SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    Form 10-Q

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

                    For the three months ended July 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 ______

                         Commission file number 0-17430

                           OBSIDIAN ENTERPRISES, INC.

             (Exact name of registrant as specified in its charter)

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

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)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

            YES   X                                     NO
               -------                                    ------

Indicate 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
          $.0001 par value                            July 31, 2002
                                                      36,007,855 shares



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                                      INDEX


                                                                         PAGE(S)

PART I - FINANCIAL INFORMATION:

     Item 1 - Condensed Consolidated Financial Statements:

              Condensed Consolidated Balance Sheets -
              July 31, 2002 and October 31, 2001                              3

              Condensed Consolidated Statements of Operations
              Three Months and Nine Months Ended July 31, 2002 and 2001       5

              Condensed Consolidated Statement of
              Changes of Stockholders' Equity                                 7

              Condensed Consolidated Statements of Cash Flows
                Nine Months Ended July 31, 2002 and 2001                      8

              Notes to Condensed Consolidated Financial Statements           10

     Item 2 - Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      23

     Item 3 - Quantitative and Qualitative Disclosures About Market Risk     36

PART II - OTHER INFORMATION:

     Item 1 - Legal Proceedings                                              36

     Item 2 - Changes in Securities and Use of Proceeds                      36

     Item 3 - Defaults Upon Senior Securities                                36

     Item 4 - Submission of Matters to a Vote of Security Holders            36

     Item 5 - Other Information                                              36

     Item 6 - Exhibits and Reports on Form 8-K                               36





<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)


<TABLE>

                                                                                     July 31,        October 31,
                                                                                       2002             2001
                                                                                 ----------------------------------

Assets

Current assets:
<S>                                                                                <C>              <C>
    Cash and cash equivalents                                                      $          456   $          529
    Marketable securities                                                                     143              223
    Accounts receivable, net of allowance for doubtful accounts
      of $66 for 2002 and $90 for 2001                                                      4,954            3,744
    Accounts receivable, related parties                                                       24              217
    Inventories, net                                                                        6,466            6,694
    Prepaid expenses and other assets                                                         814            1,275
                                                                                 ----------------------------------

Total current assets                                                                       12,857           12,682

Property, plant and equipment, net                                                         23,055           24,232

Other assets:
    Goodwill, net                                                                           7,154            9,210
    Other intangible assets, net of accumulated amortization of $555 for
      2002 and $270 for 2001                                                                1,863            2,147
    Other                                                                                     372              579
                                                                                 ----------------------------------

                                                                                   $       45,301   $       48,850
                                                                                 ==================================

</TABLE>

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

<PAGE>

                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHETTS
                                 (in thousands)
                                  (unaudited)

<TABLE>

                                                                                     July 31,       October 31,
                                                                                       2002             2001
                                                                                 ----------------------------------

Liabilities and Stockholders' Equity

Current liabilities:
<S>                                                                                <C>              <C>
    Current portion of long-term debt                                              $       11,606   $        9,233
    Accounts payable, trade                                                                 3,337            3,620
    Accounts payable, related parties                                                         647              925
    Accrued expenses and customer deposits                                                  2,496            2,388
                                                                                 ----------------------------------

Total current liabilities                                                                  18,086           16,166

Accounts payable, related parties                                                           1,662            2,170

Long-term debt, related parties                                                             3,940                -

Long-term debt, net of current portion                                                     20,571           27,546

Deferred income tax liabilities                                                               875            1,672

Commitments and contingencies                                                                   -                -

Stockholders' equity:
    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, 4,358,399 and
     3,739,169 shares issued and outstanding for 2002 and 2001, respectively,
     400,000 shares of undesignated preferred stock authorized                                  4                4
    Additional paid-in capital                                                              8,960            5,612
    Accumulated other comprehensive income (loss)                                             (43)              37
    Accumulated deficit                                                                    (8,757)          (4,360)
                                                                                 ----------------------------------

Total stockholders' equity                                                                    167            1,296
                                                                                 ----------------------------------

                                                                                   $       45,301   $       48,850
                                                                                 ==================================
</TABLE>

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



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands except per share and share data)
                                   (unaudited)
<TABLE>

                                                     Three Months Ended                   Nine Months Ended
                                            --------------------------------------------------------------------------
                                              July 31, 2002     July 31, 2001      July 31, 2002      July 31, 2001
                                            --------------------------------------------------------------------------

<S>                                           <C>               <C>                <C>                <C>
Net sales                                     $       15,475    $        6,040     $       44,931     $       15,043

Cost of sales                                         12,759             4,768             38,219             12,272
                                            --------------------------------------------------------------------------

Gross profit                                           2,716             1,272              6,712              2,771

Selling, general and administrative
 expenses                                              2,026             1,258              6,720              2,749
Insurance recovery                                      (325)                -               (325)                 -
                                            --------------------------------------------------------------------------

Income  from operations                                1,015                14                316                 22

Other income (expense):
  Interest expense, net                                 (867)             (690)            (2,713)            (1,578)
  Other income (expense)                                   1                11                (32)               (56)
                                            --------------------------------------------------------------------------

Income (loss) before income taxes                        149              (665)            (2,429)            (1,612)

Income tax benefit                                         -                52                155                 65
                                            --------------------------------------------------------------------------

Net income (loss) before cumulative effect
 of change in accounting principle                       149              (613)            (2,274)            (1,547)

Cumulative effect of change in accounting
 principle                                                 -                 -             (2,015)                 -
                                            --------------------------------------------------------------------------

Net income (loss)                             $          149    $         (613)    $       (4,289)    $       (1,547)
                                            ==========================================================================

Net income (loss) per share before cumulative effect of change in accounting
 principle:
  Basic                                       $          .00    $         (.01)    $         (.02)    $         (.03)
                                            ==========================================================================
  Diluted                                     $          .00    $         (.01)    $         (.02)    $         (.03)
                                            ==========================================================================

Cumulative effect of change in accounting principle:
  Basic                                       $          .00    $          .00     $         (.02)    $          .00
                                            ==========================================================================
  Diluted                                     $          .00    $          .00     $         (.02)    $          .00
                                            ==========================================================================

</TABLE>

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



<PAGE>

                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

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

<TABLE>

Net income (loss) per share:
<S>                                           <C>               <C>                <C>                <C>
  Basic                                       $          .00    $         (.01)    $         (.04)    $         (.03)
                                            ==========================================================================
  Diluted                                     $          .00    $         (.01)    $         (.04)    $         (.03)
                                            ==========================================================================

Weighted average common and
common equivalent shares outstanding:
  Basic                                          123,175,835        58,352,332        115,119,114         48,731,374
                                            ==========================================================================
  Diluted                                        129,251,572        58,352,332        115,119,114         48,731,374
                                            ==========================================================================

</TABLE>



























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



<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

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

<TABLE>

                                                                                        Accumulated
                             Comprehensive Common Stock     Preferred Stock  Additional   Other
                             ----------------------------------------------  Paid-in    Comprehensive     Accumulated
<S>                           <C>       <C>        <C>      <C>    <C>      <C>        <C>               <C>           <C>
                                Loss      Shares    Amount  Shares  Amount   Capital   Income (Loss)       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 of DW Leasing, LLC           -            -   -          -   -            -         -             (108)         (108)

Unrealized loss on
available-for-sale marketable
securities                         (80)           -   -          -   -            -       (80)               -           (80)

Conversion of debt to
preferred stock and
additional paid-in capital                        -   -    619,230   -        3,348         -                -         3,348

Net loss                        (4,289)           -   -          -   -            -         -           (4,289)       (4,289)
                                ---------------------------------------------------------------------------------------------------

Total comprehensive loss       $(4,369)
                                =========

Balance at July 31, 2002                 36,007,855  $3  4,358,399  $4       $8,960   $   (43)        $ (8,757)    $     167
                                         ==========================================================================================
</TABLE>



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


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<TABLE>

                                                                                       Nine Months Ended
                                                                                 -------------------------------
                                                                                  July 31, 2002  July 31, 2001
                                                                                 -------------------------------

Cash flow from operating activities:
<S>                                                                                <C>             <C>
  Net loss                                                                         $    (4,289)    $    (1,547)
  Adjustments to reconcile net loss to net cash provided by (used in) operating
   activities:
  Depreciation and amortization                                                          2,018           1,469
  Goodwill impairment loss                                                               2,015               -
  Other                                                                                   (466)            250
  Changes in operating assets and liabilities, net of effect of acquisitions:
    Accounts receivable, net                                                            (1,209)            135
    Inventories, net                                                                       227           1,001
    Other, net                                                                             840            (902)
                                                                                 -------------------------------

