SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    Form 10-K

                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended October 31, 2001

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
          For the transition period from __________ to _______________

                         Commission file number 0-17430

                           OBSIDIAN ENTERPRISES, INC.

             (Exact name of registrant as specified in its charter)

                               Delaware 35-2154335
                  (State or other jurisdiction of (IRS Employer
               incorporation or organization) Identification No.)

                      111 Monument Circle, Suite 3680 46204
                        Indianapolis, Indiana (Zip Code)
                    (Address of principal executive offices)
                                 (317) 237-4122
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None
                                      ----


                    Securities registered pursuant to Section
                               12(g) of the Act:

                        Common Stock ($0.0001 par value)
                                (Title of Class)



<PAGE>


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 ____    NO X


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of the Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

As of February 11, 2002,  the  aggregate  market value of the  Company's  common
stock held by non-affiliates of the registrant, based on the average bid and ask
price on such date, was approximately $2,951,000.

As of February 11, 2002, the  registrant  had 36,007,855  shares of common stock
and 3,739,169 shares of Series C Preferred Stock outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE


Information  required  in Part II and  Part  III has not  been  incorporated  by
reference.

<PAGE>



PART I


ITEM 1. BUSINESS.


                       HISTORY AND DEVELOPMENT OF BUSINESS

A change in control and  reorganization  of the Registrant  occurred on June 21,
2001. On that date,  Timothy S. Durham was elected Chief  Executive  Officer and
Chairman  of the  Board  of the  Registrant  and the  Registrant  acquired  from
Obsidian  Capital  Partners,  L.P. (the  "Partnership"),  Mr. Durham and certain
other shareholders all of the shares of the following companies:  Pyramid Coach,
Inc., a Tennessee corporation  ("Pyramid");  Champion Trailer,  Inc., an Indiana
corporation  ("Champion");   and  U.S.  Rubber  Reclaiming,   Inc.,  an  Indiana
corporation ("U.S.  Rubber"). On July 31, 2001, the Registrant acquired from the
Partnership  and  Mr.  Durham   substantially   all  of  the  assets  of  United
Acquisition,  Inc., an Indiana  corporation  ("UAI"),  which the  Registrant now
operates as United Expressline,  Inc.  ("United").  All of the acquisitions were
made in  exchange  for  shares  of the  Registrant's  Series C  Preferred  Stock
("Series C Preferred  Stock") and were pursuant to an Acquisition  Agreement and
Plan of  Reorganization  by and among the Registrant,  Danzer  Industries,  Inc.
("DII"), Pyramid, Champion, UAI, U.S. Rubber, the Partnership, Timothy S. Durham
and  other  related   parties,   dated  as  of  June  21,  2001.  Prior  to  the
reorganization,  the Registrant had engaged through its wholly owned subsidiary,
DII,  in the  fabrication  of metal  parts and truck  bodies for the service and
utility markets.

In October 2001, the Registrant's  state of  incorporation  was changed from New
York to Delaware and the Registrant's  name was changed from Danzer  Corporation
to Obsidian Enterprises,  Inc. The Registrant was originally incorporated in New
York in 1987 under the name Affiliated  National,  Inc. and subsequently changed
its name to Global Environmental Corp. and then to Danzer Corporation.

As used in this report, the term "Company" refers to Obsidian Enterprises,  Inc.
together with its consolidated subsidiaries.


                           DESCRIPTION OF THE BUSINESS


OVERVIEW

The Company is a holding company  headquartered  in Indianapolis,  Indiana.  The
Company conducts business through five subsidiaries: U.S. Rubber, a butyl-rubber
reclaiming  operation;  Pyramid a provider of short and  long-term  luxury coach
leases for corporations and the entertainment industry; Champion, a manufacturer
of  customized  racecar  transporters,  specialty  exhibit  trailers  and mobile
hospitality  units;  United,  a manufacturer of steel-framed  cargo,  racing and
specialty trailers;  and DII, a manufacturer of service and utility truck bodies
and accessories.

The Company  operates  in three  industry  segments  comprised  of  butyl-rubber
processing;  trailer and related  transportation  equipment  manufacturing;  and
leasing of transportation. All sales are in the Western Hemisphere, primarily in
the United  States.  For  quantitative  segment  information  see Note 11 to the
Consolidated Financial Statements.

<PAGE>

BUTYL RUBBER PROCESSING

The Company's  butyl rubber  processing  facilities  are located in two adjacent
plants in  Vicksburg,  Mississippi.  The  Company  is the sole  manufacturer  of
reclaimed  butyl  rubber in the  domestic  tire,  tape and tube  business in the
Western  Hemisphere.  The Company  collects  various used and scrap butyl rubber
products,  primarily  inner tubes from tires,  which are then  reprocessed  into
reclaimed  butyl  rubber  sheets.  Customers  mix the product  with virgin butyl
rubber and use the product  predominately  as the inner liner of tubeless tires,
and also as inner tubes for tires and for tapes and mastics for pipelines.

Reclaimed  butyl  rubber  used in  combination  with  virgin  butyl  rubber  has
properties that facilitate some manufacturing  processes.  However,  the primary
reason  manufacturers  use  reclaimed  butyl rubber is the cost savings  offered
compared to virgin butyl rubber.

The Company  distributes its reclaimed butyl rubber products through an internal
sales force.

The Company is the sole  supplier of reclaimed  butyl rubber to most of the tire
industry in the United States and has tire manufacturer  customers in Canada and
Brazil.

There are three other enterprises engaged in reclaiming butyl rubber worldwide:

     o    The Gujarat Company in India;

     o    Han Cook in Korea; and

     o    Vrederstein N.V. in the Netherlands.

Due to the cost of transporting  reclaimed butyl rubber,  these  enterprises are
not major  competitors with the Company in the Western  Hemisphere.  The primary
competitive factor is price.

Two enterprises manufacture virgin butyl rubber for sale in the United States:

     o    Exxon Corporation; and

     o    Bayer AG.

Both these  enterprises are much larger than the Company,  well  capitalized and
have larger sales  staffs.  The prices  charged by these  enterprises  places an
upper limit on the prices that may be set for reclaimed butyl rubber.

The Company  obtains its supply of scrap  inner  tubes from  approximately  1000
scrap  merchants  worldwide.  The Company's  ability to produce  reclaimed butyl
rubber is  potentially  restrained  by the limited  supply of scrap butyl rubber
products. Since the introduction of tubeless tires for automobiles in the 1970s,
the number of scrap inner tubes from  sources in the United  States has declined
substantially.  In the United States,  inner tubes are now primarily  limited to
the  agricultural  and large truck tire market.  In 2001,  the Company  began to
experiment with  reclaiming  scrap butyl rubber pads from the  manufacturers  of
other  butyl  rubber  products.  This  scrap  is  created  as a  result  of  the
manufacturing  process for molded  butyl  rubber  products  and is  available at
approximately  60% of the cost of scrap inner tubes.  The Company's work to date
suggests  that pad  scrap  may be a partial  substitute  for inner  tubes as raw
material for the Company's reclaimed butyl rubber product.

Although  the  Company  has  had  a  long-term  relationship  with  its  primary
customers,  it does not have long-term contracts with them. Two of its reclaimed
butyl rubber  customers  account for a substantial  portion of the sales of this
segment. Uniroyal-Goodrich and Kelley Springfield accounted for the sales of 38%
and 22% of the  sales of this  segment  in 2001.  The  loss of  either  of these
customers  would  materially  and  adversely  affect the Company.  The Company's
reclaimed butyl rubber products are generally  ordered by customers  monthly and
shipped  promptly  after the order.  Accounts are generally paid on 30 to 60 day
terms.
<PAGE>


TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING

The Company  manufactures  service  truck bodies at its facility in  Hagerstown,
Maryland  where the Company  produces  truck  bodies for sale under the Morrison
trademark as well as bodies built to order for other  original  equipment  truck
manufacturers.  The finished bodies are shipped to the customer for installation
on truck body  chassis.  The Company  markets  truck bodies  through an internal
sales force.  It sells its private label products  directly to its private label
customers and markets its proprietary  "Morrison"  products through a network of
approximately  300  dealers  who,  in  turn,  sell  to  municipalities,  utility
companies,  cable companies,  phone companies and  contractors.  Most truck body
customers are in the East and Southeast  United  States.  Slightly more than one
half of the  Company's  truck  body  revenue  is  accounted  for by sales to one
installer.  Although the Company's  relationship with this manufacturer has been
long term it does not have a supply  contract  and is not the sole  supplier  of
truck bodies to that enterprise. The loss of the Company's relationship with the
truck  manufacturer  could have a material adverse effect on the Company.  There
are a  significant  number of companies  engaged in the  manufacture  of service
truck bodies in the United States.  While many of these companies are relatively
small and do not  possess  the  Company's  technical  capacity,  a number of its
competitors are much larger and possess equal or greater technical and financial
resources.  Four  such  competitors  are:  Knapheide  Manufacturing  Co.,  Omaha
Standard,  Inc.,  Reading Body Works, Inc., and Stahl, a Scott Fetzer Co., which
is a wholly owned  subsidiary of Berkshire  Hathaway,  Inc. The Company competes
with others for truck body sales through price and service, with price being the
most  important  factor,  and  offers  truck  bodies  made  to the  individually
specified requirements of its customers.

The Company manufactures  specialty racing, cargo and ATV trailers at a facility
owned by the Company in Bristol,  Indiana and at another  facility  owned by the
Company in White Pigeon,  Michigan. The business is somewhat seasonal with fewer
orders  during the months  from  November  through  January.  The  trailers  are
marketed under two names "United Expressline" and "Southwest Expressline." While
the Company  markets some  trailers  under these brands at prices up to $75,000,
the average price for these trailers is approximately  $3,900. The Company sells
the "United Expressline" and "Southwest Expressline" trailers through two dealer
networks  comprised of an aggregate of  approximately  300 dealers in the United
States and Canada,  most of whom are located in the Midwest United  States.  The
Company's sales activities are conducted through an internal sales force.  While
the  Company  has  formal  agreements  with a few of the  dealers,  most  of the
dealership  arrangements  are  informal and are  nonexclusive.  The trailers are
built to order  to  dealer  specifications.  The  terms of sale for the  "United
Expressline" and "Southwest Expressline" trailers are FOB the plant with payment
generally due upon the dealer taking delivery of the trailer. A few dealers have
30 or 60 day terms.  There are a significant  number of companies engaged in the
manufacture  of specialty  racing,  cargo and ATV carriers in the United States.
While  many of these  companies  are  relatively  small and do not  possess  the
Company's technical capability,  a number of its competitors are much larger and
possess  equal  or  greater  technical  and  financial  resources.   Three  such
competitors are: Haulmark Industries, Pace American, U.S. Cargo and Wells Cargo.
The Company  competes  with others for specialty  racing,  cargo and ATV trailer
sales through price, quality and availability, with price an important factor.

The Company  manufactures  custom,  high-end racecar  transporters and specialty
trailers  at a 58,500  square  foot  manufacturing  facility  in three  adjacent
buildings leased by the Company in Lewisville,  Texas, 15 miles north of Dallas.
At that  facility  it  builds  a  variety  of  aluminum  trailers,  from 15 foot
bumper-pull units to full-size 53 foot semi models. The end uses include product
transportation,  corporate display,  hospitality units, and competitive  racecar
transports.   Among   the   Company's   customers   for   these   trailers   are
Daimler-Chrysler, Mobil, Skoal Tobacco, Mopar, US Filter, Tenneco, Amato Racing,
Mike Gunderson, Skuza Motorsports, and Vincent Motorsports. The Company competes
with others for sales of these  high-end,  custom trailers on quality and price.
Its largest competitor in this respect is Featherlite Trailers.

The  Company   purchases   its  raw   materials  for  the  trailer  and  related
transportation  equipment  segment from  numerous  suppliers and has not had any
difficulty in obtaining components or raw materials.

The Company  generally  warrants its product to be free from defects in material
and  workmanship  and  performance  under normal use and service for a period of
twelve months after shipment. The obligation of the Company is generally limited
to the repair or replacement of the defective product.

At October 31,  2001,  the  backlog of the  trailer  and related  transportation
segment was  approximately  $4,100,000  composed of  approximately  $200,000 for
truck  bodies,  $1,900,000  for  specialty  racing,  cargo and ATV  trailers and
$2,000,000  for high end  customer  trailers.  The October  31, 2001  backlog is
expected to be filled within the 2002 fiscal year.
<PAGE>


COACH LEASING

The Company  leases  high-end  luxury  entertainment  coaches  from its facility
located in Joelton,  Tennessee.  The leases are for both  short-term  (weekly or
monthly) and long-term periods.  At October 31, 2001, the Company had 34 coaches
in its fleet under management.  In addition,  the Company subleases coaches from
other coach owners on a short-term  basis, from time to time. All of the coaches
under  management  at October  31,  2001,  were owned by DW  Leasing,  a company
controlled by Messrs.  Durham and Whitesell.  Twenty-seven of these coaches were
transferred to the Company on November 1, 2001, and the remainder continue to be
owned by DW Leasing and managed by the Company.  The Company  leases the coaches
through an  internal  sales  force.  The  coaches  are leased  primarily  to the
country,  rock-n-roll, pop and traveling Broadway show entertainment industries.
The coaches are also leased to various corporations. The leases are generally on
a net  basis,  with the  customer  responsible  for fuel and  drivers  and other
personnel. During the year ended October 31, 2001, the Company leased coaches to
a number of touring  groups in  connection  with  their  tours  including  Ozzie
Osborn,  Brad Paisley and the Broadway  Show  "Stomp." The  Company's  corporate
customers include the Golf Channel. There are several other companies that lease
luxury coaches.  Some of the larger competitors  include  Entertainer Coaches of
America,  Florida  Coach,  Senators  Coach and  Hemphill  Brothers.  The Company
believes that amenities are an important factor in leasing coaches to its target
market and equips its coaches with a full  complement of amenities.  The Company
competes with other luxury coach  providers  based on a combination  of quality,
amenities, availability and price.


GOVERNMENT REGULATION

The Company is subject to regulation by federal,  state, and local agencies that
have  jurisdiction  over areas such as  environmental  and fire  hazard  control
issues and  regulate the work place to insure safe  working  conditions  for the
Company's  employees.  The trailers and truck bodies manufactured by the Company
must meet standards set by state and federal transportation  authorities and the
coaches leased by the Company must comply with those standards and  regulations.
These  regulatory  bodies could take actions that would have a material  adverse
affect upon the  Company's  ability to do business.  The business of the Company
does not subject it to any special regulatory authority.


EMPLOYEES

As of October 31, 2001, the Company had 469  employees.  The Company has a labor
contract through January 2003 with United  Brotherhood of Carpenters and Joiners
of  America  for the  approximately  60  production  workers  at its truck  body
manufacturing  facility in  Hagerstown,  Maryland.  None of the employees at the
other  facilities of the Company is  represented  by a labor union.  The Company
believes its employee relations are satisfactory.


PATENTS AND PROPRIETARY TECHNOLOGY

The Company  does not rely on any  patents,  registered  trademarks,  or special
licenses  to  give  it  a  competitive  advantage.   The  "Morrison,"  "Danzer,"
"Pyramid,"  "Champion," "United  Expressline" and "Southwest  Expressline" brand
names have brand recognition in the relevant market.


RESEARCH AND DEVELOPMENT

The Company did not incur,  during any of its last three fiscal years,  and does
not contemplate incurring, any material research and development expenses.
<PAGE>


                           FORWARD-LOOKING STATEMENTS

In addition to historical information,  this Annual Report on Form 10-K contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ  materially.  Factors that might cause or contribute to
such differences include, but are not limited to, those discussed in the section
entitled "Item 7.  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations."  Readers should carefully review the risks described
in this and other  documents  that the Company  files from time to time with the
Securities and Exchange Commission, including the quarterly reports on Form 10-Q
to be filed by the  Company in 2002.  Readers are  cautioned  not to place undue
reliance on the forward-looking statements, which speak only to the date of this
Annual  Report on Form 10-K.  The Company  undertakes  no obligation to publicly
release any revisions to the  forward-looking  statements  or reflect  events or
circumstances after the date of this document.


ITEM 2. PROPERTIES

The following describes the Company's properties:

<TABLE>
<S>                             <C>                         <C>                              <C>
Identification                  Location                     Ownership/Description            Segment
------------------------------- ---------------------------- -------------------------------- ------------------------
------------------------------- ---------------------------- -------------------------------- ------------------------
Headquarters                    111 Monument Circle, Suite   2,800 square feet leased         N/A
                                3680, Indianapolis, IN       commercial office space
                                46204
Butyl Rubber Processing         Vicksburg, Mississippi       Two adjacent plants              Butyl Rubber
Plants                                                       aggregating 87,000 square        Processing
                                                             feet, each owned by the
                                                             Company and encumbered by a
                                                             mortgage to Bank One, Indiana
                                                             NA
Truck Body Plant                Hagerstown, Maryland         75,000 square foot plant owned   Trailer and related
                                                             by the Company and encumbered    transportation
                                                             by a mortgage to Bank of         equipment
                                                             America Commercial Finance       manufacturing
United Expressline Plant        Bristol, Indiana             Several buildings aggregating    Trailer and related
                                                             49,000 square feet owned by      transportation
                                                             the Company and encumbered by    equipment
                                                             a mortgage to First Indiana      manufacturing
                                                             Bank NA
Southwest                                                    Expressline Plant
                                                             White Pigeon,
                                                             Michigan 47,000
                                                             square foot plant
                                                             owned Trailer and
                                                             related by the
                                                             Company and
                                                             encumbered
                                                             transportation by a
                                                             mortgage to First
                                                             Indiana equipment
                                                             manufacturing Bank
                                                             NA
Champion Facility               Lewisville, Texas            58,000 square feet located in    Trailer and related
                                                             three adjacent buildings         transportation
                                                             leased by the Company            equipment manufacturing
Pyramid Coach Office            Joelton, Tennessee           12,000 square feet of office     Coach Leasing
                                                             space and other facilities
                                                             leased by the Company
</TABLE>

The Company believes that its property,  plant and equipment are well maintained
and adequate for its  requirements.  The Company also  believes  that all of its
assets are adequately covered by insurance.
<PAGE>


ITEM 3. LEGAL PROCEEDINGS

None


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)  The Company's  Annual Meeting of  Stockholders  was held on October 5,
          2001.

     (b)  The  following  individuals  were  elected to the  Company's  Board of
          Directors to hold office until the next annual meeting of stockholders
          or until their successors have been duly elected and qualified:
<TABLE>

<S>                                <C>               <C>                   <C>               <C>
                                                       Against                                  Broker
Nominee                              For               or Withhold           Abstain            Non-Votes
                                     ---               -----------           -------            ---------
Timothy S. Durham                    111,727,239        0                    610                0
Terry G. Whitesell                   111,727,239        0                    610                0
Jeffrey W. Osler                     111,727,239        0                    610                0
Goodhue W. Smith, III                111,727,239        0                    610                0
John A. Schmit                       111,727,239        0                    610                0
D. Scott McKain                      111,727,239        0                    610                0
Daniel S. Laikin                     111,727,239        0                    610                0
</TABLE>

(c)  In  addition to the  election  of  Directors  described  in (b) above,  the
     following matters were voted upon:

<TABLE>
<S>                               <C>                <C>                   <C>               <C>
                                                                                                Broker
                                     For                Against              Abstain            Non-Votes
1.   Change of Company's State of    108,668,362        2,069                824                0
Incorporation from New York to
Delaware
2.   Change of Company's Name to     111,596,269        130,219              1,361              0
"Obsidian Enterprises, Inc."
3.   Authorization of 2001           111,600,270        64,543               63,036             0
Long-Term Incentive Plan
</TABLE>
<PAGE>

PART II


ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
         MATTERS

The  Company's  common  stock  is  currently  traded  on  the   Over-the-Counter
Electronic  Bulletin  Board and on October 17, 2001, the symbol was changed from
"DNZR" to "OBSD." The following table sets forth the high and low bid quotations
for the common stock for the fiscal quarters indicated.

Fiscal 2001              High                                 Low
                         ----                                 ---

First Quarter            $0.30                                $0.09

Second Quarter           $0.20                                $0.063

Third Quarter            $0.30                                $0.14

Fourth Quarter           $0.41                                $0.09

Fiscal 2000              High                                 Low
                         ----                                 ---

First Quarter            $0.25                                $0.031

Second Quarter           $1.25                                $0.09

Third Quarter            $0.125                               $0.09

Fourth Quarter           $0.45                                $0.047

The above quotations  reflect  inter-dealer  prices,  and may not include retail
mark-up,  mark down or  commissions  and may not  necessarily  represent  actual
transactions.  At October  31,  2001,  there were  approximately  900 holders of
record of the Company's common stock. Most of the shares of the common stock are
held in street  name for an unknown  number of  beneficial  owners.  To date the
Company has not paid a cash dividend on its common stock. The payment and amount
of any future cash  dividends  would be restricted by the Company's  lenders and
will  necessarily  depend  upon  conditions  such  as  the  Company's  earnings,
financial condition, working capital requirements and other factors.


ITEM 6. SELECTED FINANCIAL DATA.

The  following  table  sets  forth  certain  selected   consolidated   financial
information  concerning  the  Company.  This  information  is not covered by the
independent  auditor's  report.  For further  information,  see the accompanying
Consolidated Financial Statements of Obsidian Enterprises, Inc. (formerly Danzer
Corporation)  and  subsidiaries  for the ten-month period ended October 31, 2001
and the years ended December 31, 2000, 1999, 1998, and 1997, and the information
set  forth  in  Item 7,  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations,"  and in Item 8, "Financial  Statements and
Supplementary Data" below.

The following information is a summary of the consolidated  financial statements
of the Company  included  elsewhere and should be read in conjunction  with such
consolidated financial statements.  The information for the years ended December
31, 2000, 1999, 1998, and 1997 are for that of U.S. Rubber  Reclaiming only, the
accounting  acquirer in the reverse  merger  further  described in the financial
statements referenced above.




<PAGE>



OPERATING DATA:

                  (Amounts in thousands, except per share data)

<TABLE>
                                                       Ten Months
                                                          Ended
                                                        October 31,               Year Ended December 31,
                                                                    --------------------------------------------------
<S>                                                       <C>          <C>          <C>          <C>         <C>
                                                          2001         2000         1999         1998        1997
                                                      ----------------------------------------------------------------

Net sales                                               $  28,055     $  12,583   $  11,439    $  12,575    $  13,728
Income (loss) from operations                              (2,149)          184         413          107          819
Net income (loss)                                          (4,360)           48         216           74          525
Net income (loss)
  per common share, basic and diluted                        (.07)        --            .01        --             .01

</TABLE>

BALANCE SHEET DATA:

<TABLE>

                                                       October 31,                    December 31,
                                                                    --------------------------------------------------
<S>                                                       <C>          <C>          <C>          <C>         <C>
                                                          2001         2000         1999         1998        1997
                                                      ----------------------------------------------------------------

Working capital (deficit)                                  $(3,484)   $     864   $   1,896    $   2,864    $   2,261
Total assets                                                 48,850       9,633      11,633       11,914        8,745
Long-term debt, including current portion                    36,779       3,846       5,914        6,365        3,085
Stockholders' equity                                          1,296       4,939       4,890        4,674        4,600
</TABLE>

No dividends have been declared or paid in any period presented.
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.


                                  INTRODUCTION

The  transactions  in June and July 2001  (see  "Item 1.  Business--History  and
Development of Business") were treated for accounting purposes as an acquisition
by U. S. Rubber. For this reason, the fiscal 2000 and 1999 financial information
represents  only the financial  results of U. S. Rubber and does not include the
rest of the  operations  which  are now part of the  Company.  For this  reason,
comparisons to prior periods are of limited utility.

The results of  operations  for 2001  include the  operations  of U. S.  Rubber,
Champion  and Pyramid and a related  entity (D. W.  Leasing)  for the ten months
ended October 31, 2001,  the operations of DII for the period from June 21, 2001
through October 31, 2001 and the operations of United from July 31, 2001 through
October  31,  2001.  See  "Principles  of   Consolidation"  in  Note  2  to  the
Consolidated Financial Statements.


                 RESULTS OF OPERATIONS - 2001 COMPARED WITH 2000

PERCENTAGE OF SALES

The following table details the Company's  results of operations as a percentage
of sales:

<TABLE>
<S>                                                     <C>                     <C>
                                                        Ten Months Ended          Year Ended
                                                           October 31,           December 31,
                                                              2001                   2000
                                                     ------------------------ --------------------

Net sales                                                       100.0%                   100.0%
Cost of sales, other than depreciation                           73.3                     86.1
Cost of sales, depreciation                                       7.8                      4.4
Selling, general and administrative expenses                     18.3                      8.0
Loss on asset impairment                                          8.2                     --
Interest expense                                                  9.1                      3.5
Interest income                                                  --                       (2.8)
Other expense                                                      .1                     --
</TABLE>

SEGMENT SALES

The following table shows net sales by segment:

<TABLE>
<S>                                             <C>                     <C>
                                                  Ten Months Ended
                                                    October 31,          Year Ended December 31,
                                                        2001                      2000
                                              ------------------------- --------------------------

Trailer and related transportation equipment     $        14,016           $            --
manufacturing
Butyl rubber reclaiming                                    9,874                    12,583
Coach leasing                                              4,165                        --
                                              ------------------------- --------------------------

Total                                            $        28,055           $        12,583
                                              ========================= ==========================
</TABLE>
<PAGE>

The  Company's  revenue was less than expected for each of its segments in 2001.
This is primarily due to  interruptions in production in reclaimed butyl rubber,
softer than  expected  sales of  reclaimed  butyl  rubber,  transport  specialty
trailers and truck bodies and the overall  slowing of economic  activity  during
the third quarter  ended July 31, 2001 and the fourth  quarter ended October 31,
2001. The Company's revenue in 2001 from its "United Expressline" and "Southwest
Expressline"  trailer  manufacturing  operations  and  from  its  coach  leasing
operations were generally in line with management's budgets.


TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING

The gross profit and gross profit  percentage  for the ten months ended  October
31, 2001,  for the trailer and related  transportation  equipment  manufacturing
segment were  $1,740,320 and 12.4%.  The Company had no sales in this segment in
2000.

The  depressed  conditions in the  telecommunications  industry were the primary
factor that led to lower than expected  truck body sales during 2001. A majority
of the Company's truck bodies are used in the telecommunications industry. Sales
were  further  affected by the  recession  and the  consequent  reduction in the
overall level of capital spending.  The Company reduced costs in 2001, primarily
by reducing  the number of personnel  employed (a 35%  reduction in August 2001)
and by changing vendors for blank materials (an annualized reduction in costs of
$56,000),  but the reduction in costs was not sufficient to offset the effect of
the reduced revenue.  The Company  anticipates that overall economic  conditions
and the  economic  state of the  telecommunications  industry  will  continue to
adversely impact sales of truck bodies into 2002.

The Company's  transport  specialty  trailer revenues were  substantially  below
expectations in 2001. When this operation was acquired,  management  anticipated
that it would continue to generate repair revenue at historic  levels.  This did
not occur.  Management  believes this was because the relationships  with repair
customers  were  personal to the former owner and, for that reason,  the Company
was unable to maintain those relationships.  In addition, the Company was unable
to maintain trailer sales at anticipated levels, in part, because of the overall
reduction in the level of capital expenditures throughout the economy.  Finally,
the Company was unable to efficiently complete the trailers that were in process
at the time of  acquisition.  As a result of operating  losses,  the Company has
made additional capital  contributions to the operating subsidiary during fiscal
2001 of approximately  $1,222,000 and the operating subsidiary was in default of
certain loan covenants.  The Company is in discussions to divest this operation.
Given these  facts,  the Company  concluded  that the  goodwill in the amount of
$2,304,682,  in connection with this operation, had been impaired and recorded a
charge  against  income  to  reflect  that  impairment.   (See  "Loss  on  Asset
Impairment.")

The Company's  results of operations in its "United  Expressline" and "Southwest
Expressline"  trailer  manufacturing  operations were in line with  management's
expectations for 2001.

<PAGE>

BUTYL RUBBER RECLAIMING

Net sales for the periods reported in this segment are as follows:

                                                                Twelve Months
                                Ten Months Ended                   Ended
                                  October 31,                   December 31,
                    ---------------------------------------
                    2001               2000                         2000
                    --------------------------------------- -------------------

Rubber net sales    $     9,875,813    $    10,499,610      $    12,583,017
                    ======================================= ===================

Net sales in this segment for the ten months ended  October 31, 2001 as compared
to the comparable  ten-month period ended October 31, 2000 decreased 5.9% in the
amount of  $623,797.  Net sales in this  segment  for the  twelve  months  ended
December 31, 2000 as compared to an annualized  sales for all of 2001  decreased
approximately 5.8%.

Because of the widespread  tire recalls at  Bridgestone/Firestone  and Goodyear,
demand for the Company's reclaimed butyl products increased significantly during
June, July and August 2001 over prior similar periods.  However, the Company was
not able to take  advantage  of this demand  since the  Company had  scheduled a
complete  renovation  of its 12"  extruder (a key  element of its  manufacturing
process)  that  began in June 2001.  During  2001,  the  Company  expended  over
$850,000 in this and other major  renovations and the 12" extruder was not fully
operational  until late October 2001 after the  increased  demand had  subsided.
After Company's  customers built up large  inventories in anticipation of demand
under the recalls, the number of tires submitted by consumers to be replaced was
lower than anticipated and, as a result, tire manufacturers  accumulated a large
inventory of tires.  Tire  manufacturers  reduced  production in response to the
inventory  problem and this caused a  substantial  decrease in  reclaimed  butyl
demand  starting in September  2001.  The Company  anticipates  that more normal
inventory levels at its tire  manufacturer  customers will result in a return to
historic  levels of demand for reclaimed butyl rubber by tire  manufacturers  in
calendar 2002.

The decline in the price of crude oil in  September  and  October  2001 caused a
decline in new oil  exploration.  As a result,  the demand for  pipeline  mastic
wraps  produced  with  reclaim  butyl  rubber  supplied by the Company also fell
dramatically  beginning  in  October  2001.  As the price of crude oil begins to
climb  again,  management  believes  the demand  for those  uses will  return to
historic levels in calendar 2002.

Cost of goods sold in this segment were as follows:

<TABLE>
                                                              Ten Months Ended              Twelve Months Ended
                                                                 October 31,                   December 31,
                                                   ----------------------------------------
<S>                                                        <C>                <C>                  <C>
                                                           2001               2000                 2000
                                                   ---------------------------------------- --------------------

Rubber cost of goods sold                            $     8,883,969     $     8,845,338      $    11,389,820
Less nonrecurring settlement termination cost                      --                 --             (407,000)
                                                   ---------------------------------------- --------------------

Adjusted rubber cost of goods sold                   $     8,883,969     $     8,845,338      $    10,982,820
                                                   ======================================== ====================

% of sales                                                     89.9%               84.2%                87.3%
                                                   ======================================== ====================
</TABLE>

Manufacturing  costs  increased  in 2001 from the prior  year for the  ten-month
period ended October 31, 2001 due to the 12" extruder renovation,  the Company's
inefficiencies  in mixing poor raw material  with quality raw material and butyl
raw material buying competition.  With the 12" extruder renovation  completed in
September  2001 and the  increased  use of butyl  rubber pad  scrap,  management
anticipates  that the cost of goods sold percentage  should decline in 2002 from
that experienced in 2001.
<PAGE>

Gross profit and gross profit  percentage  for the ten months ended  October 31,
2001 and the twelve months ended December 31, 2000 were as follows:

<TABLE>
                                                           Ten Months Ended              Twelve Months Ended
                                                              October 31,                    December 31,
                                                                               ----------------------------------------
<S>                                                              <C>                  <C>                 <C>
                                                                 2001                 2000                1999
                                                          -------------------- ----------------------------------------

Rubber gross profit                                         $       991,845      $     1,193,197    $     1,355,435
Add back nonrecurring settlement termination cost                        --              407,000                 --
                                                          -------------------- ----------------------------------------

Adjusted Rubber gross profit                                $       991,845      $     1,600,197    $     1,355,435
                                                          ==================== ========================================

Rubber gross percentage                                              10.0%                12.7%              11.8%
                                                          ==================== ========================================
</TABLE>




This reduction in gross profit percentage was due to lower sales and higher cost
of sales,  associated with the extruder  renovation project and the lack of, and
higher cost of, raw materials.

The Company obtains its raw material  inventory through an extensive  collection
system  consisting of small rubber  collectors  and large scrap tire  recyclers.
During  2001  the  Company  has  experienced  competition  for its raw  material
inventory from Korean buyers and other overseas buyers.  This resulted in higher
raw material costs in 2001 and, to a lesser extent, limited sales because of the
limited supply of raw materials.

Management believes that the use of butyl rubber pad scrap will help control the
cost of raw  materials  in 2002 and that the  Company  has the  ability to raise
prices in 2002.


COACH LEASING

The  revenue  from the  Company's  coach  leasing  operations  in 2001  exceeded
management's expectations because of increased utilization of the coaches and an
increase in the size of the fleet that the Company manages.  Management believes
that the increased utilization reflects the emphasis of its marketing efforts on
rock and roll, pop, touring Broadway show and corporate customers. The financial
statements for this segment in 2001 include income and expenses of D.W. Leasing,
LLC ("DW  Leasing").  DW Leasing is controlled by Messrs.  Durham and Whitesell,
the  Chairman and  President  of the Company.  At the time of the closing of the
acquisition  in June 2001,  the  Company  and DW Leasing  conducted  cooperative
operations through a management  agreement,  cross-guarantees of debt and shared
management.  On  November  1,  2001,  a  transfer  of a  substantial  part of DW
Leasing's assets and liabilities was made to Obsidian  Leasing Company,  Inc., a
Mississippi corporation ("Obsidian Leasing"), wholly owned by the Company.

For the ten months ended October 31, 2001,  the coach leasing  segment had gross
profit and gross profit  percentage of $2,547,065 and 61.1%.  The Company had no
sales in this segment in 2000.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses are higher for the ten months ended
October 31, 2001, versus the twelve-month period ended December 31, 2000, due to
the operations added in 2001 as discussed previously.

Selling, general and administrative expenses for the ten-month period are higher
than would be expected on an on-going basis because of the administrative  costs
that were necessary to start a process of creating better subsidiary  reporting,
the use of outside  professionals for services to assist in the post-acquisition
activities,  the cost to obtain  prior  year  audits to meet  regulatory  filing
requirements,  and  the  cost  of  providing  services  to  management  normally
performed by Company personnel.

<PAGE>

INTEREST EXPENSE

The  Company's  interest  expense  is a high  percentage  when  calculated  as a
percentage of net sales since all acquisitions were highly  leveraged.  Interest
cost by business  segment and subsidiary  company for the reported periods is as
follows:

<TABLE>
                                                  Ten Months Ended                    Twelve Months Ended
                                                  October 31, 2001                      December 31, 2000
                                         ------------------------------------ -------------------------------------
                                                                   % of                                    % of
                                                                Subsidiary                              Subsidiary
<S>                                        <C>                  <C>                   <C>              <C>
                                              Expense              Sales                 Expense          Sales
                                         ------------------------------------ -------------------------------------

Trailer and related transportation
equipment manufacturing:
  DII                                      $        34,090            2.4%      $            --
  United                                           299,460            3.2%                   --
  Champion                                         287,887            8.6%                   --

Butyl rubber reclaiming:
  U.S. Rubber                                      657,589            6.7%              441,698           3.5%

Coach leasing:
  Pyramid                                        1,266,292           27.4%                   --

Corporate                                           19,564           --                      --
                                         ------------------------------------ -------------------------------------

Total Company                              $     2,564,882            9.3%      $       441,698           3.5%
                                         ==================================== =====================================
</TABLE>


LOSS ON ASSET IMPAIRMENT

During 2001, the Company evaluated the  recoverability of Champion's  long-lived
assets,  including  goodwill,  as  required  by  generally  accepted  accounting
principles.  Champion has experienced significant operating losses and cash flow
deficiencies.  Champion  determined the estimated future undiscounted cash flows
were below the carrying value of certain long-lived  assets.  Champion wrote off
the  goodwill  remaining  on its balance  sheet for these  assets and recorded a
charge of $2,304,682 in other income and expense as loss on asset impairment.


INCOME TAX PROVISION

The income tax  provision  for the  twelve-month  period ended  October 31, 2000
decreased by $422,000 to a benefit for the  ten-month  period ended  October 31,
2001.  The income tax benefit is created  primarily  through  the net  operating
losses of Obsidian Enterprises, Inc. and Danzer.
<PAGE>


                 RESULTS OF OPERATIONS - 2000 COMPARED WITH 1999

The only operations for the Company  reflected in 2000 and 1999 are those of its
butyl rubber reclaiming segment.

Net sales for the periods reported in this segment are as follows:

                                            Twelve Months Ended
                                   ---------------------------------------
                                    December 31, 2000  December 31, 1999
                                   ---------------------------------------

Rubber net sales                     $    12,583,017    $    11,438,542
                                   =======================================

Net sales in this  segment  for the twelve  months  ended  December  31, 2000 as
compared to December 31, 1999  increased 10% in the amount of  $1,144,475.  This
increase  was  based  on  the  Company's   increased  sales  for  2000  to  tire
manufacturers and to manufacturers of pipeline mastic wraps.

Cost of  goods  sold  for the  years  ended  December  31,  2000 and 1999 are as
follows:

<TABLE>
                                                    Twelve Months Ended
                                   -------------------------------------------------------
<S>                                 <C>                         <C>
                                       December 31, 2000          December 31, 1999
                                   -------------------------------------------------------

Rubber cost of
sales                                        $11,389,820                  $10,083,107
Less nonrecurring settlement
termination cost                                (407,000)                  ---
                                   -------------------------------------------------------
                                   -------------------------------------------------------
Adjusted rubber cost of goods                $10,982,820                  $10,083,107
                                             ===========                  ===========
sold
% of Sales                                         87.3%                       88.2%
                                   =======================================================
</TABLE>

Cost of goods sold decreased from 1999, if nonrecurring  settlement  termination
cost is eliminated for comparative  purposes.  The Company was more efficient in
mixing  lower  grade  raw  material  with  quality  raw  material  and  improved
productivity  with  certain  key  pieces of  equipment  from  1999 to 2000.  The
settlement  termination  cost was paid to a broker who facilitated  customer and
vendor  relationships.  All the relationships  obtained through that broker have
been preserved after termination of the broker's contract.

Gross profit and gross profit  percentage  for the twelve months ended  December
31, 2000 as  compared  to  December  31,  1999,  decreased  $162,238  and 12.0%,
respectively. After adjustment for the nonrecurring settlement termination cost,
gross profit and gross profit percentage would have increased $244,762 and 18.1%
for the twelve months ended December 31, 2000 as compared to December 31, 1999.

Selling,  general and  administrative  expenses are higher for the twelve months
ended  December 31, 2000 versus the twelve month period ended  December 31, 1999
due to higher cost of labor. Increase is also due to general increase in selling
expenses due to higher  sales,  and  increases in selected  expenses  related to
sales,  insurance and the costs associated with selling the business to Obsidian
Capital Partners, LP.

Interest  income  is down for the  twelve  months  ended  December  31,  2000 as
compared to December 31, 1999 by $68,326.  The  interest  income is being earned
due to loans made to the previous owner,  recorded as notes  receivable  related
party.  The previous owner paid off all notes due U.S.  Rubber prior to December
29, 2000, the date Obsidian Capital Partners, LP purchased U.S. Rubber. Interest
income  from  these  notes  receivable  was  lower  for the 2000 year due to the
previous owner paying down a substantial balance owed during the fall of 2000.

Interest  expense  decreased  $55,325  for the year ended  December  31, 2000 as
compared to the year ended December 31, 1999.  Interest  expense is lower due to
U.S.  Rubber  reducing the long-term  debt by paying down the debt from proceeds
received from the previous owner.

Income  before income taxes  decreased for the twelve months ended  December 31,
2000 as compared to December 31, 1999 by $242,000. The decrease, if adjusted for
the  nonrecurring  settlement  termination  cost in the amount of $407,000 would
have been an increase of $165,000.

Income tax  provision  for the  twelve-month  period  ended  December  31,  2000
decreased by $74,000. The decrease is attributable to lower income before taxes.
The tax  provision  is based on the  estimated  effective  tax rate for the full
fiscal year.
<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

Each  of  the  subsidiaries  of  the  Company  have  separate  revolving  credit
agreements and term loan  borrowings  through which the subsidiary  finances its
operations  together with cash  generated  from  operations.  The high principal
balances of some of these loans reflect the fact that Obsidian Capital Partners,
LP, from whom four of the five subsidiaries were purchased,  entered into highly
leveraged acquisitions of Champion, U.S. Rubber, Pyramid, and United.

This  high  level of debt  creates  liquidity  issues  for the  Company  and the
stringent financial covenants that are common for this type of debt increase the
probability that the Company's  subsidiaries  will be in technical default under
the loans.  These risks are mitigated,  in part, for the Company's United and U.
S. Rubber subsidiaries by the right described below under "Guarantees of OCP."

The Company was unable to obtain  audited  financial  statements for the Company
and each of its subsidiaries  within 90 days of the end of its fiscal year. This
created a  technical  default  under  most of the loans to the  Company  and its
subsidiaries.  These technical defaults have been waived by each of the lenders.
In  addition  to  these  technical  defaults,   the  Company  and  most  of  its
subsidiaries  have  violated  certain  requirements  and covenants in their debt
agreements  relating  to  maintenance  of certain  minimum  ratios and levels of
earnings to funded debt and fixed charge  coverage rate.  Management has brought
these  violations to the  attention of its lenders and,  except for the Champion
debt and one DW Leasing note agreement, the lenders have waived these violations
as described below under "Financial Covenant Waivers."

The Company's working capital position (current assets over current liabilities)
was negative at October 31, 2001 by $3,484,000 in part because nearly 25% of the
Company's debt is classified as a current liability.

The  Company is  addressing  these  liquidity  and working  capital  issues in a
variety of ways.  Management  anticipates  that these  steps  will  improve  the
Company's working capital position, strengthen its equity position and place the
Company in a position to successfully  address its liquidity issues. These steps
include:

o    The  transactions  described below under "U. S. Rubber  Transaction"  which
     would  increase the Company's  equity by $1,412,000 and improve its working
     capital position by approximately $570,000.

o    The transactions described below under "Partners Equity Transactions" which
     would convert more than $2,170,000 of long-term liabilities to equity.

o    The divestiture of Champion  described  below under "Champion  Transaction"
     which would improve the Company's working capital position by approximately
     $1,700,000.

o    The  transactions  described  below under  "Refinancing  Activities"  which
     management  anticipates  will  reduce  the  Company's  interest  costs  and
     decrease the proportion of debt which is treated as a current liability.

There can be no assurance that any or all of these transactions will occur.

<PAGE>

FINANCIAL COVENANT WAIVERS

The  Company  has  reached  agreements  with  certain  of its  lenders  to waive
financial covenant defaults under the following loans:

o    Management  has  completed  discussions  with  Bank One in  respect  of the
     violations  by U.S.  Rubber of the  negative  covenants of (i) fixed charge
     coverage  ratio  and (ii)  funded  debt to  EBITDA  ratio.  Management  has
     received  a waiver  of these  violations  and an  amendment  of the  Credit
     Agreement which extends it through November 1, 2002 when the entire debt is
     due.

o    Pyramid is a guarantor of DW  Leasing's  debt to Regions  Bank,  Nashville,
     Tennessee. DW Leasing and Pyramid have been in violation of the Funded Debt
     to EBITDA ratio in the Regions Bank Credit  Facility since the inception of
     the loan. This is due to the fact that DW Leasing acquired eight additional
     new luxury coaches, which coaches are highly leveraged.  At the time of the
     Acquisition,  Regions Bank granted a waiver of this violation. To date, the
     covenant has not been  rewritten.  Regions Bank has waived the violation as
     of  October  31,  2001.  However,  since  the  Company  continues  to be in
     violation of this covenant, $639,000 of long-term debt due Regions Bank has
     been reclassified as a current liability.

o    United was in violation of two negative loan  covenants  with First Indiana
     Bank.  United had  borrowed  approximately  $200,000  more than was allowed
     under the borrowing base at October 31, 2001 which was cured on January 31,
     2001 and waived by the bank.  In  addition,  United  made  advances  to the
     Company that were not  pre-approved  by First Indiana  Bank.  This covenant
     violation has also been cured and the default waived  through  December 31,
     2001. United is in compliance with these negative  covenants after the date
     of the waivers.

o    The Company was in  violation  of three  negative  covenants  and failed to
     submit  audited  financial  statements  within  90  days of  year-end  with
     Renaissance  US Growth & Income Trust PLC and FBSUS  Special  Opportunities
     Trust PLC,  the holders of  debentures  that  completed  the  financing  of
     United.  The  Company  has  received  a waiver  of all of these  violations
     through November 1, 2002.

o    Various  subsidiary  companies were in violation of requirements to provide
     year-end  financial  statements to their  respective  lenders within ninety
     days of the close of the year-end.  Management has received  waivers on all
     of these violations.

o    U.S.  Rubber was in violation of a covenant with  SerVaas,  Inc. at October
     31, 2001.  SerVaas,  Inc. agreed to waive through November 1, 2002, all its
     rights to  accelerate  the due date of amounts  outstanding  under the debt
     Agreement and the Subordinated Secured Promissory Note as a default created
     by U.S.  Rubber's failure to make certain payments.  In addition,  SerVaas,
     Inc.  also  agreed  to defer  payment  of all  amounts  due  under the debt
     Agreement through November 1, 2001.

o    Pyramid was in technical  default of a loan covenant with Old National Bank
     of Evansville,  Indiana.  Pyramid was required to provide various financial
     information  on a quarterly  and annual  basis.  Through  October 31, 2001,
     Pyramid had not provided all requested financial  information,  on a timely
     basis.  Old National Bank agreed to waive its right to  accelerate  the due
     date of payments under its loan through November 1, 2002.

Champion  remains  in  default  of both the  senior  and the  subordinated  debt
agreements,  which  have  been  classified  as a  current  liability  due to the
default, and is operating under a forbearance agreement through March 15, 2002.
<PAGE>


FUNDS AVAILABILITY

On a consolidated  basis, as of October 31, 2001, the Company had  approximately
$529,000 of cash and cash equivalents.  U.S. Rubber has available  approximately
$60,000 from its  revolving  line of credit with Bank One,  Indiana,  N.A.,  and
Danzer Industries has available  approximately  $925,000 from its revolving line
of credit with Bank of America Commercial Finance  Corporation  ("BOACFC"),  the
proceeds of which are available  for the  operations  of that  subsidiary.  U.S.
Rubber  may  increase  the  availability  under its  existing  revolving  credit
facilities in order to meet any of its expanded inventory requirements.

United,  Danzer,  U.S.  Rubber and  Pyramid  have  generated  net cash flow from
operations. The Company has funded Champion through inter-company advances which
were converted to capital, and related party finished goods financing through DW
Leasing through December 31, 2001, and through DC Investments, LLC controlled by
the chairman of the Company since January of 2002.


REFINANCING ACTIVITIES

In August  15,  2001,  Danzer  Industries  negotiated  and  closed a new  Credit
Agreement with Bank of America Commercial Finance Corporation ("BOACFC") whereby
BOACFC agreed to lend Danzer Industries $1,000,000 in a mortgage loan secured by
a lien on Danzer Industries' facility and a $1,000,000 Revolving Credit Facility
which will provide Danzer  Industries  with increased  liquidity for an expected
increase  in  inventories.  This new credit  facility  replaces  the Wells Fargo
credit facility for the period reported.

Management is refinancing some of the currently outstanding debt:

o    Negotiations  have been ongoing with a new lender to refinance  the primary
     lender of U.S.  Rubber at more  favorable  terms  than the  current  terms.
     Management  anticipates  the  refinancing  will be  concluded  by the third
     fiscal quarter.

o    The  Company  expects  in the  ordinary  course  of  business  to obtain an
     extension or annual renewal of the term of the First Indiana Bank revolving
     line of credit.

o    The Company is  undertaking  to refinance the coaches  transferred  from DW
     Leasing to a new wholly owned subsidiary of the Company  (Obsidian  Leasing
     Company,  Inc.)  with DC  Investments  and its  various  existing  lenders.
     Management  anticipates  that this will be  concluded  by the third  fiscal
     quarter.


PARTNERS EQUITY TRANSACTIONS

Obsidian Capital Partners, LP, the major shareholder of the Company, is required
under the Plan of  Reorganization  to fund  through the  purchase of  additional
preferred  stock  certain  ongoing  administrative  expenses  of the  Company to
complete the Plan of  Reorganization,  complete  all required  current and prior
year audits to meet the regulatory  filing  requirements,  and ensure all annual
and  quarterly  SEC  filings are  completed  to enable the  registration  of the
preferred  stock issued to Obsidian  Capital  Partners,  LP. The amounts through
January 31, 2002 were approximately  $645,000.  Management  anticipates this and
any additional items incurred will be converted to equity by May 15, 2002.

Obsidian  Capital  Partners,  LP has indicated  that it is willing to convert to
Series C Preferred Stock of the Company  $1,222,000 of advances from Partners to
the Company.  Management  anticipates  this transaction will be concluded by May
15, 2002.

<PAGE>

GUARANTEES OF OCP

The Company has an agreement with Obsidian  Capital  Partners,  LP that gives it
the right to mandate a capital  contribution from Obsidian Capital Partners,  LP
if the lenders to U.S. Rubber or United were to declare a default.  In either of
those  events,  the  Company  has the right to  enforce  a capital  contribution
agreement with Obsidian Capital Partners, LP up to $1,620,000 on U.S. Rubber and
$1,000,000  on  United  to fund the  respective  subsidiary's  shortfall.  Those
payments,   if  any,  would  be  applied   directly  to  reduce  the  respective
subsidiary's debt obligations to the lender.


U. S. RUBBER TRANSACTION

Management has reached  agreement in principle  with SerVaas,  Inc. to terminate
the Company's obligations under the Agreement with SerVaas, Inc. for $700,000 in
cash and 30,000 shares of Series C Convertible  Preferred Stock. DC Investments,
Inc.,  an entity  controlled  by Mr.  Durham,  has agreed in  principle  to loan
$700,000 to the  Company  and to purchase  from  SerVaas,  Inc.  the  $1,750,000
principal amount Subordinated Note due SerVaas, Inc. which bears interest at 20%
per annum and to exchange that note for a $700,000 principal amount note of U.S.
Rubber  bearing  interest  at 15% per annum paid  currently  and due,  as to the
principal,  in one installment in five years.  The net effect of this will be to
reduce  U.S.  Rubber's  liabilities  by  approximately  $1,300,000.   Management
anticipates  this will be concluded in late  February,  2002. The effect of this
transaction would be to increase the Company's equity and to improve its working
capital position.


CHAMPION TRANSACTION

The Board of Directors  has agreed in  principle  to divest  Champion to a group
consisting of Champion's management and Messrs. Durham and Whitesell pursuant to
the terms of a non-binding Letter of Intent, subject to an independent review of
fair value by the independent Board members of the Company. DC Investments,  LLC
has  agreed to  contribute  $660,000  to the  Company in  exchange  for Series C
Preferred  Stock.  The Company will use those funds to purchase the loan of Bank
One to  Champion in that  amount and would  contribute  that note to Champion as
additional   capital.   In  exchange  for  the   assumption  of  the  $1,250,000
subordinated  debt of Champion and all accrued  interest and either a release of
the Company's  guarantee of that debt or an  indemnification  of the Company for
any loss to the  Company,  the  management  group would  purchase the assets and
assume substantially all liabilities of Champion.

