roi_10qsb-70630.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)
[X]     Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2007

[   ]     Transition report under Section 13 or 15(d) of the Exchange Act for the transition period from __________ to __________.


Commission File Number: 333-62690

RHINO OUTDOOR INTERNATIONAL, INC.

(Exact name of small business issuer as specified in its charter)

 
 Nevada
 65-1000634
 (State or other jurisdiction of incorporation or organization)
 (I.R.S. Employer Identification No.)
 
1191 Center Point Dr., Henderson, Nevada
89704
 (Address of principal executive office)
 (Zip Code)
 
1-800-288-3099 

(Issuer's telephone number)
 
 

(Former name, former address, and former fiscal year, if changed since last report)


Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
                                Yes    x    No    o
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act 1934).
                                Yes    o    No    x
 
As of August 27, 2007, the number of outstanding shares of the issuer's common stock was 65,266,209 shares.
 
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:    Yes    o    No    x
 
1





  PART I - FINANCIAL INFORMATION
     
ITEM 1.
FINANCIAL STATEMENTS
 
     
 
Consolidated Balance Sheets for the periods ended
 
 
June 30, 2007 and December 31, 2006
3
       
 
Consolidated Statements of Operations for the Three Months and Six Months
 
 
ended June 30, 2007 and 2006, and from inception of development
 
 
stage January 1, 2005 to June 30, 2007
4
       
 
Consolidated Statement of Stockholders' Equity
5
     
 
Consolidated Unaudited Statement of Cash Flows for the Six Months
 
 
ended June 30, 2007 and 2006, and from inception of development
 
 
stage January 1, 2005 to June 30, 2007
6
       
 
Notes to Consolidated Financial Statements
7
     
ITEM 2.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
 
RESULTS OF OPERATIONS
16
     
ITEM 3.
CONTROLS AND PROCEDURES
20
     
 PART II - OTHER INFORMATION
     
ITEM 6.
EXHIBITS
20
     
SIGNATURES
21
 
2

ITEM 1. FINANCIAL STATEMENTS
 
RHINO OUTDOOR INTERNATIONAL, INC      
CONSOLIDATED BALANCE SHEETS      
JUNE 30, 2007       
               
               
     
June 30
   
December 31
 
     
2007
   
2006
 
ASSETS  
           
               
CURRENT ASSETS 
           
 Cash 
  $
9,103
    $
1,862
 
 Note receivable
   
4,500
     
-
 
 Loan receivable
           
-
 
 Prepaid expense
   
1,852
     
-
 
 Inventory 
   
113,490
     
123,490
 
 Other current assets
   
88,502
     
2,052
 
  Total Current Assets
   
217,447
     
127,404
 
                   
PROPERTY AND EQUIPMENT, NET
   
92,081
     
107,954
 
                   
OTHER ASSETS 
               
 Investments 
   
900
     
14,400
 
 Goodwill 
   
3,013,463
     
3,013,463
 
  Total Other Assets
   
3,014,363
     
3,027,863
 
                   
TOTAL ASSETS 
  $
3,323,891
    $
3,263,221
 
                   
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                   
CURRENT LIABILITIES
               
 Accounts payable
  $
1,281,163
    $
1,300,032
 
 Accounts payable- checks in excess of bank balance
   
-
     
21,534
 
 Accrued liabilities
   
1,638,798
     
1,332,860
 
 Lines of credit
   
292,995
     
299,896
 
 Current portion of long-term debt
   
36,141
     
40,485
 
 Deferred revenue and customer deposites
   
272,991
     
448,027
 
 Notes payable
   
459,172
     
294,192
 
 Notes payable - related party
   
477,614
     
573,814
 
 Other current liabilities
   
400,000
     
400,000
 
  Total Current Liabilities
   
4,858,874
     
4,710,840
 
                   
LONG TERM LIABILITIES
               
 Bank indebtedness
   
29,155
     
37,682
 
 Vehicle loans, net current portion
   
15,663
     
22,047
 
  Total Long Term Liabilities
   
44,818
     
59,729
 
                   
COMMITMENTS AND CONTINGENCIES
   
-
     
-
 
                   
STOCKHOLDERS' EQUITY (DEFICIT)
               
 Preferred stock, $.001 par value; 5,000,000 shares authorized,
               
  Series A - 835,660 shares issued and outstanding
   
836
     
836
 
  Series B - 1,000,000 shares issued and outstanding
   
1,000
     
1,000
 
  Series C - 2,250,000 shares issued and outstanding
   
2,250
     
2,250
 
 Common stock, $.001 par value; 500,000,000 shares authorized,
               
  66,066,209 and 50,748,709 shares issued and oustanding,
               
  respectively
   
66,066
     
50,749
 
 Additional paid-in capital
   
36,595,323
     
35,502,478
 
 Accumulated deficit prior to curent development stage
    (19,234,546 )     (19,234,546 )
 Accumulated deficit in development stage
    (18,899,130 )     (17,394,515 )
 Accumulated comprehensive income (loss)
    (111,600 )     (435,600 )
  Total Stockholders' Equity (Deficit)
    (1,579,801 )     (1,507,348 )
                   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $
3,323,891
    $
3,263,221
 
