)$ 228,365 ============ ============ ============= ============ Profit and Loss Information - ----------------------------------- Revenues from external customers $ 0 $ 0 $ 0 $ 0 Revenues from other operating segments 0 0 0 0 Interest revenue 0 0 0 0 Other income 22,746 0 (8,724) 14,022 Operating expenses (130,998) (10,980) 0 (141,978) Interest expense 0 0 0 0 Depreciation and amortization (2,574) 0 (1,632) (4,206) ------------ ------------ ------------- ------------ Net Loss $ (110,826) $ (10,980) $ (10,356)$ (132,162) ============ ============ ============= ============ Income tax $ 0 $ 0 $ 0 $ 0 Equity in net income of equity method investees 0 0 0 0
-18- Item 2. Management's Discussion and Analysis The following discussion of the financial condition and results of operations of Rhino Enterprises Group, Inc. and its subsidiaries should be read in conjunction with the Management's Discussion and Analysis and the consolidated financial statements and the notes thereto included in the Company's registration statement on Form 10-SB, and the amendments thereto. This quarterly report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements using terminology such as "anticipates," "expect," "will," "believes," "foresees," "could," "may" or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include statements regarding increased revenue, continued rising expenses, an increase in the staff of the Company or its subsidiaries, increased business activity, expansion of the Company's operations, increased operating costs, the execution of formal long-term lease arrangements, an increase in the Company's advertising budget, promotion of the products and services of the Company's subsidiaries and other equity investments, future loans to other companies as a way to pursue business opportunities, increased interest expense, expanded operations, increased interest income, source of potential extraordinary income, payments on or collection of notes receivables, sources of working capital, collections on advances, fees earned through incubation services, reimbursement of expenses, working capital needs, options for repayment of notes payable, the renewal or extension of existing debt, the conversion of existing debt into equity, the location of private financing, an equity placement of securities to raise funds, methods of meeting business requirements in the future, the effect the Company's growth will have on the Company's financial and operational areas, the number of future employees, an increase in the amount of funds utilized in the future for advertising/marketing/office space/equipment and increased expenditures for legal and accounting services. These forward-looking statements involve risks and uncertainties and actual results could differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described under the headings "Year 2000 Compliance" and "Factors That May Impact Future Operating Results." All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to the Company as of the date thereof, and Rhino assumes no obligation to update any forward-looking statement or risk factors. Results of Operations - --------------------- The following comments discuss the nine-month interim periods ended September 30, 2000 and 1999. -19- Revenues: The Company posted revenues of $224,205 in 2000 versus $0 in 1999, which was due primarily to $107,180 from business incubation activities and $115,524 from the lasik surgery at Eyesite.com's surgery center. Cost of Sales: The Company's cost of sales was $173,970 in 2000 versus $0 in 1999, which represents the direct costs associated with the lasik surgery operations at Eyesite.com's surgery center. General and Administrative: General and administrative expenses increased from $146,184 in 1999 to $1,388,100 in 2000 an increase of $1,241,916 due to increased personnel and other operating overhead expenses from increased business activity. Legal and professional fees increased by $87,094 due to the fact that in 1999 the Company was just initiating its activities. Also, depreciation increased by $74,609 due to the acquisition of tangible and intangible assets mainly at Eyesite.com's surgery center. Other Income (Expenses): Interest income increased from $0 in 1999 to $117,434 in 2000 representing interest on notes and advances to emerging and start-up enterprises. Interest expense increased by $233,752 representing interest on indebtedness incurred by the Company. The Company's equity interest in E-Data Alliance Corp. reflects fifty percent of the net loss from their operations. The following comments discuss the three months ended September 30, 2000 compared to the same period in 1999. Revenues: Revenues increased from $0 to $193,504 in 2000. $107,180 resulted from the Company's business incubation activities while $86,324 resulted from revenue generated at Eyesite.com's surgery center. Cost of Sales: The Company's cost of sales was $110,773 in 2000 and $0 in 1999. This increase represents the direct costs associated with the surgery center operations. General and Administrative: General and administrative expenses increased $284,244 from $108,296 in 1999 to $392,540 in 2000, due to increased personnel costs from the expanded business operations. Legal and professional fees increased by $14,222 and depreciation and amortization increased by $25,337 due to the acquisition of tangible and intangible assets for the comparable three month period. -20- Other Income (Expenses): Interest income increased from $0 in 1999 to $39,071 in 2000 representing interest on notes and advances to emerging and start-up enterprises. Interest expense