UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

                  Annual report pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                    For the fiscal year ended: July 31, 2000

                         Commission File Number 0-28313

                             RHINO ECOSYSTEMS, INC.
                           -- -----------------------
           (Name of Small Business Issuer as specified in its charter)

               Florida                                      65-0939751
         -----------------                               ----------------
       (State or other jurisdiction of                     (IRS Employer
       incorporation or organization)                     Identification No.)

                      40 Trowers Road, Woodbridge, Ontario,
                           Canada L4L 7K6 (Address of
                        principal executive offices) (Zip
                                      code)

       Registrant's telephone number, including area code: (905) 264-0198

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

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

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 X No ___.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B 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-KSB or any  amendment to
this Form 10-KSB. ____

Registrant's revenues for its most recent fiscal year were $173,942.

As of July 31, 2000, there were 6,525,539 shares of the registrant's  $.0001 par
value common stock issued and outstanding.

Transitional Small Business Disclosure Format Used  (Check one) Yes ___  No   X
                                                                           -----


<PAGE>


                                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>      <C>                                                                                                   <C>
                                                                                                               PAGE

                                     PART I
Item 1.   Business of the Company.................................................................................4

Item 2.   Properties.............................................................................................11

Item 3.   Legal Proceedings......................................................................................11

Item 4.   Submission of Matters to a Vote of Security Holders....................................................11

                                     PART II

Item 5.   Market for the Company's Common Equity And Related Shareholder Matters ................................12

Item 6.   Management's Discussion and Analysis of Financial Condition...........................................and
          Results of Operations and Plan of Operation............................................................12

Item 7.   Financial Statements...................................................................................15

Item 8.   Disagreements on Accounting and Financial Disclosures..................................................15

                                    PART III

Item 9.   Directors and Executive Officers of the Registrant.....................................................16

Item 10.  Executive Compensation.................................................................................17

Item 11.   Security Ownership of Certain Beneficial Owners and Management........................................18

Item 12.  Certain Relationships and Related Transactions.........................................................19

                                     PART IV

Item 13.  Exhibits, Financial Statements and Reports on Form 8-K.................................................19

Signatures.......................................................................................................23
</TABLE>


<PAGE>


                           Forward-Looking Statements

This  report  contains  forward-looking  statements  within  the  meaning of the
Section 21E of the Securities Exchange Act of 1934, as amended,  and Section 27A
of the Securities  Exchange Act of 1933, as amended,  and is subject to the safe
harbors created by those sections. These forward-looking  statements are subject
to significant risks and  uncertainties,  including  information  included under
Parts I and II of this annual  report,  which may cause actual results to differ
materially  from  those  discussed  in  such  forward-looking   statements.  The
forward-looking  statements  within this annual  report are  identified by words
such as "believes," "anticipates," "expects," "intends," "may," "will" and other
similar  expressions   regarding  the  Company's  intent,   belief  and  current
expectations.  However,  these words are not the exclusive  means of identifying
such  statements.  In  addition,  any  statements  which refer to  expectations,
projections or other  characterizations  of future events or circumstances,  and
statements made in the future tense are forward-looking statements.  Readers are
cautioned that actual results may differ  materially from those projected in the
forward-looking  statements  as a result of various  factors,  many of which are
beyond the control of the  Company.  The Company  undertakes  no  obligation  to
publicly  release  the  results  of  any  revisions  to  these   forward-looking
statements  which  may be made to  reflect  events  or  circumstances  occurring
subsequent to the filing of this annual  report with the SEC.  Readers are urged
to carefully review and consider the various  disclosures made by the Company in
this annual report.

<PAGE>

                                        4

                                     PART I

ITEM 1.   BUSINESS OF THE COMPANY

General

     Rhino was  organized  by the filing of articles of  incorporation  with the
Secretary of State of the State of Florida on April 7, 1999. The articles of the
Company authorized the issuance of twenty-five  million  (25,000,000)  shares of
Common  Stock at a par value of $0.0001 per share.  Rhino shall also include all
references to its majority owned subsidiary,  Rhino Ecosystems,  Inc., a company
subject to the provisions of the Business Corporations Act of Ontario.


     Rhino has invented and tested a patented  technology  known as the RINO(TM)
System which stands for "Refuse In Nothing Out." We have applied for a trademark
on the  corporate  logo and name "RINO" and we have a Canadian  patent  pending,
Patent  #  2,178,270,   as  well  as  an   international   PCT  application  No.
PCT/CA97/00377  on this innovative  technology.  Patents have been issued in the
United States of America (09/194910) and in Singapore (9806089-0).  The RINO(TM)
System  provides  a  simple,   inexpensive  solution  for  all  restaurants  and
food-related  industries  with regards to  compliance  with  existing and future
environmental legislation.  The RINO(TM) System is design to work in conjunction
with existing grease trap filtration systems.  The RINO(TM) System will serve as
a pre-grease  trap  filtration  system which captures a large portion of greases
and food solids that are typically sent down the drains of kitchen  sinks,  in a
disposable  filtration  bag.  The  RINO(TM)  System  has been  tested  and is in
compliance with the following  standards:  CSA B 125.0-98 for Plumbing Fixtures,
and ASME A112.18.1M-1996 for Plumbing Fixture Fittings.


     Water is heavily used in industrial,  commercial and  residential  settings
during the  preparation of food  including the cleaning of containers,  cookware
and utensils used in cooking.  This produces a consequent  amount of waste water
which  typically  contains a  substantial  amount of organic  matter,  including
grease.  Grease, which enters the public sewage system, may be treated at sewage
treatment plants at a substantial  cost. In industrial and commercial  settings,
some  local  governments  mandate  the use of grease  trap  collection  units to
minimize the volume of grease entering the public sewage system.

     Standard  grease trap  collection  units consist of settling  tanks for the
collection  of grease and other waste  solids.  These tanks may form part of the
waste water flow path and  accordingly may not separate grease and other organic
matter  efficiently.  Furthermore,  standard  grease trap  collection  units may
require  the  services  of a grease  removal  specialist  to empty  the trap and
dispose of the grease.  Grease traps also generally require regular  maintenance
to prevent the build up of excessive grease in the trap and the pipes. Excessive
grease in waste  water  systems  may  result in  excessive  bacteria,  which may
attract  vermin or insects,  may cause  blocked  pipes and reduced flow rates in
sinks,  and may allow noxious odors to enter the kitchen and restaurant  seating
areas through waste water drains.

<PAGE>

     The patented  RINOTM  System is in  compliance  with  Canadian  Federal and
Provincial Regulatory requirements.  In fact, current studies and literature are
leaning toward  mandatory  implementation  of pre-grease  trap  interceptors  of
grease and waste solids (i.e. RINOTM System). Current Canadian study groups such
as the  OPIA  (Ontario  Plumbing  Inspectors  Association)  are also  trying  to
legislate mandatory  implementation of grease interceptors in all industrial and
commercial locations where food is cooked, processed or prepared.

     American study groups such as the PDI (Plumbing and Drainage Institute) and
the ASPE  (American  Society of Plumbing  Engineers)  also have  identified  the
problem with grease and waste solids entering the public sewage system.

     Test data captured from RINOTM Systems  installed in various  locations has
been recently  tested and audited by an independent  engineering  and consulting
company.  Tests  performed  have  proven  the  RINOTM  System to be highly  cost
effective.  Preliminary  observations  based on the testing have  identified the
following benefits:

1.     reduces the amount of grease and waste solids which flow down the drain;
2.     reduces the risk of the clogging or backing up of grease traps and sinks;
3.     reduces the number of grease  trap cleanings required (which  will reduce
       down  time  associated with  costly specialists  required  to  clear  the
       drains);
4.     reduces the  odors associated   with the grease  trap (especially  during
       cleaning);
5.     reduces  the costs to the   municipality for  treating the sewage in  the
       public sewage system;
6.     increase in overall management and environmental awareness;
7.     reduces closure  of restaurant and loss  of revenue due to the backing up
       of the grease trap, clogged sinks and plumbing.

Business Strategy

     During its initial  phase of  development,  Rhino intends to form long term
working  relationships with selected component suppliers of the RINO(TM) System.
These  relationships  will ensure quality components at a competitive price. The
Sales  and  Marketing  strategy  for the  Company  is to  establish  a series of
independent  dealers/distributors  across North  America  during the first three
years of operation  and branch out into the  Caribbean  Island  Region,  the Far
East,  Europe and Australia as these markets  develop for the Rhino product line
of Wet Waste Interceptors.  These dealership agreements do contain inventory and
sales quotas for a defined territory or region of the country.

Recent Developments

<PAGE>

     Rhino  dealerships  have been  established in the various regions of Canada
(the Province of Nova Scotia, Vancouver,  British Columbia,  Montreal and Quebec
City, Quebec,  the Peel Region and Niagara Falls area of Ontario);  areas of the
United States (upstate New York, New Jersey,  Hawaii,  Jacksonville and Orlando,
Florida);  and in the Caribbean Islands (the Bahamas and Bermuda).  Negotiations
are on-going for other areas of Canada, the United States and Japan.

Products and Features

     The RINOTM System is the registered  trademark name for the pre-grease trap
interceptor  and/or  the wet waste  interceptor  filtration  system.  An initial
installation  provides a collector  body and  contains  one box of 30  removable
filters.  Refills of the removable  filters are then supplied to the customer as
required via the Company direct or the customers' local Rhino dealer.

     Once  the  RINOTM  unit  is  installed,   the  discharge   water  from  the
establishments'  sinks will be gravity fed into the cap (i.e. waterfeed OTM CAP)
of the RINO(TM)  unit.  The discharge  water will pass through a collection  bag
(i.e.  filter bag) that will trap the waste  materials  while  letting the water
pass through the discharge hole into a waste water  collection  area, which will
be emptied as follows:

     1. Gravity Model - waste water will flow through the  discharge  outlet and
reenter the resident  plumbing  drainage lines prior to the resident grease trap
interceptor.