 
3

 
RHINO OUTDOOR INTERNATIONAL, INC            
 
CONSOLIDATED STATEMENTS OF OPERATIONS            
 
JUNE 30, 2007            
 
                             
Inception of
 
                             
Development
 
                             
Stage
 
     
Three Months Ended   
   
Six Months Ended   
   
(January 1, 2005)
 
     
June 30
   
June 30
   
June 30
   
June 30
   
to
 
     
2007
   
2006
   
2007
   
2006
   
June 30
 
     
(unaudited)
         
(unaudited)
         
2007
 
                                 
REVENUES
  $
218,340
    $
29,750
    $
417,385
    $
29750
     
494,478
 
                                       
-
 
COST OF GOODS SOLD
  $
50,480
    $
24,654
    $
115,761
    $
24654
     
216,001
 
                                           
 Gross Profit
   
167,860
     
5,096
     
301,624
     
5,096
     
278,477
 
                                           
OPERATING EXPENSES
                                       
 Depreciation
   
9,142
     
851
     
18,373
     
851
     
36,657
 
 General and administrative
   
161,105
     
74,257
     
261,480
     
141,350
     
1,763,170
 
 Marketing expense
   
59,375
     
382,634
     
414,175
     
596,059
     
10,166,362
 
 Selling expenses
   
-
     
18,000
     
359,300
     
164,856
     
5,511,840
 
 Management fees
   
188,944
     
601,729
     
374,730
     
706,729
     
1,397,459
 
  TOTAL OPERATING EXPENSES
   
418,566
     
1,077,471
     
1,428,058
     
1,609,845
     
18,875,488
 
                                           
LOSS FROM OPERATIONS
    (250,706 )     (1,072,375 )     (1,126,434 )     (1,604,749 )     (18,597,011 )
                                           
OTHER INCOME (EXPENSES)
                                       
 Other income
           
14,063
             
14,063
     
340,272
 
 Interest income
                                   
2,500
 
 Interest expense
    (14,483 )     (21,220 )     (24,706 )     (39,858 )     (188,078 )
 Acquisition expense
   
-
              (25,098 )                
 Gain /loss on sale of investment
   
-
              (328,377 )                
 Gain on forgiveness of debt
                                    (14,171 )
  TOTAL OTHER INCOME (EXPENSES)
    (14,483 )     (7,157 )     (378,181 )     (25,795 )     (199,749 )
                                           
LOSS BEFORE TAXES
    (265,189 )     (1,079,532 )     (1,504,615 )     (1,630,544 )     (18,796,760 )
                                           
INCOME TAXES
   
-
     
-
             
-
     
-
 
                                           
NET LOSS 
    (265,189 )     (1,079,532 )     (1,504,615 )     (1,630,544 )     (18,796,760 )
                                           
OTHER COMPREHENSIVE INCOME
                                       
 Unrealized gain on investments
   
90
     
540,000
      (111,600 )    
540,000
      (547,200 )
                                           
COMPREHENSIVE LOSS
  $ (265,099 )   $ (539,532 )   $ (1,616,215 )   $ (1,090,544 )   $ (19,343,960 )
                                           
                                           
 NET LOSS PER COMMON SHARE,                                        
  BASIC AND DILUTED
  $ (0.00 )   $ (0.01 )     (0.02 )     (0.01 )        
                                           
 WEIGHTED AVERAGE NUMBER OF                                        
  COMMON STOCK SHARES
                                       
  OUTSTANDING, BASIC AND DILUTED
   
65,266,209
     
151,172,738
     
61,374,216
     
140,106,932
         
                                           
 
4

 
RHINO OUTDOOR INTERNATIONAL, INC             
 
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)            
 
JUNE 30, 2007             
 
                                                  
                            
Additional
         
Other
       
    
Convertible Preferred Stock
   
Common Stock   
   
Paid-in
   
Accumulated
   
Comprehensive
       
    
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Loss
   
Totals
 
                                                  
 Balance, December 31, 2004
   
835,600
    $
836
    $
232,258
    $
232
    $
16,193,129
    $ (19,234,546 )         $ (3,040,349 )
                                                                
 Shares issued for consulting expense
                   
996,260
     
996
     
6,945,396
                   
6,946,392
 
                                                            
-
 
 Shares issued for debt
                   
5,000
     
5
     
57,495
                   
57,500
 
                                                            
-
 
 Shares issued for compensation
   
1,000,000
     
1,000
                     
99,000
                   
100,000
 
                                                            
-
 
 Net loss for year ending December 31, 2005
                                            (7,783,970 )           (7,783,970 )
                                                                
