SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

          (Mark One)

     X    QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934 FOR THE  QUARTERLY  PERIOD ENDED JANUARY 31, 2002
          OR
          TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE    ACT   OF   1934   FOR   THE    TRANSITION    PERIOD   FROM
          _____________________________ TO ___________________________


          0-17430
          ----------------------------------------------------
          Commission File Number

                           OBSIDIAN ENTERPRISES, INC.
     ----------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            DELAWARE                            35-2154335
     -----------------------------       -----------------------------------
     (State or other jurisdiction        (I.R.S. Employer Identification No.)
   of incorporation or organization)

111 MONUMENT CIRCLE, SUITE 3680
INDIANAPOLIS, INDIANA                                   46204
----------------------------------------     -------------------------------
(Address of principal executive offices)                (Zip code)

                                   317-237-4122
----------------------------------------------------------------------------
             (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes ___ No X


APPLICABLE  ONLY  TO  ISSUERS  INVOLVED  IN  BANKTUPCY  PROCEEDINGS  DURING  THE
PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes ___ No ___


APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

         Common Stock                  Outstanding at  March 15, 2002
         $.0001 par value              36,007,855 shares


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
<TABLE>

<S>                                                                                        <C>               <C>
                                                                                   January 31,       October 31,
                                                                                       2002             2001
                                                                                 ----------------------------------


Assets

Current assets:
    Cash and cash equivalents                                                      $          417   $          529
    Marketable securities                                                                     194              223
    Accounts receivable, net of allowance for doubtful accounts
      of $95 for 2002 and $90 for 2001                                                      3,883            3,744
    Accounts receivable, related parties                                                       --              217
    Inventories, net                                                                        7,152            6,694
    Prepaid expenses and other assets                                                         731            1,275
                                                                                 ----------------------------------

Total current assets                                                                       12,377           12,682

Property, plant and equipment, net                                                         23,807           24,232

Other assets:
    Goodwill, net of accumulated amortization of $76                                        9,165            9,210
    Other intangible assets, net of accumulated amortization of $365 for 2002
    and $270 for 2001                                                                       2,052            2,147
    Other                                                                                     602              579
                                                                                 ----------------------------------

                                                                                   $       48,003   $       48,850
                                                                                 ==================================
</TABLE>
The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                        2



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)
<TABLE>

<S>                                                                                        <C>              <C>
                                                                                   January 31,      October 31,
                                                                                       2002             2001
                                                                                 ----------------------------------

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
    Current portion of long-term debt                                              $       14,383   $        9,233
    Accounts payable, trade                                                                 3,399            3,620
    Accounts payable, related parties                                                         658              925
    Accrued expenses and customer deposits                                                  2,961            2,388
                                                                                 ----------------------------------

Total current liabilities                                                                  21,401           16,166

Long-term debt, net of current portion                                                     22,228           27,546

Deferred income tax liabilities                                                             1,528            1,672

Accounts payable, related parties                                                           3,169            2,170

Commitments and Contingencies                                                                  --               --

Stockholders' equity (deficit):
    Common stock, par value $.0001 per share; 40,000,000 shares authorized,
     36,007,855 shares outstanding                                                              3                3
    Preferred stock, 5,000,000 shares authorized; Class of Series C convertible
     preferred stock, par value $.001, 4,600,000 authorized and 3,739,169 shares
     issued and outstanding, 400,000 shares of undesignated Preferred
     Stock authorized                                                                           4                4
    Additional paid-in capital                                                              5,612            5,612
    Accumulated other comprehensive income                                                      8               37
    Accumulated deficit                                                                    (5,950)          (4,360)
                                                                                 ----------------------------------

Total stockholders' equity (deficit)                                                         (323)           1,296
                                                                                 ----------------------------------

                                                                                   $       48,003   $       48,850
                                                                                 ==================================
</TABLE>
The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                       3



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In Thousands Except Per Share And Share Data)
                                   (unaudited)
<TABLE>

<S>                                                                             <C>                  <C>
                                                                                    Three Months       Three Months
                                                                                 Ended January 31,        Ended
                                                                                        2002          January 31, 2001
                                                                                 -------------------------------------

Net sales                                                                          $         12,483     $       3,743

Cost of sales                                                                                11,026             3,301
                                                                                 -------------------------------------

Gross profit                                                                                  1,457               442

Selling, general and administrative expenses                                                  2,206               515
                                                                                 -------------------------------------

Loss from operations                                                                          (749)              (73)

Other income (expense):
  Interest expense, net                                                                       (874)             (217)
  Other expense                                                                                (29)              (77)
                                                                                 -------------------------------------

Loss before income taxes                                                                    (1,652)             (367)

Income tax (expense) benefit                                                                    155                12
                                                                                 -------------------------------------

Net loss                                                                           $        (1,497)    $         (355)
                                                                                 =====================================

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

Weighted average common and common equivalent shares outstanding basic and
 diluted:                                                                               110,791,370        39,419,240
                                                                                 =====================================

</TABLE>
The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                        4



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

       CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                             (dollars in thousands)
                                   (unaudited)


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

Balance at October 31, 2001       $  --       36,007,855   $ 3    3,739,169  $ 4     $ 5,612      $    37     $ (4,360)   $  1,296

Distributions to members             --               --    --           --   --          --           --          (93)        (93)
of DW Leasing, LLC

Unrealized loss on available-
for-sale marketable securities       (29)             --    --           --   --          --          (29)          --         (29)

Net loss                          (1,497)             --    --           --   --          --           --       (1,497)     (1,497)
                                 --------------------------------------------------------------------------------------------------

Total comprehensive loss         $(1,526)
                                 =================

Balance at January 31, 2002                   36,007,855   $ 3    3,739,169  $ 4     $ 5,612      $     8     $ (5,950)   $   (323)
                                              =====================================================================================

</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                        5

<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>

<S>                                                                             <C>             <C>
                                                                                  Three Months     Three Months
                                                                                    Ended             Ended
                                                                                  January 31,       January 31,
                                                                                    2002               2001
                                                                                 -------------------------------

Cash flow from operating activities:
  Net loss                                                                         $    (1,497)    $      (355)
  Adjustments to reconcile net loss to net cash provided by (used in) operating
   activities:
  Depreciation and amortization                                                            701             286
  Other                                                                                   (140)             77
  Changes in operating assets and liabilities net of effect of acquisitions:
    Accounts receivable, net                                                              (139)            (98)
    Inventories                                                                           (458)            456
    Other, net                                                                           1,193            (309)
                                                                                 -------------------------------

Net cash provided by (used in) operating activities                                       (340)             57
                                                                                 -------------------------------

Cash flows from investing activities:
  Capital expenditures                                                                    (222)           (293)
  Payments to acquire U.S. Rubber                                                           --          (5,528)
  Other                                                                                     11               9
                                                                                 -------------------------------

Net cash used in investing activities                                                     (211)         (5,812)
                                                                                 -------------------------------
</TABLE>

The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                        6


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>

<S>                                                                             <C>             <C>
                                                                                  Three Months    Three Months
                                                                                    Ended            Ended
                                                                                   January 31,     January 31,
                                                                                    2002              2001
                                                                                 -------------------------------

Cash flows from financing activities:
  Borrowings from and distributions to related parties, net                        $       856     $       484
  Net borrowings (payments) on lines of credit and long-term debt                          961            (366)
  Borrowings (repayments) on long-term debt                                             (1,378)          4,555
  Debt issuance cost                                                                        --             (76)
  Proceeds from issuance of U.S. Rubber common stock                                        --             880
                                                                                 -------------------------------

Net cash provided by (used in) financing activities                                        439           5,477
                                                                                 -------------------------------

Decrease in cash and cash equivalents                                                     (112)           (278)

Cash and cash equivalents, beginning of period                                             529             341
                                                                                 -------------------------------

Cash and cash equivalents, end of period                                           $       417     $        63
                                                                                 ===============================

Interest paid                                                                      $       915     $       238
                                                                                 ===============================

Taxes paid                                                                         $        15     $        --
                                                                                 ===============================

Supplemental disclosure of noncash operating, investing and financing
 activities:
  Purchase price adjustment and conversion of accounts payable to debt for
   United                                                                          $       294     $        --
  Advances to construct coaches funded by issuance of debt                         $        --     $        50
  Seller notes issued in acquisition of U.S. Rubber                                $        --     $     2,573

</TABLE>


The  accompanying  notes  are an  integral  part of the  condensed  consolidated
financial statements.
                                        7


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.   BASIS OF  PRESENTATION,  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES

Description of Business:

Danzer   Corporation  was  reorganized   through  an  Acquisition  and  Plan  of
Reorganization  with U.S. Rubber  Reclaiming,  Inc. and Related  Entities ("U.S.
Rubber  Companies"),  which was  consummated  on June 21,  2001 (the  "Effective
Date").  In  addition,   Danzer   Corporation   changed  its  name  to  Obsidian
Enterprises,  Inc. However,  the operating  company,  Danzer  Industries,  Inc.,
retained its name. Hereafter, the names Danzer, Danzer Corporation, and Obsidian
Enterprises, Inc. are used interchangeably.  The operating company will continue
to be  referred  to as  Danzer  Industries,  Inc.  The  Acquisition  and Plan of
Reorganization of Danzer Corporation with U.S. Rubber Companies (see Note 2, the
"Acquisition  and  Plan  of  Reorganization")  was  accounted  for as a  reverse
acquisition as the shareholders of the U.S. Rubber Companies owned a majority of
the  outstanding  stock of  Danzer  subsequent  to the  Acquisition  and Plan of
Reorganization.  For accounting purposes, U.S. Rubber Reclaiming, Inc. is deemed
to have acquired Danzer.