Net cash provided by (used in) operating activities                                       (864)            406
                                                                                 -------------------------------

Cash flows from investing activities:
  Capital expenditures                                                                    (577)           (863)
  Payments to acquire U.S. Rubber                                                            -          (5,528)
  Other                                                                                     16               9
                                                                                 -------------------------------

Net cash used in investing activities                                                     (561)         (6,382)
                                                                                 -------------------------------

</TABLE>







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

<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)
<TABLE>

                                                                                       Nine Months Ended
                                                                                 -------------------------------
                                                                                  July 31, 2002  July 31, 2001
                                                                                 -------------------------------

Cash flows from financing activities:
<S>                                                                                <C>             <C>
  Borrowings from and distributions to related parties, net                        $     1,778     $     1,044
  Net borrowings on lines of credit                                                      1,102             408
  Borrowings (repayments) on long-term debt                                             (1,528)          3,413
  Debt issuance cost                                                                         -             (76)
  Proceeds from issuance of U.S. Rubber common stock                                         -             880
                                                                                 -------------------------------

Net cash provided by financing activities                                                1,352           5,669
                                                                                 -------------------------------

Decrease in cash and cash equivalents                                                      (73)           (307)

Cash and cash equivalents, beginning of period                                             529             340
                                                                                 -------------------------------

Cash and cash equivalents, end of period                                           $       456     $        33
                                                                                 ===============================

Interest paid                                                                      $     2,389     $     1,578
                                                                                 ===============================

Taxes paid (refunded)                                                              $         -     $      (163)
                                                                                 ===============================

Supplemental disclosure of noncash operating, investing and financing
 activities:
  Conversion of debt to preferred stock and additional paid-in capital             $     3,348     $         -
  Conversion of accounts payable, related parties to debt                          $     1,295     $         -
  Purchase price adjustment and conversion of accounts payable to debt for
   United                                                                          $       294     $         -
  Advances to construct coaches and equipment acquired by issuance of debt         $         -     $       292
  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.


<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 (the "Reorganization") 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.  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  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 July 31, 2002 and for the three and nine
months ended July 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 July 31, 2002, results of operations for the three and
nine months ended July 31, 2002 and cash flows and stockholders'  equity for the
nine months ended July 31, 2002 have been made.  The results of  operations  for
the three and nine months ended July 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.


<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 coach leasing
segment also includes 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 who
are  also   controlling   shareholders  of  Obsidian   Enterprises,   Inc.  and,
accordingly,  Pyramid.  DW Leasing and Obsidian Leasing also own the majority of
the coaches operated by Pyramid. All intercompany transactions are eliminated in
consolidation.

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, 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 July 31,  2002,  the entities are
combined due to cross-guarantees associated with the debt on the seven coaches.

Champion Trailer, Inc. ("Champion") 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  July  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
net loss of $4,289,000  for the nine months ended July 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  either  were not waived,  were waived only  through
November 2002, or were subject to amendments to credit agreements, $3,953,000 of
long-term debt has been reclassified and included in the current debt caption of
current  liabilities as of July 31, 2002. A significant portion of the Company's
assets is pledged as collateral on these loans and  foreclosure  by a 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 $5,229,000 at July 31, 2002.



<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
stockholder.

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 nine months ended July 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 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    On March 7, 2002, the Company  completed a series of transactions  with the
     subordinated lender at U.S. Rubber resulting in an increase in equity and a
     decrease in liabilities of $1,463,000.  The  subordinated  lender  received
     30,000 shares of series C convertible preferred stock in this transaction.

o    On March  20,  2002,  DC  Investments  LLC  ("DC  Investments),  an  entity
     controlled by the Company's Chairman,  acquired all outstanding debt due to
     the senior  lender of Champion  in the amount of $602,000 in a  nonrecourse
     assignment. Under the terms of the Company's agreement with DC Investments,
     this amount has been reclassified as a long term liability.

o    On April 30, 2002,  the Company  converted  $1,289,000  of debt and accrued
     interest due to Obsidian Capital  Partners,  LP ("OCP"),  majority owner of
     the  Company,  to  equity  in  exchange  for  402,906  shares  of  Series C
     convertible preferred stock.

o    On April 30,  2002,  the  Company  converted  $596,000  of debt and accrued
     interest due to Fair Holdings,  Inc. ("Fair"),  an entity controlled by the
     Company's  Chairman,  to equity in exchange for 186,324  shares of Series C
     convertible preferred stock.

o    On August 28, 2002, the Company completed refinancing of the Line of Credit
     facility and a term loan at United. The amount of maximum borrowings on the
     line of credit  facility was  increased  and the maturity  date extended to
     February  1, 2004.  In  addition,  the  maturity  date of the term note was
     extended to July 1, 2004 and monthly  principal  payments  were  reduced by
     approximately  50%.  The line of  credit  facility  and term loan have been
     classified in accordance with these new terms at July 31, 2001.

The above  transactions  are estimated to reduce interest costs by approximately
$345,000  on an annual  basis  and defer  approximately  $437,000  of  principal
repayments by twelve months.

o    The Board of Directors has  authorized the Chairman of the Board to explore
     various  options  regarding  the  operations at Champion.  Options  include
     divestiture,  restructuring of operations or closing the facility. As these
     options  are  considered,  management  has taken  steps to  further  reduce
     overhead through cost reductions and reduction in the space currently under
     lease.
<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

o    The Company is  undertaking  to refinance the coaches  transferred  from DW
     Leasing to Obsidian  Leasing  with  existing  lenders  and DC  Investments.
     Management  anticipates  that this will be concluded  by the fourth  fiscal
     quarter of 2002.

o    The Company is also pursuing  refinancing of the  outstanding  bank debt at
     U.S.  Rubber  that is due  November  1, 2002.  Management  anticipates  the
     refinancing will be concluded during the fourth fiscal quarter of 2002.

The  above  factors  combined  with  additional  actions  by  management  at the
operating  subsidiaries  and the positive  impact of the  seasonality in certain
segments resulted in the Company  recording  positive income from operations and
net income in the quarter ended July 31, 2002.  In addition,  these factors have
also  contributed to a reduction in the Company's  working  capital deficit from
$9,567,000 at April 30, 2002 to $5,229,000 at July 31, 2002.

OCP has entered into  agreements  related to the debt of U.S. Rubber and United.
Specifically,  in the  event of a default  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 legal,  accounting  and related costs to complete the Plan of  Reorganization
and the costs to meet  regulatory  requirements  to allow  continued  trading of
Company stock by  shareholders.  Funding through July 31, 2002 was $860,000 from
OCP and OCP has agreed to fund an additional  $415,000 through the end of fiscal
2002. In addition,  Fair has advanced  approximately $270,000 to fund additional
costs related to the Plan of Reorganization and related regulatory  requirements
above the  commitment of OCP. OCP and Fair have agreed to convert these advances
of  approximately  $1,275,000  to equity in exchange for  convertible  preferred
stock. Such conversion is anticipated to occur in the next fiscal year.

Significant Accounting Policies:

Property, Plant and Equipment

Property,  plant and equipment are recorded at cost.  Depreciation is calculated
using the  straight-line  method over the estimated  useful lives of the assets.
Effective  February 1, 2002 the  Company  changed  its  estimate  with regard to
depreciation of coaches owned by Obsidian Leasing and DW Leasing by establishing
a salvage  value for the  coaches of  approximately  38% of original  cost.  The
depreciable  lives of the coaches of fifteen years was not changed.  This change
in estimate  resulted in a reduced  depreciation for the second and third fiscal
quarters totaling approximately $142,000.

Earnings Per Share:

Earnings  per basic share is computed  based on the weighted  average  number of
outstanding  common  shares.  Earnings per diluted  share  includes the weighted
average  effect of  dilutive  options,  warrants,  and  convertible  debt on the
weighted average shares  outstanding.  Diluted net income includes the effect of
interest expense on the dilutive convertible debt of $10,000.  Basic and diluted
weighted average common shares outstanding for all periods presented with losses
are the same,  as the  inclusion  of options,  warrants  and other  common stock
equivalents  in the  calculation  of  diluted  loss  per  share  would  have  an
antidilutive effect.