 Balance, December 31, 2005
   
1,835,600
     
1,836
     
1,233,518
     
1,233
     
23,295,020
      (27,018,516 )           (3,720,427 )
                                                                
 Shares issued for management and consulting fees
                   
245,000
     
245
     
489,755
                   
490,000
 
                                                            
-
 
 Shares issued for accrued liabilities
                   
205,000
     
205
     
409,795
                   
410,000
 
                                                            
-
 
 Shares issued for acquistion of subsidiary
   
1,650,000
     
1,650
                     
1,648,350
                   
1,650,000
 
                                                            
-
 
 Shares issued for accrued management fees
   
600,000
     
600
                     
599,400
                   
600,000
 
                                                                
 Shares issued for related party payable
                   
5,200,000
     
5,200
     
1,228,031
                   
1,233,231
 
                                                            
-
 
 Shares issued for marketing and selling expenses
                   
43,865,191
     
43,866
     
7,832,127
                   
7,875,993
 
                                                                
 Net loss for period ending December 31, 2006
                                            (9,610,545 )           (9,610,545 )
                                                            
-
 
 Unrealized loss on investments
                                                    (435,600 )     (435,600 )
                                                                  
 Balance, December 31, 2006
   
4,085,600
     
4,086
     
50,748,709
     
50,749
     
35,502,478
      (36,629,061 )     (435,600 )     (1,507,348 )
                                                                  
 Common stock issued for cash
                   
5,268,000
     
5,267
     
259,420
                     
264,687
 
                                                              
-
 
 Shares issued for marketing, selling and financing costs
                   
15,649,500
     
15,650
     
807,825
                     
823,475
 
                                                              
-
 
 Shares issued for related party notes payable
                   
400,000
     
400
     
19,600
                     
20,000
 
                                                              
-
 
 Cancelled shares
                    (6,000,000 )     (6,000 )    
6,000
                     
-
 
                                                              
-
 
 Net loss for period ending June 30, 2007
                                            (1,504,615 )             (1,504,615 )
                                                              
-
 
 Unrealized loss on investments
                                                   
324,000
     
324,000
 
                                                                  
 Balance, June 30, 2007 (unaudited)
   
4,085,600
     
4,086
     
66,066,209
     
66,066
     
36,595,323
      (38,133,676 )     (111,600 )     (1,579,801 )
                                                                  
 
5

RHINO OUTDOOR INTERNATIONAL, INC          
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, 2007
               
From
 
               
inception of
 
                  
development
 
                  
stage
 
                  
January 1, 2005
 
      
Six Months Ended   
   
to
 
      
June 30
   
June 30
   
June 30
 
 
 
2007
   
2006
   
2007
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
 Net loss 
  $ (1,504,615 )   $ (1,630,544 )     (18,899,130 )
 Unearned revenue
                   
-
 
 Provision for doubtful accounts
                   
-
 
 Stock issued for accrued wages
           
450,000
     
510,000
 
 Stock issued for services
           
1,207,630
     
7,436,392
 
 Reserve for issuance of preferred stock
                   
400,000
 
 Stock issued for accrued management fees
           
600,000
     
600,000
 
 Forgiveness of debt
                    (2,500 )
 Bad debt expense
                   
20,000
 
 Loss on abandonment of assets
                   
14,171
 
 Amortization of deferred revenues
    (234,375 )             (562,500 )
 Common stock issued for marketing ans selling expenses
   
823,475
             
8,699,468
 
 Loss on sale of investment
   
328,377
             
417,544
 
 Amortization and depreciation
   
18,373
     
851
     
36,657
 
 Adjustments to reconcile net (loss) to net cash
                   
-
 
  provided (used) by operating activities:
                   
-
 
 Decrease (increase) in inventories
   
10,000
             
69,720
 
 Decrease (increase)  in note receivable
    (4,500 )             (4,500 )
 Decrease (increase) in accounts receivable
           
7,500
     
-
 
 Decrease (increase) in prepaids
                   
-
 
 Decrease (increase) in deposits
    (88,302 )             (88,302 )
 Decrease (increase) in other current assets
                       
 Increase (decrease) in interest payable
                   
-
 
 Increase (decrease) in accounts payable-checks in excess
                   
-
 
 Increase (decrease) in accounts payable
    (18,869 )    
116,143
     
298,345
 
 Increase (decrease) in accrued payroll
                   
-
 
 Increase (decrease) in accrued liabilities
   
305,938
      (784,459 )    
238,351
 
 Increase (decrease) in deferred revenue and customer deposits
   
59,339
     
2,000
     
310,127
 
 Increase (decrease) in inventory
                   
-
 
  Net cash used by operating activities
    (305,159 )     (30,879 )     (506,157 )
                            
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
 Increase in loan receivable
           
15,000
      (7,500 )
 Cash acquired in acquistion
           
18,578
     
18,578
 
 Purchase of plant, property, and equipment
    (2,500 )                
 Cash from sale of investments
   