increased by $85,739 representing interest on indebtedness incurred by the company. The Company's equity interest in E-Data Alliance Corp. reflects fifty percent of the net loss from their operations. Financial Condition - ------------------- At quarter end, cash and cash equivalents were $14,803 as compared to $390,071 at December 31, 1999. This change was a result of using the year-end cash to significantly increase operations, add personnel and acquire tangible and intangible assets. Receivables increased from $1,584,044 to $2,014,251 due to additional advances to start-up emerging enterprises. Prepaid expenses and deposits increased insignificantly. Property plant and equipment increased $122,600 from $87,670 in 1999 to $210,270 in 2000 due to acquisition of equipment for the surgery center. The investment in E-Data Alliance Corp. decreased by $60,647 due to recognizing the Company's share of their losses in 2000. Intangible assets increased by $43,639 primarily due to additional costs related to developing the website for the lasik surgery operation. Accounts payable increased from $41,985 in 1999 to $138,406 in 2000, which reflects the increase in the cost of business operations over the last nine months. Accrued expenses increased from $839,334 in 1999 to $1,129,115 in 2000 primarily due to accrued interest on the Company's indebtedness. Notes payable increased by $882,201 from $3,082,736 in 1999 to $3,964,937 in 2000 due to additional borrowings to fund operations. Common stock increased from $1,577 to $1,637 due to the exercise of management stock options. Preferred stock increased from $0 to $334 due to the sale and issuance of approximately $418,000 of preferred stock in Rhino's subsidiary Eyesite.com. The increase in the accumulated deficit represents the loss through nine months. Treasury stock increased from $0 to $72,690 because the Company bought some of its shares in the open market. The increase in the non-controlling interest reflects the 10% interest in Eyesite.com, Inc. transferred to Dr. Gary Edwards on July 1, 2000. Investing activities consumed $340,291 in cash for the nine months ended September 30, 2000. $219,623 was used to purchase depreciable and intangible assets. $655,508 was used to increase advances and notes to start-up and emerging enterprises. $53,384 was received from the sale and disposition of equipment and $481,456 was received from collection of notes and advances. Financing activities provided $1,243,205 for the nine months ended September 30, 2000. $433,694 was received from the sale of common and preferred stock and $1,267,570 was provided from additional borrowings while $385,369 was used to repay indebtedness. $72,690 was used to purchase treasury stock. This financing provided, in part, the funding for operations and investment activities. Management believes that collections on advances, fees earned through incubation services, interest income, revenue generated at Eyesite.com and reimbursement of expenses will be sufficient for the Company's working capital needs for the whole of the year 2000. As such, management anticipates that it may only need minimal working capital loans from time to time during the remainder of 2000. Management anticipates collecting approximately $200,000 to $500,000 of outstanding notes receivable in the fourth quarter of this year. Management foresees that its option for repaying $3,964,937 in notes payable are open. The Company could approach each lender to negotiate the renewal and extension of the debt or discuss the exploration of converting such debt into equity in the Company; could locate other private financing to replace the current financing; or could make an equity placement of securities to raise funds to repay these outstanding notes. Any one or more of these options may be used, as the Company is not committed to any single course of action at this time. The Company believes that it has the financial resources and commitments needed to meet business requirements in the foreseeable future, including capital expenditures and working capital requirements. The Company anticipates growth of its operations in fourth quarter of 2000 and on into 2001. This growth will in turn cause certain financial and operational areas of the Company to change. The most significant change in operations would be the number of employees working for the Company. The Company and its subsidiaries currently have 15 full-time employees, one part-time employee and out-source a number of projects. In an effort to bring these projects "in- house" and based on the proposed expansion, the Company anticipates having 35-50 full or part-time employees by the end of 2001. This expansion will also significantly increase the funds needed to provide sufficient advertising and marketing, office space and equipment for the increased staff and growth of the Company. Additionally, the Company will be required to increase its expenditures for legal and accounting services to meet its various compliance standards. -21- Year 2000 Compliance - -------------------- Prior to January 1, 2000, it was widely believed that many computer systems used today would not be able to interpret data correctly after December 31, 1999, because such systems allow only two digits to indicate the year in a date. The Company and its subsidiaries have been engaged, both before December 31, 1999 and after January 1, 2000, in assessing this Year 2000 ("Y2K") issue as it relates to their businesses, including their electronic interactions with banks, vendors, customers and others. The Company did not encounter any problems with Y2K