<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 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 and
nine months ended July 31, 2002,  the  4,358,399  shares of Series C Convertible
Preferred Stock have been reflected, on a weighted average basis outstanding, as
common equivalent shares of 87,167,980 and 79,111,259 respectively. The weighted
average common shares  outstanding  for the three and nine months ended July 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 above, as if such shares had been converted into their equivalent  number
of common shares of 39,419,240.

2.   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 necessary pro forma adjustments for all entities for
the periods shown.

                                       Three Months Ended  Nine Months Ended
                                            July 31,           July 31,
                                              2001               2001
                                      ----------------------------------------

Net sales                                $        16,047     $        47,624

Net loss                                 $          (305)    $        (1,528)

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

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 is it necessarily
indicative of future operating results.



<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):
<TABLE>

                                                                 July 31,        October 31,
                                                                   2002             2001
                                                             ------------------ -------------------

<S>                                                            <C>                <C>
Raw materials                                                  $        3,614     $        3,734
Work-in-process                                                           783              1,471
Finished goods                                                          2,479              2,322
Valuation reserve                                                        (410)              (833)
                                                             ------------------ -------------------

Total                                                          $        6,466     $        6,694
                                                             ================== ===================
</TABLE>

4.   GOODWILL AND INTANGIBLE ASSETS

The  Company  adopted  the new  rules  on  accounting  for  goodwill  and  other
intangible  assets  beginning in the first quarter of fiscal 2002.  Accordingly,
effective  with the November 1, 2001 adoption of Financial  Accounting  Standard
(FAS) No. 142,  goodwill  is no longer  amortized  but is instead  subject to an
annual impairment test. The Company  completed its transitional  impairment test
in  conjunction  with the adoption of FAS 142 during the quarter  ended July 31,
2002.  The impairment  test indicated that a portion of the goodwill  related to
the trailer manufacturing segment was impaired. Accordingly, $2,015,000 has been
recorded as a cumulative effect of change in accounting  principle.  This charge
has  been  reflected  in  the  first  quarter  pursuant  to  the  implementation
guidelines. Accordingly, results for the three months ended January 31, 2002 and
the six months ended April 30, 2002 have been restated to reflect this change as
follows (in thousands except for share data):
<TABLE>

                                                               Quarter Ended     Six Months Ended
                                                             January 31, 2002     April 30, 2002
                                                             ------------------ -------------------

<S>                                                            <C>                <C>
Net loss as previously reported                                $       (1,497)    $       (2,423)
Less cumulative effect of change in accounting principle               (2,015)            (2,015)
                                                             ------------------ -------------------

Net loss as restated                                           $       (3,512)    $       (4,438)
                                                             ================== ===================

Basic and diluted loss per share, as previously reported       $        (0.01)    $        (0.02)
Less cumulative effect of change in accounting principle                (0.02)             (0.02)
                                                             ------------------ -------------------

Basic and diluted loss per share as restated                   $        (0.03)    $        (0.02)
                                                             ================== ===================
</TABLE>



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


4.   GOODWILL AND INTANGIBLE ASSETS, CONTINUED

The changes in the carrying amount of goodwill are as follows (in thousands):
<TABLE>

                                             Trailer           Holding
                                           Manufacturing       Company               Total
                                         ------------------ ------------------ ------------------

<S>                                       <C>                <C>                <C>
Balance as of November 1, 2001              $       8,560      $         650      $       9,210
Purchase price adjustment                             (41)                 -                (41)
Cumulative effect of change in
 accounting principle                              (2,015)                 -             (2,015)
                                         ------------------ ------------------ ------------------

Balance as of July 31, 2002                 $       6,504      $         650      $       7,154
                                         ================== ================== ==================
</TABLE>

Had FAS No. 142 been  effective at the  beginning of 2001,  the  nonamortization
provisions  would have  reduced the net loss for the three months ended July 31,
2001 of $613,000 by $77,000,  resulting  in an adjusted net loss of $536,000 and
the net loss for the nine months ended July 31, 2001 of  $1,547,000  by $77,000,
resulting in an adjusted net loss of $1,470,000.

5.   FINANCING ARRANGEMENTS AND STOCKHOLDERS' EQUITY

U.S. Rubber

On March 7, 2002,  the  Company  completed  a series of  transactions  with U.S.
Rubber,  SerVaas,  Inc.  ("SerVaas"),  the former owner of U.S.  Rubber,  and DC
Investments,  an entity  controlled by the Company's  Chairman,  whereby certain
existing debt of U.S. 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 of $123,000, for $700,000.  U.S. 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% per annum
with  the  principal  payable  March  2007.  The  note  is  subordinate  to debt
outstanding with the senior lender of U.S. Rubber.

The Company also  acquired the SerVaas  interest in the U.S.  Rubber  $1,750,000
subordinated  note payable,  plus accrued interest of $255,000,  in exchange for
$700,000 and 30,000 shares of Series C  convertible  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% per annum with the principal payable March 2007.

No gain or loss was recognized in the transactions because of the involvement of
related  parties.  The  transaction  resulted  in an  increase  in equity of the
Company of $1,463,000 and an annual interest savings of approximately $145,000.

During  February 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 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. U.S. Rubber is currently in negotiations with a
new prospective lender to refinance this debt, as further discussed in Note 10.


<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


5.   FINANCING ARRANGEMENTS AND STOCKHOLDERS' EQUITY, CONTINUED

Obsidian Enterprises

On April 30, 2002, the Company converted $1,289,000 of debt and accrued interest
owed to OCP and  $596,000 of debt and accrued  interest  owed to Fair  Holdings,
Inc. ("Fair"), an entity controlled by the Company's Chairman, to equity through
the  issuance  to OCP  and  Fair  of a total  of  589,230  shares  of  Series  C
Convertible   Preferred  Stock  which  are  convertible  into  an  aggregate  of
11,784,600 shares of common stock of the Company. The transaction resulted in an
increase in equity of the Company of $1,885,000 and an annual  interest  savings
of approximately $200,000.

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 advances  converted to notes payable to
DC  Investments  were  $1,085,000 and $210,000 for Obsidian  Enterprises  and DW
Leasing, respectively.

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.

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.

Champion

Champion was in default of its debt due its  subordinated  lender as of July 31,
2002 and in default of debt due its  senior and  subordinated  lender at October
31, 2001. The Company has not been able to obtain a waiver from the subordinated
lender, and the subordinated lender has filed a lawsuit to collect the debt from
Champion or the Company under a guarantee  agreement.  Accordingly,  debt in the
amount of  $1,250,000  has been  classified  as current as of July 31, 2002.  At
October 31, 2001,  $2,612,000 of debt was  classified  as current.  On March 20,
2002, DC Investments acquired the senior lender's loan to Champion in the amount
of $602,000 in a nonrecourse assignment of the debt.

DW Leasing

DW Leasing was in technical  default of certain loan  covenants  with two of its
primary lenders. The Company has obtained bank waivers from one of these lenders
through  November  2002 for a portion  of this  amount.  Amounts  classified  as
current as of October 31, 2001 due to the  technical  default  that has not been
waived  was  $639,000.  DW Leasing  was in  technical  default  of certain  loan
covenants at July 31, 2002.  The maturity date of the loan is June 2003, and the
balance of the loan outstanding at July 31, 2002 has been classified as current.

Danzer Industries

Danzer  Industries  was in technical  default of certain  loan  covenants in its
credit agreement. As a result of these violations,  long-term debt in the amount
of $867,000 is classified as current as of July 31, 2002.