Pursuant to the Plan of Acquisition and Reorganization, United Expressline, Inc.
was acquired July 31, 2001.

The accompanying  financial data as of January 31, 2002 and for the three months
ended January 31, 2002 and 2001 has been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange  Commission
("SEC").  Certain  information  and footnote  disclosures  normally  included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations.  The October 31, 2001 consolidated  balance sheet
was  derived  from  audited  financial  statements,  but  does not  include  all
disclosures  required by accounting  principles generally accepted in the United
States of  America.  However,  the Company  believes  that the  disclosures  are
adequate to make the information  presented not misleading.  These  consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements  and the notes thereto  included in the  Company's  Annual
Report on Form 10-K for the period ended October 31, 2001.  The Company  follows
the same accounting policies in preparation of interim reports.

In the opinion of management,  all adjustments  (which include normal  recurring
adjustments except as disclosed herein) necessary to present a fair statement of
financial  position as of January 31, 2002,  results of operations,  cash flows,
and stockholders'  deficit for the three months ended January 31, 2002 have been
made.  The results of operations for the three months ended January 31, 2002 are
not necessarily  indicative of the operating results for the full fiscal year or
any future periods.

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

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

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

                                       8
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.   BASIS OF  PRESENTATION,  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES, CONTINUED

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

Pyramid  Coach,  Inc.  ("Pyramid"),  which is engaged in the leasing of coaches,
designed  and  fitted out for use for  travel by  country,  rock bands and other
business  enterprises,  primarily  on weekly to monthly  leases.  The  financial
statements of Pyramid are presented on a combined basis. The combined  financial
statements of Pyramid also include the assets,  liabilities,  equity and results
of operations of DW Leasing,  LLC ("DW Leasing") and Obsidian  Leasing  Company,
Inc. ("Obsidian Leasing"),  formed November 1, 2001. DW Leasing is controlled by
individuals  which are also  controlling  shareholders of Obsidian  Enterprises,
Inc. and,  accordingly,  Pyramid.  DW Leasing and Obsidian  Leasing also own all
coaches  operated by Pyramid.  All  intercompany  transactions are eliminated in
combination of this entity.

To complete the Plan of Reorganization,  Pyramid and DW Leasing were required to
obtain  lender  approval of the  transfer of assets  subject to  liabilities  to
Obsidian Leasing Company, Inc. ("Obsidian  Leasing"),  a wholly owned subsidiary
of the Company. On November 1, 2001, the Company completed the tax-free exchange
contemplated  by the  Acquisition  Agreement of June 21,  2001,  whereby all but
seven coaches and the liabilities  thereon were  transferred to Obsidian Leasing
to operate this segment of business previously under DW Leasing.  However, as of
January 31, 2002, the entities are combined due to  cross-guarantees  associated
with the debt on the seven coaches.

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

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


Basis of Presentation:

The  Company's  January 31, 2002  consolidated  financial  statements  have been
presented  on the  basis  that  it is a going  concern  which  contemplates  the
realization  of assets and  satisfaction  of liabilities in the normal course of
business.  The Company  incurred a loss from operations for the ten months ended
October 31, 2001 of $2,149,000 and a net loss of  $4,360,000,  which included an
asset impairment charge of $2,305,000.  In addition,  the Company has incurred a
loss of $1,497,000  for the three months ended January 31, 2002. The losses have
weakened the Company's  financial  condition and  contributed  to its failure to
meet certain financial  covenants required by the lenders.  As a result of these
covenant  violations  which were not waived or were only waived through November
2002,  $4,343,000 of long-term  debt has been  reclassified  and included in the
current  debt  caption  of  current  liabilities  as  of  January  31,  2002.  A
significant  portion of the  Company's  assets is pledged as collateral on these
loans  and  foreclosure  by  the  bank  would  seriously  impair  the  Company's
existence. In addition,  these losses and the reclassification of long-term debt
have  contributed to a total deficit in working capital of $9,024,000 at January
31, 2002.



                                       9
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


1.   BASIS OF  PRESENTATION,  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES, CONTINUED

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

Management,  as a part of its plan towards resolving these issues and generating
revenue  and cash  flow,  has taken  the  actions  described  below  during  and
subsequent to the quarter ended January 31, 2002.  Although  management believes
these actions will improve  operations and liquidity,  there can be no assurance
that such actions will sufficiently improve operations or liquidity, or occur on
terms  acceptable to the Company.  See  Management's  Discussion and Analysis of
Financial  Condition and Results of Operations  elsewhere in the this filing for
further  discussions  of the  liquidity  issues  facing the Company and the risk
factors  associated  with  these  issues  as  well  as  management's  plans  for
addressing them.

o    The Board of  Directors  has agreed in  principle  to divest  Champion to a
     group consisting of the Chairman of the Board of the Company, the President
     and the management group of Champion  pursuant to the terms of a nonbinding
     Letter of Intent  subject  to an  independent  review of fair  value by the
     independent  Board  members  of  the  Company.  DC  Investments,  LLC  ("DC
     Investments"),   an  entity  controlled  by  the  Company's  Chairman,   is
     negotiating to purchase the loans of Bank One to Champion and has agreed in
     principle to  contribute  the loan to the Company in exchange for an as yet
     undetermined  number  of  Series  C  Preferred  Stock.  The  Company  would
     contribute  that note to Champion as  additional  capital.  The  management
     group  would  acquire  Champion  in  exchange  for  the  assumption  of the
     $1,250,000  subordinated  debt of  Champion  and all accrued  interest  and
     either  a  release  of  the   Company's   guarantee  of  that  debt  or  an
     indemnification  of the  Company for any loss to the Company as a result of
     the guarantee.  This proposed sale would result in the Company disposing of
     a subsidiary that comprised 77% of the Company's net loss for the ten-month
     period  ended  October 31, 2001 and 22% of the  Company's  net loss for the
     quarter ended January 31, 2002.

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

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

o    Negotiations have been ongoing with a new lender to refinance the debt with
     the primary lender of U.S.  Rubber at more favorable terms than the current
     terms.  Management  anticipates  the  refinancing  will be concluded by the
     third fiscal  quarter.  Management and an affiliated  entity  subsequent to
     year-end have negotiated with the  subordinated  debt holder of U.S. Rubber
     to pay off the debt  and  reduce  debt  amounts  and  accrued  interest  by
     approximately  $1,400,000.  Such  agreement was finalized in February 2002.
     See Note 9.

o    The Company is  undertaking  to refinance the coaches  transferred  from DW
     Leasing to a new wholly owned subsidiary of the Company  (Obsidian  Leasing
     Company, Inc.) with existing


                                     10
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



1.   BASIS OF  PRESENTATION,  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES, CONTINUED

     lenders and a related party (DC Investments,  LLC). Management  anticipates
     that this will be concluded by the third fiscal quarter.

o    OCP has  entered  into  agreements  related to the debt of U.S.  Rubber and
     United.  Specifically,  in the event of and in accordance  with the default
     provisions,  Obsidian is obligated to make capital  contributions  to these
     subsidiaries of $1,620,000 and $1,000,000,  respectively.  In addition, OCP
     has  committed to fund through the purchase of additional  preferred  stock
     the costs of all legal,  accounting  and related costs to complete the Plan
     of  Reorganization  and the costs to meet all  regulatory  requirements  to
     allow continued trading of Company stock by shareholders.

SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The accompanying  condensed  consolidated financial statements as of and for the
three  months   ended   January  31,  2002  present  the  accounts  of  Obsidian
Enterprises,  Inc. and its wholly owned  subsidiaries  described  above,  all of
which are treated for accounting  purposes as purchases in a reverse merger more
fully described in Note 2. The entities are  collectively  referred to herein as
the "Company". All significant intercompany  transactions and balances have been
eliminated in consolidation.  The accompanying  financial statements include the
operations of Obsidian Enterprises,  Inc. (formerly Danzer Corporation),  Danzer
Industries,   United  Expressline,  U.S.  Rubber,  Champion,  Pyramid,  Obsidian
Leasing,  and a related  entity (DW  Leasing) for the  three-month  period ended
January 31,  2002.  The  accompanying  condensed  financial  statements  for the
three-month  period ended January 31, 2001  represent the financial  position of
U.S.  Rubber,  Champion,  Pyramid  and DW Leasing as of January  31,  2001.  The
statements of operations  and cash flows include the results of U.S.  Rubber for
the three months ended  January 31, 2001 and Champion,  Pyramid,  and DW Leasing
from January 1, 2001 through January 31, 2001.