As of October 31,  2001,  Champion is in violation  of its  financial  statement
covenant  under its Senior Credit  facility  with Bank One.  Champion is working
under a forbearance  agreement  through March 15, 2002.  After October 31, 2001,
Champion  paid  down the Bank One debt by  $570,000  as  consideration  for this
agreement.  Champion  is also  indebted  to  Markpoint  Equity  Fund IV  under a
subordinated  credit facility in the amount of $1,250,000.  Champion has been in
violation of the funded debt to EBITDA negative covenant of the Markpoint Credit
Agreement since the inception of the loan.  Management brought this violation to
Markpoint's  attention  prior to the close of the Acquisition and has obtained a
waiver of the violation each quarter. Markpoint has informed Champion it may not
grant  waiver  of this  violation  in the  future.  The  Bank  One  debt and the
Markpoint  debt  have  been  reclassified  as  current  liability  due to  these
violations.

The Company has taken actions to improve Champion's  profitability subsequent to
year end including:

o    Champion is  renegotiating  the lease on the facility where the manufacture
     of trailers is conducted,  reducing its rental space, rent expense, utility
     expense, and related property costs significantly.

o    Champion is completing  four trailers for sale to racing teams competing in
     the "NASCAR racing  circuit",  and one trailer for sale to a racing team in
     the "IRL"  circuit,  the initial  trailers sold by the Company in these new
     markets.  Champion believes new orders from this market will be forthcoming
     in the next fiscal year. In addition,  Champion backlog of trailer sales is
     higher at October 31, 2001 than at any date since the purchase of Champion.

o    Champion reduced the work force beginning February 1, 2002 by an annualized
     amount of approximately $100,000.

o    The payment of the debt due Bank One will result in an  approximate  annual
     interest cost savings of $80,000.

In spite of these  steps,  the  Board of  Directors  believes  it is in the best
interests of the Company to divest Champion.
<PAGE>


CASH FLOWS (EBITDA)

The Company's net cash provided by operations,  for the ten months ended October
31, 2001 was  $818,000.  This is  comprised  of the  non-cash  depreciation  and
amortization  of $2,296,000,  impairment  loss of  $2,305,000,  and increases in
accounts payable of $934,000 offset by the net loss of $(4,360,000) and decrease
in Champion's customer deposits of $1,104,000.

Cash flow provided from financing  activities,  for the ten months ended October
31, 2001 was  $17,196,000.  This is comprised of borrowings of long-term debt of
$11,220,000,  borrowings of short-term debt of $5,251,000, proceeds from capital
contributions and sale of stock of $2,473,000, offset by principal repayments of
long-term debt of $2,627,000.

Cash flow was used in investing  activities for the ten months ended October 31,
2001  of  $17,702,000.   This  is  comprised  of  payments  to  purchase  United
Expressline for $12,040,000, purchase of U.S. Rubber for $5,730,000, purchase of
property and  equipment of $1,185,000  offset by the proceeds  received from the
sale and leaseback of equipment at U.S. Rubber of $1,321,000.

The total increase in cash is summarized as follows:

                                                       Ten Months Ended
                                                       October 31, 2001
Net cash provided by operations                              $  818,000
Net cash used in investing activities                       (17,702,000)
Net cash provided by financing activities                    17,196,000

Increase in Cash                                             $  312,000

EBITDA is a measure of the Company's ability to generate cash flow and should be
considered  in  addition  to, but not as a  substitute  for,  other  measures of
financial   performance  reported  in  accordance  with  accounting   principles
generally accepted in the United States of America.
<PAGE>

EBITDA by  business  segment  and  reconciliation  to net  income or loss  under
accounting  principles  generally  accepted  in the United  States of America by
subsidiary for the applicable periods is as follows:

<TABLE>
                                                               Ten-month Period Ended October 31, 2001
                                                                            (in thousands)
                                              ---------------------------------------------------------------------------
                                                                                         Impairments
                                                                                        Depreciation           Net
                                                              Interest      Income                           Income
<S>                                             <C>         <C>          <C>          <C>                 <C>
                                                 EBITDA        Expense      Taxes      & Amortization        (Loss)
                                              -------------- ------------ ----------- ------------------ ----------------
Trailer and related transportation equipment manufacturing:
United (3 months' operations)                          $695         $299         $98            $   202            $  96
Danzer (4 months' operations)                           187           33          --                164             (10)
Champion (10 months' operations)                      (542)          288          --              2,546          (3,376)
                                              -------------- ------------ ----------- ------------------ ----------------
Total                                                   340          620          98              2,912          (3,290)

Consolidating                                                                  (335)                                 335

Butyl rubber reclaiming:
U.S. Rubber (10 months' operations)                   1,133          658       (135)                905            (295)
Coach leasing:
Pyramid/DW Leasing (10 months' operations)            1,576        1,266          --                785            (475)
Corporate                                             (615)           20          --                 --            (635)
                                              -------------- ------------ ----------- ------------------ ----------------
Total Company                                        $2,434  $  2,564      $(372)     $           4,602         $(4,360)
                                              ============== ============ =========== ================== ================
</TABLE>

<TABLE>
                                                                   Year Ended December 31, 2000
                                                                          (in thousands)
                                              ------------------------------------------------------------------------
                                                                                        Impairments          Net
                                                            Interest      Income       Depreciation         Income
<S>                                             <C>       <C>           <C>         <C>                   <C>
                                                EBITDA       Expense      Taxes       & Amortization        (Loss)
                                              ------------ ------------ ----------- -------------------- -------------
Trailer and related transportation
equipment manufacturing:
United                                          $      --    $     --    $    --          $      --       $      --
Danzer                                                 --          --         --                 --              --
Champion                                               --          --         --                 --              --
                                              ------------ ------------ ----------- -------------------- -------------
Total                                                  --          --         --                 --              --

Butyl rubber reclaiming:
U.S. Rubber (10 months'
operations)                                         1,094         442         50                554              48
Coach leasing:
Pyramid/DW Leasing                                     --          --         --                 --              --
Corporate                                              --          --         --                 --              --
                                              ------------ ------------ ----------- -------------------- -------------
Total Company                                   $   1,094    $    442    $    50          $     554       $      48
                                              ============ ============ =========== ==================== =============
</TABLE>
<PAGE>

                                  RISK FACTORS

There are a number of risk factors related to the future results of the Company,
including those discussed in the following paragraphs.


LIQUIDITY

The Company cannot be certain that it will have sufficient  liquidity  available
under existing lines of credit. Four of the Company's subsidiaries were acquired
during the last fiscal year in highly leveraged transactions.  Also, four of the
Company's  subsidiaries  have been in  violation  of  certain  requirements  and
covenants in their debt agreements  relating to maintenance of specified minimum
ratios and levels of  earnings  to funded debt and fixed  charge  coverage.  The
Company cannot be certain whether it will be able to meet covenant  requirements
contained  in debt  agreements.  Although  the  Company  has been able to obtain
waivers of previous  violations,  the Company  cannot be certain that it will be
able to obtain  waivers of such  covenants  if waivers are needed in the future.
One  lender,  Markpoint,  has  informed  the  Company  that it may not grant any
additional waivers of certain covenant violations.

There  is no  assurance  that  lenders  will  continue  to lend to the  Company.
Lenders' criteria for loans change and, if there is a further general tightening
of credit  standards,  the Company may not qualify for credit.  Further,  if the
Company's  financial  performance  deteriorates  from the  manner  in which  its
various  operations  have  historically  performed,  the  Company's  lenders may
declare defaults and refuse to advance funds under revolving credit lines. Under
these circumstances the Company may not be able to obtain credit on any terms.


INTEGRATION OF OPERATIONS

The Company now consists of a business combination of Obsidian Enterprises, Inc.
and various  recently  purchased  manufacturing  entities  of  Obsidian  Capital
Partners,  L.P. The management  resources to date have been spent on purchasing,
continuing  operations at  pre-acquisition  capability  after the purchase,  and
integrating  subsidiary  operations  with the Obsidian  management.  The date of
purchase of each entity by the current management is:

            Operating Entity                   Date of Purchase
            ----------------                   ----------------
            U.S. Rubber Reclaiming, Inc.       December 29, 2000
            Pyramid Coach, Inc.                December 20, 1999
            Champion Trailer, Inc.             May 2, 2000
            Danzer Industries, Inc.            June 21, 2001
            United Expressline, Inc.           July 31, 2001

The  Company  is  still in the  process  of  resolving  issues  relating  to the
integration  of the  operations  of  these  entities.  The  Company  may  not be
successful in integrating these businesses or the integration may take longer or
be more costly than currently anticipated.


MARKET RISK

The  Company is exposed to market risk  related to changes in interest  rates on
its debt.  Approximately  36% of the Company's  primary debt bears interest at a
variable rate. An interest rate increase of one percentage  point would increase
the Company's interest expense over a one-year period by approximately  $134,000
at current debt levels.


ABILITY TO ATTRACT AND RETAIN KEY MANAGERS AND EMPLOYEES

The Company's ability to retain key subsidiary  management and employees will be
a significant  factor in the Company's success.  The recent  acquisitions of the
four subsidiary  entities and the changes in the Company's  management have made
it even more important for the Company to focus on retaining former managers and
employees.  In addition,  the Company must attract a chief financial officer and
continue  to seek to  obtain  skilled  managers  and  employees  and to  provide
effective  incentives  for all of the managers and  employees of its  subsidiary
companies.
<PAGE>


COMPETITION

The Company faces strong  competitors  in its coach leasing  segment and trailer
and related transportation  equipment manufacturing segment. The Company's coach
leasing  business  competes with a number of other  companies  that lease luxury
coaches.  The Company's  success in the coach leasing  segment is dependent upon
its ability to meet demand and match the quality and  amenities  sought after by
its target  market at  competitive  prices.  The  Company's  trailer and related
transportation  equipment  manufacturing  segment  competes  with  a  number  of
companies,  including  a number who are much  larger  than the  Company and have
equal or greater technical and financial resources.


BUTYL RUBBER RECLAIMING SEGMENT

The  Company's  butyl rubber  reclaiming  segment is highly  dependent  upon the
availability of raw materials.  The Company is facing increased  competition for
raw materials from foreign manufacturers as the supply of the scrap butyl rubber
from inner tubes  continues to decline.  The success of this segment will depend
in large measure upon the Company's ability to successfully  develop alternative
sources of raw  materials.  The demand for butyl rubber by some of the Company's
customers also is closely tied to the price of crude oil, with demand falling as
the price of crude oil falls.


COACH LEASING SEGMENT

The  Company's  coach  leasing  segment  leases  luxury  coaches   primarily  to
performers in the entertainment  industry. This segment is highly dependent upon
the state of the  general  economy  and its  effect on  entertainment  spending.
Consumer spending on entertainment tends to decline during recessionary  periods
when disposable  income is low. The  availability of quality contract drivers is
another factor that affects the success of the coach leasing  segment.  Although
customers are  responsible  for engaging their own drivers,  the Company assists
customers by suggesting drivers with whom the Company has had experience.


TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING SEGMENT

A majority  of the truck  bodies  manufactured  by the  Company  are used in the
telecommunications  industry.  The success of the Company's  trailer and related
transportation   equipment  manufacturing  segment  is  dependent  upon  overall
economic  conditions  and in particular  on the state of the  telecommunications
industry.  Slightly  more  than  one  half of the  Company's  revenue  from  the
manufacture of service truck bodies,  which is part of the Company's trailer and
related transportation equipment manufacturing segment, is derived from a single
customer.  The Company's  success in this segment is dependent to a large degree
upon the  continued  financial  health of this one  customer  and the  continued
strength of the Company's  relationship with this customer.  The loss of this or
another  significant  customer  could  have a  material  adverse  effect on this
segment of the Company's business.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk  related to  interest  rate  changes on it
debt. The disclosures in Item 7 above are incorporated herein by reference.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Obsidian Enterprises, Inc.
Indianapolis, Indiana

We have  audited  the  accompanying  consolidated  balance  sheets  of  Obsidian
Enterprises, Inc. and Subsidiaries as of October 31, 2001 and December 31, 2000,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period  ended  October 31, 2001 and the years ended  December
31, 2000 and 1999.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial   position  of  Obsidian
Enterprises, Inc. and Subsidiaries as of October 31, 2001 and December 31, 2000,
and the results of their  operations  and their cash flows for the period  ended
October 31, 2001 and the years ended  December  31, 2000 and 1999 in  conformity
with accounting principles generally accepted in the United States of America.

Our audit of the consolidated financial statements of Obsidian Enterprises, Inc.
and Subsidiaries  included Schedule II, contained  herein,  for the period ended
October 31, 2001 and the years ended December 31, 2000 and 1999. In our opinion,
such schedule presents fairly the information  required to be set forth therein,
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial  statements,  the Company has suffered losses from operations in 2001,
its current  liabilities  exceed its current  assets,  and it is in violation of
certain of its loan covenants. This raises substantial doubt about the Company's
ability to continue as a going concern.  Realization of assets and  satisfaction
of  liabilities  in the  ordinary  course  of  business  is  dependent  upon the
Company's ability to generate  sufficient cash flow to meet its obligations on a
timely basis.  The Company also must comply with the terms of its debt financing
agreements  and  continue  to receive  capital  contributions  from its  owners.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

Elkhart, Indiana
February 13, 2002



                                            McGladrey & Pullen, LLP


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


<TABLE>
<S>                                                                                        <C>               <C>
                                                                                   October 31,      December 31,
                                                                                      2001             2000
                                                                                 ----------------------------------


ASSETS

Current assets:
    Cash and cash equivalents                                                      $         529   $          217
    Marketable securities                                                                     223              --
    Accounts receivable, net of allowance for doubtful accounts
      of $90 for 2001 and $0 for 2000 (Note 7)                                              3,744           1,746
    Accounts receivable, related parties (Notes 2 and 14)                                     217              --
    Notes receivable, related party, current portion (Notes 4 and 14)                          --           1,098
    Inventories, net (Notes 5 and 7)                                                        6,694             747
    Prepaid expenses and other assets                                                         602             336
    Deferred income tax assets (Note 12)                                                      673             532
                                                                                 ----------------------------------

Total current assets                                                                       12,682           4,676

Property, plant and equipment, net (Notes 6 and 7)                                         24,232           3,182

Other assets:
    Notes receivable, related party, net of current portion (Notes 4 and 14)                   --           1,770
    Intangible assets (Notes 2 and 3):
      Goodwill not subject to amortization                                                  5,829              --
      Goodwill, less accumulated amortization of $76                                        3,381              --
      Noncompete agreements, less accumulated amortization of $74                             912              --
      Trade name and customer relations, less accumulated
        amortization of $125                                                                  802              --
      Deferred debt costs, less accumulated amortization
        of $71 in 2001 and $70 in 2000                                                        433               5
      Other (Notes 3 and 8)                                                                   579              --
                                                                                 ----------------------------------

                                                                                   $      48,850   $        9,633
                                                                                 ==================================
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


<TABLE>
<S>                                                                                        <C>               <C>
                                                                                   October 31,      December 31,
                                                                                      2001             2000
                                                                                 ----------------------------------

Liabilities and Stockholders' Equity

Current liabilities:
    Current portion of long-term debt (Note 7)                                     $       9,233   $        3,135
    Accounts payable, trade                                                                 3,620             509
    Accounts payable, related parties (Note 14)                                               925              --
    Accrued expenses                                                                        1,709             168
    Customer deposits                                                                         679              --
                                                                                 ----------------------------------

Total current liabilities                                                                  16,166           3,812

Long-term debt, net of current portion (Note 7)                                            27,546             711

Deferred income tax liabilities (Note 12)                                                   1,672             171

Accounts payable, related parties (Note 14)                                                 2,170              --

Commitments and Contingencies (Note 15)

Stockholders' equity (Note 10):
    Common stock, par value $.0001 per share; 40,000,000 shares authorized in
     2001; 20,000,000 in 2000; 36,007,855 shares outstanding in 2001 and
     17,760,015 shares outstanding in 2000                                                      3               1
    Preferred stock, 5,000,000 shares authorized; Class of Series C convertible
     preferred stock, par value $.001, 4,600,000 authorized and 3,739,169 shares
     issued and outstanding in 2001, no shares issued and outstanding in
     2000, 400,000 shares of undesignated Preferred Stock authorized                            4              --
    Additional paid-in capital                                                              5,612              --
    Accumulated other comprehensive income                                                     37              --
    Retained earnings (deficit)                                                            (4,360)          4,938
                                                                                 ----------------------------------

Total stockholders' equity                                                                  1,296           4,939
                                                                                 ----------------------------------

                                                                                   $      48,850   $        9,633
                                                                                 ==================================
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands except per share and share data)

<TABLE>
                                                                   Ten Months
                                                                     Ended
                                                                    October 31,          Year Ended December 31,
                                                                                  ---------------------------------
<S>                                                                     <C>              <C>               <C>
                                                                        2001             2000              1999
                                                            -------------------------------------------------------

Net sales                                                           $  28,055          $  12,583         $  11,439

Cost of sales                                                          22,778             11,390            10,084
                                                            -------------------------------------------------------


GROSS PROFIT                                                            5,277              1,193             1,355

Selling, general and administrative expenses                          (5,121)            (1,009)             (942)
Loss on asset impairment (Notes 2 and 13)                             (2,305)                 --                --
                                                            -------------------------------------------------------

                              Income (loss) from operations           (2,149)                184               413

Other income (expense):
  Interest expense (Note 7)                                           (2,565)              (442)             (497)
  Interest income (Note 14)                                                --                356               424
  Other expense                                                          (18)                 --                --
                                                            -------------------------------------------------------

Income (loss) before income taxes                                     (4,732)                 98               340

Income tax (expense) benefit (Note 12)                                    372               (50)             (124)
                                                            -------------------------------------------------------

Net income (loss)                                                  $  (4,360)  $              48   $           216
                                                            =======================================================

Basic and diluted earnings (loss) per share                         $   (.07) $               --   $           .01
                                                            =======================================================

Weighted average common and common equivalent shares
outstanding basic and diluted:                                     63,367,140         39,419,240        39,419,240
                                                            =======================================================
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
                                                                                              Accumulated
                             Comprehensive     Common Stock      Preferred Stock   Additional    Other     Retained
                                            -------------------------------------- Paid-in   Comprehensive Earnings
<S>                        <C>            <C>         <C>      <C>      <C>       <C>        <C>         <C>       <C>
                             Income (Loss)  Shares      Amount   Shares   Amount   Capital      Income    (Deficit) Total
                             ----------------------------------------------------------------------------------------------

Balance at December 31,
 1998, adjusted for Danzer
 Corporation registered                                                           $
 common shares                     $     -- 15,870,272    $ 1         --      $--         --          $--   $4,674 $ 4,675
Issuance of stock under
 incentive plan and Parent
 note conversion                         --    141,797     --         --       --         --           --       --      --
1999 net income                          --         --     --         --       --         --           --      216     216
                             ----------------------------------------------------------------------------------------------

Balance at December 31, 1999             -- 17,588,348      1         --       --         --           --    4,890   4,891
Issuance of stock under
 incentive plan and Parent
 note conversion                         --  1,747,946     --         --       --         --           --       --      --
2000 net income                          --         --     --         --       --         --           --       48      48
                             ----------------------------------------------------------------------------------------------

Balance at December 31, 2000             -- 17,760,015      1         --       --         --           --    4,938   4,939
Conversion of debt to
 common stock                            --  1,750,000     --         --       --        355           --       --     355
To record the effect of the
 reverse merger June 21,
 2001 (Note 3)                           --         --      1  1,970,962        2      3,760        (103)  (4,938) (1,278)
Conversion of Series C
 Preferred Stock to common
 stock                                   -- 16,497,840      1  (824,892)      (1)         --           --       --      --
Issuance of 2,593,099
 shares of Series C
 Convertible Preferred
 Stock associated with the
 acquisition of United and
 capital contribution (Note
 3)                                      --         --     --  2,593,099        3      1,497           --       --   1,500
Unrealized gain on
 available-for-sale
 marketable securities                  140         --     --         --       --         --          140       --     140
2001 net loss                       (4,360)         --     --         --       --         --           --  (4,360) (4,360)
                             ----------------------------------------------------------------------------------------------

Total comprehensive loss         $  (4,220)
                             ===============

Balance at October 31, 2001
                                            36,007,855     $3 $3,739,169    $   4    $ 5,612      $    37 $(4,360) $ 1,296
                                            ===============================================================================
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
                                                                       Ten Months
                                                                         Ended
                                                                      October 31,       Year Ended December 31,
                                                                                    ---------------------------------
<S>                                                                       <C>            <C>             <C>
                                                                          2001           2000            1999
                                                                     ------------------------------------------------

Cash flow from operating activities:
  Net income (loss)                                                    $    (4,360)   $        48    $       216
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
  Depreciation and amortization                                              2,296            554            612
  (Gain) on sale of equipment                                                   (4)            --             --
  Impairment loss                                                            2,305             --             --
  Loss on sale of marketable securities                                         81             --             --
  Deferred income taxes                                                       (408)           216             --
  Changes in operating assets and liabilities net of effect of
   acquisitions:
    Accounts receivable, net                                                   643           (414)           139
    Inventories                                                                129            641            (96)
    Other assets                                                                 4           (284)           223
    Accounts payable, trade                                                    934             --            (57)
    Accrued expenses                                                           302              1              8
    Customer deposits                                                       (1,104)            --             --
                                                                     ------------------------------------------------

Net cash provided by operating activities                                      818            762          1,045
                                                                     ------------------------------------------------

Cash flows from investing activities:
  Capital expenditures                                                      (1,185)        (1,052)          (398)
  Proceeds from sale of equipment                                            1,321             --             --
  Repayment of affiliated company payable                                       --          2,208            224
  Acquisition-related closing costs                                           (148)            --             --
  Purchase of marketable equity securities                                    (213)            --             --
  Cash received in reverse merger and other acquisitions                        98             --             --
  Cash payments in connection with the purchase of
    U.S. Rubber, net of cash acquired                                       (5,730)            --             --
  Cash payments in connection with the purchase of assets
    of United, net of cash acquired                                        (12,040)            --             --
  Proceeds from sale of marketable equity securities                           195             --             --
                                                                     ------------------------------------------------

Net cash provided by (used in) investing activities                        (17,702)         1,156           (174)
                                                                     ------------------------------------------------
</TABLE>
               The accompanying notes are an integral part of the
                       consolidated financial statements.




<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>


                                                                       Ten Months
                                                                         Ended
                                                                      October 31,       Year Ended December 31,
                                                                                    ---------------------------------
<S>                                                                       <C>            <C>             <C>
                                                                          2001           2000            1999
                                                                     ------------------------------------------------

Cash flows from financing activities:
  Borrowings from related parties                                              984             --             --
  Net borrowings on lines of credit                                          5,251             --             --
  Borrowings on long-term debt                                              11,220             --             --
  Principal repayments on long-term debt                                    (2,627)        (2,186)          (458)
  Proceeds from capital contributions and
    sale of common stock                                                     2,473             --             --
  Debt issuance costs                                                         (105)            --             --
                                                                     ------------------------------------------------

Net cash provided by (used in) financing activities                         17,196         (2,186)          (458)
                                                                     ------------------------------------------------

Increase (decrease) in cash                                                    312           (268)          (413)

Cash and cash equivalents, beginning of year                                   217            485             72
                                                                     ------------------------------------------------

Cash and cash equivalents, end of year                                 $       529    $       217    $       485
                                                                     ================================================

Interest paid                                                          $     2,241    $       485    $       459
                                                                     ================================================

Interest received                                                      $        --    $       356    $       460
                                                                     ================================================

Taxes paid                                                             $        44    $         8    $        86
                                                                     ================================================

Noncash:
  Equipment purchased with debt or capital lease                       $     1,059    $        95    $        27
  Conversion of contributed amounts to equity                          $       355    $        --    $        --
  Seller note on acquisition of United Expressline                     $     1,500    $        --    $        --
  Seller note on acquisition of U.S. Rubber                            $     2,573    $        --    $        --
</TABLE>

1.   DESCRIPTION OF BUSINESS AND CHANGE OF NAME

Danzer Corporation,  formerly named Global Environmental Corp., was incorporated
on October 6, 1987.  Effective  August 1, 1988, the Company  acquired all of the
issued and  outstanding  common shares of Global  Environmental  Holdings,  Inc.
("Global  Holdings").  On October 7, 1999,  the  Company  changed  its name from
Global Environmental Corp. to Danzer Corporation.

Danzer   Corporation  was  reorganized   through  an  Acquisition  and  Plan  of
Reorganization  with U.S. Rubber  Reclaiming,  Inc. and Related  Entities ("U.S.
Rubber  Companies"),  which was  consummated  on June 21,  2001 (the  "Effective
Date").  In  addition,   Danzer   Corporation   changed  its  name  to  Obsidian
Enterprises, Inc. However, the operating company, Danzer Industries, Inc.,

               The accompanying notes are an integral part of the
                       consolidated financial statements.
<PAGE>

                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


1.   DESCRIPTION OF BUSINESS AND CHANGE OF NAME, CONTINUED

retained its name. Hereafter, the names Danzer, Danzer Corporation, and Obsidian
Enterprises, Inc. are used interchangeably.  The operating company will continue
to be  referred  to as  Danzer  Industries,  Inc.  The  Acquisition  and Plan of
Reorganization of Danzer Corporation with U.S. Rubber Companies (see Note 3, the
"Acquisition  and  Plan  of  Reorganization")  was  accounted  for as a  reverse
acquisition as the shareholders of the U.S. Rubber Companies owned a majority of
the  outstanding  stock of  Danzer  subsequent  to the  Acquisition  and Plan of
Reorganization.