9,123
             
32,456
 
  Net cash used by investing activities
   
6,623
     
33,578
     
43,534
 
                            
CASH FLOWS FROM FINANCING ACTIVITIES:
                       
 Advances from related parties
    (96,200 )    
15,500
     
76,583
 
 Proceeds from issuance of convertible debt
   
164,980
             
164,980
 
 Decrease in lines of credit
    (6,901 )             (6,955 )
 Decrease in bank indebtedness
    (12,870 )             (10,172 )
 Decrease in vehicle loans
    (6,384 )             (13,373 )
 Increase in bank overdrafts
    (1,535 )    
379
      (1,524 )
 Proceeds from notes payable
   
-
             
-
 
 Payment of notes payable
                   
-
 
 Proceeds from sale of common stock
   
264,687
             
264,687
 
  Net cash provided by financing activities
   
305,777
     
15,879
     
474,226
 
                            
 Change in cash 
   
7,241
     
18,578
     
11,603
 
                            
Cash, beginning of period
   
1,862
     
-
         
                            
Cash, end of period 
  $
9,103
    $
18,578
     
11,603
 
        
-
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
 Interest paid  
  $
-
    $
2,212
     
21,298
 
 Income taxes paid 
  $
-
    $
-
     
-
 
                            
NON-CASH INVESTING AND FINANCING ACTIVITIES:
                       
 Common stock issued for debt
  $
20,000
    $
-
     
77,500
 
 Common stock issued for accrued wages
           
450,000
     
45,000
 
 Preferred shares issued for subsidiary
  $
-
    $
1,650,000
     
16,500
 
 Shares issued for related party payable
           
1,233,231
     
1,233,231
 
 
6

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
 
 
NOTE 1 - BASIS OF PRESENTATION AND DESCRIPTION OF THE BUSINESS

Rhino Outdoor International, Inc. (fka Cyberads, Inc), was incorporated on April 12, 2000 in the State of Florida. On August 10, 2005, the Company changed domicile from Florida to Nevada.

The Company provides management and sales support to businesses focused in the Extreme Sports/Lifestyle market segment. The Company earns commissions/fees on securing distribution for the businesses and products it represents. Additionally, the Company will earn commissions when product deliveries are made through the distribution channel. The Company and its management has devoted their attention toward restructuring debt and seeking profitable products in 2005 and 2006. The Company’s year-end is December 31.

As of January 1, 2005, the Company abandoned its previous business plan of marketing cellular phone services and began a new development stage where it intends to provide management and sales support to businesses focused in the Extreme Sports/Lifestyle market segment.

On June 21, 2006, the Company entered into a share exchange agreement and plan of reorganization with Rhino Off Road Industries, Inc. Under this agreement and plan of reorganization, the Company acquired 100 percent of the outstanding common stock of Rhino in exchange for 1,650,000 shares of the Company’s Series C convertible preferred stock. Furthermore, the Company issued another 600,000 shares of Series C convertible preferred stock for the retention of the subsidiary’s officers and agreed to issue 400,000 shares of Series C convertible preferred stock for loan guarantees. As of June 30, 2007, the 400,000 shares had not yet been issued. Rhino Off Road Industries, Inc. was incorporated on September 25, 2003 in the State of Nevada. The principal business of the Company is the design, manufacturing and sale of off road vehicles and related parts. The Company’s operations are located in Henderson, Nevada. See Note 3.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Rhino Outdoor International, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

Accounting Method
The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Accounts Receivable
The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.

The Company’s policy is to accrue interest on trade receivables 90 days after invoice date. A receivable is considered past due if payments have not been received by the Company for 90 days. At that time, the Company will discontinue accruing interest and turn the account over for collection. If a payment is made after it has been turned over for collection, the Company will apply the payment to the outstanding principal first and resume accruing interest. Accounts are written off as uncollectible if no payments are received 180 days after they have been turned over for collection.

7

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
 
 
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents.

Compensated Absences
Employees of the Company are entitled to paid vacation, and sick days, depending on job classification, length of service, and other factors. Management has deemed that any liability arising from this policy would be immaterial and has accrued no compensated absences liabilities for the period ended June 30, 2007

Cost of Sales
Cost of sales consists of the purchase price of materials and supplies, shipping, labor and benefits, and other overhead costs associated with production.

Development Stage Activities
Since the inception of the current development stage (which began January 1, 2005), the Company has realized minimal revenue from operations. It expects to be engaged to provide management and sales support to businesses focused in the Extreme Sports/Lifestyle market segment.

Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the financial statements, the Company has limited cash and revenues, has incurred a net loss for the six months ended June 30, 2007, and has an accumulated deficit since the inception of the Company. These factors indicate that the Company may be unable to continue in existence. The Company is currently putting business plans in place which will, if successful, mitigate these factors which raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue existence.
 
Management has established plans designed to increase the sales of the Company’s products and services and decrease debt. These plans will include providing management and sales support to businesses focused in the Extreme/Lifestyle market segment where the Company anticipates earning commissions/fees on securing distribution from business and products it represents.