Goodwill, Intangible Assets and Other Assets:

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 142,  Goodwill and Other  Intangible  Assets,  effective
November 1, 2001 and accordingly, goodwill is no longer amortized.

Other intangible assets include trade names, customer relations and backlogs and
other  items,  which are being  amortized  on a  straight-line  basis over lives
ranging from 3 months to 15 years.


Earnings Per Share:

Basic per-share amounts are computed,  generally, by dividing net income or loss
by the weighted-average  number of common shares outstanding.  Basic and diluted
weighted  average  common  shares  outstanding  for  2002  and 2001 are the same
because the Company incurred losses for all periods  presented.  Therefore,  the
inclusion of options, warrants and other common

                                       11

<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



1.   BASIS OF  PRESENTATION,  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES, CONTINUED

stock  equivalents as described in Note 5 in the calculation of diluted loss per
share would have an antidilutive effect.

In arriving at the weighted  average  number of common  shares  outstanding  for
basic income  (loss) per share,  the Company's  Series C  Convertible  Preferred
Stock,  which has all the rights and  privileges of the Company's  common stock,
has been reflected as equivalent common shares.  Therefore, for the three months
ended January 31, 2002, the 3,739,169  shares of Series C Convertible  Preferred
Stock  have been  reflected  as common  equivalent  shares  of  74,783,380.  The
weighted  average  common shares  outstanding  for the quarter ended January 31,
2001  reflects the  1,970,962  shares of Series C  Convertible  Preferred  Stock
issued to the former  stockholders  of the  companies  acquired  in the  reverse
merger as described in Note 2, as if such shares had been  converted  into their
equivalent number of common shares of 39,419,240.


Recently Issued Accounting Pronouncements:

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

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

In July 2001, the FASB issued SFAS No. 144, Impairment or Disposal of Long-Lived
Assets,  which is effective for fiscal years  beginning after December 15, 2001.
The  provisions  of  this  statement  provide  a  single  accounting  model  for
impairment of long-lived assets.  The Company is currently  assessing the impact
of this new standard.


2.   ACQUISITIONS AND PLAN OF REORGANIZATION

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

                                       12


<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



2.   ACQUISITIONS AND PLAN OF REORGANIZATION, CONTINUED

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

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

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


Pro Forma Information:

The  unaudited  condensed  consolidated  results of  operations  shown below are
presented  on  a  pro  forma  basis  and   represent  the  results  of  Obsidian
Enterprises,  Inc. (formerly Danzer),  Danzer Industries,  U.S. Rubber,  United,
Champion,  Pyramid,  Obsidian  Leasing and DW Leasing on a combined  basis.  The
schedule below includes all depreciation,  amortization and nonrecurring charges
for all entities for the period shown.

                                       Three Months Ended
                                          January 31,
                                              2001
                                      ---------------------

Net sales                                $        13,999

Net loss                                 $          (882)

Net loss per share - basic and diluted   $          (.02)

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


                                       13
<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



3.   INVENTORIES

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

                                 January 31,         October 31,
                                   2002                 2001
                              ------------------ -------------------

Raw materials                 $        3,907     $        3,734
Work-in-process                        1,636              1,471
Finished goods                         2,317              2,322
Valuation reserve                       (708)              (833)
                              ------------------ -------------------

Total                         $        7,152     $        6,694
                              ================== ===================

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

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

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

Balance at October 31, 2001                          (820)               (13)              (833)
  Write-off of inventory, first
    quarter 2002                                       121                  4                125
                                         ------------------ ------------------ ------------------

Balance at January 31, 2002                $         (699)    $           (9)    $         (708)
                                         ================== ================== ==================
</TABLE>


4.   FINANCING ARRANGEMENTS

In connection with the  Acquisitions  described in Note 2 and to provide working
capital,  the Company has incurred the following debt as of January 31, 2002 and
October 31, 2001:

                                       14

<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                -------------------------------------
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>             <C>
                                                                                   January 31,     October 31,
                                                                                      2002              2001
                                                                                ------------------ ------------------

U.S. Rubber

Line of credit due  November  1, 2002,  bearing  interest at the prime rate plus
..75%  (5.5% at  January  31,  2002),  borrowings  not to exceed  the  greater of
$3,000,000 or the borrowing base (80% of eligible accounts receivable and 50% of
eligible inventories), collateralized by substantially all assets of
U.S. Rubber*                                                                      $        2,093     $        1,732

Note payable to a bank due November 1, 2002,  interest  payable monthly at prime
rate plus 1% (5.75% at January 31, 2002),  monthly principal  payments of $2,395
beginning January 2002, collateralized by substantially all assets
of U.S. Rubber*                                                                              195                200

Note payable to a bank,  due  November 1, 2002,  monthly  principal  payments of
$34,725, balloon payment and accrued interest due at maturity, accruing interest
at the prime  rate plus 1% (5.75% at January  31,  2002),  used to  finance  the
acquisition and capital expenditures, collateralized by
substantially all assets of U.S. Rubber*                                                   2,049              2,187

As part of the original  acquisition of U.S.  Rubber,  the Company issued a note
payable to former owner  (SerVaas,  Inc.) in the amount of $1,750,000.  The note
requires  interest  payable  monthly at fourteen  percent (14%) from the date of
this note until March 31, 2001 and at a rate of twenty percent (20%) thereafter.
The former owner agreed to defer interest and principal  payments through May of
2001.  The  amounts  accrued  during this period will become part of the balloon
payment due  December  28, 2005.  The note is  collateralized  by a Stock Pledge
Agreement  given by OCP. In addition,  this note is subordinated to the lines of
credit and note payable  described  above.  On February  26,  2002,  the Company
refinanced the debt, as further described in Note 9.*                                      1,750              1,750
</TABLE>

                                       15

<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                -------------------------------------
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>             <C>
                                                                                   January 31,     October 31,
                                                                                      2002            2001
                                                                                ------------------ ------------------
U.S. Rubber, Continued

Note payable to a bank,  due  November 1, 2002,  monthly  principal  payments of
$2,778, balloon payment and accrued interest due at maturity,  accruing interest
at the prime rate plus 1% (6.5% at January 31, 2002),  to be used to finance the
acquisition, collateralized by substantially all assets of U.S. Rubber*                       463                474

 Other                                                                                         77                 88
                                                                                ------------------ ------------------

 Subtotal U.S. Rubber                                                                       7,357              7,161
                                                                                ------------------ ------------------


*U.S. Rubber was in technical default of various loan covenants with its primary
and  subordinated  lender at January 31,  2002.  The Company has entered into an
amendment to the credit  agreement with the primary lender which includes waiver
of the covenant violations and resets the maturity date on all loans to November
1, 2002.  The Company also obtained a waiver  through  November 1, 2002 from the
subordinated lender.

Champion

Bank One, N.A. Facility 1--Line of Credit,  maximum borrowing equal to $200,000,
interest  payable  monthly at prime plus 1/2%  (5.25% at January  31,  2002) due
March 15,  2002,  collateralized  by  substantially  all assets of Champion  and
guaranteed  by Messrs.  Durham and  Whitesell.  On March 15,  2002,  the Company
refinanced the debt with a related party and paid off the Bank
One debt, as further described in Note 9.*                                        $          159     $          200

Bank One, N.A.  Facility 2--term loan, note payable  $650,000,  requires monthly
principal  installments  of $7,738  plus  interest  at prime  plus 3/4% (5.5% at
January 31, 2002), matures June 2005, collateralized by substantially all assets
of Champion and guaranteed by Messrs.  Durham and Whitesell.  On March 15, 2002,
the Company refinanced the debt with a related party and paid off
the Bank One debt, as further described in Note 9.*                                          503                526

</TABLE>


                                       16

<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>                <C>
                                                                                   January 31,        October 31,
                                                                                      2002                 2001
                                                                                ------------------ ------------------
Champion, Continued

Bank One, N.A. Facility 3 - term loan, note payable $1,118,000, requires monthly
principal  installments  of $31,056 plus interest at prime matures 1 1/2% (6.25%
at  January  31,  2002),  matures  June  2003,  paid  off on  January  8,  2002,
collateralized by substantially all assets of Champion and guaranteed by
Messrs. Durham and Whitesell*                                                                 --                621

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

 Other                                                                                         8                 15
                                                                                ------------------ ------------------

 Subtotal Champion                                                                         1,920              2,612
                                                                                ------------------ ------------------

*Champion was in technical default of all of its debt as of January 31, 2002 and
October 31, 2001, respectively.  The Company has not been able to obtain waivers
from the lenders. Accordingly, all debt has been classified as current.