     2. Pump Models -in height  restricted areas, an electrical waste water pump
is used to pump the water out of the RINO(TM) prior to the resident  grease trap
interceptor.

     The  filtration  bag can be easily  emptied and replaced via a front access
cover on the RINO(TM) unit by any staff member of the respective  establishment.
Upon  removal of the  filtration  bag,  it can be disposed of through the normal
waste removal  collection  system.  Numerous tests performed to date have proven
the  existing  filter  bag to be the most  efficient  in terms of its  filtering
capabilities. The existing filter bag specifications are as follows:

          Needle count:    401
          Cylinder size:   3-1/2
          Start up yarn:   30/2 stretch nylon
          Body yarn:       40/l/S stretch nylon 40/1/Z stretch nylon
          Run out yarn:    60/1 cotton
          Knit length:     16 inches
          Finish length:   12 inches

These  specifications  have  been  determined  as a  result  of  numerous  tests
performed.

Problems with Existing Grease Traps

<PAGE>


     The  prevailing  method of  intercepting  and removing fats, oil and grease
from waste water is through the use of grease  traps.  Grease traps are intended
to provide some retention time to cool the warm liquefied  grease for separation
in the form of a surface scum or oil layer. Unfortunately, most grease traps are
undersized  and provide only  minimal  grease  separation  prior to discharge to
sewers. Additionally,  emulsified oil, unless the emulsion breaks, will normally
not separate in grease  traps.  To make things  worse,  many  facilities  do not
adequately maintain or service the existing grease traps.

    Grease and waste solids which are not removed in grease traps will cool down
in sewers, both private and municipal,  and in this way result in gradual grease
buildup within the sewers,  leading to flow restrictions or complete  blockages.
These  blockages  lead  to  bad  odors  scented  in the  respective  facilities,
increased number of grease trap cleanings, potential down-time (i.e. shut downs)
as a result of costly work required to hire  specialists to clean any blockages,
and an  overall  negative  effect  on  the  facilities'  operations.  Additional
expenses may be incurred due to municipal  cost recovery on  prosecutions  (i.e.
fines) for municipal blockages.

     Rhino is  committed  to reduce and  eventually  eliminate  the above  noted
problems  efficiently and most importantly  cost-effectively.  Efforts are being
made to create a low cost and highly effective  biodegradable bag. This bag will
reduce any concerns  raised by the  currently  used nylon bag to  eliminate  any
waste control issues.

     Installation of the RINO(TM)  System can be accomplished  with a minimum of
disruptions  to existing  plumbing  systems.  Any local  plumber will be able to
easily install a RINO(TM) relatively short period of time.

Physical Requirements

     Rhino Ecosystems, Inc., has located itself in an 8,000 square foot facility
nearby its major  component  suppliers.  The  location of the facility is in the
central Greater Toronto Area near the 400 series highways, which can accommodate
high volumes of traffic.

Staffing/Training

     Rhino has  established  a central  core of eight  key team  members  in the
Administrative,  Manufacturing,  Sales  and  Marketing  areas.  As the  need for
additional qualified  professionals arise in any area of business,  they will be
attracted to Rhino as a company and will be competitively compensated.

     Specialized laboratory  technicians/engineering firms will be contracted as
required to maintain the Company's commitment to research and development in the
area of eliminating  waste water grease and solids and to develop new technology
and/or new product lines.

Manufacturing

     The Company is dedicated to quality products.  As such, the Company will be
seeking IS09000 accreditation and will be using IS09000 approved suppliers.


<PAGE>


     All component manufacturing is subcontracted to companies who work with the
Company's  patented  and  registered  designs.  Blow Mold  Engineering  has been
contracted to perform the tooling design and manufacture. Cousins Currie Limited
will be responsible  for the production of the plastic shells which in turn will
be equipped with Beckett Pumps. Therefore,  the Company will not manufacture its
own products but will assemble the components together,  perform quality control
testing,  do dealership  and  telemarketing  sales and  distribution.  Continual
product  redesign,  research and development  testing and servicing will be done
jointly between in-house personnel and outside engineering firms.

     Benefits of not manufacturing are as follows:

     1.     Decrease in working capital required to conduct business;
     2.     Increase focus on sales and marketing;
     3.     Able to increase capacity quickly with a reduction in capital costs;
     4.     Increase in overall flexibility.

     The RINO(TM) System is a pre-grease trap wet waste  interceptor  filtration
system.  Once the RINO(TM)  System is sold and installed,  RINO(TM)  filter bags
will be sold to RINO(TM) users on a continual basis.

Product Positioning and Pricing

     The use of the  RINO(TM)  System  reduces  the  amount of grease  and waste
solids  entering into the public sewage system.  The savings in reducing  grease
and waste  solids  have been  proven  through a  significant  number of  studies
performed.  Studies  have proven that  existing  grease traps  normally  require
cleaning  frequency of once every two weeks without  RINO(TM),  and one cleaning
every six weeks with RINO(TM) This results in cleanings  required  approximately
three  times less  frequently.  Since the cost per  cleaning is $120 in the test
market  of  Metropolitan  Toronto,  an  approximate  annual  saving of using the
RINO(TM) System, taking into consideration the cost of bags at $1.75 per bag, is
expected to be approximately $1,162 per year after installation and unit cost.

     Such a saving equates to a payback of  approximately  one year for the pump
unit and approximately  eight months for the gravity unit based on the projected
installed sale price of a RINO(TM)  System.  Savings will also be in the form of
reduced down time, no loss of customers due to odors and no  requirement to hire
a plumber to clean  drains,  and reduced risk of fines as a result of violations
of sewer use by-laws, which could cost up to $50,000 per violation.

     The publication  "Best Management  Practices" from the Canadian Ministry of
Environment and Energy directed to the restaurant  sector are recommending  that
restaurants reduce the amount of solids that are flushed down the drain. Various
government regulations exist to prevent solids and grease from entering into the
sewage system.

<PAGE>


The Market and Product Distribution

     The potential  markets are  restaurants,  and food producing and processing
facilities.  The primary  initial  markets in Canada are  Toronto,  Montreal and
Vancouver.  Upon  successful  entrance  into the  Canadian  market,  the Company
intends to focus its marketing  efforts in American  states such as  California,
Florida and New York.

Marketing Strategy

     The  RINO(TM)  System  will be  marketed  through an  information  campaign
directed at all public health and water pollution control officials, restaurants
and  other  food  preparation  or  processing  facilities,  and to all  plumbing
materials distribution outlets.

     The  Company's  sales and  technical  representatives  will also attend all
relevant seminars and conferences held by the Federal,  Provincial and Municipal
Ministries  of Health and  Environment  in Canada to talk to decision  makers in
each  community.  Representatives  will also attend trade shows held by plumbing
associations to increase the overall awareness of the product. Contacts made and
requests  developed  through  these sources will be followed up by the marketing
department.

     Promotional material,  such as brochures,  CD ROM, documentation videos and
an Internet web page is currently  available for public viewing and distribution
by the Rhino sales team. As well, there is a telephone  marketing  program being
implemented that will generate leads for all sales staff.

     A  professional  exhibit  has been  designed  and built for use at  various
conferences and trade shows.  This information  exhibit focuses on the mechanics
of the  RINO(TM)  System,  the problems  the system  resolves,  and the spin-off
benefits  and savings  that result from the use of the system.  Research  papers
supporting these benefits will be made available.

Sales

     Rhino  expects  to sell  the  majority  of its  product  line of wet  waste
interceptors through it's ever increasing group of  dealers/distributors  across
North America.

Direct Sales

     The Company expects that a portion of its sales will come from direct sales
to   owner-managed   restaurants   across   Canada   and  the   United   States.
Commission-only  sales  personnel who will be  affiliated  with but not directly
working  for the Company  will  achieve  these  sales.  These sales  people will
acquire  RINO(TM)  Units  through  the Rhino  product  distribution  channels at
standard company wide pre-set pricing.

<PAGE>


Restaurant Chains

     The large  number of  franchise  restaurants  chains in North  America will
require a combined  effort from all of the Company's  senior  management team as
well as local dealer sales agents to  adequately  service this  potential  sales
market.  Most of the fast food chains have central  purchasing and  distribution
for most of their  standard  equipment and supply  requirements.  Selling to the
head  office,  the need and  benefits to the total  organization  will result in
large quantity orders to a customer.

Competition

     As the RINO(TM) System is patented in some areas of the world and is patent
pending in other parts of the world, Rhino believes that the RINO(TM) process is
very difficult, if not impossible, to duplicate in the foreseeable future.

     Currently,  there are no  existing  pre-grease  trap wet waste  interceptor
filtration  systems comparable to the patented RINO(TM) System in place anywhere
in North  America and as a result the lead time created by Rhino should  protect
the Company from any future external developments.  Other competitors,  however,
could  develop with  greater  financial  and  technical  resources.  Should such
competition develop, the Company's operations could be impaired.

Competitive Advantage

     The Company's  competitive  advantages are numerous.  The main advantage is
the technological lead the Company has taken in the study of the pre-grease trap
wet waste  interceptor  system  problem  which creates the  opportunity  for the
RINO(TM)  System.  The technology has also been granted pioneer status,  meaning
"first use of scientific concept to solve a commercially valuable problem."

     The advantages of the RINO(TM) System over existing grease traps are:

1.     reduces the amount of grease and  waste solids which flow into the public
       sewage system
2.     expensive costs associated with hiring a specialist to pump out backed up
       material from  the drain and resulting in potential down-time
3.     reduces the number of grease trap cleanings
4.     reduces  odors associated  with  the  grease  trap,  particularly  during
       cleaning
5.     reduction  in costs to the  municipality for  treating the sewage  in the
       public sewage system.  The Company is quite  hopeful  that the  RINO (TM)
       System will be  endorsed by  all  water  pollution  control  governmental
       bodies
6.     increase in overall environmental awareness.