<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 July 31, 2002
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
<S>                                      <C>                 <C>                 <C>               <C>
  Domestic                               $       10,711      $       1,959       $       2,672     $       15,342
  Foreign                                             -                  -                 133                133
                                       ------------------------------------------------------------------------------

Total                                    $       10,711      $       1,959       $       2,805     $       15,475

Cost of goods sold                       $        9,311      $         997       $       2,451     $       12,759

Income (loss) before taxes               $         (332)     $         163       $         318     $          149

Identifiable assets                      $       21,331      $      12,670       $      10,650     $       44,651*

Depreciation and amortization expense    $          215      $         169       $         289     $          673

*Identifiable assets, as stated above                                                              $       44,651
  Corporate-level goodwill                                                                                    650
                                                                                                --------------------

Total assets                                                                                      $        45,301
                                                                                                ====================
</TABLE>
<TABLE>

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

Sales:
<S>                                      <C>                 <C>                 <C>               <C>
  Domestic                               $        1,759      $       1,467       $       2,680     $        5,906
  Foreign                                             -                  -                 134                134
                                       ------------------------------------------------------------------------------

Total                                    $        1,759      $       1,467       $       2,814     $        6,040

Cost of goods sold                       $        1,634      $         518       $       2,616     $        4,768

Loss before taxes                        $         (437)     $          29       $        (257)    $         (665)

Identifiable assets                      $       11,756      $      12,704       $      11,198     $       35,658

Depreciation and amortization expense    $          101      $         242       $         267     $          610

</TABLE>


<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


6.   BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED
<TABLE>

                                                              Nine Months Ended July 31, 2002
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
<S>                                      <C>                 <C>                 <C>               <C>
  Domestic                               $       32,839      $       4,513       $       7,134     $       44,486
  Foreign                                             -                  -                 445                445
                                       ------------------------------------------------------------------------------

Total                                    $       32,839      $       4,513       $       7,579     $       44,931

Cost of goods sold                       $       29,033      $       2,336       $       6,850     $       38,219

Loss before taxes                        $       (1,916)     $        (224)      $        (289)    $       (2,429)

Identifiable assets                      $       21,331      $      12,670       $      10,650     $       44,651*

Depreciation and amortization expense    $          639      $         579       $         800     $        2,018


*Identifiable assets, as stated above                                                              $       44,651
  Corporate-level goodwill                                                                                    650
                                                                                                --------------------

Total assets                                                                                      $        45,301
                                                                                                ====================
</TABLE>
<TABLE>

                                                              Nine Months Ended July 31, 2001
                                       ------------------------------------------------------------------------------
                                             Trailer                             Butyl Rubber
                                          Manufacturing      Coach Leasing        Reclaiming            Total
                                       ------------------------------------------------------------------------------

Sales:
<S>                                      <C>                 <C>                 <C>               <C>
  Domestic                               $        3,123      $       2,645       $       8,876     $       14,644
  Foreign                                             -                  -                 399                399
                                       ------------------------------------------------------------------------------

Total                                    $        3,123      $       2,645       $       9,275     $       15,043

Cost of goods sold                       $        2,817      $         964       $       8,491     $       12,272

Loss before taxes                        $         (746)     $        (502)      $        (364)    $       (1,612)

Identifiable assets                      $       11,756      $      12,704       $      11,198     $       35,658

Depreciation and amortization expense    $          209      $         544       $         716     $        1,469

</TABLE>


<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


6.   BUSINESS SEGMENT DATA AND GEOGRAPHIC DATA, CONTINUED

Obsidian  Enterprises,  Inc.  (legal  parent)  allocates  selling,  general  and
administrative  expenses  to  the  respective  companies  primarily  based  on a
percentage  of sales.  For the three months and nine months ended July 31, 2002,
allocated corporate expenses by segment were as follows:

                                       Three Months Ended  Nine Months Ended
                                            July 31,           July 31,
                                              2002               2002
                                      ----------------------------------------

Trailer manufacturing                    $           146     $           828
Coach leasing                                         27                 120
Butyl rubber reclaiming                               38                 185
                                      ----------------------------------------

                                         $           211     $         1,133
                                      ========================================

Included in the above  expenses  are  professional  fees  related to  regulatory
filings  and  historical  audits  and  other  related  expenses  which  will  be
nonrecurring  costs and have been funded by OCP.  Pursuant to the agreement with
OCP,  such  advances  will  be  converted  to  equity  in  Fiscal  2003.   Total
nonrecurring costs for the three months and nine months ended July 31, 2002 were
approximately $0 and $600,000 respectively.

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>
                                                                                     July 31,          October 31,
                                                                                       2002               2001
                                                                                 ------------------ ------------------
Balance sheet:
  Current assets:
<S>                                                                                <C>                <C>
    Accounts receivable, Obsidian Capital Company (OCC)                            $         13       $        217
    Accounts receivable, Obsidian Capital Partners (OCP)                                      2                  -
    Accounts receivable, stockholders                                                         9                  -
  Long-term portion:
    Investment banking fees, purchase accounting                                              -              1,960
                                                                                 ------------------ ------------------

Total assets                                                                       $         24       $      2,177
                                                                                 ================== ==================

  Current liabilities:
    Accounts payable, DC Investments                                               $         27       $          -
    Accounts payable, Fair Holdings                                                          13                  -
    Accounts payable, Obsidian Capital Company                                              270                625
    Accounts payable, Obsidian Capital Partners                                               5                  -
    Accounts payable, stockholders                                                          332                300
  Long-term portion:
    Accounts payable, DC Investments                                                        802                  -
    Accounts payable, Obsidian Capital Partners                                             860              2,170
                                                                                 ------------------ ------------------

Total liabilities                                                                  $      2,309       $      3,095
                                                                                 ================== ==================
</TABLE>
<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

7.  RELATED PARTIES, CONTINUED
<TABLE>

                                                   Three Months Ended                     Nine Months Ended
                                          -------------------------------------- -------------------------------------
                                            July 31, 2002       July 31, 2001      July 31, 2002      July 31, 2001
                                          ------------------- ------------------ ------------------ ------------------

Income statement:
<S>                                         <C>                 <C>                <C>                <C>
  Interest expense, DC Investments          $         58        $          -       $        140       $          -
                                                                                 ================== ==================
                                          =================== ==================
  Interest expense, Obsidian Capital        $          -        $          -       $         58       $          -
  Partners
                                          =================== ================== ================== ==================
  Rent expense, Obsidian Capital Company    $         16        $          -        $        41       $          -
                                          =================== ================== ================== ==================
</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 July  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 July 31,
2002 and October 31, 2001, respectively,  or amounts converted to long-term debt
subsequent to July 31, 2002.

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.  Also see Note 5 for  details  regarding
related-party transactions converting debt to equity.

8.   COMMITMENTS AND CONTINGENCIES

The  Company  has a purchase  commitment  to  purchase or lease five (5) coaches
within 60 days of completion.  The cost of these coaches will approximate  $2.34
million.  This transaction was initially expected to close in the second quarter
of calendar  2002 and has been  extended  until  financing for these coaches has
been obtained.

On April 29,  2002,  the  Company  received  notice  of a  lawsuit  filed by the
subordinated  lender of Champion  seeking  payment of a $1,250,000  note payable
plus accrued  interest from Champion or Obsidian  Enterprises  under a guarantee
agreement. An answer of general denial on behalf of Champion has been filed with
the court. In addition,  a special  appearance with respect to jurisdiction  has
been  filed with the court on behalf of  Obsidian  Enterprises.  This  matter is
currently scheduled for a nonbinding arbitration hearing in September 2002.

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.



<PAGE>
                  OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


9.   INSURANCE RECOVERY

On May 16, 2002, one of the production  facilities of U.S. Rubber was damaged by
a fire at an adjacent property. The primary production facility was not damaged,
and the Company is able to produce and ship product  although at a reduced rate.
The  Company  completed  processing  its claims with its  insurance  carrier for
damaged equipment and facilities and business interruption losses. On August 16,
2002 the Company  accepted  settlement for the business  interruption  claim for
$376,000 and has received  $250,000 as a prepayment  against an initial property
damage claim of $289,000.  An additional property damage claim is expected to be
submitted  in mid  September  2002.  There  was no  material  gain  or  loss  on
involuntary  conversion as a result of this fire. An insurance  recovery related
to the business  interruption claim net of incurred and anticipated costs in the
amount of $325,000 has been  recognized in the quarter ended July 31, 2002.  The
production facility damaged in the fire resumed operations on July 8, 2002.

10.  SUBSEQUENT EVENTS

On August 28, 2002, the Company  completed a  restructuring  of its current debt
with the senior  lender of United.  The terms of this amended  credit  agreement
extended the maturity date of the revolving  line of credit to February 2004. In
addition,  the maturity date of one of United's  term notes was extended  twelve
months to July 2004. As a result,  required monthly  principal  payments on this
term note were reduced by approximately 50%.

The Company is currently  negotiating terms with a new prospective senior lender
for U.S.  Rubber.  Appraisals  and a financial  due diligence by this new senior
lender  have been  completed,  and  closing  on the new loan is  expected  to be
completed during September 2002.




<PAGE>


                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


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

IMPORTANT NOTE ABOUT FORWARD-LOOKING STATEMENTS.