Pyramid, DW Leasing and Obsidian Leasing

Ford Motor Credit installment loan, $39,104 repayable in monthly installments of
$667 including interest at .9% through October 2005, first
lien on asset (purchase asset)                                                    $           29     $           31

Various  installment  loans,   $11,796,038  repayable  in  monthly  installments
totaling $151,453 including interest ranging from 7.5% to 11.8% through November
2007 and applicable  balloon  payments  thereafter  through December 2007, first
lien on assets financed (finance acquisition and asset purchases). Substantially
all borrowings guaranteed by the members of DW Leasing.*                                   9,411              9,584

</TABLE>

                                       17

<PAGE>



                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>               <C>
                                                                                   January 31,       October 31,
                                                                                      2002              2001
                                                                                ------------------ ------------------
Pyramid, DW Leasing and Obsidian Leasing, Continued

Various installment loans, $3,636,145 repayable in monthly installments totaling
$51,950  including  interest ranging from 8.0% to 13.2% through July 2007, first
lien on assets financed (finance acquisition and asset purchases). Substantially
all borrowings guaranteed by the members of DW Leasing.                                    3,280              3,345

Former shareholders of Pyramid and related companies installment loans, $927,500
repayable in monthly installments of interest at 9% through December 2002 with a
balloon  payment in January  2003,  collateralized  by Security  Agreements  for
Pyramid, DW Leasing and the members of DW Leasing (finance acquisition)                      928                928
                                                                                ------------------ ------------------

 Subtotal Pyramid, DW Leasing and Obsidian Leasing                                        13,648             13,888
                                                                                ------------------ ------------------

*DW Leasing was in technical  default of several loan  covenants with two of its
primary lenders. The Company has obtained bank waivers through November 2002 for
a portion of this amount.  Amounts  classified as current as of January 31, 2002
and October 31, 2001 due to defaults that have not been waived are $622 thousand
and $639 thousand, respectively.

Danzer Industries

Bank of America line of credit,  maximum  borrowing equal to $1,000,000,  with a
base  of  80% of  eligible  accounts  receivable;  plus  50%  of  raw  material,
work-in-process  and finished goods  inventory.  Interest payable monthly at the
LIBOR Daily  Floating Rate plus 3.2% (5.5% at January 31,  2002),  due March 31,
2002, collateralized by substantially all assets of Danzer
Industries and guaranteed by Obsidian Enterprises, Inc.*                          $          575     $           75
</TABLE>



                                       18

<PAGE>



                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>               <C>
                                                                                   January 31,       October 31,
                                                                                      2002              2001
                                                                                ------------------ ------------------
Danzer Industries, Continued

Bank of  America  loan--note  payable  $1,000,000,  requires  monthly  principal
installments  of $5,555 plus interest at the LIBOR Daily Floating Rate plus 3.2%
(5.5% at January 31, 2002), due August 15, 2006. Collateralized by substantially
all assets of Danzer Industries and guaranteed by Obsidian Enterprises, Inc.*                967                983

Equipment loans payable--monthly payments currently aggregating $2,443 including
interest of 8.90% to 11.25% through September 2006. Collateralized
by equipment financed.                                                                       107                 53

Term loans payable to US Amada,  Ltd.  Monthly  payments  currently  aggregating
$12,668 including interest at 10%, loans due January 2003, collateralized by
equipment financed                                                                           254                285

 Other                                                                                         9                 10
                                                                                ------------------ ------------------

 Subtotal Danzer Industries                                                                1,912              1,406
                                                                                ------------------ ------------------

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

United

First  Indiana  Bank  Revolving  Line of  Credit,  maximum  borrowing  equal  to
$3,500,000,  with a base of 80% of eligible accounts receivable; plus 50% of raw
material, work-in-process and finished goods inventory. Interest payable monthly
at prime plus .75% (5.5% at January 31,  2002) due July 1, 2002,  collateralized
by substantially all assets of United and guaranteed by
Obsidian Enterprises, Inc.*                                                       $      3,185       $      3,111
</TABLE>



                                       19

<PAGE>



                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>               <C>
                                                                                   January 31,       October 31,
                                                                                      2002              2001
                                                                                ------------------ ------------------
United, Continued

First Indiana Term Loan I--note payable  $291,000,  requires  monthly  principal
installments  of $4,850  plus  interest  at prime plus 1% (5.75% at January  31,
2002), due July 1, 2006, collateralized by substantially all assets of
United and guaranteed by Obsidian Enterprises, Inc.*                                       267                281

First Indiana Term Loan II--note payable $1,116,000,  requires monthly principal
installments  of $6,200  plus  interest  at prime plus 1% (5.75% at January  31,
2002), due July 1, 2006, collateralized by substantially all
assets of United and guaranteed by Obsidian Enterprises, Inc.*                           1,085              1,104

First Indiana Term Loan III--note payable $1,750,000, requires monthly principal
installments  of $72,917  plus  interest  at prime plus 2% (6.75% at January 31,
2002), due July 1, 2003, collateralized by substantially all
assets of United and guaranteed by Obsidian Enterprises, Inc.*                           1,385              1,604

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

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


                                       20

<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

<TABLE>
                                                                                     Debt Amount (in thousands)
                                                                                -------------------------------------
<S>                                                                                        <C>               <C> <C>
                                                                                   January 31,       October 31, 2001
                                                                                      2002              2001
                                                                                ------------------ ------------------

United, Continued

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

Note payable to former shareholder,  $248,840, interest payable at 9% per annum,
balloon payment of outstanding principal balance due February 1, 2003                      249                 --

Other                                                                                      103                112
                                                                                ------------------ ------------------

Subtotal United                                                                         11,774             11,712
                                                                                ------------------ ------------------

*    United  Expressline was in technical  default of loan covenants with one of
     its primary  lenders as of October 31, 2001.  The Company has obtained bank
     waivers from the lender  through  January 2002, at which time, the defaults
     were cured.                                                                ------------------ ------------------

 Total all companies                                                                    36,611             36,779

 Less current portion                                                                   14,383**            9,233
                                                                                ------------------ ------------------

                                                                                  $     22,228       $     27,546
                                                                                ================== ==================
</TABLE>

**   The current  portion of long-term  debt  includes  $4,343,000 of amounts in
     default or in default with waivers which expire November 1, 2002.

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


                                       21
<PAGE>




                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



4.   FINANCING ARRANGEMENTS, CONTINUED

Various  subsidiary  companies  were in  violation  of  requirements  to provide
year-end financial  statements to various lenders within 90 days of the close of
the year-end. Management has received waivers on all of these covenants.

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


5.   STOCKHOLDERS' EQUITY

Preferred Stock:

In conjunction with the merger and acquisitions  (described  previously) of June
21, the Company issued  1,970,962 of Series C Preferred  Stock. The shareholders
of Pyramid and Champion  then  converted  824,892  shares of preferred  stock to
16,497,840 of common stock. In addition,  on July 5, 2001, the Company increased
the authorized  shares of common stock by 20,000,000 to 40,000,000.  On July 31,
2001, the Company issued  2,593,099 shares of additional  convertible  preferred
stock related to the United acquisition.

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

These  shares  were  offered  and sold in  transactions  which were  exempt from
Securities Act registration  under Section 4(2) of the Securities Act,  relating
to sales by an issuer not  involving a public  offering.  No  underwriters  were
involved in the sale of these shares.  The Corporation will use its best efforts
to file, as soon as reasonable practicable following the date of issuance of the
Series C Preferred, a registration statement ("Registration  Statement") on Form
S-1, pursuant to the rules of the Securities and Exchange  Commission ("SEC") or
on such  other  form  promulgated  by the SEC for  which  the  Corporation  then
qualifies,  which  is  available  to  Corporation,  and  which  counsel  for the
Corporation shall deem appropriate for the registration under the Securities Act
of 1933.

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

                                       22
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



5.   STOCKHOLDERS' EQUITY, CONTINUED

Stock Options:

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

In April 1998,  Danzer granted  600,000 stock  options,  exercisable at $.10 per
share,  to its  president.  The options  vest over two years and expire in April
2004. None of these options have been exercised as of January 31, 2002.

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

In September 1998, Danzer granted a total of 604,500 stock options,  exercisable
at $.10 per share, to certain employees.  The options expire November 2001. As a
result of  voluntary  termination,  75,000  options  expired in 1999 and 192,000
options  expired in 2000. None of these options were exercised as of January 31,
2002.