<PAGE>


ITEM 2.   PROPERTIES

     We do not own any real property.

     The Company  leases its principal  business  operations at 40 Trowers Road,
Woodbridge,  Ontario,  Canada L4L 7K6. The lease expires in March 2001. Our rent
is $3300.00 per month. The Company's toll free telephone number is (877)746-6224
and the web site address is www.rhinoeco.com.

ITEM 3.   LEGAL PROCEEDINGS

     The  Company  is not  involved  in any  litigation  and  the  officers  and
directors are not aware of any threatened or pending  litigation that would have
a material, adverse effect on the Company.

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

     During the fourth  quarter of the fiscal year  covered by this  report,  no
matters were submitted to a vote of security  holders,  through the solicitation
of proxies or otherwise.



<PAGE>


                                     PART II

ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Market Information

     The Company's common stock is traded on the Over the Counter Bulletin Board
under the symbol "RHNC". The CUSIP number is 76217W108. The following is a table
of the high and low bid prices of the  Company's  stock for each of the  trading
quarters of the fiscal year ended July 31, 2000:


           Quarter Ended....         High              Low
               6/14/00(1)           $3.00            $1.50
               7/31/00...           $1.18            $1.00


     These  quotations  reflect  interdealer  prices,  without  retail  mark-up,
mark-down or commission and may not represent actual transactions.
-----------
1. Trading on the National Daily Quotation Bureau began on June 14, 2000.

Security Holders

     As of July 31, 2000,  the Company had  approximately  180  shareholders  of
record.

Dividends

     There have been no cash  dividends  declared or paid since the inception of
the  Company,  and  no  cash  dividends  are  contemplated  to be  paid  in  the
foreseeable  future. The Company may consider a potential dividend in the future
in either common stock or the stock of future operating subsidiaries.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS AND PLAN OF OPERATION

     The  following  discussion  and  analysis  of  the  Company's  consolidated
financial  condition and results of operation for the fiscal year ended July 31,
2000 and 1999,  should be read in  conjunction  with the Company's  consolidated
financial  statements  included  elsewhere  herein.  When used in the  following
discussions,  the words  "believes,"  "anticipates,"  "intends,"  "expects," and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are subject to certain  risks and  uncertainties,  which could cause
results to differ materially from those projected.

<PAGE>


Results of Operations

     The  Company is  primarily  engaged in the design,  development,  assembly,
marketing and sale of a unique patented wet waste  interceptor  plumbing product
called the  RINO(TM)  System.  During the fiscal  years July 31,  2000  ("fiscal
2000"),  as well as prior years,  the Company's  management has concentrated its
time and efforts on ensuring that the Rhino wet waste  interceptor  product line
be  designed  and  developed  into a  product  line  that  can  be  manufactured
efficiently and consistently to meet a wide variety of end users needs.

     During 2000, the Company started an aggressive sales and marketing  program
throughout North America. The Company has attended  hospitality,  restaurant and
plumbing  related trade shows aimed at increasing the public's  awareness of the
Company's  patented  wet  waste  interceptor  product  line and to  attract  new
dealers/distributors for the product line.

     During this time  period,  the Company  attended  shows in Toronto,  Myrtle
Beach,  Nashville,  Moncton,  New York,  Boston,  and  Chicago.  The  Company is
concentrating  on the  hospitality  and food service  market sector as this is a
market area that can realize an  immediate  savings from the  installation  of a
Rhino Wet Waste Interceptor.

     To aid in  qualifying  the  show  attendance  at the  Rhino  booth at these
various trade shows, a telemarketing/sales team within the Company is being used
to   promote   its   product   line   before   and  after   each   show.   Rhino
dealers/distributors  have been  established  in the Bahamas,  Bermuda,  Hawaii,
upstate New York,  New Jersey,  Nova Scotia,  British  Columbia,  Metro-Toronto,
Niagara Falls Region,  Montreal,  and Quebec City,  Canada,  as a result of this
sales and marketing campaign. Additional dealer/distributor locations are in the
final stages of completion.

     The Company intends to continue this sales and marketing  approach to raise
the general public's  awareness of the Rhino wet waste interceptor  product line
and to obtain a distribution network of exclusive and non-exclusive dealers. The
Company intends to supply quality, manufactured product line to a professionally
trained and dedicated dealer network.

     As of the end of fiscal 2000,  the Company has had no  significant  revenue
derived from  operations.  The Company's  cumulative net loss to year ended July
31, 2000 totals  $1,787,389.  Positive  results are  intended to be derived from
future sales of the Company's  products  through the  establishment of exclusive
and non-exclusive  dealerships  throughout North America and the Caribbean.  The
Company intends to enlarge the dealership  base and resulting  sales  throughout
the remainder of fiscal 2001.

Fiscal Year 2000 Compared to Fiscal Year 1999



<PAGE>


     Sales during fiscal 2000 totaled $173,942,  which is an improvement of 499%
over fiscal 1999.  The cost of sales as a percentage of sales during fiscal 2000
was 37.8%,  which is compared to fiscal 1999 rate of 46.2%. The slight change in
rate is related to product mix of sales between the two years and an increase in
the cost of plastic  components  which could not  completely be passed on to the
dealers or end users of the Rhino Wet Waste Interceptors.

    Expenses  associated  with the  sales and  marketing  of the Rhino Wet Waste
Interceptors  increased  between fiscal 1999 and fiscal 2000 by $218,319 or 33%.
This rise in expenditures was due to the company's attendance during fiscal 2000
of seven trade shows which raised the public's  awareness of the Rhino Wet Waste
Interceptor  product line and  increased  the Rhino  dealers from four in fiscal
1999 to eight by the end of fiscal 2000.

    The benefits of attendance at trade shows  continue to assist the company in
increased  sales  throughout  this first  quarter of fiscal 2001 and a continual
increase in signed Rhino  dealerships.  The company plans to attend  appropriate
trade shows during  fiscal 2001,  to continue on the task of raising the publics
awareness of the Rhino product line of Wet Waste Interceptors.

    The increase in professional consultant fees and wages is a direct result of
the increase in the number of employees and/or contract  professions used during
the year to attend trade shows, tele-market the company's products, assemble the
Rhino  product  line,  and test and certify the Rhino  product  line to industry
standards.  (CSA B 125.0-98 Plumbing Fixtures and ASME A112.18.1M-1996  Plumbing
Fixture Fittings)

Liquidity and Capital Resources

     During the past four fiscal years,  the Company has financed its operations
primarily  through  cash  provided  through  various  short and long term credit
facilities and through the private sale of its securities pursuant to applicable
offering  exemptions.  The Company's  management  believes that sufficient funds
will be raised from  future  operations  so as to  minimize  the need for future
equity capitalization.

     In addition,  management of the Company  believes the needs for  additional
capital  going  forward  will be derived  somewhat  from  internal  revenues and
earnings generated from the sale of its products and services. If the Company is
unable to begin to generate revenues from its anticipated  products,  management
believes  the  Company  will  need to  raise  additional  funds to meet its cash
requirements.



<PAGE>


     This document and other  documents filed by the Company with the Securities
and Exchange Commission (the "SEC") contain certain  forward-looking  statements
under the Private  Securities  Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to certain
risks and uncertainties, including those mentioned above, which may cause actual
results to differ  significantly  from  these  forward-looking  statements.  The
Company  undertakes  no  obligation  to  publicly  release  the  results  of any
revisions to these forward-looking  statements which may be necessary to reflect
events or  circumstances  after the date hereof or to reflect the  occurrence of
unanticipated  events.  An investment  in the Company  involves  various  risks,
including  those  mentioned above and those which are detailed from time to time
in the Company's SEC filings.

Year 2000 Issue

     The two-digit coding of dates in many currently  installed computer systems
and software products has had no effect on our operations, and we do not believe
that this issue will result in any effect on our Company's  financial  condition
or results of operations.

ITEM 7.   FINANCIAL STATEMENTS

     The audited  consolidated  balance sheet of the Company for its years ended
July 31,  2000  and 1999 and  related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for the years ended July 31, 2000, 1999 and
1998 are included,  following Item 13, in  sequentially  numbered pages numbered
F-1 through F-__. The page numbers for the financial statement categories are as
follows:
<TABLE>
<CAPTION>
     <S>                                                                          <C>
                                  Index                                           Page

     Report of Independent Auditors                                                F-1

     Consolidated Balance Sheets as of July 31, 2000 and 1999                      F-

     Consolidated Statements of Operations
     for the Years Ended July 31, 2000, 1999 and 1998                              F-

     Consolidated   Statement   of   Stockholders'   Equity   [Deficiency]   and
     Comprehensive Loss for the Years Ended July 31, 2000, 1999 and 1998           F-

     Consolidated Statements of Cash Flows
     for the Years Ended July 31, 2000, 1999 and 1998                              F-

     Notes to Consolidated Financial Statements                                    F-
</TABLE>

ITEM 8.   DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

    The Company has had no  disagreements  on  accounting  issues and  financial
disclosures.


<PAGE>

                                    PART III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following  sets forth the names,  ages and positions held of all of the
Directors and Executive Officers of the Company.

                  Name              Age      Position

                  Mark Wiertzema    49       President and CFO
                  Gordan Novak      50       Vice President
                  Jan Walsh         43       Secretary/Treasurer

Mark Wiertzema, President and Chief Financial Officer

     Mark Wiertzema currently serves as President and Chief Financial Officer of
the Company.  Mr.  Wiertzema  graduated  from the  University of Iowa,  where he
received both his graduate and post-graduate  degrees. Mr. Wiertzema has over 25
years of experience in financial and strategic management of regional,  national
and international corporations.  During the last 15 years, Mr. Wiertzema has had
a  managerial  position in an  independent  company that  collects,  transports,
re-directs,  re-deploys,  re-uses and  recycles  non-hazardous  solid and liquid
waste products from large municipalities.