For accounting purposes, U.S. Rubber Reclaiming, Inc. is deemed to have acquired
Danzer.  Accordingly,  the fiscal 2000 and 1999 financial  information presented
herein  represents only the financial  results of U.S. Rubber  Reclaiming,  Inc.


Pursuant to the Plan of Acquisition and Reorganization described further in Note
3, United Expressline, Inc. was acquired July 31, 2001.

The  resulting  entities,  considered  accounting  subsidiaries  of U.S.  Rubber
Reclaiming,  Inc. (the accounting  acquirer) and legal  subsidiaries of Obsidian
Enterprises,   Inc.   (formerly  Danzer)  after  the  Acquisition  and  Plan  of
Reorganization, are as follows:

U.S. Rubber Reclaiming,  Inc. ("U.S. Rubber", the accounting acquirer), which is
engaged in  reclaiming  scrap  butyl  rubber  into butyl  reclaim  for resale to
manufacturers of rubber products.

Obsidian  Enterprises,  Inc.  (formerly Danzer,  the legal acquirer),  a holding
company.

Danzer Industries,  Inc. ("Danzer Industries"),  which is principally engaged in
the design, manufacture and sale of truck bodies.

Pyramid  Coach,  Inc.  ("Pyramid"),  which is engaged in the leasing of coaches,
designed  and  fitted out for use for  travel by  country,  rock bands and other
business  enterprises,  primarily  on weekly to monthly  leases.  The  financial
statements of Pyramid are presented on a combined basis. The combined  financial
statements of Pyramid also include the assets,  liabilities,  equity and results
of operations  of DW Leasing,  LLC ("DW  Leasing").  DW Leasing is controlled by
individuals  which are also  controlling  shareholders of Obsidian  Enterprises,
Inc. and,  accordingly,  Pyramid.  DW Leasing also owns all coaches  operated by
Pyramid.  All  intercompany  transactions  are eliminated in combination of this
entity.

Champion  Trailer,  Inc.  ("Champion"),  which  manufactures and sells transport
trailers to be used primarily in the auto racing industry.

United  Expressline,  Inc.  ("United")  manufactures and sells general use cargo
trailers  and  specialty  trailers  used in the  racing  industry  and for other
special purposes.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The  accompanying  consolidated  financial  statements  present the  accounts of
Obsidian Enterprises,  Inc. and its wholly owned subsidiaries  described in Note
1, all of which are treated for  accounting  purposes as  purchases in a reverse
merger more fully described in Note 3. The entities are collectively referred to
herein as the "Company". All significant intercompany  transactions and balances
have been eliminated in  consolidation.  The accompanying  financial  statements
include the operations of U.S.  Rubber,  Champion,  Pyramid and a related entity
(DW Leasing) for the ten-month period ended October 31, 2001. January 1, 2001 is
the beginning of the calendar year of the accounting  acquirer U.S. Rubber. U.S.
Rubber changed its fiscal year


<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

end to adopt Danzer's  (legal  acquirer and previous  registrant)  year end. The
financial statements include the operating results of Obsidian Enterprises, Inc.
(formerly  Danzer   Corporation)  and  Danzer   Industries,   its  wholly  owned
subsidiary,  from June 21, 2001 (date of acquisition)  through October 31, 2001.
In  addition,  they  include  the  results of United from July 31, 2001 (date of
acquisition) through October 31, 2001.

BASIS OF PRESENTATION:

The  Company's  October 31, 2001  consolidated  financial  statements  have been
presented  on the  basis  that  it is a going  concern  which  contemplates  the
realization  of assets and  satisfaction  of liabilities in the normal course of
business.  The Company incurred a loss from operations in 2001 of $2,149,000 and
a net  loss  of  $4,360,000,  which  included  an  asset  impairment  charge  of
$2,305,000.  The  loss  has  weakened  the  Company's  financial  condition  and
contributed to its failure to meet certain financial  covenants  required by the
lenders. As a result of these covenant violations,  $2,570,000 of long-term debt
has  been  reclassified  as a  current  liability  as of  October  31,  2001.  A
significant  portion of the  Company's  assets is pledged as collateral on these
loans  and  foreclosure  by  the  bank  would  seriously  impair  the  Company's
existence. In addition,  these losses and the reclassification of long-term debt
have  contributed to a total deficit in working capital of $3,484,000 at October
31, 2001.

In view of these  matters,  realization  of the assets and  satisfaction  of the
liabilities in the ordinary  course of business is dependent upon its ability to
generate  sufficient cash flow to meet its obligations on a timely basis, comply
with the terms of its debt financing  agreements,  obtain refinancing of certain
obligations,  and continue to receive  capital  contributions  from its majority
shareholder.

Management,  as a part of its plan towards resolving these issues and generating
revenue and cash flow, has taken the actions subsequent to year end as described
below.  Although  management  believes these actions will improve operations and
liquidity, there can be no assurance that such actions will sufficiently improve
operations or liquidity, or occur on terms acceptable to the Company.

o    The Company,  with Board of Directors approval,  has agreed in principle to
     divest  Champion to a group  consisting of the Chairman of the Board of the
     Company,  the President and the management group of Champion.  The terms of
     the  nonbinding  Letter of Intent are subject to an  independent  review of
     fair value by the independent Board members of the Company. DC Investments,
     LLC has agreed to contribute $660,000 to the Company in exchange for Series
     C Preferred Stock. The Company will use those funds to purchase the loan of
     Bank One to  Champion  in that  amount  and would  contribute  that note to
     Champion as  additional  capital.  In exchange  for the  assumption  of the
     $1,250,000  subordinated  debt of  Champion  and all accrued  interest  and
     either  a  release  of  the   Company's   guarantee  of  that  debt  or  an
     indemnification of the Company for any loss to the Company,  the management
     group would purchase the assets and assume substantially all liabilities of
     Champion.  This  proposed  sale will result in the Company  disposing  of a
     subsidiary  that  comprised 77% of the Company's net loss for the ten-month
     period ended October 31, 2001.

o    DC Investments, controlled by the Chairman of the Board, as approved by the
     Company  Board of  Directors,  has made a loan in the amount of $570,000 to
     pay down a portion of the  Champion  debt that will be  converted to equity
     after final review by the Board.

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

o    Obsidian Capital Partners,  LP ("OCP"),  majority owner of the Company,  is
     negotiating with the Board of Directors to convert to capital $1,222,000 of
     loans made at the date of the Acquisition and Plan of Reorganization.

o    Negotiations  have been ongoing with a new lender to refinance  the primary
     lender of U.S.  Rubber at more  favorable  terms  than the  current  terms.
     Management  anticipates  the  refinancing  will be  concluded  by the third
     fiscal quarter.  Management and an affiliated entity subsequent to year end
     have negotiated with the subordinated debt holder of U.S. Rubber to pay off
     the  debt  and  reduce  debt  amounts  by  approximately  $1,300,000.  Such
     agreement is scheduled to close in early 2002.

o    The Company is  undertaking  to refinance the coaches  transferred  from DW
     Leasing to a new wholly owned subsidiary of the Company  (Obsidian  Leasing
     Company,  Inc.)  subsequent to year end with existing lenders and a related
     party (DC  Investments,  LLC)  controlled  by the  Chairman of the Company.
     Management  anticipates  that this will be  concluded  by the third  fiscal
     quarter. See Note 16.

o    OCP has  entered  into  agreements  related to the debt of U.S.  Rubber and
     United.  Specifically,  in the event of and in accordance  with the default
     provisions,  Obsidian is obligated to make capital  contributions  to these
     subsidiaries  of  $1,000,000  and  $1,600,000,  respectively.  In addition,
     Partners has committed to fund through the purchase of additional preferred
     stock the costs of all legal,  accounting and related costs to complete the
     Plan of Reorganization and the costs to meet all regulatory requirements to
     allow continued trading of Company stock by shareholders.


REVENUE RECOGNITION:

Sales are recorded  when title passes to the customer  (FOB  shipping  point) or
when services are performed in accordance with  agreements  with customers.  The
Company  accumulates  costs  of  trailers  in  work-in-process  inventory  until
completion.  The Company recognizes repair revenue when services are provided to
the customer. Shipping and handling charges billed to the customers are included
in net sales.  Shipping and handling  costs incurred by the Company are included
in cost of sales.

The  Company  also  engages in used  trailer  sales  transactions,  in which the
Company  collects a commission  for brokering  activities.  The Company does not
take title to these trailers.  Accordingly,  commission revenues are recorded as
cash is received by the Company.

For operating  leases,  income is recognized on a  straight-line  basis over the
lease term.  Recognition of income is suspended when management  determines that
collection of future income is not probable  (generally after 90 days past due).
Recognition is resumed if the receivable becomes  contractually  current and the
collection of amounts is again considered probable. Operating lease equipment is
carried at cost less  accumulated  depreciation  and is depreciated to estimated
residual value using the  straight-line  method over the lease term or projected
economic life of the asset.

In the fourth  quarter of 2000,  effective  as of January 1, 2000,  the  Company
adopted  Staff  Accounting   Bulletin  101,  Revenue  Recognition  in  Financial
Statements (SAB 101). The adoption of SAB 101 did not have a significant  impact
upon adoption at January 1, 2000, any quarterly reporting period during 2000, or
at December 31, 2000.
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


FAIR VALUE OF FINANCIAL INVESTMENTS:

The  carrying  amounts  of cash  and  cash  equivalents,  receivables,  accounts
payable,  and accrued  liabilities  approximate  fair value because of the short
maturity of these  instruments.  The carrying  amounts of long-term  receivables
approximates  fair  value as the  effective  rates  for  these  instruments  are
comparable  to market  rates at year end.  The  carrying  amount of  investments
approximates  fair market value. The carrying amount of debt at October 31, 2001
approximates  fair value, as a result of the current  interest rates paid on the
Company's borrowings being at market.


MARKETABLE SECURITIES:

The Company  classifies  its  marketable  securities as available for sale.  The
securities  consist of equity  securities,  which are stated at fair value, with
net unrealized gains or losses on the securities  recorded as accumulated  other
comprehensive income (loss) in stockholders'  equity.  Realized gains and losses
are  included in  earnings  and are derived  using the  specific  identification
method for determining the cost of the securities.


PROPERTY, PLANT AND EQUIPMENT:

Building, equipment, furniture and fixtures are recorded at historical cost with
depreciation taken using primarily the straight-line method over their estimated
useful lives.  Vehicles  under capital lease of $291,290 are stated at the lower
of fair market value or net present value of the minimum  lease  payments at the
date of lease.  Amortization  of equipment  under  capital  lease is included in
depreciation expense. Life ranges for property and equipment are as follows:

        Buildings and improvements 30 - 39 years
        Plant, machinery and equipment 5 - 7 years
        Furniture and fixtures 5 - 7 years
        Coach fleet and vehicles 5 - 15 years

CONCENTRATION OF CREDIT RISK:

The Company maintains cash balances at a bank, which at various times throughout
the year exceeded the Federal Deposit Insurance Corporation (FDIC) limit.

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally of trade receivables.  The Company's  customers
are not  concentrated  in any one specific  geographic  region.  The credit risk
associated with trade receivables  within this specific industry may be affected
by changes in  economic or other  conditions  and may,  accordingly,  impact the
Company's  overall credit risk. The Company reviews a customer's  credit history
before extending credit.  Allowances for doubtful accounts are established based
on specific  customer risk,  historical trends and other  information.  Also see
major customers described below.

Certain of the  Company's  employees  are  currently  represented  by the United
Brotherhood  of Carpenters  and Joiners of America,  Local Union No. 340,  whose
contract is in effect to February 2003. The contract  contains  provisions  that
affect compensation to be paid to employees included in the union.

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


GOODWILL, INTANGIBLE ASSETS AND DEFERRED COSTS:

Goodwill, net was $9,210 thousand at October 31, 2001. Accumulated  amortization
amounted to $76 thousand at October 31, 2001.  In accordance  with  Statement of
Financial  Accounting  Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets, goodwill associated with acquisitions consummated after June 30, 2001 in
the  amount  of  $5,829 is not being  amortized.  All  other  goodwill  is being
amortized on a  straight-line  basis over 15 years through October 31, 2001. See
Accounting Pronouncements within Note 2 for more information on SFAS No. 142.

Other  intangible  assets,  net were $1,714 thousand at October 31, 2001.  These
amounts  include trade names,  customer  relations and backlogs and other items,
which are being  amortized on a  straight-line  basis over lives  ranging from 3
months to 15 years. At October 31, 2001,  accumulated  amortization  amounted to
$199 thousand.

Deferred  debt issuance  costs are amortized  over the term of the related debt,
primarily four to five years.

Goodwill  and other  intangible  amortization  expense for the ten months  ended
October  31,  2001  was  $216  and  $231  thousand,  respectively.   Accumulated
amortization on goodwill and other  intangible  assets of Champion in the amount
of $172 thousand was written off with the impairment discussed in Note 13.


INCOME TAXES:

The Company accounts for income taxes in accordance with Statement of Accounting
Standards No. 109,  Accounting for Income Taxes, (SFAS 109), as required.  Under
SFAS 109,  deferred tax assets and  liabilities  are recorded for any  temporary
differences  between  the  financial  statement  and tax  bases  of  assets  and
liabilities,  using the enacted tax rates and laws expected to be in effect when
the taxes are actually paid or received. (See Note 12.)


USE OF ESTIMATES:

The  preparation  of the  financial  statements in  conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management  to make  estimates  and  assumptions  that affect  certain  reported
amounts and disclosures. Actual results may differ from those estimates.


CASH EQUIVALENTS:

For purposes of the statement of cash flows  presentation,  cash equivalents are
unrestricted,  highly  liquid  short-term  cash  investments  generally  with  a
maturity of three months or less.


IMPAIRMENT OF LONG-LIVED ASSETS:

The  Company   evaluates  the  carrying  value  of  long-lived  assets  whenever
significant  events or changes in  circumstances  indicate the carrying value of
these assets may be impaired.  The Company  evaluates  potential  impairment  of
long-lived  assets by comparing the carrying value of the assets to the expected
future cash flows resulting from the use of the assets. (See Note 13.)
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED


MAJOR CUSTOMERS:

The following is a list of the Company's customers that represent 10% or more of
consolidated net sales:

                               Ten Months
                               Ended
                               October 31,         Year Ended December 31,
                                           -----------------------------------
                                2001             2000              1999
                          ----------------------------------------------------

Butyl rubber sales:
  Customer (1)                  13%              34%               34%
  Customer (2)                   8%              22%               21%

EARNINGS PER SHARE:

Basic per-share amounts are computed,  generally, by dividing net income or loss
by the weighted-average  number of common shares outstanding.  Diluted per-share
amounts  are  computed  similar  to  basic  per-share  amounts  except  that the
weighted-average  shares  outstanding are increased to include additional shares
for the assumed exercise of stock options and warrants, if dilutive.

In arriving at the weighted  average  number of common  shares  outstanding  for
basic income  (loss) per share,  the Company's  Series C  Convertible  Preferred
Stock,  which has all the rights and  privileges of the Company's  common stock,
has been  reflected as equivalent  common  shares.  The weighted  average common
shares  outstanding  for the years ended  December 31, 2000 and 1999 reflect the
1,970,962  shares of Series C Convertible  Preferred  Stock issued to the former
stockholders of the companies  acquired in the reverse merger, see Note 3, as if
such shares had been converted into their equivalent  number of common shares of
39,419,240.  Furthermore, because no other common equivalents were issued to the
former  stockholders of the acquired  companies,  the basic and diluted weighted
average common shares outstanding for 2000 and 1999 are the same.

As  described  in Note 7, at October 31,  2001,  the Company has a note  payable
agreement which is convertible by the holder to common stock totaling  5,000,000
shares at a conversion rate of $0.10 per share at October 31, 2001. In addition,
and as described in Note 10, the Company has options and warrants outstanding to
purchase a total of 1,047,500 and 200,000 shares of common stock,  respectively,
at a weighted average exercise price of $0.09 and $0.25, respectively.  However,
because the Company  incurred a loss for the period ended October 31, 2001,  the
inclusion of those  potential  common shares in the  calculation of diluted loss
per share would have an antidilutive effect.


COMPREHENSIVE INCOME:

SFAS  No.  130,  Reporting  Comprehensive  Income,   establishes  standards  for
reporting and display of  comprehensive  income and its  components in financial
statements.  It requires that all items that are required to be recognized under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements. Comprehensive income consists of net earnings, the

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

net unrealized gains or losses on  available-for-sale  marketable securities and
is presented in the consolidated statement of stockholders' equity.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting and Reporting for
Derivative  Instruments.  This  statement  establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  (collectively referred to as derivatives), and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value.  This  statement  was  amended by SFAS No. 137 in June 1999.  The
adoption of these statements did not materially impact the Company.

In June 2001, the FASB issued SFAS No. 141, Business Combinations,  and SFAS No.
142,  Goodwill and Other Intangible  Assets.  SFAS No. 141 requires all business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase  method.  In addition,  companies  are required to review  goodwill and
intangible  assets  reported in  connection  with prior  acquisitions,  possibly
disaggregate and report separately  previously  identified intangible assets and
possibly  reclassify  certain  intangible  assets  into  goodwill.  SFAS No. 142
establishes  new guidelines  for  accounting  for goodwill and other  intangible
assets. In accordance with SFAS No. 142,  goodwill  associated with acquisitions
consummated  after June 30, 2001 is not amortized.  The Company  implemented the
remaining  provisions  of SFAS No.  142 on  November  1, 2001.  Since  adoption,
existing  goodwill  is no longer  amortized  but instead  will be  assessed  for
impairment at least annually.  The adoption of this pronouncement will result in
$5,829,000 of goodwill not being amortized and the elimination of  approximately
$225,000 of amortization  annually on another $3,381,000 of goodwill  previously
being amortized.

In June 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  SFAS No. 143 addresses  accounting  and reporting for  obligations
associated with the retirement of tangible  long-lived assets and the associated
asset retirement  costs.  This statement is effective for fiscal years beginning
after June 15, 2002.  The Company is currently  assessing the impact of this new
standard.

In July 2001, the FASB issued SFAS No. 144, Impairment or Disposal of Long-Lived
Assets,  which is effective for fiscal years  beginning after December 15, 2001.
The  provisions  of  this  statement  provide  a  single  accounting  model  for
impairment of long-lived  assets. The Company does not believe that the adoption
of this pronouncement will have a material effect on its financial statements.

3.   ACQUISITIONS AND PLAN OF REORGANIZATION

On June 21, 2001  ("Acquisition  Date"),  a change of control of the  Registrant
occurred through an Acquisition  Agreement and Plan of Reorganization dated June
21,  2001  (the  "Reorganization   Agreement")  by  and  among  Danzer,   Danzer
Industries,  Inc.,  a wholly owned  subsidiary  of Danzer,  and OCP,  Timothy S.
Durham (the newly elected Chairman of the Board of Danzer), and other individual
owners of Pyramid and Champion. On the Acquisition Date, Danzer acquired: all of
the  outstanding  capital  stock of Pyramid in exchange  for  810,099  shares of
Danzer Series C Convertible  Preferred  Stock ("Danzer  Preferred");  all of the
outstanding capital

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


3.   ACQUISITIONS AND PLAN OF REORGANIZATION, CONTINUED

stock  of  Champion  for  135,712  shares  of  Danzer  Preferred  and all of the
outstanding  capital  stock  of U.S.  Rubber  for  1,025,151  shares  of  Danzer
Preferred.  On July 31, 2001,  Danzer  acquired all of the  outstanding  capital
stock of United Acquisition, Inc. ("UAI"), the holding company formed to acquire
assets of United, from OCP for 2,593,099 shares of Danzer Preferred.

Pursuant to the Reorganization Agreement,  Danzer issued 4,564,061 shares of its
preferred stock to OCP, Timothy Durham,  and other individual  owners of Pyramid
and Champion  ("OCP  Partners").  The  Preferred  Shares  exchanged are Series C
Convertible  Preferred Stock,  designated $.001 par value per share, with voting
rights equal to common  shareholders  based upon the Preferred Shares conversion
rights of exchange of 20 common  shares for each 1 preferred  share  owned.  The
holders  of the Danzer  Preferred  vote as a single  class  with the  holders of
Danzer's common stock.  After the series of transactions  were completed on July
31, 2001, the OCP Partners owned 75.42% of the total voting, convertible capital
stock  (Preferred) of Danzer.  The preacquisiton  Danzer  shareholders and their
successors  own the  remaining  capital stock  representing  24.58% of the total
voting  capital  stock  (Common).  Since the U.S.  Rubber  Companies are so much
larger  than  Danzer,  and the  existing  U.S.  Rubber  shareholders  obtained a
majority interest in the stock of Danzer, they have been treated, for accounting
purposes, as the acquirer in the Reorganization  (reverse merger).  Although for
accounting  purposes,  U.S.  Rubber  has become  the  registrant,  for all other
purposes,  U.S.  Rubber,  Pyramid and Champion  legally became  subsidiaries  of
Danzer on June 21,  2001.  For purposes of this filing,  the  registrant's  name
continues to be Danzer, subsequently changed to Obsidian Enterprises,  Inc., and
the U.S.  Rubber  Companies  will  change  their  fiscal year to the fiscal year
(October 31) used by Danzer  prior to the  Reorganization.  Therefore,  the name
Obsidian Enterprises and Danzer Corporation are one and the same as used in this
filing and the financial statements attached as exhibits.

Pursuant  to  the  Acquisition   Agreement  and  Plan  of  Reorganization   (the
"Acquisition  Agreement")  discussed above,  UAI was created.  On July 31, 2001,
OCP,  through  UAI,  acquired  substantially  all of the  assets of  United,  an
Indiana-based  manufacturer  of  enclosed  cargo  and  specialty  trailers,  for
approximately  $15,358,000.  The purchase price and purchase accounting has been
allocated  to the assets and  liabilities  of United based on their fair values.
OCP  exchanged  100% of its  shares of UAI for  shares  of Series C  Convertible
Preferred Stock of Danzer ("Series C Preferred  Stock").  The  consideration was
negotiated in arm's length discussions  between the parties. As a result, UAI is
now a wholly  owned  subsidiary  of  Danzer.  Danzer  intends  to  continue  the
operations of UAI under the name of "United Expressline, Inc."

In connection with the Acquisition  Agreement described above, on June 21, 2001,
the parties completed the first closing whereby OCP and affiliates exchanged all
of the shares of  Champion,  Pyramid,  and U.S.  Rubber to Danzer for  1,970,962
shares of Series C Preferred  Stock with voting  rights,  which is a controlling
interest in Danzer.  At the second  closing on July 31, 2001,  Danzer  issued an
additional  2,593,099  shares of Series C Preferred Stock to OCP in exchange for
100% of the shares of UAI.

The Reorganization  (reverse merger) with Danzer, and subsequent  acquisition of
United, were accounted for under the purchase method of accounting. U.S. Rubber,
the largest  company  owned by OCP  Partners,  was  considered  the acquirer for
accounting purposes and recorded

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


3.   ACQUISITIONS AND PLAN OF REORGANIZATION, CONTINUED

Danzer's  assets and liabilities  based upon their estimated fair values,  under
the purchase  method of  accounting  for business  combinations.  The  operating
results of Danzer have been included in the accompanying  consolidated financial
statements  from  the  date  of  acquisition.   Under  the  purchase  method  of
accounting,  the acquired assets and assumed  liabilities  have been recorded at
their estimated fair values at the date of the acquisition.

The  acquisition  of Champion  and  Pyramid  were also  accounted  for under the
purchase method of accounting;  however, due to the related-party  relationships
of the  previous  owners to the  Company,  the assets were  recorded at net book
value similar to pooling-of-interest  accounting,  referred to as reorganization
of entities  under  common  control.  Accordingly,  no  additional  goodwill was
recognized  beyond that recorded during the original  acquisition from unrelated
third parties.

Champion and Pyramid,  originally  acquired January 1, 2001 and part of the Plan
of  Reorganization of June 21, 2001 as discussed above, were previously owned by
individuals who are also the members and managing  directors of Obsidian Capital
Company,  LLC ("OCC"),  the General  Partner of OCP.  Purchase  accounting and a
goodwill  allocation of $2.6 million were recorded on Champion when the managing
members of the OCC and others  acquired  those  entities  from  unrelated  third
parties.


ACQUISITION OF DANZER CORPORATION AND SUBSIDIARY:

The  purchase  price and  purchase  accounting  was  allocated to the assets and
liabilities  of Danzer based on their fair values.  The purchase price was based
on the value of Danzer's equity determined by a third-party appraisal company of
$3,257,539 plus acquisition costs of $963,919.

An independent  third-party  appraisal company conducted a valuation of Danzer's
stock.  The valuation  allocation to tangible  assets  included  $2,300,000  and
$1,536,000 of net liabilities assumed. The excess of the purchase price over the
fair value of the identifiable  tangible and intangible net assets of $3,456,539
was allocated to goodwill.

The  following  schedule is a  description  of  acquisition  costs of Danzer and
Danzer Industries and the purchase price allocation (in thousands):

Purchase price:
  Preferred stock                                              $       3,257
  Acquisition costs, including amounts to
   related parties (see Note 15)                                         964
                                                             ------------------

Total purchase price                                           $       4,221
                                                             ==================

Purchase price allocations:
  Tangible net assets acquired                                 $         764
  Goodwill acquired                                                    3,457
                                                             ------------------

Total allocation of purchase price                             $       4,221
                                                             ==================

ACQUISITION OF UNITED EXPRESSLINE, INC.:

An independent  third-party  appraisal company conducted a valuation of United's
intangible assets.  These intangibles  include existing brand name,  noncompete,
and the customer base.