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 this 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 results for the nine-month  period July 31, 2001 represent only the
financial  results of U.S.  Rubber for nine months,  Champion  Trailer for seven
months,  and the  Pyramid  Group for seven  months  based on the January 1, 2001
acquisition  date. Danzer  Corporation and its wholly owned  subsidiary,  Danzer
Industries,  and United  Expressline  were  acquired  June 21, 2001 and July 31,
2001,  respectively,  and,  accordingly,  are not  included  in the  results  of
operations for the three and nine months ended July 31, 2001.  Since the Company
acquired a substantial portion of its operations on or after January 1, 2001 and
was not previously a registrant,  management's  discussion and analysis does not
include a detailed comparison of 2001 operating results with the three-month and
nine-month periods ended July 31, 2000.

The Company initially  reported its financial position and results of operations
as of and for the three  months and nine months ended July 31, 2001 in September
2001 as part of its filing under Form 10-Q. That filing included  accounting for
the reverse merger  transactions  on a preliminary  basis.  Subsequently  and in
conjunction  with the  Company's  annual  report  filed on Form 10-K in February
2002, certain  preliminary  accounting and reporting  decisions were revised and
finalized.  As a result,  the Company  will amend its filing under Form 10-Q for
the quarter ended July 31, 2001.  The Company  anticipates  filing the amendment
during the fiscal fourth quarter.

The financial  condition at July 31, 2002 and the results of operations  for the
three and nine months ended July 31, 2002,  include the  operations  of Obsidian
Enterprises,  U.S. Rubber, Champion Trailer, Pyramid Coach, Obsidian Leasing, DW
Leasing, United Expressline, and Danzer Industries.

RESULTS OF OPERATIONS

The Company's  overall operating  results and financial  condition  continued to
improve  during  the third  quarter  of 2002  compared  to the first and  second
quarters of 2002 and can be  characterized  by the shift to positive  EBITDA and
operating  income.  These results are indicative of business  seasonality in the
trailer and related  transportation  equipment  manufacturing  and coach leasing
segments,  and  increasing  demand  in the  butyl  rubber  segment,  as  well as
management's efforts to concentrate on generating revenue and earnings, managing
cash, and steadily  addressing the debt/equity  structure  while  completing the
integration of acquired  subsidiaries  (mostly  privately held entities) into an
operating  company with consistent  reporting  systems.  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 long-term Company revenues and profits.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


The  Company  operates  in three  industry  segments,  comprised  of trailer and
related transportation  equipment  manufacturing,  butyl rubber reclaiming,  and
coach  leasing.  Trailer  and  related  transportation  equipment  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.

The  following is a discussion  of the major  elements  impacting  the Company's
operating  results by segment for the three-month  and nine-month  periods ended
July 31, 2002 compared to the three-month and nine-month  periods ended July 31,
2001. The comments that follow should be read in conjunction  with the Company's
condensed  consolidated financial statements and related notes contained in this
Form 10-Q.

TRAILER AND RELATED TRANSPORTATION EQUIPMENT MANUFACTURING

The following table shows sales, cost of sales and gross profit for this segment
for the periods indicated (in thousands):
<TABLE>

                      Three Months Ended Nine Months Ended
                        ------------------------------------------ ------------------------------------------
                           July 31, 2002         July 31, 2001        July 31, 2002         July 31, 2001
                        --------------------- -------------------- --------------------- --------------------

<S>                         <C>                   <C>                  <C>                   <C>
Net Sales                   $     10,711          $      1,759         $     32,839          $      3,123
Cost of Sales                      9,311                 1,634               29,033                 2,817
                        --------------------- -------------------- --------------------- --------------------

Gross Profit                $      1,400          $        125         $      3,806          $        306
                        ===================== ==================== ===================== ====================

Gross Profit %                      13.1%                  7.1%                11.6%                  9.8%
                        ===================== ==================== ===================== ====================
</TABLE>

Three  Months  Ended July 31, 2002  Compared to The Three  Months Ended July 31,
2001 And Nine Months Ended July 31, 2002  Compared to The Nine Months Ended July
31, 2001

Operating   results  between  these  periods  are  not  comparable  due  to  the
acquisition of Danzer and United in June and July of 2001, respectively, and the
acquisition of Champion in January 2001. During the three months and nine months
ended July 31, 2002, this segment has seen  increasing  sales in cargo trailers,
primarily  in the three months ended July 31,  2002,  due to  additional  demand
driven by  marketing  efforts,  as well as the  seasonal  nature of the product.
These  increases  have been  partially  offset by a continued  reduction  in the
demand for truck bodies and slow sales volume in the transport specialty trailer
product line.

The primary reason for truck body sales at levels below historic  amounts is the
continued   depressed   condition  of  the   telecommunications   industry  that
historically  purchased a significant  volume of this product  line.  Management
anticipates that the overall general economic  conditions and the economic state
of the  telecommunications  industry will continue to adversely  impact sales of
truck bodies during the remainder of calendar  2002.  Management  has integrated
the  production of cargo trailers into its truck body  production  facility as a
means to increase  production  capacity of the cargo trailer  product and absorb
excess capacity at this facility.

Gross  profit for the three  months  and nine  months  ended  July 31,  2002 was
impacted by a traditional seasonal week long holiday shut down at United as well
as the reduced  volume in the truck body and specialty  transport  trailer lines
only  partially  offset by  reductions  in  personnel  at these  facilities  and
increased volume in the cargo trailer product line.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


BUTYL RUBBER RECLAIMING

The following table shows sales, cost of sales and gross profit for this segment
for the periods indicated (in thousands):
<TABLE>

                      Three Months Ended Nine Months Ended
                        ------------------------------------------ ------------------------------------------
                           July 31, 2002         July 31, 2001        July 31, 2002         July 31, 2001
                        --------------------- -------------------- --------------------- --------------------

<S>                         <C>                   <C>                  <C>                   <C>
Net Sales                   $     2,805           $     2,814          $     7,579           $     9,275
Cost of Sales                     2,451                 2,616                6,850                 8,491
                        --------------------- -------------------- --------------------- --------------------

Gross Profit                $       354           $       198          $       729           $       784
                        ===================== ==================== ===================== ====================

Gross Profit %                     12.6%                  7.0%                 9.6%                  8.5%
                        ===================== ==================== ===================== ====================
</TABLE>

Three  Months  Ended July 31, 2002  Compared to The Three  Months Ended July 31,
2001

Net sales in this  segment for the three  months ended July 31, 2002 as compared
to the  comparable  three-month  period ended July 31, 2001 decreased .3% in the
amount of $9. Sales in this segment  were lower than  anticipated  for the three
months  ended July 31, 2002 due to damage at a  production  facility in May as a
result of a fire at an adjacent  property.  The damage caused the facility to be
closed for  approximately two months and resulted in the Company being unable to
fill all outstanding  customer orders.  This facility resumed  production during
July 2002. Note 9 of the Notes to Condensed  Consolidated  Financial  Statements
provides additional  information regarding the insurance recovery from the fire.
Sales for the quarter are still below  historical  levels  primarily  due to the
factors enumerated below.

The Company's tire manufacturing customers built up large inventories during the
widespread  tire  recalls  in 2001 in  anticipation  of huge  demand  under such
recalls.  The number of tire orders  submitted  by  consumers to be replaced was
substantially lower than anticipated,  and as a result, tire manufacturer orders
were lower than the previous year, producing a substantial decrease in reclaimed
butyl demand.  The Company is continuing to see an increase in sales  throughout
calendar year 2002 which may indicate a return to historic  inventory  levels at
its tire manufacturer customers,  but management does not anticipate a return to
historic levels of demand for reclaimed butyl rubber by tire manufacturers prior
to fiscal 2003.

The demand for  pipeline  mastic  wraps  produced  with  reclaimed  butyl rubber
supplied by the Company  also fell  dramatically  beginning in October 2001 as a
result of the  decline  in the price of crude  oil in late 2001  which  caused a
decline  in new oil  exploration.  As the  price of crude oil has begun to climb
again, the demand for those uses is also returning to historic levels.  Although
this demand has increased  from its lows at the end of fiscal 2001 and beginning
2002, demand has not returned to historical levels.