Gordan Novak, Vice President

     Since February, 1999, serves as Vice President of the Company. Mr. Novak is
Vice President of Light Steel  Technologies,  Inc.,  which licenses  proprietary
light steel building  technology and has  established a number of joint ventures
in Czech  Republic,  Croatia,  Germany,  Russia and  Ukraine.  Mr.  Novak was an
advisor to Queen of Diamonds  Resources,  Inc., where he negotiated the purchase
of mineral rights in Guyana. He also negotiated exclusive first right of refusal
for all  mineral  resources  (excluding  oil) in Somalia,  and signed  exclusive
contract for export of that country's  scrap metal. In 1996, he acted as advisor
to Alba Resources,  Inc.,  negotiating 50% joint venture agreements for two base
metal  properties in  Newfoundland.  Mr. Novak has had over 28 years of business
experience.

Jan Walsh, Secretary/Treasurer

     Jan Walsh,  since March,  1999,  has served as  Secretary/Treasurer  of the
Company.  Ms. Walsh works  extensively  on the  development  and  maintenance of
corporate images through imaginative corporate logo design, print literature and
corporate  informational  videos. Ms. Walsh is a graduate of the Ontario College
of Art & Design  and is an  accomplished  professional  caricature  artist.  Her
professional  objective  is to  create a better  future in the  world's  ecology
through  waste  management  efficiencies,  practices  and  industrial  pollution
prevention.


<PAGE>


Section 16(A) Beneficial Ownership Reporting Compliance

     Section 16(A) of the Securities Exchange Act of 1934, as amended,  requires
the Company's directors and executive officers, and persons who beneficially own
more than 10% of the  Company's  common  stock to file with the  Securities  and
Exchange  Commission  reports  of  ownership  of common  stock and other  equity
securities in the Company.  Officers,  directors and more than 10%  stockholders
are  required  by SEC  regulations  to furnish  the  Company  with copies of all
Section 16(a)  reports they file.  Since the Company  currently  does not have a
class of equity  securities  registered  pursuant to Section 12 of the  Exchange
Act,  there is no obligation  upon the Company's  offices,  directors and 10% or
greater  stockholders to file any such reports  pursuant to Section 16(a) of the
Exchange Act.

ITEM 10.  EXECUTIVE COMPENSATION

     The  following   table   provides   information   regarding  the  executive
compensation of persons serving as Rhino's executive  officers during the fiscal
years ended 2000, 1999 and 1998.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------

     SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------
---------------------------------------- ---------- ----------------------- -------------------- -------------------
<S>                                      <C>        <C>                     <C>                  <C>

                                                     Annual Compensation         Long-Term
                                                                               Compensation             All
               Name and                   Fiscal         Salary Bonus           Options by       Other Compensation
          Principal Position               Year                                 # of Shares
---------------------------------------- ---------- ----------------------- -------------------- -------------------
---------------------------------------- ---------- ------------- --------- -------------------- -------------------


Mark Wiertzema                           2000       $64,800
President & CFO                          1999       $65,800
                                         1998       $64,800
---------------------------------------- ---------- ------------- --------- -------------------- -------------------
---------------------------------------- ---------- ------------- --------- -------------------- -------------------

Gordan Novak                             2000       N/A
Vice President                           1999
                                         1998
---------------------------------------- ---------- ------------- --------- -------------------- -------------------
---------------------------------------- ---------- ------------- --------- -------------------- -------------------

Jan Walsh                                2000       N/A
 Secretary/Treasurer                     1999
                                         1998
---------------------------------------- ---------- ------------- --------- -------------------- -------------------
</TABLE>

     The Company had no  employment  agreements or stock options with any of its
executive  officers as of July 31,  2000.  Through  July 31,  2000,  none of the
officers  or  directors  except  Mr.  Wiertzema  received a salary or other cash
compensation.



<PAGE>


Compensation Committee

     Mark Wiertzema and Gordan Novak are members of the Compensation  Committee,
which  reviews  and  makes  recommendations  with  respect  to  compensation  of
officers, employees and consultants, including granting of options.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT

     As of the date of this  report,  we have a total of  25,000,000  shares  of
Common Stock authorized at a par value of $.0001, and there are 6,525,539 shares
of Common Stock  outstanding.  The following table sets forth  information as of
the date hereof with respect to the beneficial  ownership of our Common Stock by
(a) each person  known by us to be the  beneficial  owner of more than 5% of our
outstanding  Common Stock,  (b) the directors and officers of Rhino, and (c) the
directors and officers of the Company.

                                           Number of           % of Shares
Name and Address                           Shares Owned         Outstanding

Mark Wiertzema                                  894,885           14%
13203 Guelph Line - R.R. # 1
Campbellville, Ontario L0P 1B0 Canada

Gordan Novak                                     53,333            1%
Hamilton, Ontario, Canada

Jan Walsh                                        12,000            *
65 Harbour Square, Suite 2502
Toronto, Ontario M5J 2L4, Canada

All Directors and Officers as a group           960,218           15%
---------
* Less than 1%

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There  are no  transactions  to  which we are a party  or  certain  matters
affecting  us have or will  result  in a  material  benefit  to  certain  of our
directors and executive  officers,  or may create conflicts of interest.  Normal
business  transactions  that have occurred  between Rhino  shareholders  and the
Company are discussed in the audited financial  statements and are insignificant
in nature.


<PAGE>


     No director, officer or principal security holder of Rhino has or has had a
direct or indirect  material interest in any transaction to which we are or were
a party. We believe that the terms of each of the  transactions  described above
were no less favorable to us than could have been obtained from third parties.

                                     PART IV

ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

     (a) Index to financial statements and financial statement schedules

     The audited  balance sheets of the Company as of July 31, 2000 and 1999 and
the related  statements of operations,  stockholders'  equity and cash flows for
the years ended July 31,  2000,  1999 and 1998 follow in  sequentially  numbered
pages F-1 through F-___. The page numbers for the financial statement categories
are as follows:

         Page                       ........Description

         F-1               Report of Independent Auditors
         F-2               Balance Sheets as of July 31, 2000, 1999 and 1998
         F-3               Statements of Operations for the Years Ended
                           July 31, 2000, 1999 and 1998
         F-4               Statements of Stockholders' Equity [Deficiency] and
                           Comprehensive Loss for the Years Ended
                           July 31, 2000, 1999 and 1998
         F-5               Statements of Cash Flows for the Years Ended
                           July 31, 2000, 1999 and 1998
         F-6 through F-21  Notes to Financial Statements

     (b)  8-K Reports

     No reports on Form 8-K have been filed on behalf of the Company.

     (c)  Exhibits:

     3.1      Articles of Incorporation (1)
     3.2      By-laws (1)
     10       Material contracts (N/A)
     11       Statement of Computation of Earnings per Share
     21       Subsidiaries of the Company
     23       Consent of KPMG LLP
     27       Financial Data Schedule
-------------------------------
1. Incorporated by reference to the Company's original registration statement on
Form 10SB.



<PAGE>


                             ADDITIONAL INFORMATION

                             Corporate Headquarters
              40 Trowers Road, Woodbridge, Ontario, Canada L4L 7K6
          Telephone Number: (905) 264-0198; Fax Number: (905) 265-0515
                   Toll Free Telephone Number: (877) 746-6224
                    Internet Address http://www.rhinoeco.com;
                        E-mail Address sales@rhinoeco.com


                         Independent Public Accountants
                                    KPMG LLP
                                    Suite 600
                            3700 Steeles Avenue West
                            Vaughan, Ontario L4L 8K8


                                 Transfer Agent
                     American Stock Transfer & Trust Company
                                 40 Wall Street
                            New York, New York 10005

     Exhibits to Form 10-KSB will be provided to  shareholders of the Registrant
upon written  request  addressed to Rhino  Ecosystems,  Inc.,  40 Trowers  Road,
Woodbridge,  Ontario,  Canada L4L 7K6. Any exhibits  furnished  are subject to a
reasonable photocopying charge.

     The Securities  and Exchange  Commission has not approved or disapproved of
this Form 10-KSB and Annual  Report to  Shareholders  nor has it passed upon its
accuracy or adequacy.


                                    KPMG LLP
                              Chartered Accountants
                       3700 Steeles Avenue West, Suite 600
                            Vaughan, Ontario L4L 8K8
                                 (905) 264-4100



<PAGE>


                          INDEPENDENT AUDITOR'S REPORT




                        Consolidated Financial Statements
                        (Stated in United States dollars)


                             Rhino Ecosystems, Inc.
                          (A DEVELOPMENT STAGE COMPANY)


                    Years ended July 31, 2000, 1999 and 1998

<PAGE>



Independent auditors' report


To the Board of Directors and Stockholders
Rhino Ecosystems, Inc.