An estimated $2 million is believed necessary to continue operations and increase development through the next fiscal year. The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for international expansion through affiliations and other business relationships. Management intends to seek new capital from new equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.

Goodwill
Goodwill represents the excess of the purchase price and related direct costs over the fair value of net assets acquired as of the date of the acquisition of Rhino Off Road Industries, Inc. The Company reviews periodically its goodwill to assess recoverability based on projected undiscounted cash flows from operations. Impairments are recognized in operating results when a permanent diminution in value occurs. At June 30, 2007, no impairment was deemed necessary for the Company’s goodwill.

8

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007


Inventories
The Company records inventories at the lower of cost or market on a first-in, first-out basis.

 
 
June 30,
   
June 30,
 
 
 
2007
   
2006
 
Raw materials and work-in-process
  $
47,954
    $
152,107
 
Finished goods
   
65,537
    $
81,103
 
Total Inventory
  $
113,491
    $
233,210
 

Investments
The Company’s investments in securities are classified as either trading, held to maturity, or available-for-sale in accordance with Statement of Financial Accounting Standards No. 115. Available-for-sale securities consist of equity securities not classified as trading securities or as securities to be held to maturity. Unrealized holding gains and losses, net of tax, on available-for-sale securities are reported as a net amount in a separate component of other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the average cost method and are included in earnings. The Company determines the gain or loss on investment securities held as available-for-sale, based upon the accumulated cost basis of specific investment accounts. On the Company’s balance sheet, short-term available for sale securities are classified as “investments.”

Long-lived Assets
The Company accounts for its long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This standard establishes a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations, and requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations. Accordingly, the Company reviews the carrying amount of long-lived assets for impairment where events or changes in
circumstances indicate that the carrying amount may not be recoverable. The determination of any impairment would include a comparison of estimated future cash flows anticipated to be generated during the remaining life of the assets to the net carrying value of the assets.

Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. See Note 5.

Principles of Consolidation
The accompanying consolidated financial statements at June 30, 2007 include the accounts of Rhino Outdoor International, Inc. and its wholly owned subsidiaries: IDS Cellular, Inc. (“IDS”) and Rhino Off Road Industries, Inc. All significant transactions and balances among the companies included in the consolidated financial statements have been eliminated. The operations of IDS are currently idle.
 
Provision for Taxes
Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (hereinafter “SFAS No. 109). Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by SFAS No. 109 to allow recognition of such an asset.

9

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007


Recent Accounting Pronouncements
In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (hereinafter “SFAS No. 159”). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. Management has not determined the effect that adopting this statement would have on the Company’s financial condition or results of operations.
 
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87,88,106, and 132(R)” (hereinafter “SFAS No. 158”). This statement requires an employer to recognize the overfunded or underfunded statues of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not for profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year end statement of financial position, with limited exceptions. The adoption of this statement had no immediate material effect on the Company’s financial condition or results of operations.
 
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (hereinafter “SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. Where applicable, SFAS No. 157 simplifies and codifies related guidance within GAAP and does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier adoption is encouraged. The Company does not expect the adoption of SFAS No. 157 to have a significant effect on its financial position or results of operations.

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (hereinafter “FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have an immediate material impact on its financial reporting, and the Company is currently evaluating the impact, if any, the adoption of FIN 48 will have on its disclosure requirements.

Reclassifications
Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company’s accumulated deficit or net losses presented.

Revenue Recognition
The Company recognizes revenue for product sales when there is a mutually executed sales contract, when the products are shipped and title passes to customers, when the contract price and terms are fixed, and when collectibility is reasonably assured.

10

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007


Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

NOTE 3 - ACQUISITION OF RHINO OFF ROADS INDUSTRIES, INC.

On June 21, 2006, the Company acquired one hundred percent of the issued and outstanding shares of Rhino Off Roads Industries, Inc. for 1,650,000 convertible preferred shares Series C of Rhino Outdoor International, Inc. Per the merger agreement, the Company issued another 600,000 shares of Series C convertible preferred stock for the retention of the subsidiary’s officers. Furthermore, 400,000 shares were to be issued for loan guarantees that the subsidiary’s officers had for lines of credit and bank indebtedness. As of March 31, 2007, these shares have not been issued.

The purchase price was allocated as follows:

Cash
 
$
18,578
 
Accounts receivable
 
 
5,000
 
Investments
 
 
562,500
 
Inventories
 
 
183,210
 
Plant, property & equipment, net
 
 
126,238
 
Other assets
 
 
2,052
 
Total Assets Acquired
 
 
897,578
 
Current liabilities
 
 
(2,186,533
)
Other liabilities
 
 
(74,508
)
Total Liabilities Assumed
 
 
(2,261,041
)
Net liabilities acquired in excess of assets
 
$
(1,363,463
)

NOTE 4 - BANK OVERDRAFTS

Bank overdrafts consist of checks written in excess of funds on deposit. The underlying bank is used as an imprest account with automatic transfers from the Company’s general account as checks are presented.
 