On July 24,  2001,  the Board  adopted,  and on October 5, 2001,  the  Company's
stockholders  approved, the 2001 Long Term Incentive Plan (the "2001 Plan"). The
2001 Plan  authorizes  the granting to the Company's  directors,  key employees,
advisors and  consultants  of options  intended to qualify as Incentive  Options
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code"), options that do not so qualify ("Non-Statutory  Options"),
restricted stock and Other Stock-Based  Awards that are not Incentive Options or
Non-Statutory  Options.  The awards are payable in Common Stock and are based on
the formula which measures performance of the company.  There was no performance
award  expense in 2002 and 2001.  No options under this plan were granted to any
employees. Options are exercisable for up to 10 years from the date of grant.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards (SFAS) No. 123,  Accounting for Stock-Based  Compensation.
Accordingly,  no  compensation  expense has been recognized for the stock option
plans.



                                       23
<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



5.   STOCKHOLDERS' EQUITY, CONTINUED

Stock Options and Warrants:

The following  table  summarizes  the  outstanding  options and warrants for the
three-month period ended January 31, 2002:

<TABLE>
                                                                                               January 31, 2002
                                                                                          ----------------------------
<S>                                                                                     <C>             <C>
                                                                                                           Weighted
                                                                                                           Average
                                                                                                           Exercise
                                                                                             Shares         Price
                                                                                          -------------- -------------

Total granted stock options outstanding, January 31, 2002                                     800,000         $  .09
                                                                                          ============== =============

Fixed options:
  Exercise price $.10                                                                         600,000         $  .10
  Exercise price $.05                                                                         200,000         $  .05
                                                                                          ============== =============

Warrants:
  On June 21, 2001, Duncan-Smith Co. terminated warrant for 650,000 common
   shares and was issued new warrant for 10,000 shares Series C Preferred
   exercisable at $2.00 per
   share, expiring August 31, 2002                                                            200,000          $2.00
                                                                                          ============== =============

Markpoint financing agreement expiring May 2008 associated with Champion                        Zero*         $  .01
                                                                                          ============== =============
</TABLE>

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


Convertible Debt:

As  described  in Note 4, at January 31,  2002,  the Company has a note  payable
agreement which is convertible by the holder to common stock totaling  5,000,000
shares at a conversion rate of $0.10 per share at January 31, 2002.



                                       24
<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



6.   BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA

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

<TABLE>
                                                            Three Months Ended January 31, 2002
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
<S>                                     <C>                <C>                  <C>                 <C>
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
  Domestic                               $        9,250      $       1,043       $       2,079        $    12,372
  Foreign                                            --                 --                 111                111
                                       ------------------------------------------------------------------------------

Total                                    $        9,250      $       1,043       $       2,190        $    12,483

Cost of goods sold                       $        8,407      $         573       $       2,046        $    11,026

Income (loss) before taxes               $        (933)      $       (367)       $       (352)        $   (1,652)

Identifiable assets                      $       25,370      $      12,380       $      10,253        $    48,003

Depreciation and amortization expense    $          197      $         245       $         259        $       701

                                                            Three Months Ended January 31, 2001
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
  Domestic                               $          118      $         278       $       3,082        $     3,478
  Foreign                                            --                 --                 265                265
                                       ------------------------------------------------------------------------------

Total                                    $          118      $         278       $       3,347        $       3,743

Cost of goods sold                       $           83      $          88       $       3,130        $       3,301

Income (loss) before taxes               $        (137)      $       (165)       $        (65)        $       (367)

Identifiable assets                      $        5,415      $      12,604       $      11,519        $      29,538

Depreciation and amortization expense    $           29      $          75       $         182        $         286
</TABLE>


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


                                       25
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



7.   RELATED PARTIES

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

<S>                                                                                    <C>                   <C>
                                                                               January 31,           October 31,
                                                                                  2002                   2001
                                                                            ----------------- ------------------------
Balance sheet:
  Current assets:
    Accounts receivable, Obsidian Capital Company (OCC)                      $     --           $        217

  Long-term portion:
    Investment banking fees, purchase accounting*                                  --                  1,960
                                                                            ----------------- ------------------------

Total assets                                                                $      --           $      2,177
                                                                            ================= ========================
  Current liabilities:
    Accounts payable, Obsidian Capital Company (OCC)                        $     314           $        625
    Accounts payable, Obsidian Capital Partners                                    16                     --
    Accounts payable, stockholders                                                328                    300
  Long-term portion:
    Accounts payable, DC Investments                                            1,295                     --
    Accounts payable, Obsidian Capital Partners (OCP)                           1,874                  2,170
                                                                            ----------------- ------------------------

Total liabilities                                                            $  3,827           $      3,095
                                                                            ================= ========================

                                                                               January 31,         January 31,
                                                                                  2002                2001
                                                                            ----------------- ------------------------

Income statement:
  Rent expense, Obsidian Capital Company (OCC)                              $      15             $       --
                                                                            ================= ========================
</TABLE>

Related-party  amounts classified as current reflect those portions of the total
receivable or payable that were currently due in accordance  with the terms,  or
were  collected  or paid  subsequent  to January 31,  2002 or October 31,  2001,
respectively.  Amounts  classified as long term represent  amounts not currently
due,  amounts that are expected to be converted to equity  subsequent to January
31, 2002 and October 31, 2001,  respectively,  or amounts converted to long-term
debt subsequent to January 31, 2002. (See Note 9.)

The Company was obligated to the stockholders  and certain  employees (that were
formerly  stockholders of subsidiary  companies)  under note payable  agreements
acquired as part of the  acquisitions.  The  details of these notes  payable are
included in Note 4.

*    Subsidiaries  of the  Company  paid  Obsidian  Capital  Company,  an entity
     controlled by Mr. Durham (Chairman of the Company), investment banking fees
     associated with the  acquisitions  and related  financing on the Danzer and
     U.S. Rubber merger and the United acquisition. Amounts paid by U.S. Rubber,
     United, and Danzer were $760,000, $600,000, and $600,000 respectively.

                                       26
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



8.   COMMITMENTS AND CONTINGENCIES

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

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


9.   SUBSEQUENT EVENTS

On February 26, 2002, the Company entered into a series of transactions  with US
Rubber,  SerVaas,  Inc.  ("SerVaas"),  the  former  owner of US  Rubber,  and DC
Investments,  an entity  controlled by the Company's  Chairman)  whereby certain
existing debt of US Rubber was acquired from SerVaas.  DC  Investments  acquired
the SerVaas interest in the debt agreement with a remaining  balance of $730,000
plus accrued  interest for $700,000.  US Rubber then acquired this  agreement in
exchange  for a new  note  payable  to DC  Investments  with  a face  amount  of
$700,000.  The note requires monthly interest payments at 15% with the principal
payable March 2007. The note is subordinate to debt  outstanding with the senior
lender of US Rubber.

The  Company  also  acquired  the SerVaas  interest in the US Rubber  $1,750,000
subordinated note payable in exchange for $700,000 and 30,000 shares of Series C
Preferred  Stock. The cash portion of the transaction was from the proceeds of a
note  payable  in the  amount of  $700,000  issued to DC  Investments.  The note
requires monthly interest payments at 15% with the principal payable March 2007.

No  gain  or  loss  will  be  recognized  in  the  transactions  because  of the
involvement of related  parties.  The transaction  will result in an increase in
equity of the consolidated group of approximately $1,400,000.

On February 12, 2002,  U.S.  Rubber  entered into a "Second  Amendment to Credit
Agreement" with its primary lender. The terms of the amendment require scheduled
debt service payments under  substantially the same terms as described in Note 4
through  November 1, 2002 when all debt outstanding with the primary lender will
become due. The agreement also modifies the terms of an operating lease with the
lender  requiring  payment  in  full of the  remaining  lease  obligation  as of
November 1, 2002 of approximately $738,000.

After October 31, 2001,  Champion is in violation of its Senior Credit  facility
with Bank One.  Champion is working under a forbearance  agreement through March
15,  2002.  Champion  has paid  down the Bank One debt by  $570,000  during  the
quarter ended January 31, 2002 as consideration for such agreements. The Company
made a capital  contribution  to Champion of $570,000 from loan proceeds from DC
Investments.



                                       27
<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



9.   SUBSEQUENT EVENTS, CONTINUED

DC Investments has purchased accounts receivable from DW Leasing, recorded by DW
Leasing as deposits on trailers,  in the amount of $1,050,000 as of February 13,
2002. DW Leasing used the proceeds from the purchase of the accounts  receivable
to pay off the accounts  payable due Obsidian  Capital  Company in the amount of
$624,000  and the  amount  due  shareholders  and other  related  parties in the
approximate amount of $300,000.

On March 15,  2002,  the Company  and DW Leasing  converted  amounts  owed to DC
Investments to notes payable.  The notes bear interest at 10% payable quarterly,
with principal due in one  installment in March 2005. The total amounts  payable
under these notes to DC  Investments  are  $1,085,000  and $210,000 for Obsidian
Enterprises and DW Leasing, respectively.



ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.