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Rhino
Ecosystems,  Inc. (a development stage company) as at July 31, 2000 and 1999 and
the  related  consolidated   statements  of  operations,   stockholders'  equity
(deficiency) and comprehensive  loss and cash flows for each of the years in the
three-year  period ended July 31, 2000 and for the period from  inception of the
development stage on June 7, 1996 to July 31, 2000. These consolidated financial
statements are the responsibility of Rhino Ecosystems,  Inc.'s  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  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 audit 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 Rhino Ecosystems,
Inc. as of July 31, 2000 and 1999 and the results of its operations and its cash
flows for each of the years in the three-year period ended July 31, 2000 and for
the period from inception of the  development  stage on June 7, 1996 to July 31,
2000, in conformity with accounting  principles generally accepted in the United
States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that Rhino  Ecosystems,  Inc. will continue as a going concern.  As discussed in
note 1(b) to the  financial  statements,  Rhino  Ecosystems,  Inc.  has suffered
recurring  losses from  operations and has a net capital  deficiency  that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regards to these matters are also described in note 1(b). The financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


/s/ KPMG, LLP
Chartered Accountants

Toronto, Canada
October 20, 2000, except
as to note 15 which is as
of November 6, 2000


<PAGE>
<TABLE>
<CAPTION>


Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)

Consolidated Balance Sheets
(Stated in United States dollars)

July 31, 2000 and 1999

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

Assets

Current assets:
     Accounts receivable                                                    $      14,896        $           -
     Goods and services tax recoverable                                            11,600                6,298
     Investment tax credits recoverable                                            33,054               26,675
     Inventory (note 3)                                                           202,775               37,917
     Prepaid expenses and deposits                                                 14,508               11,402
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  276,833               82,292

Fixed assets (note 4)                                                             112,718              277,647
Patent                                                                             98,159               77,691

------------------------------------------------------------------------------------------------------------------------------------
                                                                            $     487,710        $     437,630
------------------------------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Deficiency

Current liabilities:
     Bank indebtedness                                                      $       8,806        $      34,532
     Accounts payable and accrued liabilities                                     344,004              181,376
     Current portion of deferred revenue (note 5)                                   2,461                    -
     Due to related parties (note 6)                                              120,141              111,468
     Current portion of long-term debt (note 7)                                    21,015               20,746
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  496,427              348,122

Deferred revenue (note 5)                                                          11,486                    -
Long-term debt (note 7)                                                           108,580              127,935
Due to Rhino U.S. (note 8)                                                              -              311,946

Stockholders' deficiency:
     Share capital (note 8)                                                     1,661,704              736,387
     Deficit accumulated during development stage                              (1,787,389)          (1,081,316)
     Accumulated other comprehensive loss                                          (3,098)              (5,444)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 (128,783)            (350,373)

Future operations (note 1(b)) Commitments and contingencies  (note 9) Subsequent
event (note 15)

------------------------------------------------------------------------------------------------------------------------------------
                                                                            $     487,710        $     437,630
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-2



<PAGE>
<TABLE>
<CAPTION>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)

Consolidated Statements of Operations
(Stated in United States dollars)
Years ended July 31, 2000,  1999 and 1998 and cumulative  from inception on June
7, 1996 to July 31, 2000

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Cumulative
                                                                                                    total from
                                                                                                  inception on
                                                                                                  June 7, 1996
                                                 2000              1999              1998     to July 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>               <C>               <C>             <C>

Sales and other income                   $    173,942     $      28,998     $           -      $       202,940

Expenses:
     Cost of goods sold (excluding
       amortization of fixed assets)           65,710            13,384                 -               79,094
     Marketing                                265,863           156,788           113,750              536,401
     Professional and consulting fees         160,237           115,454            77,530              374,721
     Amortization of fixed assets             111,614           115,253             8,616              235,483
     Office salaries, benefits and
       services                               108,322            92,502            55,374              256,198
     Rent                                      45,457            37,505            38,593              129,924
     Research and product
       development (note 10)                   37,488            45,087             2,183              105,762
     Telephone                                 17,396            10,475             5,167               36,118
     Office and general                        17,379            13,667            25,252               66,287
     Bank charges and interest                 16,970            14,104            11,428               42,577
     Interest on long-term debt                13,166            15,679             5,012               33,857
     Travel and promotion                       9,906            25,925            21,576               75,804
     Utilities                                  5,025             3,563             1,124                9,765
     Royalties                                  3,805                 -                 -                3,805
     Insurance                                  1,677             2,310               546                4,533
------------------------------------------------------------------------------------------------------------------------------------
                                              880,015           661,696           366,151            1,990,329
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Loss for the year                        $    706,073     $     632,698     $     366,151      $     1,787,389
------------------------------------------------------------------------------------------------------------------------------------

Loss per common share                    $       0.11     $        0.11     $        0.11      $          0.50
------------------------------------------------------------------------------------------------------------------------------------

Weighted average number of
   common shares outstanding                6,525,539         5,608,872         3,327,005            3,558,997
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3


<PAGE>
<TABLE>
<CAPTION>

RHINO ECOSYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)

Consolidated Statements of Stockholders' Equity (Deficiency) and Comprehensive Loss
(Stated in United States dollars)

Years ended July 31, 2000, 1999 and 1998

------------------------------------------------------------------------------------------------------------------------------------
                                                           Deficit
------------------------------------------------------------------------------------------------------------------------------------
                             accumulated Accumulated
------------------------------------------------------------------------------------------------------------------------------------
                                  Common Shares             during           other
                          -------------------------
                           Number of         Stated    development   comprehensive                     Comprehensive
                              Shares          value          stage   income (loss)        Total        income (loss)
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>             <C>      <C>                 <C>         <C>

Shares issued on
   incorporation                 100    $        73   $          -     $         -   $       73

Loss for the year                  -              -        (82,467)              -      (82,467)       $    (82,467)

Foreign currency
  translation adjustment           -              -              -             682          682                 682
-----------------------------------------------------------------------------------------------        ------------
                                                                                                      $    (81,785)
Balance, July 31, 1997           100             73        (82,467)            682      (81,712)

Shares issued for:
     Cash                  4,746,729        609,117              -               -      609,117
     Services                 20,000         14,015              -               -       14,015
     Cash and conversion
     of loans (note 11)      758,710        157,871              -               -      157,871
     ------------------------------------------------------------------------------------------
                           5,525,439        781,003              -               -      781,003
     Less share issue costs        -        (44,689)             -               -      (44,689)
     -------------------------------------------------------------------------------------------
                           5,525,439        736,314              -               -      736,314
-----------------------------------------------------------------------------------------------

Loss for the year                  -              -       (366,151)              -     (366,151)      $   (366,151)

Foreign currency
  translation adjustment           -              -              -         (14,072)     (14,072)           (14,072)
------------------------------------------------------------------------------------------------      -------------
                                                                                                      $   (380,223)
Balance, July 31, 1998     5,525,539        736,387       (448,618)        (13,390)     274,379

Loss for the year                  -              -       (632,698)              -     (632,698)      $   (632,698)

Foreign currency
  translation adjustment           -              -              -           7,946        7,946              7,946
-----------------------------------------------------------------------------------------------        ------------
                                                                                                      $   (624,752)
Balance, July 31, 1999             -        736,387     (1,081,316)         (5,444)    (350,373)

Loss for the year                  -              -       (706,073)              -     (706,073)      $   (706,073)

Recapitalization (note 1(a))1,000,000       925,317              -               -      925,317

Foreign currency
   translation adjustment          -              -              -           2,346        2,346              2,346
                                                                                                       ------------
                                                                                                      $   (703,727)

------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2000     6,525,539    $ 1,661,704   $ (1,787,389)    $    (3,098)  $ (128,783)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-4


<PAGE>
<TABLE>
<CAPTION>

Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)

Consolidated Statements of Cash Flows
(Stated in United States dollars)

Years ended July 31, 2000, 1999 and 1998

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Cumulative
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    total from
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  inception on
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  June 7, 1996
------------------------------------------------------------------------------------------------------------------------------------
                                                 2000              1999              1998     to July 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                 <C>               <C>         <C>
Cash provided by (used in):

Operations:
     Loss for the year                   $   (706,073)    $    (632,698)    $    (366,151)     $    (1,787,389)
     Adjustments to reconcile loss for the year to net cash:
         Amortization of fixed assets         111,614           115,253             8,616              235,483
         Accounts receivable                  (14,896)                -                 -              (14,896)
         Goods and services tax
           recoverable                         (5,302)           38,837           (39,704)             (11,600)
         Inventory                           (164,858)          (17,434)          (20,483)            (202,775)
         Prepaid expenses and deposits         (3,106)           23,941           (35,343)             (14,508)
         Due from related parties                   -            38,233           (14,966)                   -
         Accounts payable and accrued
           liabilities                        162,628            59,231            65,864              344,004
         Deferred revenue                      13,947                 -                 -               13,947
         Due to related parties                 8,673           109,445           (29,510)             120,141
------------------------------------------------------------------------------------------------------------------------------------
                                             (597,373)         (265,192)         (431,677)          (1,317,593)

Financing:
     Bank indebtedness                        (25,726)           34,532                 -                8,806
     Proceeds from long-term debt                   -                 -           165,355              165,355
     Principal payments on long-term debt     (19,086)          (16,674)                -              (35,760)
     Advances from Rhino U.S. (note 8)        613,371           311,946                 -              925,317
     Issuance of share capital                      -                 -           710,921              710,994
     Share issue costs                              -                 -           (44,689)             (44,689)
     Loans payable (note 11)                        -                 -            (2,471)              70,082
------------------------------------------------------------------------------------------------------------------------------------
                                              568,559           329,804           829,116            1,800,105

Investments:
     Expenditures on fixed assets             (46,319)          (50,296)         (351,220)            (447,835)
     Expenditures on patent                   (20,468)          (48,386)           (6,592)             (98,159)
     Investment tax credits                    93,255               (99)              495               66,580
     Due from Le Group De Recuperation
        O'Energie P.H. Inc. (note 12)               -            99,213           (99,213)                   -
     Accounts payable for fixed assets              -           (97,817)           97,817                    -
------------------------------------------------------------------------------------------------------------------------------------
                                               26,468           (97,385)         (358,713)            (479,414)

Other:
     Foreign currency translation
        adjustment                              2,346             7,946           (14,072)              (3,098)
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash                         -           (24,827)           24,654                    -

Cash, beginning of year                             -            24,827               173                    -

------------------------------------------------------------------------------------------------------------------------------------
Cash, end of year                        $          -      $          -     $      24,827      $             -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                       Supplemental information (note 16)

          See accompanying notes to consolidated financial statements.