Gross profit  percentage  improved from 7.0% for the three months ended July 31,
2001 to 12.6% for the three  months ended July 31, 2002 as a result of operating
efficiency.  The improvement was partially due to the  refurbishment  of the 12"
extruder,  a primary piece of operating  equipment,  and the use of butyl rubber
pad scrap in the  production  process that have reduced  operating  costs.  This
piece of equipment  was not used in the  production  process  during much of the
comparable period of 2001, which negatively impacted that period's gross profit.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


Nine Months Ended July 31, 2002 Compared to The Nine Months Ended July 31, 2001

Net sales in this segment for the nine months ended July 31, 2002 as compared to
the  comparable  nine-month  period ended July 31, 2001  decreased  18.3% in the
amount of $1,696.  The  reduction in sales is due  primarily to reduced sales to
tire manufacturers and pipeline mastic manufacturers as described above.

Gross  profit  percentage  for the nine  months  ended  July  31,  2002 was 9.6%
compared  to 8.5% for the nine  months  ended  July 31,  2001 as a result of the
improved operating  efficiency.  Gross profit for the nine months ended July 31,
2001 was also below historical levels as the result of an inventory obsolescence
charge  recorded in December  2000. The increase in gross profit for 2002 is due
primarily to the refurbishment of the 12" extruder, a primary piece of operating
equipment,  and the use of butyl rubber pad scrap in the production process that
have reduced operating costs.

Management believes that the use of butyl rubber pad scrap will help control the
cost of raw  materials  during  the  remainder  of 2002 and the  Company is also
exploring the ability to raise prices in late 2002 and 2003.

On March 7, 2002,  the  Company  completed  a series of  transactions  with U.S.
Rubber,  SerVaas,  the former owner of U.S. Rubber,  and DC Investments  whereby
certain existing debt of U. S. 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 of $123,000,  for $700,000.  U.S.  Rubber then
acquired the debt  agreement  from DC Investments in exchange for a new $700,000
note payable to DC Investments.  The note requires monthly interest  payments at
15% per annum with the principal  payable March 2007. The note is subordinate to
debt outstanding with the senior lender of U.S. Rubber.

The Company also  acquired the SerVaas  interest in the U.S.  Rubber  $1,750,000
subordinated  note payable,  plus accrued interest of $255,000,  in exchange for
$700,000 and 30,000 shares of Series C  convertible  preferred  stock.  The cash
portion of the  transaction  was from the  proceeds  of a  $700,000  loan to the
Company by DC Investments.  The loan requires monthly  interest  payments at 15%
with the principal payable March 2007.

No gain or loss was recognized in the transactions due to involvement of related
parties.  The  transaction  resulted  in an increase in equity of the Company of
$1,463,548 and a net annual interest savings of approximately $145,000.

COACH LEASING

The following table shows sales, cost of sales and gross profit for this segment
for the periods indicated (in thousands):
<TABLE>

                      Three Months Ended Nine Months Ended
                        ------------------------------------------ ------------------------------------------
                           July 31, 2002         July 31, 2001        July 31, 2002         July 31, 2001
                        --------------------- -------------------- --------------------- --------------------

<S>                        <C>                   <C>                  <C>                   <C>
Net Sales                  $      1,959          $      1,467         $      4,513          $      2,645
Cost of Sales                       997                   518                2,336                   964
                        --------------------- -------------------- --------------------- --------------------

Gross Profit               $        962          $        949         $      2,177          $      1,681
                        ===================== ==================== ===================== ====================

Gross Profit %                       49.1%                 64.7%                48.2%                 63.6%
                        ===================== ==================== ===================== ====================
</TABLE>
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


Three  Months  Ended July 31, 2002  Compared to The Three  Months Ended July 31,
2001

Sales for the three months ended July 31, 2002 increased  33.5% in the amount of
$492 over the comparable three-month period ended July 31, 2001. The increase in
sales is attributable to an increase in the size of the coach fleet,  additional
revenue from the increased  use of employee  coach  drivers  versus  independent
contractors  paid directly by the customer and due to increased  utilization  of
the fleet in 2002.  Management believes the increased utilization is a result of
its  marketing  efforts  to rock and  roll,  pop,  touring  Broadway  shows  and
corporate customers.  These customers are in addition to the traditional country
and  western  performers  who have  historically  been  this  segment's  primary
customer base. In addition, this business is seasonal in nature and historically
is stronger in the spring, summer and fall months.

Gross profit for this segment was 49.1% for the three months ended July 31, 2002
compared to 64.7% for the comparable three-month period ended July 31, 2001. The
reduction is attributable  to several  factors.  During the  three-month  period
ended July 31, 2002,  additional  coaches have been leased from unrelated  third
parties to meet current demand. The additional lease cost has been recorded as a
component of cost of sales and represents an increase of  approximately  5% as a
percentage of sales.  This segment had no lease cost for outside  coaches in the
comparable  period of 2001. In addition,  additional  drivers have been added as
employees  during 2002 adding  approximately  7% as a percentage of sales to the
costs of direct wages and  benefits  for the quarter.  In the three month period
ended July 31,  2001, a larger  percentage  of coach  drivers  were  independent
contractors paid directly by the customer.

Nine Months Ended July 31, 2002 Compared to The Nine Months Ended July 31, 2001

Results for the nine months ended July 31, 2002 are not comparable to the
nine-month period ended July 31, 2001, as this segment was acquired as of
January 1, 2001 and, therefore, includes only seven months of operations for the
period ended July 31, 2001. Gross profit percentage is also not comparable for
the reasons stated above and also 2001 does not include the months of November
and December that are historically a slow period for this segment.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES

The Company's selling,  general and  administrative  expenses are higher for the
three  months ended July 31, 2002 versus the  three-month  period ended July 31,
2001 due to the operations added in 2002, as previously discussed.

In addition,  selling,  general and  administrative  expenses are higher for the
nine month  period  ended July 31,  2002 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,  that will  normally be  performed  by Company  personnel on a going
forward  basis.  As a part of the  postacquisition  process,  OCP has  agreed to
provide capital to fund certain of the  administrative  expenses and convert the
amount to equity prior to the end of this fiscal year. As of July 31, 2002,  OCP
has provided  funding of  approximately  $860,000 of such  expenses.  Management
anticipates  this  amount  will be  converted  to equity  during  fiscal 2003 in
exchange for issuance of convertible  preferred  stock.  In addition,  under the
terms of the agreement with OCP, the Company anticipates receiving an additional
amount of  approximately  $415,000 during the fourth fiscal quarter of 2002. The
Company has also received  approximately $270,000 in advances from Fair to cover
additional  costs above amounts agreed to by OCP. The  additional  advances from
OCP and Fair  will also be  converted  to equity  in  exchange  for  convertible
preferred stock.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


INTEREST EXPENSE

Interest  expense for the three months  ended July 31, 2002 as a  percentage  of
average debt borrowings of $35,893 was 2.4% (9.6% on an annual basis).  Interest
expense for the three months ended July 31, 2001 as a percentage of average debt
borrowings  of $24,964  was 2.8%  (11.2% on an annual  basis).  The  decrease is
primarily due to the reduction of the prime rate as well as the refinancing debt
and equity  transactions  discussed below in "Liquidity and Capital  Resources,"
"Refinancing Activities," and "Partners Equity Transactions."

Interest  expense for the nine months  ended July 31,  2002 as a  percentage  of
average debt borrowings of $36,448 was 7.5% (10.0% on an annual basis). Interest
expense for the nine months ended July 31, 2001 as a percentage  of average debt
borrowings of $24,601 was 6.4% (8.6% on an annual basis).  The increase for 2002
is due to additional debt of the entities that were not part of the consolidated
group during the nine months ended July 31, 2001.  Portions of this debt carries
higher interest rates than rates charged on debt  outstanding in the prior year.
This increase is net of the factors described above.

INCOME TAX PROVISION

There was no income tax expense for the three  months ended July 31, 2002 due to
the  utilization of fully reserved net operating loss (NOL)  carryforwards.  The
income tax benefit for the  nine-month  period ended July 31, 2002  increased by
$90 as compared to the  nine-month  period ended July 31,  2001.  The income tax
benefit is created primarily through NOL carryforwards  recognized to the extent
they are  available to offset the  Company's  net deferred  tax  liability.  Any
quarterly  tax benefits are based on the  estimated  effective  tax rate for the
full year.

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 principal balances
of some of these  loans  reflect  the fact that OCP,  from whom four of the five
subsidiaries  were  purchased,  entered into highly  leveraged  acquisitions  of
Champion, U.S. Rubber, Pyramid, and United.

This high level of debt has  created  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  may  from  time  to  time be in
technical default under these 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." They are also mitigated by the actions taken with Champion,
U.S.  Rubber,  United and the refinancing  efforts underway with U.S. Rubber and
Pyramid.