NOTE 5 - PROPERTY AND EQUIPMENT
 
Property and equipment are stated at cost less depreciation taken. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The useful lives of property, plant and equipment for purposes of computing depreciation are five to forty years. The following is a summary of property, equipment, and accumulated depreciation:

 
 
June 30,
   
June 30,
 
 
 
2007
   
2006
 
 
 
 
       
Plant assets
  $
118,061
    $ 177,149  
Office furniture
   
9,532
      13,984  

11

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007

 
Leasehold improvements
   
1,145
      1,604  
 
   
128,738
      192,737  
Less accumulated depreciation
    (36,657 )     (66,498 )
Net, property and equipment
  $
92,081
    $ 126,239  

Depreciation and amortization expense for the period ended June 30, 2007 and 2006 was $18,373 and $851 respectively. The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

NOTE 6 - CAPITAL STOCK

Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001. These shares are convertible to common stock.  As of September 30, 2006, the Company has issued 835,660 shares of preferred Series A, 1,000,000 shares of preferred Series B, and 2,250,000 shares of preferred Series C.

On June 26, 2005, the Company issued 1,000,000 shares of its convertible preferred Series B stock in exchange for partial payment of accrued salary to an officer of the Company. The shares were recorded at $0.10 value, which was a fair price average during the period of accrual. The Company recorded a reduction in accrued salary liability as a result of this issuance. While each share of Series B preferred was originally entitled to 100 votes per share, this was increased to 255 votes per share on June 21, 2006.

On June 21, 2006, the Company issued 1,650,000 shares of its convertible preferred Series C stock in a share exchange agreement and plan of reorganization when the Company acquired 100 percent of the outstanding common stock of Rhino Off Road Industries, Inc. The Company also issued another 600,000 shares of Series C convertible preferred stock for the retention of the subsidiary’s officers. Per the merger agreement, 400,000 shares were to be issued for loan guarantees that the subsidiary’s officers had for lines of credit and bank indebtedness. As of September 30, 2006, these shares have not been issued.

Common Stock
The Company is authorized to issue 500,000,000 shares of common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

On August 30, 2006, the board of directors approved and the Company effected a one hundred-for-one reverse stock split of the Company’s common stock. All references in the financial statements to shares, share prices, per share amounts and stock plans have been adjusted retroactively for the one hundred-for-one reverse stock split.

During the year ended December 31, 2005, the Company issued 996,260 shares of its common stock in exchange for consulting services for $6,946,392. The services were measured at the fair market value of the shares received on the day the shares were issued.

12

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007


During the year ended December 31, 2005, the Company issued 5,000 shares of its common stock in exchange for debt of $60,000 and recorded a gain of forgiveness of debt of $2,500 for this exchange. The services were measured at the fair market value of the shares received on the day the shares were issued.

During the twelve months ended December 31, 2006, the Company issued 245,000 and 205,000 shares of its common stock for $490,000 and $410,000 in exchange for management and consulting services and accrued wages, respectively. The services were measured at the fair market value of the shares received on the day the shares were issued. Also, during the year ended December 31, 2006, the Company issued 43,865,191 shares of common stock in exchange for marketing and selling expenses for $7,875,993. Also, during the year ended December 31, 2006, the Company issued 5,200,000 shares of common stock for related party debt of $1,300,000.

During the six months ended June 30, 2007, the Company issued 15,649,500 shares of its common stock in exchange for marketing and selling expenses of $823,475, and 5,268,000 shares in exchange for cash of $264,687 and 400,000 shares in payment of $20,000 in notes payable.  Additionally, the Company cancelled 6,000,000 shares that were previously issued for services.

NOTE 7 - LEASE COMMITMENTS

Lease Payments
The Company has operating lease commitments for its premises. The monthly lease commitment is approximately $6,000. For years ended December 31, 2005, and 2004, the Company had paid approximately $72,000 for rent of facilities costs. The lease expired in April 2006. No replacement lease agreement has been signed and the Company continues to rent the facilities on a month-to-month basis.

NOTE 8 - LINES OF CREDIT AND LOANS PAYABLE

Corporate debt consisted of the following at June 30, 2007:
 
 
 
2007
   
2006
 
The Company has a $100,000 operating line of credit with Nevada First Bank that bears interest at a rate of 8.5% per annum, and was completely drawn down at September 30, 2006. This line of credit has no security directly associated with it. The Company has a second operating line of $199,896 with Nevada First Bank that bears interest at 8.5% per annum, and was completely drawn down at September 30, 2006. This line of credit is 100% secured with a CD owned by related parties.
  $
292,995
    $
-299,950
 
The Company has a 5-year term loan with Nevada First Bank which had an initial value of $125,000. With 3 years left on the term, it bears interest at an annual rate of 7.5%, and is secured by all physical assets of the business. This loan is secured by a personal guarantee by related parties.
   