                                      F-5


<PAGE>
Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)

Notes to Consolidated Financial Statements (continued)
(Stated in United States dollars)

Years ended July 31, 2000, 1999 and 1998

--------------------------------------------------------------------------------



Rhino Ecosystems, Inc.
(A DEVELOPMENT STAGE COMPANY)

Notes to Consolidated Financial Statements
(Stated in United States dollars)

Years ended July 31, 2000, 1999 and 1998

--------------------------------------------------------------------------------


Rhino  Ecosystems,   Inc.  ("Rhino   U.S." or "the  Company")   is  incorporated
under the laws  of the State  of  Florida.  Rhino U.S.  is  considered  to be  a
development stage company,  as from  inception,  Rhino U.S. and its wholly owned
subsidiary  have  been  primarily  engaged  in   developing  the   manufacturing
process for a wet waste interceptor and has had no significant  revenue  derived
from operations.


1.     Basis of presentation:

       (a)  Recapitalization:

            In the fiscal year ended July 31, 1999, Rhino U.S. filed a Rule 504,
            Regulation D Offering under the United States Securities Act of 1933
            (the "504  Offering").  Pursuant  to the 504  Offering,  one million
            common shares of Rhino U.S. were offered at the price of (USD) $1.00
            each.  In fiscal 1999 and 2000,  the one  million  shares were fully
            subscribed.

            The funds received for the share  subscriptions  were transferred to
            Rhino Ecosystems Inc. ("Rhino Canada") a company  incorporated under
            the laws of the Province of Ontario, Canada on June 7, 1996.

            On November 3, 1999,  the  stockholders  of Rhino Canada  approved a
            share exchange whereby, the stockholders of Rhino Canada,  exchanged
            all 5,525,539 of the issued and  outstanding  common shares of Rhino
            Canada for 5,525,539  common shares of Rhino U.S. Upon completion of
            this  transaction,  Rhino U.S. had issued and outstanding  6,525,539
            common shares of which the former  stockholders of Rhino Canada held
            approximately 85% of the common shares of Rhino U.S.

            As former stockholders of Rhino Canada hold approximately 85% of the
            outstanding  common shares of Rhino U.S.  immediately  subsequent to
            these  transactions,  the  combination of the two companies has been
            accounted for as a recapitalization,  effectively as if Rhino Canada
            had issued  5,525,539 common shares for  consideration  equal to the
            net monetary assets of Rhino U.S.

            Application of recapitalization accounting results in the following:
(i)
                    The consolidated financial statements of the combined entity
                    are issued under the name of the legal parent ("Rhino U.S.")
                    but  are   considered  a   continuation   of  the  financial
                    statements of the legal subsidiary, Rhino Canada.
(ii)
                    Rhino Canada's  assets and  liabilities  are included in the
                    consolidated   financial   statements  at  their  historical
                    carrying values.




<PAGE>




1.     Basis of presentation (continued):
(iii)
                    The   consolidated   statements  of   stockholders'   equity
                    (deficiency)  presents  the  equity  transactions  of  Rhino
                    Canada  on a  historical  basis  with  the  recapitalization
                    presented with effect from November 3, 1999.

            For  purposes  of this  transaction,  the  deemed  consideration  is
            considered  to be  equivalent  to the net book value of Rhino U.S.'s
            net monetary  assets as at November 3, 1999. The net monetary assets
            of  Rhino  U.S.  as  at  November  3,  1999  consisted  solely  of a
            receivable  from Rhino  Canada in the amount of  $925,317  which had
            arisen  from the  transfer  of the net funds  received  from the 504
            Offering.


--------------------------------------------------------------------------------

           Deemed consideration                                    $     925,317

           Assigned value of net monetary assets:
               Due from Rhino Canada                                $    925,317

--------------------------------------------------------------------------------


       (b)  Future operations:

            These consolidated  financial statements have been prepared assuming
            the Company will  continue as a going  concern  notwithstanding  the
            Company  has  suffered  recurring  losses  since  inception  and has
            negative  working  capital and a net capital  deficiency  that raise
            substantial  doubt as to its ability to continue as a going concern.
            The  application  of the going  concern  concept  which  assumes the
            realization  of assets and  liquidation of liabilities in the normal
            course of business,  is dependent on the Company's ability to attain
            profitable  operations  and  obtain  sufficient  cash from  external
            financing to meet the Company's  liabilities and commitments as they
            become payable. Management is of the opinion that sufficient working
            capital will be obtained from  operations and external  financing to
            meet  the  Company's  liabilities  and  commitments  as they  become
            payable.   However,  no  additional   financing  sources  have  been
            contracted  to October 20, 2000 and there can be no  certainty as to
            the  availability  of  such  financing  in the  future.  Failure  to
            identify  additional  financing  in the near  term may  require  the
            Company reduce its operating activities.

            A failure to continue as a going  concern  would then  require  that
            stated  amounts  of  assets  and   liabilities  be  reflected  on  a
            liquidation basis which could differ from the going concern basis.




<PAGE>




2.     Summary of significant accounting policies and practices:

       (a)  Principles of consolidation:

            The consolidated  financial statements include the accounts of Rhino
            U.S. and its wholly owned subsidiary,  Rhino Canada. All significant
            intercompany  balances  and  transactions  have been  eliminated  on
            consolidation.

       (b)  Inventory:

            Inventory is valued at the lower of cost,  determined on a first-in,
            first-out  basis and  market.  For  materials,  market is defined as
            replacement cost; for  work-in-process and finished goods, market is
            defined as net realizable value.

       (c)  Fixed assets:

            Fixed assets are stated at cost less related investment tax credits.
            Amortization is provided on a straight-line  basis from the date the
            asset is put in use using the following annual rates:


--------------------------------------------------------------------------------
           Asset                                                     Rate
--------------------------------------------------------------------------------

           Moulds and dies                                               3 years
           Manufacturing equipment                                       3 years
           Furniture and fixtures                                        3 years
           Office equipment                                              3 years
           Computer equipment                                            3 years
           Vehicle                                                       2 years

--------------------------------------------------------------------------------


       (d)  Patent:

            Patent is  stated at the cost  incurred  to date with  respect  to a
            Patent  Cooperation  Treaty  International  Application to apply for
            letters of  patent.  It is  anticipated  that  amortization  will be
            provided  by the  straight-line  basis over  seventeen  years when a
            commercial level of production and sales is attained.




<PAGE>




2.     Summary of significant accounting policies and practices (continued):

       (e)  Impairment of long-lived assets and long-lived assets to be disposed
            of:

            Long-lived   assets  are  accounted  for  in  accordance   with  the
            provisions of Statement of Financial  Accounting  Standards ("SFAS")
            No. 121,  Accounting  for the  Impairment of  Long-Lived  Assets and
            Long-Lived  Assets to be Disposed of. This  statement  requires that
            long-lived assets and certain  identifiable  intangibles be reviewed
            for impairment whenever events or changes in circumstances  indicate
            that  the  carrying  amount  of an  asset  may  not be  recoverable.
            Recoverability  of  assets  to be held  and  used is  measured  by a
            comparison  of the  carrying  amount of an asset to future  net cash
            flows  expected  to be  generated  by the asset.  If such assets are
            considered  to be  impaired,  the  impairment  to be  recognized  is
            measured  by the amount by which the  carrying  amount of the assets
            exceed the fair value of the  assets.  Assets to be  disposed of are
            reported  at the lower of the  carrying  amount or fair  value  less
            costs to sell.

       (f)  Revenue recognition:

            (i) Product sales:

                Revenue from product  sales is recorded  when the  purchaser has
                paid, or is obligated to pay for the product, and the obligation
                is not contingent on resale of the product.

            (ii)Dealer agreements:

                Rhino Canada grants both exclusive and  non-exclusive  rights to
                distribute  and sell its products.  The  agreements are based on
                the dealer  purchasing a yearly minimum amount of product and/or
                on a payment for a dealer licence. Revenue derived from the sale
                of product in accordance  with the product supply  agreements is
                recorded  when the dealer has paid,  or is  obligated to pay and
                the obligation is not contingent on the resale of the product.

                Revenue from dealer  licence fees is deferred and amortized over
                the term of the agreement.

            (iii) Deferred revenue:

                Proceeds received in advance of meeting the revenue  recognition
                criteria is recorded as deferred revenue.




<PAGE>




2.     Summary of significant accounting policies and practices (continued):

            (iv)Warranty claims:

                Provision for potential  warranty  claims is provided for at the
                time revenue is  recognized,  based on warranty terms and claims
                experience.

       (g)  Stock-based compensation:

            To the date of these consolidated financial statements, arrangements
            have not been  entered into  whereby one or more  employees  receive
            shares of stock or other equity  instruments  of the Company or cash
            payments  based on the  future  value of the  Company  for  services
            performed.  The Company will recognize equity grants to employees by
            the intrinsic value method whereby  compensation expense is recorded
            only to the extent that the market  value at the grant date  exceeds
            the exercise or payment price for the underlying instrument.

       (h)  Comprehensive income:

            The Company applies SFAS No. 130,  Reporting  Comprehensive  Income.
            SFAS No. 130 establishes standards for reporting and presentation of
            comprehensive  income and its  components in a full set of financial
            statements.  Comprehensive  income  consists of net loss and foreign
            currency   translation   adjustments   and  is   presented   in  the
            consolidated  statements of  stockholders'  equity  (deficiency) and
            comprehensive   loss.   The  statement   requires  only   additional
            disclosures in the consolidated  financial  statements;  it does not
            affect the Company's financial position or results of operations.