Cautionary Statement Regarding Forward-Looking Statements

The Private Securities  Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. The Company and its representatives may from time to
time make  written  or oral  forward-looking  statements,  including  statements
included in or incorporated by reference into this Quarterly Report on Form 10-Q
and  the  Company's   other  filings  made  with  the  Securities  and  Exchange
Commission. These forward-looking statements are based on management's views and
assumptions and involve risks,  uncertainties and other important factors,  some
of which may be beyond the  control of the  Company,  that  could  cause  actual
results  to  differ   materially   from  those   expressed  or  implied  in  the
forward-looking  statements.  Factors  that might  cause or  contribute  to such
differences  include,  but are not  limited  to,  those  discussed  in Item  2.,
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  in this  Form  10-Q.  Readers  should  carefully  review  the risks
described in this and other  documents  that the Company files from time to time
with the  Securities and Exchange  Commission.  The  forward-looking  statements
speak  only as of the date  that  they are made and the  Company  undertakes  no
obligation to update or revise any of the forward-looking statements.


Overview

The reverse  merger  transactions,  completed  in June and July 2001,  have been
treated for  accounting  purposes as an  acquisition  by U.S.  Rubber.  For this
reason,  the first quarter results for 2001 represent only the financial results
of U.S. Rubber for three months, Champion Trailer for one month, and the Pyramid
Group for one  month  based on the  January  1, 2001  acquisition  date.  Danzer
Industries and United Expressline were acquired June 21, 2001 and July 31, 2001,
respectively,  and,  accordingly,  are not  included in  financial  condition at
January  31,  2001 or the  results of  operations  for the first  quarter  ended
January 31, 2001.

The financial condition as of January 31, 2002 and the results of operations for
the first quarter ended January 31, 2002, include the operations of U.S. Rubber,
Champion  Trailer,   Pyramid  Coach,   Obsidian  Leasing,  DW  Leasing,   United
Expressline, and Danzer Industries.


                                       28

<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



RESULTS OF OPERATIONS 2002 COMPARED WITH 2001

The Company  operates  in three  segments,  trailer  and related  transportation
manufacturing,  butyl rubber reclaiming,  and coach leasing. Trailer and related
transportation   manufacturing   includes  the  operations  of  United,   Danzer
Industries,  and Champion.  Butyl rubber  reclaiming  includes the operations of
U.S.  Rubber and coach leasing  includes the operations of Pyramid,  DW Leasing,
and Obsidian Leasing.


Segment Sales
The following table shows net sales by segment:
                                           Three Months Ended January 31,
                                        -------------------------------------
                                               2002               2001
                                        ------------------ ------------------
                                                   (in thousands)

Trailer and related transportation
 equipment manufacturing                   $       9,250      $         118
Butyl rubber reclaiming                            2,190              3,347
Coach leasing                                      1,043                278
                                        ------------------ ------------------

Total                                      $      12,483      $       3,743
                                        ================== ==================

The Company's  operating results and revenue were less than expected for each of
its segments in the first quarter ended January 31, 2002.  This is primarily due
to softer than expected  sales of reclaimed  butyl rubber,  transport  specialty
trailers,  and truck  bodies,  and the  overall  continued  slowdown of economic
activity  during the first  quarter  ended  January  31,  2002.  The  results of
operations  were also  negatively  impacted by normal seasonal slow activity for
the  coach  leasing   activities  and  the  Company's  sales  from  its  trailer
manufacturing  operations.  Management is still  focused on creating  consistent
reporting systems and communication  with each of its subsidiaries.  In addition
Management  is continuing to address the  transition  of the  subsidiaries  from
closely held mostly non-audited private companies to public entities. Management
has no prior history in effecting such an integration  of  subsidiaries  under a
holding company and its ability to successfully accomplish this task will have a
substantial  impact on future  Company  revenues and profits.  Subsequent to the
first quarter, the Company hired a new Chief Financial Officer to direct many of
these  functions  including cash  management,  debt  consolidation,  more timely
reporting,  development  of  programs  to  incentives  personnel,  and  to  help
integrate the acquired subsidiaries into an effective operating Company.


TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING

Company  gross  profit and gross  profit  percentage  for the three months ended
January  31,  2002,  for  the  trailer  and  related  transportation   equipment
manufacturing  segment  were  $842,256  and 9.1%.  This segment had one month of
operations  only  generated  by Champion  Trailer  resulting in gross profit and
gross profit  percentage of $34,670 and 29.5% for the three months ended January
31, 2001.

Sales and gross  profits were lower than expected in this segment due to various
factors described below.


                                       29
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



The continued depressed  conditions in the  telecommunications  industry was the
primary  factor that has seen lower than  expected  truck body sales  during the
first quarter. Truck body cost of sales were greatly affected by the lower sales
and the efforts to lower  reductions in costs were not  sufficient to offset the
effect of the reduced  revenue.  The Company  anticipates  that overall economic
conditions  and the  economic  state  of the  telecommunications  industry  will
continue to impact sales of truck bodies during 2002.

The Company's  transport  specialty trailer gross profit was substantially below
expectations  in the first  quarter of 2002.  As a result of continued  negative
operating  results of  Champion  Trailer,  including a $2.3  million  impairment
charge in the  fourth  quarter  of 2001,  the Board of  Directors  has agreed in
principle to divest Champion to a group  consisting of the Chairman of the Board
of the Company,  the President and the management group of Champion  pursuant to
the terms of a nonbinding  Letter of Intent subject to an independent  review of
fair value by the  independent  Board members of the Company.  DC Investments is
negotiating  to  purchase  the loans of Bank One to  Champion  and has agreed in
principle  to  contribute  the loan to the  Company  in  exchange  for an as yet
undetermined  number of Series C Preferred  Stock.  The Company would contribute
that note to Champion as additional capital.  The management group would acquire
Champion in exchange for the assumption of the $1,250,000  subordinated  debt of
Champion  and all  accrued  interest  and  either  a  release  of the  Company's
guarantee of that debt or an  indemnification of the Company for any loss to the
Company as a result of the guarantee.

The Company's  gross profit and operating  results in its trailer  manufacturing
operations  were lower for the first  quarter  than was  expected.  Although the
Company  normally expects this quarter to be lower due to the seasonal nature of
the trailer manufacturing  operations,  the results of the first quarter of 2002
sales, gross profit and net operating income are lower than expected. Management
believes that there are operational  savings  available in the  consolidation of
administrative  functions  performed at United's two  facilities  and expects to
make  changes  necessary  to reduce  certain  common  costs during the third and
fourth quarter of 2002.

Sales and  gross  profit  were  affected  by the  recession  and the  consequent
reduction  in the overall  level of capital  spending  during the first  quarter
ended January 31, 2002. As capital spending increases, the Company expects sales
and gross profit to rebound to  historical  levels in this segment at United and
Danzer Industries.


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

                                        Three Months Ended January 31,
                                   ------------------------------------------
                                         2002                  2001
                                   ------------------ -----------------------

Rubber net sales                      $   2,190,445      $   3,347,276
                                   ================== =======================

Net sales in this  segment  for the  three  months  ended  January  31,  2002 as
compared to the comparable  three-month  period ended January 31, 2001 decreased
34.6% in the amount of $1,156,831.

The Company's  customers had built up large  inventories  during the  widespread
tire  recalls at  Bridgestone/Firestone  and  Goodyear in  anticipation  of huge
demand  under such  recalls.  The number of tires  submitted  by consumers to be
replaced  was  substantially  lower  than  anticipated,  and as a  result,  tire
manufacturer  orders  through  December 2001 were lower than the previous  year,
producing a  substantial  decrease in reclaimed  butyl demand  through  December
2001. The Company saw an increase in sales during January 2002 and anticipates a
return to more normal inventory levels at its tire manufacturer  customers,  but
doesn't  anticipate a return to historic  levels of demand for  reclaimed  butyl
rubber by tire manufacturers until the third quarter of 2002.

                                       30
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



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

         Cost of goods sold in this segment were as follows:

                                        Three Months Ended January 31,
                                    ----------------------------------------
                                           2002                2001
                                    ----------------- ----------------------

Rubber cost of goods sold           $     2,045,930   $     3,130,018
                                    ==========================================

% of sales                                    93.4%             93.5%
                                    ==========================================

Manufacturing  costs remained stable in 2002 when compared to the prior year for
the three-month period ended January 31, 2001. With the 12" extruder  renovation
completed in  September  2001 and the  increased  use of butyl rubber pad scrap,
management anticipates that the cost of goods sold percentage should continue to
decline in 2002 from that  experienced in 2001 so long as sales volume increases
as expected.

Gross profit and gross profit  percentage for the three months ended January 31,
2002 and 2001 were as follows:

                                        Three Months Ended January 31,
                                  ------------------------------------------
                                         2002                 2001
                                  ------------------- ----------------------

Rubber gross profit                 $    144,515         $    217,258
                                  ============================================

Rubber gross percentage                     6.6%                 6.5%
                                  ============================================

Gross profit was consistent  during the first quarter of 2002 as compared to the
2001 period.