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


3.   ACQUISITIONS AND PLAN OF REORGANIZATION, CONTINUED

The  valuation of  intangibles  included  $821,592 for brand name,  $886,058 for
noncompete, and $104,958 for the customer base. The excess of the purchase price
of $15,358,000 over the fair value of the  identifiable  tangible and intangible
net assets of $5,820,972 has been  allocated to goodwill.  The value assigned to
tangible assets totaled $7,563,000.

The following  schedule is a description of acquisition  costs of United and the
purchase price allocation (in thousands):

Purchase Price:
  Cash to seller                                              $       11,050
  Seller note                                                          1,500
  Liabilities assumed                                                  1,670
  Acquisition costs, including amounts to related
    parties (see Note 15)                                              1,138
                                                            -------------------

Total Purchase Price                                          $       15,358
                                                            ===================

Purchase Price Allocation:
  Current assets, including accounts
    receivable and inventory                                  $        5,559
  Land, property and equipment                                         2,004
  Goodwill                                                             5,821
  Intangible assets                                                    1,813
  Other assets                                                           161
                                                            -------------------

Total Purchase Price Allocation                               $       15,358
                                                            ===================

PRO FORMA INFORMATION:

The unaudited condensed  consolidated results of operations on a pro forma basis
as if the  reorganization  had  occurred  as of  the  beginning  of the  periods
projected are as follows (in thousands, except per share data):

The  unaudited  condensed  consolidated  results of  operations  shown below are
presented  on a pro forma  basis and  represent  the  results of Danzer,  Danzer
Industries,  U.S. Rubber, Champion,  Pyramid and DW Leasing on a combined basis.
In addition, United is treated as if the business combinations of these entities
occurred at the beginning of the periods presented.  The schedule below includes
all depreciation, amortization and nonrecurring charges for all entities for the
periods shown.

                                        Ten Months Ended   Year Ended December
                                          October 31,              31,
                                              2001                 2000
                                      -----------------------------------------

Net sales                                $        53,195      $        63,228

Net loss                                 $        (3,867)     $          (537)

Net loss per share - basic and diluted   $          (.03)     $          (.01)

<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


3.   ACQUISITIONS AND PLAN OF REORGANIZATION, CONTINUED

The pro forma financial information is presented for informational purposes only
and is not indicative of the operating  results that would have occurred had the
Reorganization  been consummated as of the above dates, nor are they necessarily
indicative of future operating results.

4.   NOTES RECEIVABLE

U.S.  Rubber had notes  receivable  amounting to $2,868 thousand from its former
owner and the owner's  affiliates.  These notes were repaid in conjunction  with
the Acquisition and Reorganization of Danzer and U.S. Rubber. Also see Note 14.

5.   INVENTORIES

Inventories  are stated at the  lower-of-cost  (first-in,  first-out  method) or
market and are comprised of the following components (in thousands):

                                October 31,     December 31,
                                   2001            2000
                          ------------------ -------------------

Raw materials             $        3,734     $        1,649
Work-in-process                    1,471                  -
Finished goods                     2,322                435
Valuation reserve                   (833)            (1,338)
                          ------------------ -------------------

Total                     $        6,694     $          747
                          ================== ===================

The Company provides valuation reserves for inventory considered obsolete or not
currently available for use in production. Inventory reserves at U.S. Rubber are
related to excess scrap butyl  rubber not  currently  available  for use without
further processing;  therefore,  it has minimal value.  Changes in the valuation
reserve are as follows (in thousands):

<TABLE>
<S>                                     <C>                     <C>             <C>
                                            U.S. Rubber          United              Total
                                         ------------------ ------------------ ------------------

Balance at January 1, 2000                 $       (1,818)    $           --     $       (1,818)
  Provision for losses, 2000                         (120)                --               (120)
  Write-off of inventory, 2000                        600                 --                600
                                         ------------------ ------------------ ------------------

Balance at December 31, 2000               $       (1,338)    $           --     $       (1,338)
  Provision for losses, 2001                          (60)               (13)               (73)
  Write-off of inventory, 2001                        578                 --                578
                                         ------------------ ------------------ ------------------

Balance at October 31, 2001                $         (820)    $          (13)    $         (833)
                                         ================== ================== ==================
</TABLE>



<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


6.   PROPERTY, PLANT AND EQUIPMENT

Property,  plant and equipment is summarized by major  classification as follows
(in thousands):

                                       October 31,     December 31,
                                          2001            2000
                                   ------------------ -------------------

Land and improvements                   $     488        $        37
Buildings and improvements                  3,701              1,076
Plant machinery and equipment               8,756              7,297
Furniture and fixtures                        376                 48
Coach fleet and vehicles                   13,407                 --
                                    ------------------ -------------------

Total                                      26,728              8,459
Less accumulated depreciation               2,496              5,276
                                    ------------------ -------------------

Net property, plant and equipment      $   24,232        $     3,182
                                    ================== ===================

Depreciation  expense of property,  plant and equipment for the ten months ended
October  31,  2001 and the years ended  December  31, 2000 and 1999  included in
continuing operations was $1,844,000, $547,739, and $604,759, respectively.

7.   FINANCING ARRANGEMENTS

In connection  with the  Acquisitions  described in Notes 1 and 2 and to provide
working  capital,  the Company has incurred the following debt as of October 31,
2001 and December 31, 2000:

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------

U.S. Rubber

Line of credit due, bearing interest at the prime rate plus .75% (6.25% at
 October 31, 2001), borrowings not to exceed the greater of $3,000,000 or the
 borrowing base (80% of eligible accounts receivable and 50% of eligible
 inventories), collateralized by substantially all assets of U.S. Rubber*         $        1,732     $        2,740

Note payable to a bank, interest payable monthly at prime rate plus 1% (6.5% at
 October 31, 2001), monthly principal payments of $2,395 beginning January
 2002, collateralized by substantially all assets of U.S. Rubber                             200                200

Note payable to a bank, due November 30, 2005, monthly principal payments of
 $34,725, balloon payment and accrued interest due at maturity, accruing
 interest at the prime rate plus 1% (6.5% at October 31, 2001), to be used to
 finance the acquisition and capital expenditures, collateralized by
 substantially all assets of U.S. Rubber*                                                  2,187                 --
</TABLE>


<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



7.   FINANCING ARRANGEMENTS, CONTINUED
<TABLE>

                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------

As part of the original acquisition described in Note 3, the Company issued a
 note payable to former owner (SerVaas, Inc.) in the amount of $1,750,000. The
 note requires interest payable monthly at fourteen percent (14%) from the date
 of this note until March 31, 2001 and at a rate of twenty percent (20%)
 thereafter. The former owner agreed to defer interest and principal payments
 through May of 2001. The amounts accrued during this period will become part of
 the balloon payment due December 28, 2005. The note is collateralized by a
 Stock Pledge Agreement given by OCP. In addition, this note is subordinated to
 the lines of credit and note payable described
 above.*                                                                                   1,750                 --

Note payable to former owner, total payments of $929,600, with interest
 imputed at 12%. Due in monthly installments of $38,733. Subordinate to bank
 debt and collateralized by inventory. Matures December 2001.                                730                 --

Note payable to a bank, due November 30, 2005, monthly principal payments of
 $2,778, balloon payment and accrued interest due at maturity, accruing interest
 at the prime rate plus 1% (6.5% at October 31, 2001), to be used to finance the
 acquisition, collateralized by substantially all assets of U.S.
 Rubber*                                                                                     474                806

Other                                                                                         88                100
                                                                                ------------------ ------------------

Subtotal U.S. Rubber                                                                       7,161              3,846
                                                                                ------------------ ------------------
</TABLE>

*    U.S.Rubber  was in  technical  default of various loan  covenants  with its
     primary  and  subordinated  lender at October  31,  2001.  The  Company has
     entered into an amendment to the credit  agreement  with the primary  which
     includes  waiver of the  covenant  violations.  The  amendment  is  further
     described in Note 16. The Company also obtained a waiver  through  November
     2002 from the subordinated lender.

**   The debt balances for December 31, 2000 reflect only those of U.S.  Rubber.
     While the other  companies  listed for  October 31, 2001 did have 2000 debt
     balances,  U.S. Rubber becomes the accounting acquirer in a reverse merger.
     Debt  balances for  December 31, 2000 and prior years are  presented in the
     financial statements of acquired businesses.
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


7.   FINANCING ARRANGEMENTS, CONTINUED
<TABLE>

                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------

                                                                                ------------------ ------------------
Champion

Bank One, N.A. Facility 1--Line of Credit, maximum borrowing equal to $200,000,
 interest payable monthly at prime plus 1/2% (6% at October 31, 2001) due March
 15, 2002, collateralized by substantially all assets of Champion
 and guaranteed by Messrs. Durham and Whitesell*                                  $          200     $           --

Bank One, N.A. Facility 2--term loan, note payable $650,000, requires monthly
 principal installments of $7,738 plus interest at prime plus 3/4% (6 1/4% at
 October 31, 2001), matures June 2005, collateralized by substantially all
 assets of Champion and guaranteed by Messrs. Durham and Whitesell*                          526                 --

Bank One, N.A. Facility 3 - term loan, note payable $1,118,000, requires monthly
 principal installments of $31,056 plus interest at prime matures 1 1/2% (7% at
 October 31, 2000), matures June 2003, paid off on January 8, 2002,
 collateralized by substantially all assets of Champion and guaranteed by
 Messrs. Durham and Whitesell*                                                               621                 --

Note payable to The Markpoint Company, $1,250,000, interest payable monthly at
 13 1/2%, commencing June 1, 2000, balloon payment of outstanding principal
 balance due May 2005, collateralized by substantially all assets of Champion
 and subordinate to senior bank debt described above*                                      1,250                 --

Other                                                                                         15                 --
                                                                                ------------------ ------------------

Subtotal Champion                                                                          2,612                 --
                                                                                ------------------ ------------------
</TABLE>

*    Champion was in technical  default of all of its debt.  The Company has not
     been able to obtain  waivers  from the lenders.  Accordingly,  all debt has
     been classified as current.

**   The debt balances for December 31, 2000 reflect only those of U.S.  Rubber.
     While the other  companies  listed for  October 31, 2001 did have 2000 debt
     balances,  U.S. Rubber becomes the accounting acquirer in a reverse merger.
     Debt  balances for  December 31, 2000 and prior years are  presented in the
     financial statements of acquired businesses.

<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


7.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>

                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------
Pyramid and DW Leasing

Ford Motor Credit installment loan, $39,104 repayable in monthly installments of
 $667 including interest at .9% through October 2005, first lien on asset
 (purchase asset)                                                                 $           31     $           --

Various installment loans, $15,483,033 repayable in monthly installments
 totaling $203,402 including interest ranging from 8.5% to 13.1% through
 November 2007 and applicable balloon payments thereafter through December 2007,
 first lien on assets financed (finance acquisition and asset purchases).
 Substantially all borrowings guaranteed by the members of DW
 Leasing.*                                                                                12,929                 --

                                                                                -------------------------------------
Former shareholders of Pyramid and related companies installment loans,                      928                 --
 $927,500 repayable in monthly installments of interest at 9% through
 December 2003 with a balloon payment in January 2004, collateralized by
 Security Agreements for Pyramid, DW Leasing and the members of DW Leasing
 (finance acquisition)
                                                                                ------------------ ------------------

Subtotal Pyramid and DW Leasing                                                           13,888                 --
                                                                                ------------------ ------------------
</TABLE>

*    Pyramid was in technical defaults of several loan covenants with two of its
     primary  lenders.  Debt totaling  $6,000,000 was subject to these defaults.
     The Company has obtained bank waivers  through  November 2002 for a portion
     of this amount. Amounts classified as current due to defaults that have not
     been waived are $639 thousand.

**   The debt balances for December 31, 2000 reflect only those of U.S.  Rubber.
     While the other  companies  listed for  October 31, 2001 did have 2000 debt
     balances,  U.S. Rubber becomes the accounting acquirer in a reverse merger.
     Debt  balances for  December 31, 2000 and prior years are  presented in the
     financial statements of acquired businesses.




<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


7.   FINANCING ARRANGMENTS, CONTINUED

<TABLE>


                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------
Danzer Industries

Bank of America line of credit, maximum borrowing equal to $1,000,000, with a
 base of 80% of eligible accounts receivable; plus 50% of raw material,
 work-in-process and finished goods inventory. Interest payable monthly at the
 LIBOR Daily Floating Rate plus 3.2% (5.5% at October 31, 2001), due March 31,
 2002, collateralized by substantially all assets of Danzer
 Industries and guaranteed by Obsidian Enterprises, Inc.*                         $           75     $           --

Bank of America loan--note payable $1,000,000, requires monthly principal
 installments of $5,555 plus interest at the LIBOR Daily Floating Rate plus 3.2%
 (5.5% at October 31, 2001), due August 15, 2006. Collateralized by
 substantially all assets of Danzer Industries and guaranteed by Obsidian
 Enterprises, Inc.*                                                                          983                 --


Equipment loans payable--monthly payments currently aggregating $2,443
 including interest of 8.90% to 11.25% through September 2006. Collateralized
 by equipment financed.                                                                       53                 --

Term loans payable to US Amada, Ltd. Monthly payments currently aggregating
 $12,668 including interest at 10%, loans due January 2003, collateralized by
 equipment financed                                                                          285                 --

Other                                                                                         10                 --
                                                                                ------------------ ------------------

Subtotal Danzer Industries                                                                 1,406                 --
                                                                                ------------------ ------------------
</TABLE>

*    Danzer  Industries  was in default of its credit  agreement  for failure to
     provide audited financial statements within 90 days of fiscal year end. The
     Company has obtained an  additional  45-day  extension  from the lender and
     anticipates providing audited statements within the extension period.

**   The debt balances for December 31, 2000 reflect only those of U.S.  Rubber.
     While the other  companies  listed for  October 31, 2001 did have 2000 debt
     balances,  U.S. Rubber becomes the accounting acquirer in a reverse merger.
     Debt  balances for  December 31, 2000 and prior years are  presented in the
     financial statements of acquired businesses.
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


7.   FINANCING ARRANGMENTS, CONTINUED

<TABLE>

                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------

United

First Indiana Bank Revolving Line of Credit, maximum borrowing equal to
 $3,500,000, with a base of 80% of eligible accounts receivable; plus 50% of raw
 material, work-in-process and finished goods inventory. Interest payable
 monthly at prime plus .75% (6.25% at October 31, 2001) due July 1, 2002,
 collateralized by substantially all assets of United and guaranteed by
 Obsidian Enterprises, Inc.*                                                      $      3,111       $           --

First Indiana Term Loan I--note payable $291,000, requires monthly principal
 installments of $4,850 plus interest at prime plus 1% (6.50% at October 31,
 2001), due July 1, 2006, collateralized by substantially all assets of
 United and guaranteed by Obsidian Enterprises, Inc.*                                      281                   --

First Indiana Term Loan II--note payable $1,116,000, requires monthly principal
 installments of $6,200 plus interest at prime plus 1% (6.50% at October 31,
 2001), due July 1, 2006, collateralized by substantially all
 assets of United and guaranteed by Obsidian Enterprises, Inc.*                          1,104                   --

First Indiana Term Loan III--note payable $1,750,000, requires monthly principal
 installments of $72,917 plus interest at prime plus 2% (7.50% at October 31,
 2001), due July 1, 2003, collateralized by substantially all
 assets of United and guaranteed by Obsidian Enterprises, Inc.*                          1,604                   --

Subordinated note payable to Huntington Capital Investment Company, $3,500,000,
 interest payable quarterly at 14% per annum, balloon payment of outstanding
 principal balance due July 26, 2006. Unsecured and subordinate
 to First Indiana debt.                                                                  3,500                   --

Note payable to former shareholder $1,500,000, interest payable monthly at 9%
 per annum, balloon payment of outstanding principal balance due July 27,
 2006. Unsecured and subordinate to First Indiana and Huntington debt.                   1,500                   --

</TABLE>


<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


7.   FINANCING ARRANGMENTS, CONTINUED
<TABLE>


                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   October 31,       December 31,
                                                                                      2001              2000**
                                                                                ------------------ ------------------
United, Continued

Note payable to Renaissance (formerly parent Danzer Corporation), interest
 payable monthly at 8% per annum, with monthly principal payments beginning July
 2004 at a rate of $10 for each $1,000 of outstanding principal, due July 2008.
 Convertible at the option of the holder to common stock of Obsidian Enterprises
 at a conversion price of $.10 per share. The loan agreement also restricts
 dividend payments without the prior consent of the
 lender.                                                                                   500                   --

                                                                                ------------------ ------------------
Other                                                                                      112                   --
                                                                                ------------------ ------------------

Subtotal United                                                                         11,712                   --
                                                                                ------------------ ------------------

*United Expressline is in technical default of loan covenants with one of its
  primary lenders. The Company has obtained bank waivers from the lender through
  January 2002, at which time, the defaults were cured.
                                                                                ------------------ ------------------

Total all companies                                                                     36,779                3,846

Less current portion                                                                     9,233                3,135
                                                                                ------------------ ------------------

                                                                                  $     27,546       $          711
                                                                                ================== ==================
</TABLE>

**   The debt balances for December 31, 2000 reflect only those of U.S.  Rubber.
     While the other  companies  listed for  October 31, 2001 did have 2000 debt
     balances,  U.S. Rubber becomes the accounting acquirer in a reverse merger.
     Debt  balances for  December 31, 2000 and prior years are  presented in the
     financial statements of acquired businesses.

The Company was in  violation  of three  negative  covenants  and failure of the
Company to submit audited  financial  statements within 90 days of year end with
Renaissance US Growth & Income Trust PLC and FBSUS Special  Opportunities  Trust
PLC, the holders of  debentures  that  completed  the  financing of United.  The
Company has  received a waiver of all of these  violations  through  November 1,
2002.

Various  subsidiary  companies  were in  violation  of  requirements  to provide
year-end financial  statements to various lenders within 90 days of the close of
the year end. Management has received waivers on all of these covenants.
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



7.   FINANCING ARRANGMENTS, CONTINUED

The  Company  has an  agreement  with OCP that  gives it the right to  mandate a
capital  contribution  from OCP if the lenders to U.S. Rubber and United were to
declare a default. In that event, the Company has the right to enforce a capital
contribution  agreement with OCP up to $1,620,000 on U.S.  Rubber and $1,000,000
on United to fund the respective subsidiary's shortfall. Those payments, if any,
would be applied directly to reduce the respective subsidiary's debt obligations
to the lender.

Following are the  maturities of long-term  debt for each of the next five years
and thereafter (in thousands):

        2002                                $      9,233***
        2003                                       8,495
        2004                                       1,370
        2005                                       3,140
        2006                                       9,932
        Thereafter                                 4,609
                                        ------------------

                                                $ 36,779
                                        ==================

***  The current  portion of long-term  debt  includes  $2,570,000 of amounts in
     default and classified as current.

8.   LEASING ARRANGEMENTS

In 2001,  U.S.  Rubber  entered into a  sales-leaseback  arrangement.  Under the
arrangement,  U.S. Rubber sold equipment and leased it back for a period of five
years.  The leaseback has been accounted for as an operating  lease. The loss of
$218,236  realized in the transaction has been deferred and will be amortized to
income in proportion to rental expense over the term of the lease.

The Company has various  operating  lease  commitments,  principally  related to
machinery and equipment,  office  equipment,  and  facilities.  The  approximate
future  minimum  annual  rentals for the years under the terms of these  leases,
which expire on various dates through the year ending  October 31, 2008,  are as
follows (in thousands):

Year Ending October 31,

        2002                      $          727
        2003                                 980
        2004                                  67
        2005                                  32
        2006                                  21
        Thereafter                            27
                                -------------------

                                  $        1,854
                                ===================

Rental expense under operating leases for the ten months ended October 31, 2001,
in  thousands,  was $514 and for the years ended  December 31, 2000 and 1999 was
$130 and $136, respectively.
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


9.   EMPLOYEE BENEFIT PLANS

Danzer  Industries has a contributory  defined benefit pension plan covering all
eligible  employees  who have  elected  to  participate  in the plan.  It is the
Company's policy to fund pension costs as determined by the plan's actuary.  The
weighted  average  discount rate and expected rate of return on long-term assets
used in  determining  the  actuarial  present  value  of the  projected  benefit
obligation  were 7% for the plan year ended  December  31, 2000.  The  actuarial
information  included  below,  which is as of January 1, 2001, is for the plan's
fiscal  year  ended  December  31,  2000,  and  is  the  most  recent  available
information.

Pension  expense for the ten-month  period ended October 31, 2001 is expected to
approximate  the  year  ended  December  31,  2000,  which  was as  follows  (in
thousands):

December 31,                                                               2000
                                                            -------------------

Benefits earned (service cost)                                $            3
Actual return on plan assets                                              22
Other items                                                              (43)
Interest expense                                                          22
                                                            -------------------

Total pension expense                                         $            4
                                                            ===================

A summary of the status of the plan as of  December  31,  2000 is as follows (in
thousands):

December 31,                                                             2000
                                                           -------------------

Projected benefit obligation:
    Vested                                                   $         (345)
    Nonvested                                                            --
                                                           -------------------

                                                                       (345)
Plan assets at fair value                                               287
                                                           -------------------

Funded status                                                           (58)
Unrecognized net actuarial loss                                          (9)
Unrecognized net (asset) obligation                                      47
                                                           -------------------

Accrued pension cost                                         $          (20)
                                                           ===================

The Company, through certain of its subsidiaries,  also has defined contribution
401(k) plans which permit voluntary  contributions up to 20% of compensation and
which  provide   Company-matching   contributions  of  up  to  10%  of  employee
contributions not to exceed 6% of employee compensation. 401(k) plan expense for
the ten-month  period ended October 31, 2001 was  approximately  $35 and $25 and
$28 thousand for the years ended December 31, 2000 and 1999, respectively.



<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


10.  STOCKHOLDERS' EQUITY


PREFERRED STOCK:

The original  capital  structure of Danzer  Corporation  prior to the merger was
comprised  of the  following:  5,000,000  authorized  shares  of $.001 par value
preferred stock;  10,500 shares authorized of the Class of 10% Cumulative Senior
Preferred  Stock (Series A) with no shares issued or outstanding as 7,650 shares
were retired;  (Series B) Cumulative  Convertible  Senior  Preferred  Stock with
16,000 shares  authorized  and no shares issued or  outstanding as 16,000 shares
were  retired.  In addition,  the Company had  20,000,000  authorized  shares of
common stock with 17,760,015 shares outstanding at December 31, 2000.

In June  2001,  Danzer  issued  an  aggregate  of  1,750,000  shares  of  Danzer
unregistered  common stock in connection  with the exchange of $355,000 of debt.
On June 21, 2001,  Danzer amended its articles of  incorporation to authorize up
to 4,500,000 shares of Series C Convertible Preferred Stock. In conjunction with
the merger and acquisitions (described in Note 3) of June 21, the Company issued
1,970,962 of Series C Preferred  Stock. The shareholders of Pyramid and Champion
then converted  824,892 shares of preferred stock to 16,497,840 of common stock.
In addition,  on July 5, 2001, the Company  increased the  authorized  shares of
common stock by 20,000,000 to  40,000,000.  On July 31, 2001, the Company issued
2,593,099 shares of additional convertible preferred stock related to the United
acquisition.

The  convertible  preferred  stock is convertible at the option of the holder at
any time, unless previously redeemed, into shares of common stock of the Company
at an  initial  conversion  rate of 20 shares of common  stock for each share of
convertible stock. However, the convertible preferred stock may not be converted
prior to the corporation filing a registration statement of such shares. Holders
of the convertible preferred stock have voting rights which entitle them to cast
on each matter  submitted to a vote of the  stockholders  of the Corporation the
number of votes  equal to the  number of shares of common  stock into which such
shares of Series C Preferred could be converted.

These  shares  were  offered  and sold in  transactions  which were  exempt from
Securities Act registration  under Section 4(2) of the Securities Act,  relating
to sales by an issuer not  involving a public  offering.  No  underwriters  were
involved in the sale of these shares.  The Corporation will use its best efforts
to file, as soon as reasonable practicable following the date of issuance of the
Series C Preferred, a registration statement ("Registration  Statement") on Form
S-4,  pursuant to the rules of the  Securities and Exchange  Commission  ("SEC")
and, if not, on such other form promulgated by the SEC for which the Corporation
then  qualifies,  which is available to  Corporation,  and which counsel for the
Corporation shall deem appropriate for the registration under the Securities Act
of 1933.

On October 4, 2001,  the Company  changed its name from  Danzer  Corporation  to
Obsidian Enterprises, Inc. In addition, 5,000,000 shares of Preferred Stock were
authorized with the  domestication of Obsidian in Delaware.  On October 9, 2001,
the  Company  filed  designation  of  preferences,  rights  and  limitations  of
4,600,000  shares of Series C  Preferred  Stock.  This  transaction  results  in
400,000 shares of authorized but  undesignated  preferred stock and cancellation
of the Series A and B shares.


<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


10.  STOCKHOLDER'S EQUITY, CONTINUED

As a result of the reverse merger,  U.S. Rubber becomes the accounting  acquirer
and accordingly, under purchase accounting,  becomes the Registrant.  Therefore,
the 2000 and 1999 financial  statements  become those of U.S.  Rubber.  However,
under purchase accounting for a reverse merger, the stockholders' equity section
of the Registrant (formerly Danzer Corporation) becomes the equity of the merged
entity.  Accordingly,  the statement of changes in stockholders' equity reflects
that purchase accounting.


STOCK OPTIONS:

On May 7, 1990, Danzer's stockholders approved a stock option plan to issue both
"qualified" and "nonqualified" stock options. Under the plan, 800,000 options to
purchase shares of the Company's common stock may be issued at the discretion of
the Company's  Board of  Directors.  The option price per share is determined by
the Company's Board of Directors, but in no case will the price be less than 85%
of the fair value of the common  stock on the date of grant.  Options  under the
plan will have a term of not more than ten years  with  accelerated  termination
upon the occurrence of certain events.