       (i)  Income taxes:

            Income taxes are accounted for under the asset and liability method.
            Under  the asset and  liability  method,  deferred  tax  assets  and
            liabilities   are  recognized   for  the  future  tax   consequences
            attributable to differences between the financial statement carrying
            amounts of existing assets and liabilities and their  respective tax
            bases and operating loss and tax credit carryforwards.  Deferred tax
            assets and liabilities are measured using enacted tax rates expected
            to apply to  taxable  income in the years in which  those  temporary
            differences  are expected to be recovered or settled.  The effect on
            deferred  tax  assets  and  liabilities  of a change in tax rates is
            recognized in income in the year that includes the enactment date.




<PAGE>




2.     Summary of significant accounting policies and practices (continued):

       (j)  Investment tax credits:

            Investment  tax  credits  relating  to  fixed  asset  purchases  and
            research and development  expenses are accounted for by the deferral
            method as a reduction of the cost of such assets and expenses in the
            period allowable.

       (k)  Research and product development:

            Research  and  product  development  costs  (R&D)  are  expensed  as
            incurred.  Related  investment tax credits reduce R&D expense in the
            same  period  in which  the  related  expenditures  are  charged  to
            operations, provided there is reasonable assurance the benefits will
            be realized.

       (l)  Foreign currency translation:

            The  Canadian  dollar is the  functional  currency of the  Company's
            business.  The consolidated financial statements are translated into
            United States dollars using the average rates for the year for items
            included  in the  consolidated  statements  of  operations  and  the
            current rate for items included in the consolidated  balance sheets.
            The  translation  gains or losses are  included in the  consolidated
            statements of stockholders'  equity  (deficiency) and  comprehensive
            loss as other comprehensive income or loss.

       (m)  Use of estimates:

            The   preparation  of  financial   statements  in  conformity   with
            accounting  principles  generally  accepted in the United  States of
            America  requires  management to make estimates and assumptions that
            affect the reported amounts of assets and liabilities and disclosure
            of contingent  assets and  liabilities  at the date of the financial
            statements and the reported  amounts of revenues and expenses during
            the year. Actual results could differ from those estimates.


3.     Inventory:

--------------------------------------------------------------------------------
                                                     2000                 1999
--------------------------------------------------------------------------------

       Materials                                 $ 73,788              $ 28,291
       Work-in-process and finished goods         128,987                 9,626

--------------------------------------------------------------------------------
                                                $ 202,775              $ 37,917
--------------------------------------------------------------------------------

<PAGE>
<TABLE>
<CAPTION>

4.     Fixed assets:

------------------------------------------------------------------------------------------------------------------------------------
                                                                               Accumulated            Net book
       2000                                                        Cost         amortization             value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>                      <C>

       Moulds and dies                                  $       238,467      $     180,028       $      58,439
       Manufacturing equipment                                   37,062             18,036              19,026
       Furniture and fixtures                                    24,490             14,040              10,450
       Office equipment                                          26,129              7,495              18,634
       Computer equipment                                         9,608              5,006               4,602
       Vehicle                                                    4,531              2,964               1,567

------------------------------------------------------------------------------------------------------------------------------------
                                                        $       340,287      $     227,569       $     112,718
------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------
                                                                               Accumulated            Net book
       1999                                                        Cost         amortization             value
------------------------------------------------------------------------------------------------------------------------------------

       Moulds and dies                                  $       324,447      $      98,553       $     225,894
       Manufacturing equipment                                   35,273              5,609              29,664
       Furniture and fixtures                                    19,388              6,464              12,924
       Office equipment                                           6,721              2,241               4,480
       Computer equipment                                         6,140              2,078               4,062
       Vehicle                                                    1,247                624                 623

------------------------------------------------------------------------------------------------------------------------------------
                                                        $       393,216      $     115,569       $     277,647
------------------------------------------------------------------------------------------------------------------------------------



5.     Deferred revenue:


------------------------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
------------------------------------------------------------------------------------------------------------------------------------

       Deferred revenue                                                     $      13,947        $           -

       Current portion of deferred revenue                                         (2,461)                   -

------------------------------------------------------------------------------------------------------------------------------------
                                                                            $      11,486        $           -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

       Deferred revenue represents the unearned revenue derived from a fee
    received for a dealer licence which is being recorded to revenue over the
                  period of the agreement term of sixty months.


<PAGE>




6.     Related party transactions:

       Rhino  U.S.  and  Rhino  Canada  (the  "Companies")   purchase  products,
       administrative,  consulting  and  marketing  services  from its officers,
       stockholders,  individuals  and  companies  related  to the  stockholders
       ("related parties").  The cost of these products and services aggregating
       2000 -  $116,850;  1999 -  $136,498;  and 1998 - $81,694  was  charged as
       follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                   2000              1999                 1998
------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>                  <C>

       Cost of goods sold                                 $      20,162     $      14,842        $           -
       Marketing                                                  9,744                 -                    -
       Professional and consulting fees                          39,124            51,642               44,061
       Office salaries, benefits and services                    44,016            47,008               30,521
       Travel and promotion                                           -            15,724                7,382
       Royalties                                                  3,804                 -                    -
       Expenditures on fixed assets                                   -             7,282                    -

------------------------------------------------------------------------------------------------------------------
                                                          $     116,850     $     136,498        $      81,964
------------------------------------------------------------------------------------------------------------------
</TABLE>


       These  transactions  are  measured at the exchange  amount,  which is the
       amount of consideration established and agreed to by the related parties.

       The Companies  also transfer and receive funds from the related  parties.
       In 2000 and 1999, the Companies  incurred  interest of nil, 1998 - $6,847
       on amounts due to related parties.

       The amount due to related parties that has arisen from these transactions
       is unsecured with no fixed terms of payment is as follows:


-------------------------------------------------------------------------
                                               2000                 1999
-------------------------------------------------------------------------

       Due to related parties:
           Due to stockholders            $ 120,141          $  111,468

-------------------------------------------------------------------------





<PAGE>




7.     Long-term debt:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                    <C>

       Termloan bearing  interest at the bank's prime rate plus 2.5%,  repayable
           in principal monthly installments of $2,604 plus
           interest, due October 2008                                       $     129,595        $     148,681

       Current portion of long-term debt                                          (21,015)             (20,746)

--------------------------------------------------------------------------------------------------------------------
                                                                            $     108,580        $     127,935
--------------------------------------------------------------------------------------------------------------------
</TABLE>


       The term loan is secured by a security  agreement  on specific  equipment
       and by a stockholder's guarantee in the amount of $41,339.

       The  aggregate  maturities  on long-term  debt for each of the five years
       subsequent  to July  31,  2000 are as  follows:  2001 -  $21,015;  2002 -
       $21,015; 2003 - $21,015; 2004 - $21,015 and 2005 - $21,015.




<PAGE>




8.     Share capital:

       (a)  Authorized:

            25,000,000 common shares at a par value of $0.0001 per share.

       (b) Issued and outstanding share capital of Rhino U.S. is:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                                        Number
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                                     <C>

           Issued and outstanding:
                Prior to the recapitalization                                                        1,000,000
                Shares issued on recapitalization                                                    5,525,539

---------------------------------------------------------------------------------------------------------------------
                                                                                                     6,525,539
---------------------------------------------------------------------------------------------------------------------


            As a result of the  recapitalization  described in note 1(a),  total
            share   capital  on  the   consolidated   financial   statements  is
            represented by:

--------------------------------------------------------------------------------------------------------------------

           Existing share capital of Rhino Canada, prior
              to recapitalization on November 3, 1999                                            $     736,387

           Assigned value of Rhino U.S. shares exchanged
              for common shares of Rhino Canada (note 1(a))                                            925,317

---------------------------------------------------------------------------------------------------------------------
                                                                                                 $   1,661,704
---------------------------------------------------------------------------------------------------------------------
</TABLE>

            As at July 31, 2000 and 1999,  Rhino U.S. had  transferred the funds
            received from the 504 Offering (note 1(a)) to Rhino Canada and Rhino
            Canada  had  incurred  share  issue  costs  related  thereto.  These
            transactions  are  summarized as follows and the net funds  received
            from the 504  Offering  was  recorded in the accounts as at July 31,
            2000 and 1999 of Rhino U.S.  and Rhino  Canada as a  receivable  and
            payable, respectively.

--------------------------------------------------------------------------------
                                                      2000                 1999
--------------------------------------------------------------------------------

           Proceeds from 504 Offering             $   977,181         $  323,517

           Shares issued for services                 188,828                  -
--------------------------------------------------------------------------------
                                                    1,166,009            323,517

           Less share issue costs                     240,692             11,571

--------------------------------------------------------------------------------
                                                  $   925,317         $  311,946
--------------------------------------------------------------------------------


<PAGE>


9.     Commitments and contingencies:
(a)
            Lease commitments:

            Rhino Canada rents  premises and equipment  under  operating  leases
with minimum aggregate payments as follows:

--------------------------------------------------

           2001                     $   18,812
           2002                          1,091
           2003                          1,000

--------------------------------------------------
                                    $   20,903
--------------------------------------------------

(b)
            Supply agreement:

            Rhino  Canada  has in  place  an  exclusive  supply  agreement  with
            Filterco  Inc.  which  expires  April  30,  2003.  Pursuant  to  the
            agreement,  Filterco Inc. is the exclusive  supplier to Rhino Canada
            of  the  disposable  filtration  bags  utilized  in  its  wet  waste
            interceptors.

       (c)  Royalties:

            Sales of wet waste  interceptors  are subject to royalties at a rate
            of 3% of the sales price.  The royalties are payable to the inventor
            of  the  wet  waste  interceptor  who  is  also  a  stockholder,  as
            consideration for the inventor's assignment of all rights, title and
            interest in the invention.


10.    Research and product development:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                  2000              1999                 1998
-------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>                  <C>

       Research and product development      $     37,488     $      45,087        $       3,913
       Less investment tax credits                      -                 -                1,730

-------------------------------------------------------------------------------------------------------
                                             $     37,488     $      45,087        $       2,183
-------------------------------------------------------------------------------------------------------
</TABLE>


11.    Loans payable:

       In the fiscal year ended July 31, 1997,  Rhino Canada  received  interest
       free loans in the aggregate  amount of $72,553.  In the fiscal year ended
       July 31, 1998, the lenders acquired in aggregate 758,710 common shares of
       Rhino Canada for consideration  consisting of cash $87,789 and conversion
       of the loans of $70,082 to share capital.