issues, nor, based upon a review of its systems, does it expect to encounter any in the future. Factors That May Impact Future Operating Results - ------------------------------------------------ The Company and its subsidiaries operate in a rapidly changing environment that involves numerous risks and uncertainties. The following section lists some, but not all, of these risks and uncertainties which may have a material adverse effect on the Company's business, financial condition or results of operations. The Company is dependent upon its current management team. If the Company were to lose any one or more of its management team, it could face a financial setback or suffer in other ways related to is planned business. It could take the Company a significant period of time to locate and train replacements, if and when necessary. The Company does have employment agreements with both its President and Chief Operating Officer, which may be terminated upon certain circumstances. These agreements are filed as exhibits to the Company's First Amendment to the Form 10-SB filed with the Securities and Exchange Commission. Since the Company has very little revenue at the moment, it is dependent upon outside financing for working capital and to grow its business. The Company may find it difficult to borrow additional funds or have access to additional funds via some other method. If such a situation occurs, the Company may not be able to make debt service payments, provide the services it has planned, increase its staff as planned or otherwise grow its business. The Company has a significant portion of debt which must be repaid in cash at some point or the Company must explore other alternatives for repayment, which could be in the form of conversion of debt to equity, replacement financing and/or an offering of securities. The Company may find it difficult to repay the existing debt when due, extend the due date of the existing debt, reach some agreement with regard to converting the debt to equity or otherwise satisfy its obligation. Likewise, if a new source of financing is found to replace the current source, the Company could face similar risks in the future with regard to its ability to repay or otherwise take care of any future debt. Also, any additional issuances of securities, whether in the form of converting debt to equity or the form of a securities offering, would dilute the share value of current shareholders. The Company has made several unsecured loans to other small companies. The Company faces a risk that these third party borrowers will not be able to pay the interest and/or principal on their debt. In the event these borrowers are unable to repay the interest and/or principal, the Company may seek to convert the debt into an equity interest in the borrowing entity. However, the Company may face difficulty in negotiating with such borrowers with regard to the ability to convert the debt into equity or the conversion ratio. Likewise, if such debt is converted into equity of the borrowing entity, there exists a great possibility that the equity interest in the borrowing entity will not be a liquid investment or that the value of such equity interest will not be at or near the original loan to the borrowing entity. Further, if one or more of these borrowing entities is unable to make interest and/or principal payments when due or if the debt is converted into a non-liquid equity investment, the Company could face a working capital shortage. The Company's subsidiary, Eyesite.com, Inc. has planned its business in accordance with current legislation. If new legislation is passed at a local, state or federal level, it -22- could materially adversely affect Eyesite.com's business plan. Eyesite.com faces the risks that it might not be able to (1) continue its business as planned, (2) adjust its business plan in accordance with any new legislation, or (3) operate in such a manner that would eventually be profitable. In order to grow the Company's business as planned, the Company will have to hire additional personnel for a number of positions. The current low unemployment rate presents a challenge for management of the Company to locate and attract qualified individuals to fill the positions that the Company expects to have available. The Company faces the risks that it might not be able to (1) fill every position as it becomes available in a timely manner, (2) retain those employees it currently has or that it hires, or (3) offer an attractive enough compensation package to attract top quality candidates to its positions. PART II - OTHER INFORMATION (Items 1, 2, 3, 4 and 5 have been omitted as there is no information to report.) Item 6. Exhibits and Reports on Form 8-K. Exhibit No. Description - ----------- ------------------------------------------- 27.0 Financial Data Schedule Reports on Form 8-K - ------------------------------------------------------------ During the quarter ended September 30, 2000, the Company did not file any reports on Form 8-K with the Securities and Exchange Commission. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Rhino Enterprises Group, Inc. (Registrant) Date: November 14, 2000 By: /s/ DANIEL H. WEAVER -------------------------------- Daniel H. Weaver Chief Financial Officer and duly authorized officer EX-27 2 0002.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 14,803 0 2,014,251 0 0 2,868,675 210,270 15,944 3,505,226 5,232,458 0 0 334 1,637 (1,729,203) 3,505,226 224,205 224,205 173,970 173,970 0 0 233,752 (1,512,116) 0 (1,512,116) 0 0 0 (1,512,116) (.94) (.94)
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