In April 1998,  Danzer granted  600,000 stock  options,  exercisable at $.10 per
share,  to its  president.  The options  vest over two years and expire in April
2004. None of these options have been exercised as of October 31, 2001.

In September 1998, Danzer adopted a qualified  incentive stock option plan under
Section 422 of the Internal Revenue Code. Options granted under the plan will be
granted at prices not less than fair value of the Company's stock at the date of
grant,  have a term not more  than ten  years  and have  other  restrictions  as
determined by statute.

In September 1998, Danzer granted a total of 604,500 stock options,  exercisable
at $.10 per share, to certain employees.  The options expire November 2001. As a
result of  voluntary  termination,  75,000  options  expired in 1999 and 192,000
options  expired in 2000. None of these options were exercised as of October 31,
2001.

On July 24,  2001,  the Board  adopted,  and on October 5, 2001,  the  Company's
stockholders  approved, the 2001 Long Term Incentive Plan (the "2001 Plan"). The
2001 Plan  authorizes  the granting to the Company's  directors,  key employees,
advisors and  consultants  of options  intended to qualify as Incentive  Options
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code"), options that do not so qualify ("Non-Statutory  Options"),
restricted stock and Other Stock-Based  Awards that are not Incentive Options or
Non-Statutory  Options.  The awards are payable in Common Stock and are based on
the formula which measures performance of the company.  There was no performance
award expense in 2001. No options under this plan were granted to any employees.
Options are exercisable for up to 10 years from the date of grant.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards (SFAS) No. 123,  Accounting for Stock-Based  Compensation.
Accordingly,  no  compensation  expense has been recognized for the stock option
plans.  Had  compensation  expense for the  Company's  stock  option  plans been
determined based on the fair value at the grant date for awards  consistent with
the provisions of SFAS No. 123, the Company's net



<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


10.  STOCKHOLDERS' EQUITY, CONTINUED

income (loss) for the period ended October 31, 2001 and the years ended December
31,  2000 and 1999  would  have  been (in  thousands)  $(4,360),  $3,  and $198,
respectively.  Basic and diluted net income  (loss) per share as reported  would
not have  changed in any period  presented  had such  compensation  expense been
recorded.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions used for grants in 2000 and 1999 (no options were granted during the
period ended October 31, 2001),  respectively:  risk-free  interest rates of 6.4
and 5.5 percent;  dividend yield of 0 percent in both years; expected lives of 5
years;  and volatility of 978 and 170 percent.  The estimated  weighted  average
fair  value of  options  granted  during  2000 and 1999 were $0.10 and $0.05 per
share, respectively.

Following is a summary of  transactions  of granted  shares under option for the
period ended October 31, 2001 and years ended December 31, 2000 and 1999:

<TABLE>
                                        2001                           2000                          1999
                           ------------------------------- ----------------------------- ------------------------------
                                              Weighted                      Weighted                       Weighted
                                              Average                        Average                        Average
                                              Exercise                      Exercise                       Exercise
<S>                         <C>             <C>             <C>            <C>          <C>             <C>
                               Shares          Price          Shares          Price          Shares          Price
                           --------------- --------------- -------------- -------------- --------------- --------------

Outstanding, beginning
 of year                        1,137,500          .09         1,029,500          .09         1,077,128          .09
Issued during the year                 --        --              450,000          .10           200,000          .05
Canceled during the year         (90,000)          .10           192,000          .09            75,000          .09
Exercised during the year              --        --              150,000          .10            72,628          .10
                           --------------- --------------- -------------- -------------- --------------- --------------

Outstanding, end of year        1,047,500          .09         1,137,500          .09         1,129,500          .09
                           =============== =============== ============== ============== =============== ==============

Eligible, end of year
 for exercise                  1,047,500*          .09         1,137,500          .09         1,029,500          .09
                           =============== =============== ============== ============== =============== ==============
</TABLE>


<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


10.  STOCKHOLDERS' EQUITY, CONTINUED

A further  summary  about fixed  options  outstanding  at October 31, 2001 is as
follows:

<TABLE>
                                                            Weighted
                                                             Average        Weighted                       Weighted
                                                            Remaining       Average                        Average
<S>                                     <C>             <C>              <C>            <C>             <C>
                                            Number         Contractual      Exercise        Number         Exercise
                                          Outstanding         Life           Price        Exercisable       Price
                                        ---------------- ---------------- ------------- ---------------- -------------

Exercise price of $.10                       847,500*        1.6 yr.             .10        847,500              .10
                                        ================ ================ ============= ================ =============

Exercise price of $.05                       200,000         1.2 yr.             .05        200,000              .05
                                        ================ ================ ============= ================ =============
</TABLE>

*    247,500  of the  options  listed  above  expire on  November  1,  2001.  In
     addition,  in accordance with the Plan of Reorganization and Merger and the
     related  "Letter  agreements",  the above options cannot be exercised until
     the Company  amends its articles of  incorporation  to authorize  shares of
     approximately 120,000,000 and has registered such shares.


STOCK WARRANTS:

Danzer  issued  warrants  to  purchase  common  stock to  several  parties.  The
following  table  summarizes the outstanding  warrants for the ten-month  period
ended October 31, 2001 and the year ended December 31, 2000:

<TABLE>

                                                                                Warrants Issued       Outstanding
<S>                                  <C>                    <C>              <C>                  <C>
                                       Outstanding Warrants                     (Expired) in           Warrants
                                       December 31, 2000      Exercise Price       Period          October 31, 2001
                                     ----------------------- ---------------- ------------------ ---------------------

Former president, upon resignation
in March 1998, expired in March
2001                                        100,000          $.25                   (100,000)                --
Financing agreement, effective
August 1997, terminated June 21,                             $.25 subject
2001                                        650,000          to adjustment          (650,000)                --
On June 21, 2001, Duncan-Smith Co.
terminated warrant for 650,000
common shares and was issued new
warrant for 10,000 shares Series C
Preferred exercisable at $2.00 per
share, expiring August 31, 2002                  --          $2.00                   200,000            200,000
Markpoint financing agreement
expiring May 2008 associated with
Champion**                                   Zero**           $.01                        --             Zero**

</TABLE>

**   The number of warrants  available  under the  agreement  with  Markpoint is
     based on  twenty-five  percent of the fair  market  value of Champion to be
     determined based on a formula  including a multiple of EBITDA.  No warrants
     are currently available under this agreement based on the operating results
     and stockholder's deficit of Champion.



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


10.  STOCKHOLDERS' EQUITY, CONTINUED


CONVERTIBLE DEBT:

As  described  in Note 7, at October 31,  2001,  the Company has a note  payable
agreement which is convertible by the holder to common stock totaling  5,000,000
shares at a conversion rate of $0.10 per share at October 31, 2001.

11.  BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA

The Company operates in three industry segments comprised of trailer and related
transportation  equipment   manufacturing;   coach  leasing;  and  butyl  rubber
reclaiming.  All sales are in North and South  America  primarily  in the United
States,  Canada  and  Brazil.   Selected  information  by  segment  follows  (in
thousands):

<TABLE>

                                                             Ten Months Ended October 31, 2001
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
<S>                                     <C>                <C>                  <C>                <C>
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
  Domestic                               $       13,466      $       4,165       $       9,253      $      26,884
  Foreign                                           550                 --                 621              1,171
                                       ------------------------------------------------------------------------------

Total                                    $       14,016      $       4,165       $       9,874      $      28,055

Cost of goods sold                        $      12,276      $       1,618       $       8,884      $      22,778

Income (loss) before taxes                $      (3,509)     $        (570)      $        (653)     $      (4,732)

Identifiable assets                       $      25,315      $      13,330       $      10,205      $      48,850

Depreciation and amortization expense     $         606      $         785       $         905      $       2,296

</TABLE>


Obsidian  Enterprises,  Inc.  (legal  parent)  allocates  selling,  general  and
administrative  expenses  to  the  respective  companies  primarily  based  on a
percentage of sales.

For the calendar years ended December 31, 2000 and 1999, the Company operated in
only one  segment  (butyl  rubber  reclaiming),  which  was the  segment  of the
accounting  acquirer U.S. Rubber.  U.S. Rubber had foreign sales of $943,325 for
2000.

12.  INCOME TAXES

The  Company  files a  consolidated  federal  tax  return.  The  parent and each
subsidiary  record  their  share of the  consolidated  federal  tax expense on a
separate-return basis. Any additional income tax expense on recovery realized as
a result of filing a consolidated tax return is recorded in  consolidation.  The
Company and each subsidiary file separate state income tax returns.  The Company
accounts for income taxes in compliance with SFAS No. 109, Accounting for Income
Taxes.  Under SFAS No. 109, deferred tax assets and liabilities are recorded for
any  temporary  differences  between the  financial  statement  and tax bases of
assets and  liabilities,  using the enacted tax rates and laws expected to be in
effect when the taxes are actually paid or recovered.



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


12.  INCOME TAXES, CONTINUED

The provision for (expenses)  benefit for income taxes consists of the following
(in thousands):

<TABLE>

<S>                                             <C>             <C>             <C>
                                                2001            2000            1999
                                           ------------------------------------------------

Current:
  Federal                                    $         --    $        152    $       (112)
  State                                               (36)             14             (12)
                                           ------------------------------------------------

                                                      (36)            166            (124)
                                           ------------------------------------------------

Deferred:
  Federal                                             350            (187)             --
  State                                                58             (29)             --
                                           ------------------------------------------------

                                                      408            (216)             --
                                           ------------------------------------------------

Total                                        $        372    $        (50)   $       (124)
                                           ================================================
</TABLE>

A  reconciliation  of income tax benefit  (expense) at U.S.  statutory  rates to
actual income tax benefit (expense) is as follows (in thousands):

<TABLE>

<S>                                             <C>             <C>             <C>
                                                2001            2000            1999
                                           ------------------------------------------------

Benefit (tax) at statutory rate (34%)        $      1,609    $        (33)   $       (110)
Effect of nontaxable combined entity                 (166)             --              --
State income tax                                      (36)             (5)            (17)
Goodwill amortization                                 (26)             --              --
Increase in valuation reserve                      (1,024)             --              --
Other                                                  15             (12)              3
                                           ------------------------------------------------

                                             $        372    $        (50)   $       (124)
                                           ================================================
</TABLE>


<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



12.  INCOME TAXES, CONTINUED

Deferred  income taxes  represent  the net tax effects of temporary  differences
between the carrying amount of assets and  liabilities  for financial  reporting
purposes and for income tax  purposes.  Significant  components of the Company's
deferred tax assets and liabilities are as follows (in thousands):

<TABLE>

<S>                                             <C>             <C>             <C>
                                                2001            2000            1999
                                           ------------------------------------------------

Deferred tax assets (liabilities):
  Accounts receivable                        $         32    $         --    $         --
  Inventories                                         472             517             693
  Accrued expenses                                    117              15              15
  Intangibles                                         791              --              --
  Operating loss carryforwards                      1,474              --              --
  Property and equipment                           (2,267)           (171)           (131)
  Loss on sale-leaseback                              (81)             --              --
                                           ------------------------------------------------

                                                      538             361             577
Less valuation reserves                            (1,537)             --              --
                                           ------------------------------------------------

Deferred tax assets (liabilities), net       $       (999)   $        361    $        577
                                           ================================================
</TABLE>

Included in the accompanying balance sheet under the following (in thousands):

<TABLE>


<S>                                             <C>             <C>             <C>
                                                2001            2000            1999
                                           ------------------------------------------------

Deferred tax assets                          $        673    $        532    $        708
Deferred tax liabilities                           (1,672)           (171)           (131)
                                           ------------------------------------------------

                                             $       (999)   $        361    $        577
                                           ================================================
</TABLE>

The amount of federal tax net operating loss carryforwards  available at October
31, 2001 was $3,600,000. The majority of these loss carryforwards were generated
by certain subsidiaries prior to the reverse merger transaction in June 2001 and
have expiration dates through the year 2021. The use of preacquisition operating
losses  is  subject  to  limitations  imposed  by  the  Internal  Revenue  Code.
Utilization  of  these  loss  carryforwards  is  impacted  by such  limitations.
Accordingly,  the deferred tax assets related to premerger operating losses have
been  reserved  with a valuation  allowance to the extent they are not offset by
deferred liabilities.

Federal tax net operating loss  carryforwards and expiration dates as of October
31, 2001 are as follows:

<TABLE>

<S>                                       <C>              <C>                     <C>             <C>
                                             Premerger        Expiration Dates       Postmerger     Expiration
                                             ---------                                              Dates
                                          ---------------- ----------------------- ---------------- ------------------

Obsidian Enterprises                         $     --                                  $    297           2021
Danzer Industries                               1,986        2008 through 2018               --            --
Pyramid                                           126               2020                     --            --
Champion                                          789               2021                    402           2021
                                          ----------------                         ----------------

                                             $  2,901                                  $    699
                                          ================                         ================
</TABLE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


12.  INCOME TAXES, CONTINUED

Cash  payments of income taxes for the ten months ended October 31, 2001 and for
the years 2000 and 1999 were $44, $8, and $86 thousand, respectively.

13.  CHARGES FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

The Company  reviews the  recoverability  of the  carrying  value of  long-lived
assets,  primarily property,  plant and equipment and related goodwill and other
intangible  assets,  for impairment  whenever events or changes in circumstances
indicate  that the  carrying  amount of an asset  may not be fully  recoverable.
Impairment  losses are  recognized  when the fair value is less than the asset's
carrying value.  When indicators of impairment are present,  the carrying values
of the assets are evaluated in relation to the operating  performance and future
undiscounted  cash flows of the underlying  business.  The net book value of the
underlying  assets  is  adjusted  to fair  value if the sum of  expected  future
undiscounted cash flows is less than book value. Fair values are based on quoted
market  prices and  assumptions  concerning  the amount and timing of  estimated
future cash flows and assumed  discount  rates,  reflecting  varying  degrees of
perceived risk.

During October 2001, the Company  completed an evaluation of the  recoverability
of the assets (primarily  goodwill) of Champion.  Certain events occurred during
the period ended October 31, 2001 which caused the full  recoverability of those
assets to be brought into question. When this operation was acquired, management
anticipated  that this operation  would continue to generate  certain  revenues,
namely repair  revenues,  at historically  consistent  levels.  This was not the
case.  It appears as though the customer  relationships  of this  business  were
based on relationships  with the former owner and as such have been difficult to
maintain after the  acquisition of Champion.  Further eroding the performance of
Champion  have been lower  overall  sales demand and  difficulties  in achieving
manufacturing efficiencies.  As a result of these events that occurred after the
acquisition, it became clear that the investment in Champion had become severely
impaired.  Accordingly,  during fiscal 2001, Champion recorded charges of $2,305
thousand  related to the  impairment  of goodwill.  This charge was based on the
estimated fair value of the long-lived assets of Champion.






<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


14.  RELATED PARTIES

The  Company  makes  advances,   receives  loans  and  conducts  other  business
transactions with affiliates  resulting in the following amounts for the periods
ended (in thousands):
<TABLE>

                                                                                    October 31,       December 31,
<S>                                                                                    <C>                <C>
                                                                                       2001               2000
                                                                                 ------------------ ------------------

Balance sheet:
  Current assets:
    Accounts receivable, Obsidian Capital Company (OCC)                            $        217       $         --
    Notes receivable, former parent of U.S. Rubber                                           --              1,098
  Long-term portion:
    Notes receivable, former parent of U.S. Rubber                                           --              1,770
    Investment banking fees, purchase accounting*                                         1,960                 --
                                                                                 ------------------ ------------------

Total assets                                                                       $      2,177       $      2,868
                                                                                 ================== ==================

  Current liabilities:
    Accounts payable, Obsidian Capital Company (OCC)                               $        625       $         --
    Accounts payable, stockholders                                                          300                 --
  Long-term portion:                                                                         --                 --
    Accounts payable, Obsidian Capital Partners (OCP)                                     2,170                 --
                                                                                 ------------------ ------------------

Total liabilities                                                                  $      3,095       $         --
                                                                                 ================== ==================

Income statement:
  Rent expense, Obsidian Capital Company (OCC)                                     $         15       $         --
  Interest income, related to note above                                                     --                356
                                                                                 ================== ==================
</TABLE>

Related-party  amounts classified as current reflect those portions of the total
receivable or payable that were currently due in accordance  with the terms,  or
were collected or paid subsequent to year end.  Amounts  classified as long term
represent amounts not currently due or amounts that are expected to be converted
to equity subsequent to year end. Also see Note 16.

The Company was obligated to the stockholders  and certain  employees (that were
formerly  stockholders of subsidiary  companies)  under note payable  agreements
acquired as part of the  acquisitions.  The  details of these notes  payable are
included in Note 7.

*    Subsidiaries  of the  Company  paid  Obsidian  Capital  Company,  an entity
     controlled by Mr. Durham (Chairman of the Company), investment banking fees
     associated with the  acquisitions  and related  financing on the Danzer and
     U.S. Rubber merger and the United acquisition. Amounts paid by U.S. Rubber,
     United, and Danzer were $760, $600, and $600 thousand, respectively.

The December 31, 2000  balance  sheet  includes  notes  receivable  due from the
former  parent  company  of U.S.  Rubber,  Inc.  prior to it being  acquired  by
Obsidian. The following table summarizes those notes (in thousands):


<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


14.  RELATED PARTIES, CONTINUED

<TABLE>

<S>                                                                                                             <C>
                                                                                                       December 31,
                                                                                                           2000

Unsecured note receivable from affiliated company. Interest accrues at an annual rate equal to
 Bank One prime (9.5% at December 31, 2000); due on demand.                                            $         737

Unsecured note receivable from affiliated company. Interest is to be paid monthly at an annual
 rate of 6.2%. Principal is due as follows: $200,000 in 2001; $300,000 in 2002; and $284,360 in
 2003. Note matures June 19, 2003.                                                                               784

Unsecured note receivable from affiliated company. Interest is to be paid monthly at an annual
 rate equal to Bank One prime plus 1/2% (10% at December 31, 2000). Principal is due in equal
 monthly installments of $13,440, beginning December 31, 1998, until maturity  (November 30,
 2005), at which time all unpaid principal and interest will be due.                                             806

Unsecured note receivable from affiliated company, payable on demand, with no stated interest                    541

                                                                                                               2,868
Less current portion                                                                                           1,098

                                                                                                       $       1,770
</TABLE>

15.  COMMITMENTS AND CONTINGENCIES

The  Company  has a purchase  commitment  to purchase or lease three (3) coaches
within 60 days of  completion,  expected to be in the first  quarter of calendar
2002. The cost of these coaches will approximate $1.35 million.

In the normal course of business,  the Company is liable for contract completion
and product performance. In the opinion of management, such obligations will not
significantly affect the Company's financial position or results of operations.

Certain  insurable risks such as health insurance are self-insured by certain of
the Company's subsidiaries. However, the Company has umbrella insurance coverage
for certain  risk  exposures  subject to specified  limits.  Accruals for claims
under the  Company's  self-insurance  program are  recorded on a  claim-incurred
basis.

16.  SUBSEQUENT EVENTS

Management has reached  agreement in principle  with SerVaas,  Inc. to terminate
the Company's obligations under the Agreement with SerVaas, Inc. for $700,000 in
cash and 30,000 shares of Series C Convertible  Preferred Stock. DC Investments,
Inc.,  an entity  controlled  by Mr.  Durham,  has agreed in  principle  to loan
$700,000 to the  Company  and to purchase  from  SerVaas,  Inc.  the  $1,750,000
principal amount Subordinated Note due SerVaas, Inc. which bears interest at 20%
per annum and to exchange that note for a $700,000 principal amount note of U.S.
Rubber  bearing  interest  at 15% per annum paid  currently  and due,  as to the
principal,  in one installment in five years.  The net effect of this will be to
reduce  U.S.  Rubber's  liabilities  by  approximately  $1,300,000.   Management
anticipates this will be concluded in late February 2002. The effect of



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


16.  SUBSEQUENT EVENTS, CONTINUED

this  transaction  would be to increase the Company's  equity and to improve its
working capital position.

On February 12, 2002,  U.S.  Rubber  entered into a "Second  Amendment to Credit
Agreement" with its primary lender. The terms of the amendment require scheduled
debt service payments under  substantially the same terms as described in Note 7
through  November 1, 2002 when all debt outstanding with the primary lender will
become due. The agreement also modifies the terms of an operating lease with the
lender  requiring  payment  in  full of the  remaining  lease  obligation  as of
November 1, 2002 of approximately $738,000.

After October 31, 2001,  Champion is in violation of its Senior Credit  facility
with Bank One.  Champion is working under a forbearance  agreement through March
15, 2002.  Champion has paid down the Bank One debt by $570,000 as consideration
for such  agreements.  The Company made a capital  contribution of $570,000 from
loan proceeds from DC Investments,  LLC,  controlled by Tim Durham,  Chairman of
the  Company.  Champion  is also  indebted to  Markpoint  Equity Fund IV under a
subordinated  credit facility in the amount of $1,250,000.  Champion has been in
violation of the funded debt to EBITDA negative covenant of the Markpoint Credit
Agreement  since the inception of the loan.  Markpoint has informed  Champion it
may not grant a waiver of this  violation in the future.  The Markpoint debt has
been reclassified as current liability due to this default.

The Board of Directors  has agreed in  principle  to divest  Champion to a group
consisting of Champion's management and Messrs. Durham and Whitesell pursuant to
the terms of a nonbinding Letter of  Intent,subject to an independent  review of
fair value by the independent Board members of the Company. DC Investments,  LLC
has  agreed to  contribute  $660,000  to the  Company in  exchange  for Series C
Preferred  Stock.  The Company will use those funds to purchase the loan of Bank
One to  Champion in that  amount and would  contribute  that note to Champion as
additional   capital.   In  exchange  for  the   assumption  of  the  $1,250,000
subordinated  debt of Champion and all accrued  interest and either a release of
the Company's  guarantee of that debt or an  indemnification  of the Company for
any loss to the  Company,  the  management  group would  purchase the assets and
assume substantially all liabilities of Champion.

To complete the Plan of Reorganization,  Pyramid and DW Leasing were required to
obtain  lender  approval of the  transfer of assets  subject to  liabilities  to
Obsidian Leasing Company, Inc. ("Obsidian  Leasing"),  a wholly owned subsidiary
of the Company. On November 1, 2001, the Company completed the tax-free exchange
contemplated  by the  Acquisition  Agreement of June 21,  2001,  whereby all but
seven coaches and the liabilities  thereon were  transferred to Obsidian Leasing
to operate this segment of business previously under DW Leasing.

DC  Investments,  LLC, a related party 50% owned by Mr. Durham  (Chairman of the
Company),  subsequent to year end, has  purchased  accounts  receivable  from DW
Leasing,  recorded  by DW  Leasing as  deposits  on  trailers,  in the amount of
$1,050,582  as of February  13,  2002.  DW Leasing  used the  proceeds  from the
purchase of the accounts receivable to pay off the accounts payable due Obsidian
Capital  Company in the amount of $624,317 and the amount due  shareholders  and
other related parties in the approximate amount of $300,000.
<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
     (dollars in thousands, except per share amounts)


                                          Fiscal Year Ended October 31, 2001
<TABLE>

<S>                                      <C>               <C>                  <C>                <C>
                                             First Qtr.*     Second Qtr. Ended   Third Qtr. Ended      Fourth Qtr.
                                            Ended 1/31/01         4/30/01             7/31/01        Ended 10/31/01
                                          ------------------ ------------------- ------------------ ------------------

Net sales                                   $        3,743     $        5,548      $        5,752     $     15,163

Gross profit                                           442              1,345                 984            2,659

Net income (loss)                                     (355)              (291)               (901)          (2,836)**

Net income (loss) per common and common
 equivalent share                                     (.01)              (.01)               (.02)            (.03)
                       Fiscal Year Ended December 31, 2000

                                          First Qtr. Ended   Second Qtr. Ended   Third Qtr. Ended      Fourth Qtr.
                                               3/31/00            6/30/00             9/30/00        Ended 12/31/00
                                          ------------------ ------------------- ------------------ ------------------

Net sales                                   $        3,059     $        3,024      $        3,233     $        3,267

Gross profit (loss)                                    301                372                 373                147

Net income (loss)                                       86               (118)                146                (66)

Net income (loss) per common and common
 equivalent share                                    --                 --                  --                    --
</TABLE>

*    The first  quarter  for U.S.  Rubber  includes  the first and second  month
     (November and December) of 2000.

**   The fourth  quarter  includes  the charge for the  impairment  of  goodwill
     related to Champion of $2,305 ($.02 per share).



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


SCHEDULE II--VALUATION AND QUALIFYING OF ACCOUNTS
<TABLE>

                                                Ten Months Ended October 31, 2001
                                                            (in thousands)
                                                       Column C--Additions
                                               -----------------------------------
<S>                           <C>                   <C>                <C>          <C>             <C>
    Column A--Description          Column        (1)--              (2)--
                               B--Balance at     Charged to      Charged to         Column D--        Column E--
                               Beginning of       Costs and      Other Accounts--   Deductions--      Balance at
                                  Period           Expenses      Describe           Describe          End of Period
----------------------------- ---------------- ----------------- ----------------- ----------------- -----------------

Inventory valuation
allowances                      $    1,338       $       73        $       --        $      578*       $      833
                              ================ ================= ================= ================= =================

Deferred tax valuation
reserve                         $       --       $    1,024        $      513**      $       --        $    1,537
                              ================ ================= ================= ================= =================
</TABLE>

<TABLE>
                                                     Year Ended December 31, 2000
                                                            (in thousands)

                                                       Column C--Additions
                                               -----------------------------------
<S>                           <C>                   <C>                <C>          <C>             <C>
    Column A--Description          Column        (1)--              (2)--
                               B--Balance at     Charged to      Charged to         Column D--        Column E--
                               Beginning of       Costs and      Other Accounts--   Deductions--      Balance at
                                  Period           Expenses      Describe           Describe          End of Period
----------------------------- ---------------- ----------------- ----------------- ----------------- -----------------

Inventory valuation
allowances                      $    1,818       $      120        $       --        $      600*       $    1,338
                              ================ ================= ================= ================= =================

Deferred tax valuation
reserve                         $       --       $       --        $       --        $       --        $       --
                              ================ ================= ================= ================= =================
</TABLE>

*    Write-off of inventory  against reserve.
**   Valuation  reserve of acquired companies recorded in purchase accounting.