<PAGE>




12.    Due from Le Group De Recuperation O'Energie P.H. Inc.:

       In  March  1998, in  the course of  negotiations  to acquire  all of  the
       outstanding  and issued shares of Le Group De Recuperation O'Energie P.H.
       Inc.,  Rhino  Canada  advanced to Le Group De Recuperation O'Energie P.H.
       Inc.  $99,213.  The  advance  was  non-interest  bearing  and was  to  be
       recovered  upon either the favourable or  unfavourable  conclusion of the
       negotiations.  On August 26, 1999, the  negotiations  were concluded with
       the  transaction  not  proceeding.  During the year  ended July 31, 1999,
       Rhino Canada  received cash  of $99,213 in  full settlement of the amount
       advanced.


13.    Fair value of financial assets and financial liabilities:

       Financial instruments:

       The following  table  presents the carrying  amounts and  estimated  fair
       values of financial  instruments at July 31, 2000 and 1999. The estimated
       fair  value  of a  financial  instrument  is  the  amount  at  which  the
       instrument  could be exchanged in a current  transaction  between willing
       parties,  other  than a forced  or  liquidation  sale.  These  estimates,
       although  based on the relevant  market  information  about the financial
       instrument,  are  subjective  in nature  and  involve  uncertainties  and
       matters of significant  judgment and therefore  cannot be determined with
       precision.

       Changes in assumptions could significantly affect the estimates.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                   2000         2000         1999         1999
------------------------------------------------------------------------------------------------------------------
                                                               Carrying         Fair     Carrying         Fair
                                                                 amount        value       amount        value
------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>      <C>           <C>

       Financial assets:
         Accounts receivable                             $       14,896   $   14,896   $        -   $        -
         Deposits                                                14,200       14,200       11,174       11,174
       Financial liabilities:
         Bank indebtedness                                        8,806        8,806       34,532       34,532
         Accounts payable and accrued liabilities               344,004      344,004      181,376      181,376
         Long-term debt                                         129,595      129,595      148,681      148,681
         Due to Rhino U.S.                                            -            -      311,946      311,946
         Due to related parties                                 120,141      120,141      111,468      111,468
------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>




13.    Fair value of financial assets and financial liabilities (continued):

       The  following  methods and  assumptions  were used to estimate  the fair
value of each class of financial instruments:

       (i) Accounts receivable,  deposits,  bank indebtedness,  accounts payable
and accrued liabilities and due to Rhino U.S.:

            The carrying  amounts  approximate  fair value  because of the short
term to maturity of these instruments.

       (ii) Long-term debt:

            The fair value is estimated by discounting  the future cash flows at
            rates  currently  offered to Rhino U.S. and Rhino Canada for similar
            debt instruments of comparable maturity by the Company's bankers.

       (iii)      Due to related parties:

            Imputed interest computed at comparable market rates on the interest
            free advances from related  parties is not considered to be material
            to the financial statements.  Consequently, the financial statements
            do not include a charge for imputed  interest on the  interest  free
            advances and the fair value is  considered  to be  comparable to the
            carrying value.


14.    Income taxes:

       The tax effects of temporary  differences  that give rise to  significant
       portions  of the  deferred  tax  assets  at July  31,  2000  and 1999 are
       presented below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                    <C>
       Deferred tax assets:

       Net operating loss carryforwards                                     $     623,000      $       337,000
       Fixed assets, principally due to differences
         in amortization                                                           12,000               52,000
       Unamortized share issue costs                                                7,000               11,000
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
       Total gross deferred tax assets                                            642,000              400,000
       Less valuation allowance                                                  (642,000)            (400,000)

-----------------------------------------------------------------------------------------------------------------------
       Net deferred tax assets                                              $           -        $           -
-----------------------------------------------------------------------------------------------------------------------
</TABLE>





<PAGE>




14.    Income taxes (continued):

       The  valuation  allowance for deferred tax assets as at July 31, 2000 and
       1999 was $642,000 and $400,000, respectively. The net change in the total
       valuation  allowance for the years ended July 31, 2000, 1999 and 1998 was
       an  increase  of  $242,000,  $223,000,  and  $143,000,  respectively.  In
       assessing the realizability of deferred tax assets,  management considers
       whether  it is more  likely  than not  that  some  portion  or all of the
       deferred tax assets will not be realized.  The  ultimate  realization  of
       deferred tax assets is dependent  upon the  generation of future  taxable
       income  during the periods in which those  temporary  differences  become
       deductible.

       Management  considers  projected  future  taxable income and tax planning
       strategies  in making  this  assessment.  In order to fully  realize  the
       deferred  tax assets,  the Company will need to generate  future  taxable
       income of  approximately  $1,400,000  prior to the  expiration of the net
       operating  loss  carryforwards  which occur between 2004 and 2007.  Based
       upon the level of  historical  taxable  income  and that the  Company  is
       considered a development stage company, it cannot be reasonably estimated
       at this time if its more  likely than not the  Company  will  realize the
       benefits of the  deferred  tax assets.  Consequently,  the  deferred  tax
       assets  have been  reduced  by an  equivalent  valuation  allowance.  The
       valuation  allowance  will be adjusted  in the period that is  determined
       with  reasonable  certainty  that it is more  likely  than not that  some
       portion or all of the deferred tax assets will be realized.

       At July 31, 2000,  the Company has net operating loss  carryforwards  for
       income tax purposes of  approximately  $1,400,000  which are available to
       offset future taxable income,  if any, through 2004 to 2007. In addition,
       the Company  has  unamortized  capital  cost over net book value of fixed
       assets  and  unamortized  share  issue  costs  for  income  tax  purposes
       aggregating  approximately  $42,000  available  to reduce  future  years'
       income for tax purposes.




<PAGE>




15.    Subsequent event:

       On  August  23,  2000,  the  Company  filed  a   Registration   Statement
       ("Registration  Statement") on Form S-8 with the United States Securities
       and Exchange Commission.

       Pursuant to the  Registration  Statement,  an aggregate of 670,000 common
       shares  ("shares")  of the Company were  registered as having been issued
       and sold. The shares were issuable to compensate for services received or
       to be received pursuant to ten separate consulting agreements and one fee
       agreement with legal counsel.

       20,000 of the issued shares were released as  compensation  to retain the
       services of legal counsel.  The Company deferred release of the remaining
       650,000  shares  until such time it was  satisfied  it had  received  the
       services to be paid for by the release of the shares.

       As of November 6, 2000, the Company  determined that the services set out
       in six of the  ten  consulting  agreements  ("agreements")  would  not be
       rendered.  Consequently, the Company will not be releasing 390,000 of the
       shares  that had been  issued  for the six  agreements  and it intends to
       cancel the  390,000  shares.  It is the  opinion of  management  that the
       Company  will have no  liability  for the  non-release  of the shares and
       subsequent cancellation.

       The remaining  260,000 shares held for four agreements are to be released
       to the intended  recipients  when the Company is satisfied  that services
       pursuant  to  the  agreements  have  been  satisfactorily  rendered.  The
       services to be provided and the number of shares to be released  pursuant
       to the four agreements are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
       Nature of service                                                                      Number of shares
--------------------------------------------------------------------------------------------------------------
<S>                                                                                                    <C>

       Developing corporate dealerships                                                                 90,000

       Mould design                                                                                     60,000

       Testing measurements required on the
         patenting and plumbing code compliance                                                         50,000

       Assistance in locating warehouses throughout
         the United States for delivery of the Company's products                                       60,000

---------------------------------------------------------------------------------------------------------------
                                                                                                       260,000
---------------------------------------------------------------------------------------------------------------
</TABLE>

      The fair value of these shares determined by reference to the market
    value of the Company's common shares will be recognized during the period
                           to performance completion.




<PAGE>




15.    Subsequent event (continued):

       As of November 6, 2000,  the Company has  instructed its legal counsel to
       take the  action  required  to inform  the SEC  concerning  its intent to
       cancel 390,000 shares issued  pursuant to the  Registration  Statement of
       August 23, 2000.


16.    Supplemental information to consolidated statements of cash flows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                   2000              1999                 1998
------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>                  <C>

       (a) Cash paid during the year for:
              Interest                                     $     22,140     $      18,165      $        11,859
              Income taxes                                            -                 -                    -

------------------------------------------------------------------------------------------------------------------
</TABLE>


       (b)  Non-cash financing activities:
(i)
                    In fiscal 2000,  188,828  common  shares of Rhino U.S.  were
                    issued to  compensate a merchant bank for the sale of shares
                    pursuant to the 504 Offering.
(ii)
                    In fiscal 2000,  5,525,539  common shares of Rhino U.S. were
                    issued upon the recapitalization described in note 1(a).
(iii)
                    In fiscal 1998,  20,000  common  shares of Rhino Canada were
                    issued to settle a liability in the amount of $14,015.




<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  Registrant  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.

                             Rhino EcoSystems, Inc.


October 30, 2000               By:   /s/ Mark Wiertzema
                           --------------------------------
                                         Mark Wiertzema, President
                                         and Chief Financial Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.

                             Rhino EcoSystems, Inc.


October 30, 2000                    By:   /s/ Mark Wiertzema
                                    -------------------------------
                                              Mark Wiertzema, Director


October 30, 2000                    By:   /s/ Gordon Novak
                                   --------------------------------
                                              Gordon Novak, Vice President


October 30, 2000                    By:   /s/ Jan Walsh
                                   -------------------------------------
                                               Jan Walsh, Secretary/Treasurer