51,042
     
76,323
 
The Company has two vehicles 5-year loans with lending companies and pays approximately $1,250 in payments at an average interest rate of approximately 2.5% on these vehicles. The loans mature in 2009.
   
29,917
     
43,290
 
Note payable was due in installments of $5,000 on January 15, 2004 and February 15, 2004 with final payment due March 15, 2004, plus interest at 10% per annum; secured by all of the Company's accounts receivable, inventories, and computer hardware and software and is personally guaranteed by two former officers of the Company. In default.
   
109,000
     
109,000
 

13

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007

Note payable to cellular phone service provider; due in installments of $92,596 payable on January 2, 2005 and August 2, 2005, plus interest at Libor index. In default.
   
185,192
     
185,192
 
 
               
Total Lines of Credit and Loans Payable
  $
668,146
    $
713,755
 

NOTE 9 - COMMITMENTS AND CONTINGENCIES

On June 9, 2006, the Company signed an agreement with Hebei Sida Industry Group Col, Ltd (“Sida”), pursuant to which Sida will become an authorized exclusive distributor of the Company’s products in China. Sida has agreed to purchase 1,000 units over a three year period. Under the agreement, Sida will manufacture these units in China and pay the Company a license fee of 10% over its purchase costs for distribution rights.

The Company is non-compliant with respect to certain federal and state payroll related taxes. Included in accrued payroll and payroll related liabilities at June 30, 2007 is approximately $601,482 of unpaid payroll taxes.

In April 2004, the Company agreed to indemnify a former officer of the Company for any loss he sustained in a settlement reached with a cellular phone service provider against IDS and him personally. Under the indemnification agreement, the Company was obligated to pay an aggregate of $72,261 with the balance due October 1, 2004. These amounts were never paid. The indemnification had no effect on the accompanying financial statements as the amount owed to the cellular phone service provider was previously recorded as accounts payable in the records of IDS.

The Company is currently in negotiations with an individual who has threatened a lawsuit against the Company, a former officer and a cellular phone service provider. The Company has offered to issue the individual 250,000 shares of common stock to settle any claims he may have against the Company. This individual has verbally accepted the settlement offer. The offer had no effect on the accompanying consolidated financial statements as consulting services totaling $27,500 owed this individual were previously recorded as accounts payable in the records of Rhino Outdoor International, Inc. The Company has reserved 250,000 shares of common stock to be issued under this settlement offer.

A claim against the Company of approximately $500,000 has been threatened by the Creditors Committee of World Com. The Company does not believe that it owes the amount and intends to vigorously defend the claim. The claim has not been pursued and the Company is not subject to any legal action pursuing this claim. Any claims asserted may be challenged by claims of the Company concerning funds owed to Rhino Outdoor International, Inc. for its prior trade relationship with World Com.

NOTE 10 - RELATED PARTY TRANSACTIONS

Accrued payroll and accrued taxes represents amounts owed to management for services provided. At June  30, 2007 and 2006 the Company had accrued payroll of $598,277 and $211,333, respectively

14

RHINO OUTDOOR INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007


Related party payables represent amounts due to management and shareholders, who have loaned money to the Company to pay expenses on behalf of the Company. At June 30, 2007 and 2006, short-term related party payables were $358,614 and $1,687,925, respectively. These loans are unsecured, non-interest bearing, and payable on demand.

NOTE 11 - INVESTMENTS

The Company’s securities investments are classified as trading securities and are recorded at fair value as of the balance sheet date, with the change in fair value during the period included in accumulated comprehensive income.

In May 2006, the Company acquired shares of common stock in Luvoo, Inc, a public company, for sponsorship and visual representation on Rhino vehicles in competition for a consecutive twelve months beginning on June 1, 2006. The deferred revenue received from this sponsorship is being amortized at a rate of $46,875 per month as other income.

The Company carries this investment at fair market value. See Note 2.

NOTE 12 - SUBSEQUENT EVENT

The Company has signed a letter of intent to acquire Great Vans West, a privately held Canadian company that manufacturers recreational class “B” motor homes.  At this time the acquisition of Great West Vans is not contemplated to be completed as the required debt structure and floorplan line required to operate the business have not been successfully negotiated.  The Company has a deposit with Great West Vans attorney’s escrow account, and if the company is not successful in completing this acquisition the company may lose all or part of the deposit depending upon final negotiations.

On August 21, 2007 the company announced it intended to complete a “share exchange agreement” with W.E.Rock an event planning and off-road championship series company.  Management estimates it will consummate the transaction on or near September 1, 2007.
 


15

 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Management's discussion and analysis contains various forward-looking statements within the meaning of the Securities and Exchange Act of 1934. These statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward looking terminology such as "may", "expect", "anticipate", "estimates", or "continue" or use of negative or other variations of comparable terminology. We caution that these statements are further qualified by important factors that could cause actual results to differ materially from those contained in our forward looking statements, that these forward looking statements are necessarily speculative, and there are certain risks and uncertainties that could cause actual events or results to differ materially from those referred to in our forward looking statements.
 