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

On February 26, 2002, the Company entered into a series of transactions  with US
Rubber,  SerVaas,  Inc.  ("SerVaas"),  the  former  owner of US  Rubber,  and DC
Investments  whereby  certain  existing  debt of US  Rubber  was  acquired  from
SerVaas. DC Investments acquired the SerVaas interest in the debt agreement with
a remaining  balance of $730,000 plus accrued  interest for $700,000.  US Rubber
then  acquired  this  agreement  in  exchange  for  a  new  note  payable  to DC
Investments  with a face amount of $700,000.  The note requires monthly interest
payments at 15% with the principal  payable March 2007.  The note is subordinate
to debt outstanding with the senior lender of US Rubber.

The  Company  also  acquired  the SerVaas  interest in the US Rubber  $1,750,000
subordinated note payable in exchange for $700,000 and 30,000 shares of Series C
Preferred  Stock. The cash portion of the transaction was from the proceeds of a
note  payable  in the  amount of  $700,000  issued to DC  Investments.  The note
requires monthly interest payments at 15% with the principal payable March 2007.



                                       31
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



No  gain  or  loss  will  be  recognized  in  the  transactions  because  of the
involvement of related  parties.  The transaction  will result in an increase in
equity of the consolidated group of approximately $1,400,000.


Coach Leasing

The results of  operations  for the three months ended January 31, 2001 includes
only one month of  operating  results of coach  leasing,  as  Pyramid,  Obsidian
Leasing and DW Leasing  ("Pyramid  Group") were not a part of the Company  until
January 1, 2001. Coach leasing revenue was higher due to the increase in size of
the coach fleet.  Management  expects  decreased  utilization  during the second
quarter of fiscal 2002.  Management  believes its marketing  efforts to rock and
roll,  pop,  touring  Broadway  shows and  corporate  customers  will  result in
increased utilization during the third quarter of the Company's fiscal year.

Through  the fiscal  year ended  October  31,  2001,  the Company and DW Leasing
conducted    cooperative    operations    through   a   management    agreement,
cross-guarantees of debt and shared management and expense. On November 1, 2001,
a substantial  part of DW Leasing's  asset and liabilities  were  transferred to
Obsidian  Leasing  Company,  Inc.  ("Obsidian  Leasing"),  wholly  owned  by the
Company, to complete the purchase of the Coach Leasing business  contemplated by
the purchase  transaction in June 2001. The operations of Obsidian  Leasing have
been  included in the first  quarter  results of operation  of the  Company.  DW
Leasing's  operations  are also  included in the results of  operations  for the
first quarter of 2002.

For the three months ended January 31, 2002, the coach leasing segment had gross
profit and gross profit percentage of $470,537 and 45.1%.


SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES

Selling,  general and  administrative  expenses  are higher for the three months
ended January 31, 2002 versus the three-month  period ended January 31, 2001 due
to the operations added in 2001, as previously discussed.

Selling,  general  and  administrative  expenses  are higher for the three month
period than would be  expected on an ongoing  basis.  This is due  primarily  to
increased  administrative  costs that were  necessary to continue the process of
creating  better  subsidiary  reporting,  the use of outside  professionals  for
services in assisting in post-acquisition  activities,  the cost to obtain prior
year audits to meet regulatory  filing  requirements,  and the cost of providing
accounting  and related  services to management,  normally  performed by Company
personnel.


INTEREST EXPENSE

The Company's  interest  expense is a very high  percentage when calculated as a
percentage of net sales,  as all  acquisitions  were made on a highly  leveraged
basis.  For the  three-month  period ended January 31, 2002,  the  percentage of
interest  expense to net sales of 7% was lower than the 7.4% for the  comparable
Pro Forma period ended January 31, 2001 reflecting the lower sales for the three
months ended January 31, 2002,  offset by debt reductions  during 2001 primarily
from capital contributions.  The historical three-month period ended January 31,
2002, the percentage of interest expense to sales of 7% was higher than the 5.8%
for the  comparable  period ended January 31, 2001, due to the cost of financing
the subsidiary purchases in June and July 2001.


INCOME TAX PROVISION

The income tax  benefit  for the  three-month  period  ended  January  31,  2002
increased by $143,000 as compared to the  three-month  period ended  January 31,
2001.  The  income  tax  benefit is created  primarily  through  operating  loss
carryforwards  recognized  in the  quarter to the extent they are  available  to
offset the  Company's  net deferred tax  liability.  Quarterly  tax benefits are
based on the estimated effective tax rate for the full year.


                                       32
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES




LIQUIDITY AND CAPITAL RESOURCES

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

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

The Company and most of its subsidiaries have violated certain  requirements and
covenants in their debt  agreements  relating to maintenance of certain  minimum
ratios and levels of  earnings to funded debt and fixed  charge  coverage  rate.
Management  has brought  these  violations  to the attention of its lenders and,
except for the Champion debt and one DW Leasing note agreement, the lenders have
waived these violations as described below under "Financial Covenant Waivers."

The Company's working capital position (current assets over current liabilities)
was negative at January 31, 2002 by $9,024,000 in part because approximately 39%
of the Company's debt is classified as a current liability.

The Company has been addressing  these liquidity and working capital issues in a
variety of ways.  Management  anticipates  that the  following  steps started in
early 2002 will improve the Company's working capital  position,  strengthen its
equity position and place the Company in a position to successfully  address its
liquidity issues. These steps include:

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

o    The divestiture of Champion  described  below under "Champion  Transaction"
     which would improve the Company's working capital position.

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

There can be no  assurance  that any or all of these  transactions  will  occur.
Moreover,  if these  transactions do occur,  there can be no assurance that they
will  sufficiently  address the  Company's  liquidity  issues.  Management  will
continue to address the  liquidity  concerns as well as consider any  additional
actions  if  the   contemplated   transactions   either  do  not  occur  or  are
insufficient.


                                       33
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



FINANCIAL COVENANT WAIVERS

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

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

o    Pyramid is a guarantor of DW  Leasing's  debt to Regions  Bank,  Nashville,
     Tennessee. DW Leasing and Pyramid have been in violation of the Funded Debt
     to EBITDA ratio in the Regions Bank Credit  Facility since the inception of
     the loan. This is due to the fact that DW Leasing acquired eight additional
     new luxury coaches,  in highly leveraged  transactions.  At the time of the
     Acquisition,  Regions Bank granted a waiver of this violation. To date, the
     covenant has not been  rewritten.  Regions Bank has waived the violation as
     of  October  31,  2001.  However,  since  the  Company  continues  to be in
     violation of this covenant, $622,000 of long-term debt due Regions Bank has
     been reclassified as a current liability.

o    The Company was in violation of three negative  covenants with  Renaissance
     US Growth & Income Trust PLC and FBSUS Special Opportunities Trust PLC, the
     holders of debentures  that completed the financing of United.  The Company
     has received a waiver of these violations through November 1, 2002.

Champion  remains  in  default  of both the  senior  and the  subordinated  debt
agreements,  which  have  been  classified  as a  current  liability  due to the
default,  and is  operating  under a  forbearance  agreement  on the senior debt
through March 15, 2002. DC Investments is negotiating  with Bank One to purchase
the senior debt from Bank One. (See Champion Transactions.)


FUNDS AVAILABILITY

On a consolidated  basis, as of January 31, 2002, the Company had  approximately
$417,000 of cash and cash equivalents. Danzer Industries, U.S. Rubber and United
each  have  revolving  credit  lines  available  for  working  capital  at  each
individual  entity.  Borrowings under the credit facilities are available to the
lesser of the  maximum  amount or the  borrowing  base as  defined in the credit
agreement.  At January 31, 2002, these  subsidiaries  had no additional  current
availability  due to borrowing  base  limitations.  Maximum  additional  amounts
available  under these credit lines if supported by their  individual  borrowing
base are approximately  $425,000,  $900,000, and $315,000 for Danzer Industries,
U.S. Rubber, and United, respectively.

The Company did not  generate net cash flow from  operations  during the quarter
ended  January  31,  2002.  Operating  losses  during the  quarter  were  funded
primarily  through  borrowings under existing lines of credit and  related-party
finished  goods  financing  provided by DC  Investments,  and borrowing  from DC
Investments.