<PAGE>



ITEM 9. CHANGES AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE

As previously  reported in a Current Report Form 8-K filed on November 13, 2001,
the Audit Committee of the Company's  Board of Directors  decided on November 7,
2001,  to  dismiss  Linton,  Shafer & Company,  P.A.  ("Linton  Shafer")  as the
Company's  independent  auditors.  The audit  reports  of  Linton  Shafer on the
consolidated  financial  statements of the Company as of and for the years ended
October 31, 2000 and 1999 did not contain any adverse  opinion or  disclaimer of
opinion,  nor were they qualified or modified as to uncertainty,  audit scope or
accounting  principles.  During the fiscal years ended October 31, 2000 and 1999
and the period following  October 31, 2000, there were no disagreements  between
the Company and Linton Shafer on any matter regarding  accounting  principles or
practices,  financial statement  disclosure,  or auditing scope or procedure.  A
letter from Linton Shafer confirming the statements set forth in this Item 9 was
attached as Exhibit 16 to the Current  Report on Form 8-K filed on November  13,
2001.

On November 7, 2001,  the Board of  Directors  engaged  McGladrey & Pullen,  LLP
("McGladrey") as the Company's new independent auditors. During the fiscal years
ended  October  31,  2000 and 1999 and during the period  following  October 31,
2000, the Company did not consult McGladrey regarding either (i) the application
of  accounting  principles  to a  specified  transaction,  either  completed  or
proposed,  or the type of audit  opinion that might be rendered on the Company's
financial  statements,  and neither a written report was provided to the Company
nor oral advice  provided  that  McGladrey  concluded  was an  important  factor
considered by the Company in reaching a decision as to an  accounting,  auditing
or financial  reporting issue; or (ii) any matter that was either the subject of
a disagreement or a reportable event.

<PAGE>

PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth  information with respect to all Directors of the
Company,  including their ages,  present principal  occupations,  other business
experience during the last five years, membership on committees of the Board and
directorships in other publicly held companies.
<TABLE>

<S>                             <C>       <C>                                                   <C>
Name                                Age                         Position                           Director Since

Timothy S. Durham                    39    Chief Executive Officer and Chairman of the Board             2001
Terry G. Whitesell                   62    President, Chief Operating Officer and Director               2001
Jeffrey W. Osler                     33    Executive Vice President, Secretary, Treasurer and            2001
                                           Director
Goodhue W. Smith, III*+              51    Director                                                      1997
John A. Schmit*+                     33    Director                                                      2001
D. Scott McKain                      47    Vice Chairman and Director                                    2001
Daniel S. Laikin+                    40    Director                                                      2001
</TABLE>

---------
* Members of the Compensation Committee
+ Members of the Audit Committee
<PAGE>

Timothy S. Durham has been a director  since June 2001.  Mr. Durham has been the
Company's  Chairman of the Board and Chief  Executive  Officer  since June 2001.
Since April 2000, Mr. Durham has served as a Managing Member and Chief Executive
Officer  of  Obsidian  Capital  Company  LLC,  which is the  general  partner of
Obsidian  Capital  Partners LP. Prior to that time,  between 1998 and 2000,  Mr.
Durham  founded and  maintained  a  controlling  interest in several  investment
vehicles,  including Durham Capital Corporation,  Durham Hitchcock Whitesell and
Company  LLC,  and Durham  Whitesell & Associates  LLC.  From 1991 to 1998,  Mr.
Durham served in various  capacities at Carpenter  Industries,  Inc.,  including
Vice Chairman,  President and Chief Executive Officer. Mr. Durham is Mr. Osler's
brother-in-law.

Terry G. Whitesell has been the Company's  President and Chief Operating Officer
since June 2001 and has been a director since October 2001.  Prior to that time,
Mr. Whitesell  co-founded  several entities with Mr. Durham,  including Obsidian
Capital  Company LLC,  Durham  Hitchcock  Whitesell  and Company LLC, and Durham
Whitesell & Associates LLC. Mr.  Whitesell is also a Managing Member of Obsidian
Capital Company LLC. From April 1992 until September 1998, Mr.  Whitesell served
as Executive Vice President of Carpenter Industries, Inc. Prior to that time Mr.
Whitesell  held various  management  positions  over the course of 25 years with
Wayne Corporation.

Jeffrey W. Osler has been the Company's Executive Vice President,  Secretary and
Treasurer  since June 2001 and has been a director since October 2001. Mr. Osler
is also a Managing  Member of Obsidian  Capital  Company LLC. Mr. Osler has also
served as Senior Vice President at Durham  Whitesell & Associates LLC and Durham
Capital  Corporation  since September 1998. Prior to that time, Mr. Osler served
as the  General  Manager of Hilton Head  National  Golf Club.  Mr.  Osler is Mr.
Durham's brother-in-law.

Goodhue  W.  Smith,  III has been a  director  since  1997.  Mr.  Smith  founded
Duncan-Smith Co., an investment banking firm in San Antonio,  Texas, in 1978 and
since that time has served as its Secretary and  Treasurer.  Mr. Smith is also a
director  of  Citizens  National  Bank of Milam  County,  Ray  Ellison  Mortgage
Acceptance Co. and American Absorbents Natural Products, Inc.

John  A.  Schmit  has  been a  director  since  July  2001.  Mr.  Schmit  joined
Renaissance  Capital Group,  Inc. in 1997 and is a Vice  President--Investments.
Prior to joining  Renaissance  Capital Group,  Mr. Schmit practiced law with the
law firm of Gibson,  Ochsner & Adkins in Amarillo,  Texas from September 1992 to
September 1994. Between August 1994 and May 1996, Mr. Schmit attended Georgetown
University where he earned his L.L.M. in International and Comparative Law.

D. Scott McKain has been Vice Chairman and a director since October 2001. He has
served as the Chairman of McKain  Performance  Group since 1981.  Mr. McKain has
also been the Vice Chairman of Durham Capital  Corporation  since 1999. Prior to
that  time  from  1983 to  1998,  Mr.  McKain  was a  broadcast  journalist  and
television  commentator.  Mr.  McKain has also  authored  several books and is a
keynote speaker, who presents high content workshops across the nation.

Daniel S.  Laikin has been a director  since  October  2001.  He has served as a
Managing  Member  of  Fourleaf  Management  LLC,  a  management  company  of  an
investment fund that invests in technology  related entities,  since 1999. Prior
to that time,  Mr. Laikin served as the Chairman of the Board of Biltmore  Homes
from  1993 to 1998.  Mr.  Laikin is a member  of the  Board of  Directors  of J2
Communications, Inc.

<PAGE>

EXECUTIVE OFFICERS

The  Company's  executive  officers are  appointed by the Board of Directors and
hold office at the pleasure of the Board until successors are appointed and have
qualified.  Compliance with Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors,  executive officers,  and persons who own more
than ten percent of the  Company's  Common  Stock ("10%  Shareholders")  to file
reports of ownership and reports of changes in ownership of the Company's Common
Stock with the Securities Exchange Commission ("SEC").  Officers,  Directors and
Shareholders  are required by SEC  regulation to furnish the Company with copies
of all forms they file under  Section 16 (a).  Based solely on its review of the
copies of such  forms  received  by it with  respect  to its  fiscal  year ended
October 31, 2001, and written  representations  from certain  reporting  persons
that no other reports were required to those persons,  the Company believes that
its  officers,  directors  and 10%  Shareholders  were complied with all Section
16(a)  requirements,  except  that the Form 3 Initial  Statement  of  Beneficial
Ownership of Securities for Mr. Schmit was filed late.


ITEM 11. EXECUTIVE COMPENSATION


                           SUMMARY COMPENSATION TABLE

The following table sets forth certain  information  concerning the compensation
paid or accrued by the Company for services  rendered  during the Company's past
three  fiscal  years ended  October 31, 2001 by the  Company's  Chief  Executive
Officer.
<TABLE>

                                                                                  Long-Term
                                        Annual Compensation                   Compensation Awards
------------------------- --------------------------------------------------- -------------------- -----------------
<S>                      <C>         <C>                <C>                  <C>                  <C>
        Name and                                                                  Securities          All Other
   Principal Position       Year           Salary               Bonus             Underlying         Compensation
                                                                                 Options/SARs
------------------------- ---------- ------------------- -------------------- -------------------- -----------------
Timothy S. Durham,           2001           $27,404                 $0                 $0                   $0
Chief Executive              2000               N/A                N/A                N/A                  N/A
Officer(1)                   1999               N/A                N/A                N/A                  N/A
------------------------- ---------- ------------------- -------------------- -------------------- -----------------
M. E. Williams,              2001          $110,000            $12,824                  0                    0
Chief Executive              2000          $107,609             $9,375                  0               $3,125
Officer(2)                   1999          $105,000             $8,386                  0                    0
------------------------- ---------- ------------------- -------------------- -------------------- -----------------
</TABLE>


(1)  Mr. Durham was elected Chief Executive Officer and Chairman of the Board on
     June 21, 2001.
(2)  Mr. Williams resigned as Chief Executive Officer on June 21, 2001.


                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

No grants were made  during  fiscal 2001  pursuant to the  Company's  1999 Stock
Option Plan or the Company's 2001 Long Term Incentive Plan.

<PAGE>

             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                        FISCAL YEAR-END OPTION/SAR VALUES

The following  table sets forth  information for 2001 with respect to Option/SAR
exercises by the executive officers named in the Summary  Compensation Table and
the value of unexercised options and SARs as of October 31, 2001.

                         Number of Unexercised      Value of Unexercised
                         Options/SARs at Fiscal         In-the-Money
                              Year-End (#)         Options/SARs at Fiscal
                                                        Year-End ($)
------------------      ------------------          -------------------
Name                       Exercisable/                 Exercisable/
                           Unexercisable                Unexercisable
------------------      ------------------          -------------------
M. E. Williams             882,000/0                     $138,550/0(1)
------------------      ------------------          -------------------

(1) Represents the difference between the last reported sales price per share of
the Company's  common stock as reported on the OTC Bulletin Board on October 31,
2001, and the exercise price of the option.

                             1999 STOCK OPTION PLAN

The Company  maintains  the 1999 Stock Option Plan (the "1999 Plan") under which
options of purchase  800,000  shares of the Company's  Common  Stock,  par value
$.0001 per share, have been reserved.  Pursuant to the 1999 Plan, the Company is
permitted to issue  incentive  stock  options  ("Incentive  Stock  Options") and
non-qualified  stock  options  ("Non-Qualified  Stock  Options") to employees or
directors of the Company;  provided,  however,  that no incentive  Stock Options
shall be granted to a non-employee  director.  Incentive Stock Options under the
1999 Plan are intended to qualify for the tax treatment accord under Section 422
of the Internal  Code of 1986, as amended (the  "Code").  Non-Qualified  Options
under the 1999 Plan are intended to be options  which do not qualify for the tax
treatment accorded under Section 422 of the Code.

All directors and key employees of the Company and its subsidiaries are eligible
to participate in the 1999 Plan. The 1999 Plan is  administered  by the Board of
Directors of the Company which,  to the extent it  determines,  may delegate its
power with  respect  to the  administration  of the 1999 Plan to a  compensation
advisory  committee  consisting of not less than three members,  at least two of
whom shall be directors for the Company.

Under the 1999 Plan, Incentive Stock Options to purchase shares of the Company's
Common  Stock may not be granted for less than 100 percent of fair market  value
of the Common Stock on the date the Incentive Stock Option is granted; provided,
however,  that in the case of an Incentive  Stock  Option  granted to any person
then  owning 10  percent  of the voting  power of all  classes of the  Company's
stock,  the Purchase Price per share of all classes of the Company's  stock, the
Purchase  Price per share subject to the Incentive  Stock Option may not be less
than 110 percent of the fair market  value of the stock on the date of the grant
of the option.  The option  price per share with  respect to each  Non-Qualified
Stock Option  granted  under the 1999 Plan is to be  determined  by the Board of
Directors  but may not be less than 85 percent of the fair  market  value of the
Common Stock on the date the Non-Qualified Stock Option is granted.

Options under the 1999 Plan may not have a term of more than 10 years; provided,
however, that an Incentive Stock Option granted to a person then owing more than
10 percent of the voting power of all classes of the Company's  stock may not be
exercised more than 5 years after the date such option is granted.  In addition,
the aggregate fair market value,  determined at the time the options granted, of
the stock with respect to which  Incentive  Stock  Options are exercised for the
first  time by an  employee  in any  calendar  year  under the 1999 Plan may not
exceed $100,000.

<PAGE>

                          2001 LONG-TERM INCENTIVE PLAN

On July 24,  2001,  the Board  adopted,  and on October 5, 2001,  the  Company's
stockholders  approved, the 2001 Long Term Incentive Plan (the "2001 Plan"). The
2001 Plan  authorizes  the granting to the Company's  directors,  key employees,
advisors and  consultants  of options  intended to qualify as Incentive  Options
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code"), options that do not so qualify ("Non-Statutory  Options"),
restricted stock and Other Stock-Based  Awards that are not Incentive Options or
Non-Statutory Options.


                            SUMMARY OF THE 2001 PLAN

The  description  herein is a summary,  and is subject to and  qualified  by the
complete  text of the 2001 Plan,  which is  attached  as Appendix E to the proxy
statement for the 2000 Annual  Meeting filed with the SEC on September 18, 2001.
Capitalized  terms used and not  otherwise  defined in this portion of the proxy
statement have the respective meanings ascribed to such terms in the 2001 Plan.


PURPOSE

The  purpose  of the 2001 Plan is to promote  the  interests  of the  Company by
providing  eligible  persons  with the  opportunity  to  acquire  a  proprietary
interest,  or otherwise  increase  their  proprietary  interest,  in the Company
thereby  promoting a closer  identity of interests  between such persons and the
Company's shareholders.


STRUCTURE

The 2001 Plan is divided into three  separate  equity  programs:  (1) the Option
Grant Program under which  eligible  persons may be granted  options to purchase
shares of common stock,  (2) the Stock  Issuance  Program  under which  eligible
persons  may be  issued  shares of  common  stock and (3) the Other  Stock-Based
Awards  Program  under which  eligible  persons may be issued other  stock-based
incentives and awards.


ADMINISTRATION

The 2001 Plan is administered by the "Plan Administrator," which may be the full
Board or a Committee  consisting of two Board  members  designated by the Board.
The Plan  Administrator  has the authority to establish rules and regulations it
deems appropriate for the proper  administration of the 2001 Plan.  Decisions of
the Plan Administrator are final and binding on all parties who have an interest
in the 2001 Plan, and the Plan  Administrator  may not be held personally liable
for any action taken in good faith under the 2001 Plan.

<PAGE>

TERM

The 2001 Plan became  effective as of the date it was adopted by the Board,  and
terminates  upon the  earliest  of (1) the  expiration  of the  ten-year  period
measured  from the date the 2001 Plan is adopted  by the Board,  (2) the date on
which all  shares  available  for  issuance  under the 2001 Plan shall have been
issued as fully-vested  shares or (3) the termination of all outstanding options
and Other Stock-Based  Awards in connection with a Corporate  Transaction.  Upon
termination of the 2001 Plan, all options, Other Stock-Based Awards and unvested
stock  issuances  outstanding  will  continue  to have full  force  and  effect.
However,  no option  will have a term in excess of 10 years from the grant date,
and with respect to Incentive Options granted to a 10 percent  shareholder,  the
term may not exceed five  years.  The Board may amend or modify the 2001 Plan in
any or all respects.  However, no such amendment may adversely affect the rights
of existing optionees without their consent. Certain amendments may also require
the approval of the Company's stockholders.


ELIGIBILITY

Employees,  non-employee  members  of the Board,  certain  persons  who  provide
services to the Company or its  subsidiaries,  and  non-employee  members of the
board of directors of any parent or subsidiary are eligible to be granted awards
under the 2001 Plan.  It is not known how many  options  will be received by the
Company's named executive  officers,  current  executive  officers,  non-officer
directors,  employees, their associates, or any other group under the 2001 Plan.
As of October  31,  2001,  the  Company  had 409  employees,  four  non-employee
directors and an unknown number of consultants or advisors who might be selected
to receive Awards under the 2001 Plan.


STOCK

The maximum  number of shares of common stock  available for issuance  under the
2001 Plan is 500,000 shares,  subject to possible  adjustment for changes in the
Company's common stock occasioned by stock splits,  reverse stock splits,  stock
dividends,   recapitalization,   conversions  or  other  changes  affecting  the
outstanding   common  stock  as  a  class  without  the  Company's   receipt  of
consideration.  If an option  expires or terminates  for any reason prior to its
exercise  in full,  the  shares  subject  to the  portion  of the  option not so
exercised  will be available for subsequent  Awards under the 2001 Plan.  Vested
shares repurchased pursuant to the Company's repurchase rights will not be added
back to the number reserved for issuance under the 2001 Plan but will be held as
treasury stock.


FINANCIAL ASSISTANCE

The Plan  Administrator  may permit any participant to deliver a promissory note
to the  Company in payment of the  exercise  or  purchase  price.  The terms and
conditions of the loan will be  established by the Plan  Administrator,  and the
maximum  credit  extended to a participant  may not exceed the aggregate  option
price for the  purchased  shares plus any Federal,  state or local tax liability
incurred in connection with the option exercise or share purchase.


TAX WITHHOLDING

The Company's  obligation to deliver shares of common stock upon the exercise of
options or upon the  issuance or vesting of such  shares  under the 2001 Plan is
subject to the  satisfaction of all applicable  Federal,  state and local income
and employment tax withholding requirements.
<PAGE>


REGULATORY APPROVAL

The  implementation  of the 2001 Plan, the granting of any option under the 2001
Plan and the issuance of any shares of common stock (i) upon the exercise of any
option or (ii) under the Stock  Issuance  Program are  subject to the  Company's
procurement  of all  approvals and permits  required by  regulatory  authorities
having  jurisdiction  over the 2001 Plan,  the options  granted under it and the
shares of common stock issued pursuant to it.


NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the 2001 Plan shall confer upon the optionee or the  participant  any
right to continue in service  for any period of specific  duration or  interfere
with or  otherwise  restrict in any way the rights of the Company (or any parent
or  subsidiary  employing or retaining  such person) to terminate  such person's
service at any time for any reason, with or without cause.


                              OPTION GRANT PROGRAM


OPTION PRICE AND TERM

The  exercise  price  of each  option  granted  will be  determined  by the Plan
Administrator,  and may be less than,  equal to or greater  than the fair market
value of the  common  stock at the time the  option is  granted.  For  Incentive
Options,  the option  price per share may not be less than the fair market value
of each  share of Company  common  stock on the date of the grant (nor less than
110 percent in the case of 10 percent shareholders).  The 2001 Plan contains the
$100,000 per year limitation  upon incentive stock options  contained in Section
422(d) of the Code.  Excluding options granted to 10 percent  shareholders,  the
option  term may not  exceed  ten years  measured  from the grant  date.  For 10
percent shareholders, the option term may not exceed five years.


PAYMENT

The option price is payable in cash, by certified  check, or in shares of common
stock valued at fair market  value on the date of  exercise.  The 2001 Plan also
provides  for a special  sale and  remittance  procedure  whereby  the  optionee
provides  irrevocable  written  instructions  to a designated  brokerage firm to
effect the immediate sale of the purchased shares and remit to the Company,  out
of the sales proceeds, an amount equal to the aggregate option price payable for
the purchased shares plus all applicable withholding taxes.


TERMINATION OF SERVICE

Except as provided in an option agreement  governing the options or as permitted
by the Plan Administrator, any option outstanding at the time an optionee ceases
to remain in the Company's  service will terminate  immediately  and cease to be
outstanding. The Plan Administrator has complete discretion to extend the period
following the optionee's  termination  of service  during which the  outstanding
options may be exercised and/or to accelerate the exercisability of such options
in whole or in part.
<PAGE>


CORPORATE TRANSACTION

Except to the extent  otherwise  provided in the option  documents,  each option
share will become  fully vested in the event of certain  Corporate  Transactions
unless the option is assumed or is replaced with a cash incentive  program which
preserves  the  material  benefits  of the  options.  Upon  consummation  of the
Corporate  Transaction,  all options  which are not assumed will be canceled and
cease to exist.  A  Corporate  Transaction  includes,  but is not  limited to, a
merger,  consolidation,  sale of  substantially  all of the  assets or change in
control.  The options or cash incentive programs which replace any options which
do not  accelerate  may  provide  for full  vesting in the event of  involuntary
termination of employment within 18 months following the Corporate Transaction.


SHAREHOLDER RIGHTS AND ASSIGNABILITY

Optionees  do not have  shareholder  rights until the option is  exercised,  the
price is paid and stock certificates have been issued for the shares.  Incentive
Options are not assignable or transferable  other than by will or by the laws of
inheritance following the optionee's death. A Non-Statutory Option may, however,
in connection with an optionee's estate plan, be assigned, during the optionee's
lifetime and upon approval to an immediate  family member or tax exempt charity.
The option  may,  during  the  optionee's  lifetime,  be  exercised  only by the
optionee or approved transferee.


CANCELLATION/REGRANT

The Plan  Administrator  may effect the cancellation of outstanding  options and
issue  replacement  options with an exercise price based on a lower market price
of the common  stock at the time of grant with the  consent of  affected  option
holders.


                             STOCK ISSUANCE PROGRAM


RESTRICTED STOCK

The Plan  Administrator  is authorized  to grant  restricted  stock.  Restricted
stocks are shares of common stock subject to restrictions on transferability and
forfeiture  upon  termination of employment.  A participant  granted  restricted
stock has all of the rights of the Company's  stockholders  except as restricted
by the 2001 Plan or any award agreement.


ISSUE PRICE

Under the Stock Issuance Program, the purchase price per share may be less than,
equal  to  or  greater  than  the  fair  market  value  on  the  date  the  Plan
Administrator  authorizes  the issuance.  The issue price is payable in cash, by
certified check or by past services rendered.

<PAGE>

VESTING OF SHARES

The  shares  may,  in the  discretion  of the Plan  Administrator,  be fully and
immediately  vested upon issuance or may vest in one or more  installments  over
the  participant's  period  of  service  or upon  the  attainment  of  specified
performance objectives.


SHAREHOLDER RIGHTS

The recipient of a share issuance will have full shareholder  rights,  including
voting and dividend rights, whether or not the shares are vested.


REPURCHASE RIGHTS

Should a participant cease to remain in the service of the Company while holding
vested shares issued under the Stock Issuance Program, the Company has the right
to repurchase the shares on terms established by the Plan Administrator and at a
price  per  share  equal to fair  market  value.  In the  event  of a  Corporate
Transaction,  all  repurchase  rights will  terminate and each share will become
fully vested unless the repurchase  rights are assigned to the successor company
or accelerated  vesting is precluded by the applicable stock issuance agreement.
Following  consummation of a Corporate  Transaction,  the Plan Administrator may
provide  for the  automatic  termination  of all  repurchase  rights  which  are
assigned to the  successor and the  immediate  vesting of shares,  including the
involuntary  termination  of employment  within 18 months  following a Corporate
Transaction.


                            OTHER STOCK-BASED AWARDS


SARS

The Plan  Administrator  is authorized to grant stock  appreciation  rights,  or
SARs.  SARs  entitle  the  participant  to receive  the amount by which the fair
market  value of a share of common  stock on the date of  exercise  exceeds  the
grant price of the SAR.


DEFERRED STOCK

The Plan  Administrator  is authorized to grant  deferred  stock,  which will be
delivered  upon the  expiration of a deferral  period  specified for an award of
deferred  stock by the Plan  Administrator.  Deferred  stock is also  subject to
forfeiture upon termination of employment.


STOCK BONUS AWARDS

The Plan Administrator is authorized to grant shares of common stock as a bonus,
or to grant other stock-based awards in lieu of the Company's obligation to pay
cash under other plans or compensatory arrangements.


DIVIDEND EQUIVALENTS

The Plan Administrator is authorized to grant dividend  equivalents  entitling a
participant to receive cash, common stock,  other awards or other property equal
in value to dividends paid.
<PAGE>


PERFORMANCE BASED AWARDS

The Plan  Administrator  may,  in its  discretion,  designate  an award  that is
subject to the achievement of performance conditions.  These awards are intended
to qualify as "qualified  performance-based  compensation" within the meaning of
the Code. The Plan Administrator uses one or more business criteria and targeted
levels of performance. The business criteria includes the following:

               o    Annual return on capital;
               o    Annual earnings per share;
               o    Annual cash flow provided by operations;
               o    Changes in annual revenues; and/or
               o    Strategic  business  criteria,  consisting  of one  or  more
                    objectives  based  on  meeting  specified  revenue,   market
                    penetration,   geographic  business  expansion  goals,  cost
                    targets, and goals relating to acquisitions or divestitures.

Performance  objectives  may differ for  performance-based  awards to  different
participants, and the Plan Administrator shall specify the weight to be given to
each performance  objective in determining the final amount payable with respect
to any performance-based award.


          CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE 2001 PLAN

The following is a summary of certain federal income tax  considerations  and is
not a complete  description of all applicable  laws regarding the federal income
tax treatment of awards under the 2001 Plan.  The discussion set forth herein is
based  upon the  federal  income  tax  laws in force on the date of this  Annual
Report on Form 10-K.  This summary does not address the  following  issues:  (i)
dispositions of common stock other than by sale (for example, by gift), (ii) tax
consequences  of  modifications  to  Options  that  otherwise  would  qualify as
Incentive  Options,  (iii)  alternative  minimum tax  consequences,  (iv) state,
local, or foreign tax consequences,  and (v) gift,  estate,  and inheritance tax
consequences.  Because of the  complexity  of the tax rules  relating to Options
awards,  each 2001 Plan participant should consult with his own tax advisor with
respect to any specific tax questions.