Management's discussion and analysis should be read in conjunction with the financial statements and the notes thereto.
 
OVERVIEW
 
Rhino Outdoor International, Inc. (ROI) did not record revenues during 2005.  We discontinued the third party affiliate sales of Cellular phones and services during 2004, and discontinued all cellular sales in 2005 due to the financial losses inherent with the commission structure paid to third party affiliates.  The affiliate commissions were earned on "leads" provided, rather than on sales made, therefore the cancellations and returns on cellular phones were not recouped from the third party affiliate and the losses became ROI expense. During 2006 and 2005, we focused on developing a new business plan in the extreme sports sector and marketing of its lifestyle.  We engaged with three primary products during 2005, XBoard, Rhino, and Planet X TV.
 
In 2006, we focused 100% of our efforts on Rhino Off Road Industries, and it’s product the RTV.  On June 21, 2006 we acquired by share exchange agreement and plan of reorganization all the outstanding shares of capital stock of Rhino in exchange for shares of capital stock of ROI, formerly known as CyberAds.  On August 30, 2006 the company was renamed Rhino Outdoor International, Inc, to reflect a more accurate brand name for our business model.  During 2006, we implemented sales and marketing strategies for the Rhino Off Road RTV, and invested in further development of new models which are designed to increase sales to consumers, and potentially to government agencies for the Search and Rescue requirements.  During the first quarter of 2007 we continued to focus on developing the Rhino RTV product line, and began marketing to consumers through trade advertising and direct sales through our web site.
 
During the 2nd quarter of 2007 we continued development of the Rhino Off Road RTV and our implementation of the production facility in China.  Management spent time in China finalizing plant layout and assisting our plant facility in obtaining necessary equipment to build the RTV product line.
 
RELATED PARTIES AND RELIANCE ON CERTAIN PROVIDERS
 
We rely on the suppliers of inventory to Rhino, for production of products specific to our reselling, or direct selling rights.
 
16

RECENT EVENTS
 
As noted above we entered into relationships with Aqua Xtremes, Inc., and its products XBoard, whereby the company was provided exclusive rights to resell distribution and dealers within a defined territory.  During 2005, we developed a resell relationship with Rhino Off Road Industries whereby the company would recruit and demonstrate the Rhino product line to Distributors, Dealers, and consumers.  During 2005, we developed a relationship with Planet X TV whereby the company would be compensated for recruiting advertisers and sponsors for the Planet X TV shows.
 
During 2006, we did not focus on either Planet X or XBoard as we put all our efforts towards Rhino and the acquisition and subsequent development of the RTV and potential government Search and Rescue opportunities.  In 2006, we entered into an LOI with Great West Vans (GWV), at this time we have not concluded on the transaction and there is no guarantee that the company will raise the capital required to complete this specific transaction.
 
During the first quarter of 2007 we continued to pursue the GWV acquisition.  Further, we have developed a strategic relationship with Arizona Emergency products for the distribution to government agencies of our recently developed Emergency Response vehicle.  Additionally, we are completing the design and prototype on a new 4-seater version of the RTV to expand our product line to meet the consumer demand.
 
During the second quarter of 2007 we focused our efforts on finalizing the China production facility, and completing the design and prototype for AEP and our Rapid Response 4 seater style vehicle.
 
PATENTS AND PROPRIETARY RIGHTS
 
We do not hold any trademark, copyright or patent protection.
 
RESULTS OF OPERATIONS
 
Quarter ENDED June 30, 2007 AND  2006
We reported revenues of $218,340 and $29,750 for the quarter ending June 30, 2007 and  2006, respectively, losses of $ 265,099 and $ 539,532 during the quarters ended June 30, 2007 and 2006, respectively.  The increase in revenue from 2007 to 2006 is attributed to the acquisition of Rhino Off Road effective June 21, 2006 and our effort to develop into an Outdoor lifestyle sector company. The Increase in losses was due to the developmental stage of the company, and our investment in developing the sales and marketing plan for Rhino Off Road.  The decrease in loss is attributable to the increase in revenue during 2007 compared with 2006 2nd quarter

RESULTS OF OPERATIONS

Three months ended June 30, 2007 compared to the three months ended June 30, 2006.
 
            
Increase
 
   
2007
   
2006
   
Amount
   
Percentage
 
                                 
Revenue      $ 218,340     $ 29,750     $ 188,590      
633%
 
 
Revenue for the three months ended June 30, 2007 resulted from the sale of Rhino RTV vehicles, and parts. There were limited sales in 2006 as we were in developmental stage.
 
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Increase
 
   
2007
   
2006
   
Amount
   
%
 
                                 
G&A Expenses   $ 161,105     $ 74,257     $ 86,848      
116%