The Company and certain 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  subordinated  debt, Danzer Line of Credit and Term
Note 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 July 31, 2002 by $5,229,000 in part because approximately 32% of
the Company's debt is classified as a current liability. By the end of the third
quarter  2002,  the working  capital  position  had  improved by  $4,338,000,  a
reduction of negative working capital of approximately 45%.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


The Company has been addressing  these liquidity and working capital issues in a
number of ways. Management anticipates that the following steps started in early
2002 and  currently  in process  will  improve the  Company's  working  capital,
strengthen  its equity  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  approximately  $2,689,000 of long-term  liabilities to equity. Of
     this amount,  $1,289,000  was converted to Series C  convertible  preferred
     stock during the second fiscal quarter of 2002.

o    The actions taken with respect to Champion  described below under "Champion
     Transactions"  which  improved  the  Company's  overall  equity and 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 has been  reclassified  as a current
     liability.  The Company  completed  the  refinancing  of the United Line of
     Credit and a term note which  significantly  contributed  to  reducing  the
     negative working capital.

While there can be no assurance that these transactions will occur as projected,
the transactions  that have taken place are consistent with the plans delineated
in previously issued reports. It should be noted that even 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.

FINANCIAL COVENANT WAIVERS

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

o    Management 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.  The  Company
     anticipates  closing on a new credit  facility  for US Rubber in  September
     2002.

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. The Company continues to be in technical  violation of
     this  covenant;  therefore,  the balance of the long-term  debt due Regions
     Bank at July 31, 2002 has been  classified as a current  liability as it is
     due June 2003.

o    At October  31,  2001,  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.  These  covenants  are to be analyzed  annually.  The
     Company has received a waiver of these violations  through November 1, 2002
     and is in discussions with Renaissance Capital to restructure the covenants
     on a go forward basis.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


o    Danzer  Industries was notified by letter dated May 28, 2002 that it was in
     technical  default of its revolving note and term note due to nonreceipt of
     certain  documentation and  noncompliance  with the debt service ratio. The
     Company is endeavoring to provide the appropriate documentation and resolve
     the compliance requirement.  In addition, the Company's line of credit with
     an  outstanding  balance of $825,000  expired  March 31, 2002.  The line of
     credit has been extended  based on a verbal  agreement  with the bank while
     the covenant  violations  are addressed.  As of July 31, 2002,  $867,000 of
     long-term  debt related to these  obligations  has been  reclassified  as a
     current liability due to these violations.

o    Champion  remains in  default of its  subordinated  debt  agreement  in the
     amount of $1,250,000,  which has been classified as a current liability due
     to the default. On April 29, 2002, the Company received notice of a lawsuit
     filed by the  subordinated  lender seeking  payment of the $1,250,000  note
     payable plus accrued interest from Champion or Obsidian Enterprises under a
     guarantee agreement.  An answer of general denial on behalf of Champion has
     been filed with the court. In addition,  a special  appearance with respect
     to  jurisdiction  has been  filed  with the  court on  behalf  of  Obsidian
     Enterprises. DC Investments, in a nonrecourse assignment, has purchased the
     outstanding  senior  debt from Bank One on March 20,  2002.  (See  Champion
     Transactions below.)

FUNDS AVAILABILITY

On a  consolidated  basis,  as of July 31, 2002,  the Company had  approximately
$456,000 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 July 31, 2002,  Danzer  Industries,  U.S. Rubber,  and United had
additional  current  availability of $0, $692,000,  and $401,000,  respectively.
Maximum  additional  amounts  available under these credit lines if supported by
their individual borrowing base are approximately $0, $140,000, and $261,000 for
Danzer Industries, U.S. Rubber, and United, respectively.

The Company generated  negative net cash flow of $542 from operations during the
quarter  ended July 31,  2002.  Cash used in  operations  during the  quarter is
primarily  due to increases  in accounts  receivable  as a result of  increasing
revenues and  reductions  in accounts  payable.  Funding  during the quarter was
provided through borrowings on lines of credit and from related parties.

REFINANCING ACTIVITIES

Management is in the process of refinancing certain 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 during September
     2002.

o    The Company has obtained a renewal and increased maximum borrowing limit of
     the  revolving  line of credit of United  with  First  Indiana  Bank and an
     additional one year of amortization of its previous 2-year term debt.

o    The Company is  undertaking  to refinance the coaches  transferred  from DW
     Leasing to Obsidian  Leasing with DC Investments  and its various  existing
     lenders.  Two senior  lenders  representing  approximately  80% of Obsidian
     Leasing  Company's debt have provided  letters of intent to refinance their
     respective loans which will include a substantial reduction in the interest
     rates and a longer  amortization of the debt.  Management  anticipates that
     this  refinancing  will be concluded  during the fourth  fiscal  quarter of
     2002.
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES


PARTNERS EQUITY TRANSACTIONS

OCP,  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 OCP.
Such amounts expended through July 31, 2002 approximated $1,275,000.  As of July
31,  2002,  OCP has  advanced  approximately  $860,000  to the Company for these
expenses.  In addition,  the Company  expects to receive an additional  $415,000
during fourth  fiscal  quarter  2002.  Pursuant to the  agreement  with OCP, the
Company plans to convert these amounts to equity in exchange for issuance to OCP
of convertible  preferred stock. This conversion to convertible  preferred stock
is  dependent  upon  the  authorization  of  additional  shares  of  convertible
preferred  stock by the  Company's  shareholders,  which is  planned to occur in
calendar 2003.

Previously OCP converted  $1,289,000 of notes payable and accrued  interest from
OCP to the Company to 402,906 shares of Series C convertible  preferred stock of
the Company.

GUARANTEES OF OCP

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 or United were to
declare a  default.  In either of those  events,  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.
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  authorized  the Chairman of the Board of the Company
to  explore  various  options  to divest  Champion  Trailer  or,  at a  minimum,
restructure  this  component  of  the  business.  As a  result,  DC  Investments
negotiated the purchase of the loans of Bank One to Champion.

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  through  January 31, 2002.  Markpoint has
informed  Champion  that it would not  grant  waiver  of this  violation  in the
future.  The Markpoint  debt has been  classified as a current  liability due to
this violation.  Subsequent to DC Investments  purchasing the Bank One debt in a
nonrecourse  assignment,  Markpoint filed a lawsuit in Texas state court seeking
payment  in  full  for  their   subordinated  debt  from  Champion  or  Obsidian
Enterprises under a guarantee agreement.



<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 July 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
 violations and classified as current    $3,953,000   $3,953,000    $        -   $        -   $        -   $        -
Long-term debt, and all debt service
 interest payments                       39,682,000    2,068,000     7,734,000    7,291,000    9,025,000   13,564,000
Operating leases                          1,854,000      727,000       980,000       67,000       32,000       48,000
Purchase agreement for equipment          2,343,000    2,343,000
                                        ------------ ------------- ------------ ------------ ------------ ------------

Total contractual cash obligations       $47,832,000  $9,091,000    $8,714,000   $7,358,000   $9,057,000   $13,612,000
                                        ============ ============= ============ ============ ============ ============
</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>

 Other Commercial Commitment      Total Amount Committed       Outstanding at July 31,        Date of Expiration
                                                                        2002
------------------------------- ---------------------------- ---------------------------- ----------------------------

<S>                                   <C>                          <C>                    <C>
Line of credit                        $       1,000,000            $         825,000      March 31, 2002*
Line of credit                                3,750,000                    3,088,000      February 1, 2004
Line of credit                                3,000,000                    2,168,000      November 1, 2002
</TABLE>

*currently in negotiations with a new lender

The  Company's  net cash used in  operations  for the nine months ended July 31,
2002 was $864.  This is  comprised  of a net loss of $4,289,  decreases in other
liabilities  of $466 and increases in accounts  receivable of $1,209,  offset by
noncash  depreciation and amortization of $2,018 and goodwill impairment loss of
$2,015,  decreases in inventories of $227,  prepaid expenses and other assets of
$333,  increases in accrued expenses and customer deposits of $495, and accounts
payable of $12.

Net cash flow provided from financing  activities for the nine months ended July
31, 2002 was $1,352.  This is comprised of borrowings of long-term  debt and net
borrowings of short-term  debt of $3,002 and borrowings  from related parties of
$1,778, offset by principal repayments of long-term debt of $3,428.

Cash flow was used in  investing  activities  for the nine months ended July 31,
2002 of  $561.  This  is  comprised  primarily  of  purchases  of  property  and
equipment.