INCENTIVE OPTIONS

An Optionee  will not  recognize  ordinary  income and the  Company  will not be
entitled  to a tax  deduction  upon  either  the  grant  or the  exercise  of an
Incentive  Option. If an Optionee holds common stock purchased upon the exercise
of an  Incentive  Option  until a date that is more than one year after the date
the  Incentive  Option is  exercised  and more than two years after the date the
Incentive Option is granted (the "holding  period"),  the difference between the
amount realized on the sale of the common stock and the exercise price will be a
long-term  capital gain or loss to the Optionee,  and no tax  deduction  will be
available to the Company.

If common stock purchased upon the exercise of an Incentive Option is sold prior
to the expiration of the holding  period,  the Optionee will recognize  ordinary
income  equal to the lesser of (i) the excess,  if any, of the fair market value
of the common stock on the date of exercise over the exercise price, or (ii) the
excess,  if any, of the amount realized on the sale over the exercise price. The
Company will be entitled to a  corresponding  tax  deduction.  In addition,  the
difference  between (i) the amount  realized on the sale of the common stock and
(ii) the sum of the exercise price and any amount  recognized by the Optionee as
ordinary taxable income will be a capital gain or loss. The capital gain or loss
will be long-term or short-term  depending  upon the length of time the Optionee
has held the common stock. Other rules apply if an Incentive Option is exercised
by tendering common stock.

The difference  between (i) the fair market value,  on the date of exercise,  of
common stock  purchased  upon the  exercise of an Incentive  Option and (ii) the
exercise  price of the Option  increases  income  for  alternative  minimum  tax
purposes. Additional rules apply if the common stock is sold prior to expiration
of the holding period.

<PAGE>

NON-STATUTORY OPTIONS

An Optionee will not recognize  income upon the grant of a Nonqualified  Option,
and no tax  deduction  will be  available to the  Company,  if the  Nonqualified
Option  does not have a  readily  ascertainable  value on the date of  grant.  A
Nonqualified  Option that is not publicly traded ordinarily is not considered to
have a readily ascertainable value on the date of grant.

Upon exercise of a Nonqualified  Option,  the Optionee will  recognize  ordinary
income equal to the difference between (i) the fair market value, on the date of
exercise,  of the common stock subject to the Nonqualified  Option, and (ii) the
exercise price.  The Company will be entitled to a corresponding  tax deduction.
The  Optionee's  tax basis in the common stock  purchased  upon  exercise of the
Nonqualified  Option  will be the sum of (i) the  exercise  price  and  (ii) the
amount of ordinary  income the Optionee  recognized  on the  exercise.  When the
Optionee sells the common stock,  the difference  between the amount realized on
the sale and the tax basis of the common  stock will be capital gain or loss and
will be long-term or short-term  depending  upon the length of time the Optionee
has held the  common  stock.  Other  rules  apply if a  Nonqualified  Option  is
exercised by tendering common stock.  The exercise of a Nonqualified  Option has
no effect upon income for alternative minimum tax purposes.


OTHER AWARDS

With respect to other Awards made under the 2001 Plan that are settled either in
cash or in stock or other property that is either transferable or not subject to
substantial risk of forfeiture,  the grantee  generally must recognize  ordinary
income  equal to the cash or the fair market  value of shares or other  property
received,  and the Company will be entitled to a deduction  for the same amount.
With  respect  to Awards  that are  settled in stock or other  property  that is
restricted as to transferability  and subject to substantial risk of forfeiture,
the grantee  generally must recognize  ordinary  income equal to the fair market
value of the shares or other  property  received at the first time the shares or
other  property  become  transferable  or not subject to a  substantial  risk of
forfeiture,  whichever  occurs  earlier,  and the Company  will be entitled to a
deduction for the same amount.


PLAN NOT QUALIFIED

The 2001 Plan is not qualified under Section 401 of the Code.

<PAGE>

                            COMPENSATION OF DIRECTORS

Directors who are not employees of the Company are entitled to a board meeting
attendance fee of $750 plus reimbursement of expenses.


                   EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS

The Company  currently does not have any employment  agreements  with any of the
Company's executive officers.


           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Smith is a member of the Compensation Committee.  The disclosures in Item 13
below are incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


                 PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP

The following table sets forth information with respect to beneficial  ownership
of common stock as of October 31, 2001,  by (i) all persons known to the Company
to be the  beneficial  owner of five percent or more of the common  stock,  (ii)
each director of the Company,  (iii) the chief executive officer and each of the
Company's other most highly  compensated  executive  officers whose total annual
compensation  for 2001 based on salary and bonus  earned  during  2001  exceeded
$100,000 (the "named executive officers");  (iv) the current executive officers;
and (v) all Company directors and executive officers as a group. This table does
not include shares of common stock that may be purchased pursuant to options not
exercisable  within 60 days of the record  date.  All  persons  listed have sole
voting and  investment  power  with  respect to their  shares  unless  otherwise
indicated.

<TABLE>
                                                             Common Stock                 Series C Preferred Stock

                                                                          Percentage      Number of      Percentage
                                                                           of Shares        Shares        of Shares
<S>                                             <C>                     <C>             <C>             <C>
              Name and Address of                   Number of Shares     Beneficially    Beneficially   Beneficially
               Beneficial Owner                    Beneficially Owned        Owned          Owned           Owned
               ----------------                    ------------------        -----          -----           -----

Executive Officers and Directors:

Timothy S. Durham (1)                                  76,055,366            73.8%         3,352,963       89.2%
Terry G. Whitesell (2)                                 73,972,240            71.8%         3,352,963       89.2%
D. Scott McKain                                           810,100             2.3%
Jeffrey W. Osler (3)                                   67,878,560            65.9%         3,352,963       89.2%
Goodhue W. Smith, III (4)                                 363,334             1.0%            10,000           *
John A. Schmit (5)                                      5,000,000            12.2%                --          --
All current officers and directors as a                89,933,940            83.1%         3,362,963       89.7%
  group (7)
Former Chief Executive Officer:
M. E. Williams (6)                                        910,706             2.5%                --          --
Other 5% Shareholders:                                         --               --         3,352,963       89.2%
Obsidian Capital Partners, L.P. (8)                            --               --         3,352,963       89.2%
Richard W. Snyder                                       1,946,667             5.4%                --          --
Huntington Capital Investment Company (9)                      --               --           386,206       10.3%
</TABLE>

---------
*    less than one percent
<PAGE>

(1)  Includes  6,885,840  shares of common stock  directly  owned by Mr. Durham;
     2,083,126  shares held by Diamond  Investments,  LLC, for which Mr.  Durham
     serves as Managing  Member and for which shares Mr. Durham may be deemed to
     share voting and dispositive power;  3,352,963 shares of Series C preferred
     stock over which Mr. Durham shares  voting and  dispositive  power and that
     may be deemed to be beneficially owned by Mr. Durham due to his position as
     a managing member of Obsidian  Capital  Company,  LLC, which is the general
     partner of Obsidian Capital Partners,  LP, which directly owns such shares;
     and 27,140  shares of common stock over which Mr.  Durham shares voting and
     dispositive  power and that may be deemed to be  beneficially  owned by Mr.
     Durham due to his  position as a managing  member of Durham  Whitesell  and
     Associates, LLC, which directly owns such shares. The address of Mr. Durham
     is 111 Monument Circle, Suite 3680, Indianapolis, Indiana 46204.

(2)  Includes  6,885,840 shares of common stock directly owned by Mr. Whitesell;
     3,352,963  shares of Series C  preferred  stock  over  which Mr.  Whitesell
     shares  voting  and  dispositive  power  and  that  may  be  deemed  to  be
     beneficially  owned by Mr.  Whitesell  due to his  position  as a  managing
     member of Obsidian  Capital  Company,  LLC, which is the general partner of
     Obsidian Capital Partners,  LP, which directly owns such shares; and 27,140
     shares  of  common  stock  over  which  Mr.  Whitesell  shares  voting  and
     dispositive  power and that may be deemed to be  beneficially  owned by Mr.
     Whitesell due to his position as a managing member of Durham  Whitesell and
     Associates,  LLC,  which  directly  owns such  shares.  The  address of Mr.
     Whitesell is 111 Monument Circle, Suite 3680, Indianapolis, Indiana 46204.

(3)  Includes  819,300 shares of common stock  directly owned by Mr. Osler;  and
     3,352,963  shares of Series C preferred  stock over which Mr.  Osler shares
     voting  and  dispositive  power and that may be  deemed to be  beneficially
     owned by Mr.  Osler due to his  position  as a managing  member of Obsidian
     Capital  Company,  LLC,  which is the general  partner of Obsidian  Capital
     Partners,  LP, which directly owns such shares. The address of Mr. Osler is
     111 Monument Circle, Suite 3680, Indianapolis, Indiana 46204.

(4)  Includes 116,667 shares of common stock owned by Duncan-Smith  Investments,
     Inc.,  of which Mr.  Smith is an owner,  and warrant  for 10,000  shares of
     Series C  Preferred  Stock  issuable  to  Duncan-Smith  Co.  pursuant  to a
     presently exercisable warrant. The address of Mr. Smith is 711 Navarro, San
     Antonio, Texas 78205.

(5)  Consists of shares that may be acquired pursuant to convertible  debentures
     issued  by the  Registrant  on  July  19,  2001,  to two  trusts  of  which
     Renaissance   Capital  Group,   Inc.,  serves  as  investment  manager  and
     investment  advisor.  Mr.  Schmit is an  executive  officer of  Renaissance
     Capital Group, Inc. He disclaims  beneficial ownership of any securities of
     Registrant  held by  Renaissance  Capital  Group,  Inc.  The address of Mr.
     Schmit is 8080 North Central Expressway, Suite 210, Dallas, Texas 75206.

(6)  Includes 88,706 shares of common stock directly owned by Mr. Williams;  and
     882,500  shares of  common  stock  that may be  purchased  by Mr.  Williams
     pursuant to options that are immediately exercisable. Mr. Williams resigned
     as Chief Executive Officer on June 21, 2001.

(7)  Includes  3,352,963  shares of Series C preferred stock over which Obsidian
     Capital  Company,  LLC shares voting and dispositive  power and that may be
     deemed to be beneficially owned by Obsidian Capital Company, LLC due to its
     position as the general  partner of Obsidian  Capital  Partner,  LP,  which
     directly owns such shares.

(8)  Includes  3,352,963  shares of Series C preferred  stock  directly owned by
     Obsidian Capital Company, LLC. Voting and dispositive power over the shares
     of Series C preferred  stock may be deemed to be held by  Obsidian  Capital
     Partners,  LP, Obsidian  Capital  Company,  LLC and the managing members of
     Obsidian Capital Company LLC, which include Messrs.  Durham,  Whitesell and
     Osler.

(9)  Based on the  information  reported in a Schedule 13G filed with the SEC on
     August 6, 2001.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


RELATED PARTY TRANSACTIONS FOR THE TEN MONTHS ENDED OCTOBER 31, 2001

On August 1, 1997,  DII entered into a loan  agreement  with  Duncan-Smith  Co.,
Trustee. One of the Company's directors,  Goodhue Smith is a founder and officer
of  Duncan-Smith  Co. Terms of the $650,000 loan included an interest rate of 11
percent  with  payments  due  quarterly  and a final  payment on June 15,  2002.
Duncan-Smith  Co.  received  a cash fee of  $32,500  and a warrant  to  purchase
650,000  shares of common  stock at $0.25 per share with an  expiration  date of
August  2002.  Subsequently,  Goodhue W. Smith,  III, a director  and officer of
Duncan-Smith Co., was elected Chairman of the Board of the Company and currently
serves as a director of the Company.  In February 1999,  Duncan-Smith Co. agreed
to temporarily defer principal repayments on the note for February and May 1999.
In consideration,  the interest rate was increased to 13 percent until such time
as the original payment schedule became current. Effective January 21, 2000, DII
entered  into a  loan  with  Banc  of  America  Commercial  Finance  Corporation
("BACFC") and repaid the indebtedness to Duncan-Smith Co. in full.  However,  as
an  accommodation  to the Company,  Duncan-Smith  Co.  pledged a certificate  of
deposit for $150,000 to BACFC to secure the loan. During 2001, DII paid a fee to
Duncan-Smith  Co. of $2,812.50 for providing this  collateral and the pledge was
released in August 2001.  In June 2001,  Duncan-Smith  Co.'s warrant to purchase
650,000 shares of common stock at $0.25 per share was exchanged for a warrant to
purchase 10,000 shares of Series C preferred stock at $2.00 per share.

Some of the following  related party  transactions were commitments that existed
and were a part of the Acquisition and Plan of  Reorganization  that occurred on
June 21, 2001.

The Company owes to Obsidian Capital Partners,  LP, the majority  shareholder of
the Company,  the  approximate  amount of  $2,170,000  at October 31, 2001.  The
advances made to the Company by Obsidian  Capital  Partners,  LP is comprised of
$1,222,000 of advances to provide working capital and to fund losses of Champion
Trailer,  $279,806 to fund the  professional  fees to pay the cost of filing and
consultation  on the 8-K's and the 10-Q  reports to the SEC,  to pay the cost of
closing the  Acquisition  transaction  on the reverse merger on June 21, 2001 in
the amount of $363,919, and to complete the closing of the purchase of United in
the amount of $293,652.

Subsidiaries of the Company paid Obsidian Capital Company,  a company controlled
by  Messrs.  Durham  and  Whitesell,  fees of  $1,960,000,  associated  with the
acquisitions and related bank financing  through October 31, 2001. The fees paid
for the  acquisition and financing of the Danzer  transaction was $600,000.  The
fee paid for the U.S.  Rubber  transaction  was  $760,000.  The fee paid for the
United acquisition was $600,000.

At October 31, 2001,  the Company owed  Obsidian  Capital  Company  $624,317 for
funds advanced to Champion Trailer to fund the completion of trailers for resale
to third party customers.  DW Leasing obtained these funds from Obsidian Capital
Company.

DW Leasing owed Messrs.  Durham,  Whitesell and Osler, officers and directors of
the  Company,  the total amount of  approximately  $300,000 at October 31, 2001.
These  amounts  were  advanced by the  shareholders  to DW Leasing  prior to the
purchase by the Company of Pyramid and the DW Leasing coach assets.

Fair Holdings,  Inc., an Ohio  corporation 50% owned by Mr. Durham  (Chairman of
the Company),  subsequent to year end, has purchased accounts receivable from DW
Leasing,  recorded  by DW  Leasing as  deposits  on  trailers,  in the amount of
$1,050,582  as of February  13,  2002.  DW Leasing  used the  proceeds  from the
purchase of the accounts receivable to pay off the accounts payable due Obsidian
Capital  Company in the amount of $624,317 and the amount due  shareholders  and
other related parties in the approximate amount of $300,000.

United advanced Obsidian Capital Company  $216,000,  as a part of the closing of
the  purchase  of the  United  transaction.  The  amount was paid back to United
subsequent to year-end.

The Company for the year ended October 31, 2001,  paid Obsidian  Capital Company
rent expense of $15,000 for the use of office space.
<PAGE>


RELATED PARTY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2000

U.S.  Rubber had notes  receivable  due from the former parent  company owner of
U.S.  Rubber  in the  amount of  $2,868,000  at  December  31,  2000.  The notes
receivable were paid in full prior to the closing of the U.S. Rubber merger with
the Company,  effective January 1, 2001. U.S. Rubber received interest income on
the notes  receivable for the year ended  December 31, 2000, in the  approximate
amount of $356,000.


PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  Documents filed as part of this Annual Report on Form 10-K:

     (1)  Financial Statements.

          See the Financial Statements included in Item 8.

     (2)  Financial  Statement  Schedules Required to be Filed by Item 8 on this
          Form.

          See Item 8

     (3)  Exhibits.

The exhibits  filed as part of this Annual Report on Form 10-K are identified in
the Exhibit Index,  which Exhibit Index  specifically  identifies those exhibits
that describe or evidence all  management  contracts and  compensating  plans or
arrangements required to be filed as exhibits to this Report. Such Exhibit Index
is incorporated herein by reference.

(b)  Reports on Form 8-K

     The following Reports on Form 8-K were filed during the last quarter of the
     fiscal year ended October 31, 2001:

     (1)  Report  on  Form  8-K   regarding   July  31,  2001   acquisition   of
          substantially  all of the assets of United  Expressline,  Inc.  (filed
          August 15, 2001).

     (2)  Report on Form 8-K regarding  change in  independent  auditors  (filed
          November 13, 2001).




<PAGE>



                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  Registrant
caused  this report to be signed on its behalf,  by the  undersigned,  thereunto
duly authorized.

Dated:  February 22, 2002                   OBSIDIAN ENTERPRISES, INC.



                                            By /s/ Timothy S. Durham
                                            Timothy S. Durham
                                            Chief Executive Officer

In  accordance  with the Exchange  Act,  this report was signed by the following
persons  on  behalf of the  Registrant  and in the  capacities  and on the dates
indicated.



Dated:  February 22, 2002                 /s/ Timothy S. Durham
                                          Timothy S. Durham
                                          Chief Executive Officer (Principal
                                          Executive Officer) and Chairman of the
                                          Board and Director


Dated:  February 22, 2002                 /s/ Jeffrey W. Osler
                                          Jeffrey W. Osler,
                                          Executive  Vice  President,
                                          Secretary and  Treasurer,  (Principal
                                          Financial and Accounting Officer)
                                          and Director



Dated:  February 22, 2002                 /s/ Terry G. Whitesell
                                          Terry G. Whitesell, Director


Dated:  February 22, 2002                 /s/ Goodhue W. Smith, III
                                          Goodhue W. Smith, III, Director


Dated:  February 22, 2002                 /s/ John A. Schmit
                                          John A. Schmit, Director



Dated:  February 22, 2002                 /s/ D. Scott McKain
                                          D. Scott McKain, Vice Chairman
                                          and Director


Dated:  February 22, 2002                 /s/ Daniel S. Laikin
                                          Daniel S. Laikin, Director



<PAGE>


                                  EXHIBIT INDEX
<TABLE>

<S>               <C>                                                           <C>
Exhibit No.                        Description                                     Incorporated by Reference/Attached

2                  Acquisition Agreement and Plan of Reorganization, dated June    Incorporated by reference to
                   21, 2001, by and among Registrant, Danzer Industries, Inc.,     Exhibit 2.1 to Report on Form 8-K
                   Pyramid Coach, Inc., Champion Trailer, Inc., United             filed August 15, 2001
                   Acquisition, Inc., U.S. Rubber Reclaiming, Inc., Obsidian
                   Capital Partners, L.P. and Timothy S. Durham
3.1                Certificate of Incorporation (filed with Delaware Secretary                  Attached
                   of State on October 4, 2001)
3.2                Certificate of Designations, Preferences, Rights and                         Attached
                   Limitations of Series C Preferred Stock
3.3                By Laws of the Registrant                                                    Attached
4.1                Registration Rights Agreement, dated June 21, 2001                           Attached
4.2                Amendment and Joinder to Registration Rights Agreement,  dated               Attached
                   July 27, 2001
4.3                8.00% Convertible Debenture Issued by Registrant on July 19,    Incorporated by reference to
                   2001 to HSBC Global Custody Nominee Due July 19, 2008           Exhibit 2 to Schedule 13D filed
                                                                                   September 20, 2001 by Russell
                                                                                   Cleveland, Renaissance Capital
                                                                                   Group, Inc.
4.4                8.00% Convertible Debenture Issued by Registrant on July 19,    Incorporated by reference to
                   2001 to Renaissance US Growth & Income Trust PLC Due July 19,   Exhibit 3 to Schedule 13D filed
                   2008                                                            September 20, 2001 by Russell
                                                                                   Cleveland, Renaissance Capital
                                                                                   Group, Inc.
4.5                Convertible Loan Agreement, dated July 19, 2001, Among                       Attached
                   Registrant, BFSUS Special Opportunities Trust PLC,
                   Renaissance US Growth & Income Trust PLC and Renaissance
                   Capital Group, Inc.
10.1               2001 Long Term Incentive Plan*                                  Incorporated by reference to
                                                                                   Appendix E to the Registrant's
                                                                                   Proxy Statement filed on
                                                                                   September 18, 2001
10.2               Asset Purchase Agreement, dated April 20, 2000, between                      Attached
                   Champion Trailer Company, L.P. and Harold Peck, Mary Peck,
                   Champion Trailer, Ltd. (f/k/a) Champion Trailer, LLC,
                   Champion Collision, Ltd. (f/k/a) Champion Collision, L.L.C.
                   and Brandonson, Inc.
10.3               Stock and Asset Purchase Agreement, dated December 20, 1999,                 Attached
                   among Timothy S. Durham, Terry Whitesell, DW Leasing, LLC,
                   Bobby Michael, Becky Michael, Jennifer George, Pyramid Coach,
                   Inc., Precision Coach, Inc., American Coach Works, Inc.,
                   Transport Trailer Service, Inc., Rent-A-Box, Inc. and LBJ, LLC
10.4               Assumption Agreement and Second Amendment to Credit                          Attached
                   Agreement, dated June 18, 2001, among Bank One, Indiana,
                   N.A., Champion Trailer, Inc. and Champion Trailer Company,
                   L.P.
10.5               Credit Agreement, dated December 29, 2000, between USRR                      Attached
                   Acquisition Corp. and Bank One, Indiana, N.A.
10.6               First Amendment to Credit Agreement, dated June 20, 2001,                    Attached
                   between U.S. Rubber Reclaiming, Inc. and Bank One, Indiana,
                   N.A.
10.7               Note Purchase Agreement, dated May 2, 2000, between Champion                 Attached
                   Trailer, Inc. and Markpoint Equity Growth Fund, J.V., and
                   Related Documents
10.8               Warrant, dated May 2, 2000, from Champion Trailer Company, LP                Attached
                   to Markpoint Equity Growth Fund, J.V.
10.9               Management Agreement, dated December 29, 2000, between                       Attached
                   Obsidian Capital Company, LLC and USRR Acquisition Corp.
10.10              Management Agreement, dated June 16, 2001, between Pyramid,                  Attached
                   Inc. and D.W. Leasing
10.11              Promissory Note, dated June 1, 2001, from Obsidian Capital                   Attached
                   Company, LLC to U.S. Rubber Reclaiming, Inc.
10.12              Promissory Note, dated June 11, 2001, from Champion Trailer,                 Attached
                   Inc. to Obsidian Capital Partners, LP
10.13              Purchase Agreement, dated June 5, 2001, between United                       Attached
                   Expressline, Inc., United Acquisition, Inc., J.J.M.
                   Incorporated and the Shareholders of United Expressline, Inc.
                   and J.J.M. Incorporated
10.14              Promissory Note, dated July 27, 2001, from United                            Attached
                   Acquisition, Inc. to United Expressline, Inc.
10.15              Credit Agreement, dated July 27, 2001, between United                        Attached
                   Acquisition, Inc. and First Indiana Bank
10.16              Loan and Security Agreement, dated January 21, 2000, between                 Attached
                   Danzer Industries, Inc. and Banc of America Commercial
                   Finance Corp.
10.17              Warrant, dated August 1997, by Danzer Corp. to Duncan-Smith                  Attached
                   Co. and Letter Agreement, dated June 21, 2001, between Danzer
                   Corp. and Duncan-Smith Co.
10.18              Stock Purchase Agreement, dated December 29, 2000, between                   Attached
                   USRR Acquisition Corp. and SerVaas, Inc.
10.19              Subordinated Secured Promissory Note, dated December 29,                     Attached
                   2000, from USRR Acquisition Corp. to SerVaas, Inc.
10.20              Supply and Consignment Agreement, dated December 29, 2000,                   Attached
                   between U.S.R.R. Acquisition and SerVaas, Inc.
10.21              Form of Installment Loan from Edgar County Bank & Trust Co.                  Attached
                   to DW Leasing Company, LLC, Related Documents and Schedule
                   Identifying Material Details
10.22              Loan Agreement, dated December 10, 1999, between Old National                Attached
                   Bank and DW Leasing Company, LLC, and Related Documents
10.23              Form of Promissory Note from DW Leasing Company, LLC, to                     Attached
                   Former Shareholders of Pyramid Coach, Inc., Related Security
                   Agreement, and Schedule Identifying Material Details
10.24              Form of Promissory Note from DW Leasing Company, LLC to Star                 Attached
                   Financial Bank, Related Documents and Schedule Identifying
                   Material Details
10.25              Form of Lock-Up Agreement, dated July 19, 2001, and Schedule                 Attached
                   Identifying Material Details
10.26              Master Lease Agreement, dated May 17, 2000, between Old                      Attached
                   National Bank and DW Leasing Company, LLC, and Related
                   Documents
10.27              Loan Agreement, dated June 1, 2000, between DW Leasing                       Attached
                   Company LLC and Regions Bank and Security Agreement
10.28              Business Loan Agreement (Asset Based), dated August 15, 2001,                Attached
                   between Danzer Industries, Inc. and Bank of America, N.A.
10.29              1999 Stock Option Plan*
10.30              Amendment to Acquisition Agreement and Plan of                               Attached
                   Reorganization, dated December 28, 2001, between Registrant
                   and Obsidian Leasing Company, Inc.
10.31              Agreement and Plan of Reorganization and Corporate
                   Separation, dated December 28, 2001, between DW Leasing LLC
                   and Obsidian Leasing Company, Inc.
21                 List of Subsidiaries                                                         Attached

</TABLE>

*    Indicates  Exhibits  that  describe or  evidence  management  contracts  or
     compensatory plans or arrangements required to be filed as Exhibits to this
     Annual Report on Form 10-K.