REFINANCING ACTIVITIES

Management is refinancing some of the currently outstanding debt:

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

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


                                       34
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



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


PARTNERS EQUITY TRANSACTIONS

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

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


GUARANTEES OF OCP

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


CHAMPION TRANSACTIONS

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

Champion was working under a forbearance  agreement  with Bank One on its Senior
Credit  Facility  which  expired on March 15,  2002.  Although  the  forbearance
agreement has not been formally  extended,  DC Investments  is negotiating  with
Bank One to purchase the loan.  Champion is also  indebted to  Markpoint  Equity
Fund IV under a  subordinated  credit  facility  in the  amount  of  $1,250,000.
Champion has been in violation of the funded debt to EBITDA negative covenant of
the  Markpoint  Credit  Agreement  since the  inception of the loan.  Management
brought  this  violation  to  Markpoint's  attention  prior to the  close of the
Acquisition  and has obtained a waiver of the violation each quarter.  Markpoint
has  informed  Champion  that it may not grant  waiver of this  violation in the
future. The Bank One debt and the Markpoint debt have been classified as current
liabilities due to these violations.

                                       35
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



CASH FLOWS (EBITDA)

A summary of our contractual  cash  obligations for the fiscal years ending 2002
through 2005 and 2006 and thereafter at January 31, 2002 is as follows:
<TABLE>

<S>                                       <C>             <C>           <C>          <C>          <C>          <C>
Contractual Obligations                    Total           2002          2003         2004         2005         2006 and
                                                                                                               Thereafter
                                        ------------- --------------- ------------ ------------ ------------ ---------------
Long-term debt, with covenant             $4,343,000      $4,343,000  $        --   $       --   $       --  $           --
 violations and classified as current
Long-term debt, and all debt service
 interest payments                        36,108,300       7,137,800   11,264,500    3,417,400    2,559,000      12,729,600

Operating leases                           1,854,000         727,000      980,000       67,000       32,000          48,000

Purchase agreement for equipment           1,350,000       1,350,000           --           --           --              --
                                        ------------- --------------- ------------ ------------ ------------ ---------------

Total contractual cash obligations       $43,655,300     $13,557,800  $12,244,500   $3,484,400   $2,591,000     $12,777,600
                                        ============= =============== ============ ============ ============ ===============
</TABLE>

Cash flow and liquidity are discussed  further  below,  and the footnotes to our
financial statements discuss cash flow, liquidity and the current classification
of debt due to loan covenant violations.

We also have a commercial commitment as described below:
<TABLE>

<S>                             <C>                          <C>                          <C>
 Other Commercial Commitment      Total Amount Committed       Outstanding at December        Date of Expiration
                                                                      31, 2001
------------------------------- ---------------------------- ---------------------------- ----------------------------

Line of credit                       $          200,000           $          159,000      March 15, 2002
Line of credit                                1,000,000                      575,000      March 31, 2002
Line of credit                                3,500,000                    3,185,000      July 1, 2002
Line of credit                                3,000,000                    2,093,000      November 1, 2002
</TABLE>

The Company's net cash used in operations for the three months ended January 31,
2002 was $(340,000). This is comprised of net losses of $1,497,000, increases in
inventories  of  $458,000,  and  increases in accounts  receivable  of $139,000,
offset by noncash  depreciation and  amortization of $701,000,  and increases in
customer  deposits and accrued expenses of $678,000 and decreases in prepaid and
other assets of $375,000.

Cash flow provided from financing activities, for the three months ended January
31, 2002 was $439,000.  This is comprised of  borrowings  of long-term  debt and
borrowings of short-term  debt of $961,000,  and borrowings from related parties
of $856,000, offset by principal repayments of long-term debt of $1,378,000.

Cash flow was used in investing  activities  for the three months ended  January
31, 2002 of $211,000.  This is  comprised  primarily of purchase of property and
equipment of $222,000.

The total decrease in cash is summarized as follows:

                                                 Three Months Ended
                                                 January 31, 2002
                                            ------------------------------

Net cash used in operations                        $      (340,000)
Net cash used in investing activities                     (211,000)
Net cash provided by financing activities                  439,000
                                            ------------------------------

Decrease in cash and cash equivalents              $      (112,000)
                                            ==============================

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


                                       36
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



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

<TABLE>
                                                             Three-month Period Ended January 31, 2002
                                                                           (in thousands)
                                              -------------------------------------------------------------------------
                                                                                                              Net
<S>                                          <C>          <C>           <C>         <C>                  <C>
                                                            Interest      Income       Depreciation         Income
                                                EBITDA       Expense      Taxes       & Amortization        (Loss)
                                              ------------ ------------ ----------- -------------------- --------------

Trailer and related transportation
equipment manufacturing                         $    (376)   $    360    $   (46)         $     197       $    (887)

Butyl rubber reclaiming                                83         176       (109)               259            (243)

Coach leasing                                         235         357          --               245            (367)
                                              ------------ ------------ ----------- -------------------- --------------

Total Company                                   $     (58)   $    893    $  (155)         $     701       $  (1,497)
                                              ============ ============ =========== ==================== ==============

                                                                Three Months Ended January 31, 2001
                                                                          (in thousands)
                                              ------------------------------------------------------------------------
                                                                                                             Net
                                                            Interest      Income       Depreciation         Income
                                                EBITDA       Expense      Taxes       & Amortization        (Loss)
                                              ------------ ------------ ----------- -------------------- -------------

Trailer and related transportation
 equipment manufacturing                        $     (73)   $     35    $    --          $      29       $    (137)

Butyl rubber reclaiming                               192          74        (12)               182             (52)

Coach leasing                                          17         108         --                 75            (166)
                                              ------------ ------------ ----------- -------------------- -------------

Total Company                                   $     136    $    217    $   (12)         $     286       $    (355)
                                              ============ ============ =========== ==================== =============
</TABLE>

CRITICAL ACCOUNTING POLICIES

Our  significant  accounting  policies are  summarized  in the  footnotes to our
financial  statements.  Some of the most  critical  policies are also  discussed
below.

As a matter of policy,  we review our major  assets  for  impairment.  Our major
operating  assets are  accounts  receivable,  inventory,  intangible  assets and
property and equipment.  We have not  experienced  significant bad debts expense
and our reserve for  doubtful  accounts  of $95,000  should be adequate  for any
exposure  to loss in our  January 31,  2002  accounts  receivable.  We have also
established  reserves for slow-moving  and obsolete  inventories and believe the
reserve of $708,000 is adequate.  We  depreciate  our property and equipment and
amortize  intangible  assets (except for goodwill) over their  estimated  useful
lives. We have identified items that are impaired and the operating  results for
the  ten-month  period  ended  October 31, 2001  included a goodwill  impairment
charge of $2,305,000. There are no impairment charges in the three-month periods
ended January 31, 2002 and 2001.


                                       37
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



RISK FACTORS

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


Liquidity

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

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


Integration Of Operations

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

Operating Entity                            Date of Purchase

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

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


Market Risk

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


                                       38
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES




Ability To Attract And Retain Key Managers And Employees

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


Competition

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


Butyl Rubber Reclaiming Segment

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


Coach Leasing Segment

The  Company's  coach  leasing  segment  leases  luxury  coaches   primarily  to
performers in the entertainment  industry. This segment is highly dependent upon
the state of the  general  economy  and its  effect on  entertainment  spending.
Consumer spending on entertainment tends to decline during recessionary  periods
when disposable  income is low. The  availability of quality contract drivers is
another factor that affects the success of the coach leasing segment.


Trailer And Related Transportation Equipment Manufacturing Segment

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


                                       39
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES




Other Factors

Management's  attention to day-to-day  operating issues and the solution of such
issues is ongoing due to the very recent dates of purchase. Management's ability
to successfully  integrate the operating  companies into a public  reporting and
cohesive operations while attempting to attain profitable operating results will
be determinative of later success.  Employee  uncertainty and lack of management
focus  during the  initial  stages of purchase  and  continuing  integration  is
disruptive  to the business of each Company  subsidiary.  Retention of employees
through support of the Company's ongoing manufacturing capability, ongoing sales
and marketing efforts will be required, but is not assured.

The Company's ability to stabilize  operations and to eventually  achieve growth
of each of its segments  will require it to implement  and expand its  operating
and   financial   systems.   This   implementation   will  carry  a  significant
disproportionate  cost to the  operations  in the next twelve  months which will
have a negative impact on revenues.  The Company expects any significant  growth
would place a strain on its  operational  resources and its  financial  systems.
Failure to effectively manage any growth would have a material adverse effect on
the Company's  business,  financial  condition,  results of operations  and cash
flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risk related to interest rate changes.  See the
discussion of market risk in  Management's  Discussion and Analysis of Financial
Condition and Results of Operations in Item 2, which  discussion is incorporated
by reference herein.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

         None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

         None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

         None

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

         None

ITEM 5. OTHER INFORMATION.

         None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

         None

     A.   EXHIBITS

         None

     B.   REPORTS ON FORM 8-K

         None






                                       40
<PAGE>
                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                 OBSIDIAN ENTERPRISES, INC.

March 18, 2002                   By:  /s/ Timothy S. Durham
--------------------------            Timothy S. Durham, Chairman and
Date                                  Chief Executive Officer



March 18, 2002                   By:  /s/ Jeffrey W. Osler
--------------------------            Jeffrey W. Osler, Principal Financial
Date                                  Officer