<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



The total decrease in cash is summarized as follows:

                                                   Nine Months Ended
                                         --------------------------------------
                                             July 31,            July 31,
                                               2002                2001
                                         ------------------ -------------------

Net cash used in operations                $          (864)   $           406
Net cash used in investing activities                 (561)            (6,382)
Net cash provided by financing
 activities                                          1,352              5,669
                                         ------------------ -------------------

Decrease in cash and cash equivalents      $           (73)   $          (307)
                                         ================== ===================

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.

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

                                                                 Three Months Ended July 31, 2002
                                                                          (in thousands)
                                              ------------------------------------------------------------------------
                                                                                                             Net
                                                            Interest      Income       Depreciation         Income
                                                EBITDA       Expense      Taxes       & Amortization        (Loss)
                                              ------------ ------------ ----------- -------------------- -------------

Trailer and related transportation
<S>                                             <C>          <C>         <C>              <C>             <C>
equipment manufacturing                         $     276    $    393    $     -          $     215       $    (332)

Coach leasing                                         697         365          -                169             163

Butyl rubber reclaiming                               716         109          -                289             318
                                              ------------ ------------ ----------- -------------------- -------------

Total Company                                   $   1,689    $    867    $     -          $     673       $     149
                                              ============ ============ =========== ==================== =============
</TABLE>
<TABLE>

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

Trailer and related transportation
<S>                                             <C>          <C>         <C>              <C>             <C>
 equipment manufacturing                        $    (215)   $    121    $     -          $     101       $    (437)

Coach leasing                                         648         377          -                242              29

Butyl rubber reclaiming                               202         192        (52)               267            (205)
                                              ------------ ------------ ----------- -------------------- -------------

Total Company                                   $     635    $    690    $   (52)         $     610       $    (613)
                                              ============ ============ =========== ==================== =============
</TABLE>
<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES

<TABLE>

                                                                  Nine Months Ended July 31, 2002
                                                                          (in thousands)
                                              ------------------------------------------------------------------------
                                                                                                             Net
                                                            Interest      Income       Depreciation         Income
                                                EBITDA       Expense      Taxes       & Amortization        (Loss)
                                              ------------ ------------ ----------- -------------------- -------------

Trailer and related transportation
<S>                                             <C>          <C>         <C>              <C>             <C>
equipment manufacturing                         $     (91)   $  1,186    $   (46)         $   2,654*      $  (3,885)

Coach leasing                                       1,454       1,099          -                579            (224)

Butyl rubber reclaiming                               948         437       (109)               800            (180)
                                              ------------ ------------ ----------- -------------------- -------------

Total Company                                   $   2,311    $  2,722    $  (155)         $   4,033       $  (4,289)
                                              ============ ============ =========== ==================== =============
</TABLE>

*Includes impairment charge of $2,015.
<TABLE>

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

Trailer and related transportation
<S>                                             <C>          <C>         <C>              <C>             <C>
equipment manufacturing                         $    (287)   $    250    $     -          $     209       $    (746)

Coach leasing                                         901         859          -                544            (502)

Butyl rubber reclaiming                               821         469        (65)               716            (299)
                                              ------------ ------------ ----------- -------------------- -------------

Total Company                                   $   1,435    $  1,578    $   (65)         $   1,469       $  (1,547)
                                              ============ ============ =========== ==================== =============
</TABLE>

Obsidian  Enterprises,  Inc.  (legal  parent)  allocates  selling,  general  and
administrative  expenses  to  the  respective  companies  primarily  based  on a
percentage of sales. Amounts allocated by segment are as follows:

                                       Three Months Ended  Nine Months Ended
                                            July 31,           July 31,
                                              2002               2002
                                      ----------------------------------------

Trailer manufacturing                    $           146     $           828
Coach leasing                                         27                 120
Butyl rubber reclaiming                               38                 185
                                      ----------------------------------------

Total                                    $           211     $         1,133
                                      ========================================



<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



EBITDA by segment, exclusive of the allocation of the above selling, general and
administrative expenses, is as follows:

                                       Three Months Ended  Nine Months Ended
                                            July 31,           July 31,
                                              2002               2002
                                      ----------------------------------------

Trailer manufacturing                    $           422     $           737
Coach leasing                                        724               1,574
Butyl rubber reclaiming                              754               1,133
                                      ----------------------------------------

Total                                    $         1,900     $         3,444
                                      ========================================

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 $66 should be adequate for any exposure
to loss in our July 31,  2002  accounts  receivable.  We have  also  established
reserves for  slow-moving  and obsolete  inventories  and believe the reserve of
$410 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.  During the quarter ended July 31, 2002,  the Company  completed its
transitional  impairment  test in conjunction  with the adoption of FAS 142. The
impairment  test  indicated  that  certain   goodwill  related  to  the  trailer
manufacturing segment was impaired.  Accordingly $2,015,000 has been recorded as
a cumulative effect of change in accounting principle.



<PAGE>

                   OBSIDIAN ENTERPRISES, INC. AND SUBSIDIARIES



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

On April 29,  2002,  Markpoint  Equity  Fund J.V.  ("Markpoint"),  a Texas joint
venture for which The Markpoint  Company serves as Managing  Venturer,  filed an
action in the Texas District Court,  Dallas County seeking payment of $1,250,000
owed by Champion  under the  subordinated  credit  facility  described  above in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation under the caption "Champion Transactions."

Item 2. Changes in Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

As described above in Management's Discussion and Analysis of Financial
Condition and Results of Operation under the caption "Champion Transactions,"
Champion has been in violation of the funded debt-to-EBITDA negative covenant in
a $1,250,000 subordinated credit facility with Markpoint. Markpoint has filed a
lawsuit asserting default and seeking payment in full of the debt from Champion
or Obsidian Enterprises under a guarantee agreement in the suit described above
in Item 1 of this Part II.

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.

A.       Exhibits
<TABLE>

                    --------------------------------------- ---------------------------------------------------------
<S>                     <C>                                     <C>
                                 Exhibit No.                                      Description
                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     10.1                   Second Amendment to Credit  Agreement,  dated August 28,
                                                            2002,  between  United   Expressline,   Inc.  and  First
                                                            Indiana Bank, N.A.

                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     99.1                   Statement Regarding Certification Pursuant
                                                            to  18  U.S.C. Section  1350  by  Timothy  S.  Durham,
                                                            Chief Executive Officer

                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     99.2                   Statement Regarding Certification Pursuant
                                                            to 18 U.S.C. Section 1350 by Barry S. Baer,  Chief
                                                            Financial Officer
                    --------------------------------------- ---------------------------------------------------------
</TABLE>

B.       Reports on Form 8-K
         None



<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.

September 13, 2002                 By:  /s/ Timothy S. Durham
----------------------------       --------------------------------------------
Date                               Timothy S. Durham, Chairman and
                                   Chief Executive Officer

September 13, 2002                 By:  /s/ Barry S. Baer
----------------------------       --------------------------------------------
Date                               Barry S. Baer, Executive Vice President/
                                   Chief Financial Officer


                                 CERTIFICATIONS

     I, Timothy S. Durham, certify that:

     1.   I have  reviewed  this  quarterly  report  on Form  10-Q  of  Obsidian
          Enterprises, Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial  statement,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report.

Date:  September 13, 2002          /s/ Timothy S. Durham
                                   --------------------------------------------
                                   Timothy S. Durham, Chief Executive Officer


     I, Barry S. Baer, certify that:

     1.   I have  reviewed  this  quarterly  report  on Form  10-Q  of  Obsidian
          Enterprises, Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial  statement,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report.

Date:  September 13, 2002          /s/ Barry S. Baer
                                   --------------------------------------------
                                   Barry S. Baer, Chief Financial Officer



<PAGE>






                                  EXHIBIT INDEX

<TABLE>

                    --------------------------------------- ---------------------------------------------------------
<S>                     <C>                                     <C>
                                 Exhibit No.                                      Description
                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     10.1                   Second Amendment to Credit  Agreement,  dated August 28,
                                                            2002,  between  United   Expressline,   Inc.  and  First
                                                            Indiana Bank, N.A.

                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     99.1                   Statement Regarding Certification Pursuant
                                                            to  18  U.S.C. Section  1350  by  Timothy  S.  Durham,
                                                            Chief Executive Officer

                    --------------------------------------- ---------------------------------------------------------
                    --------------------------------------- ---------------------------------------------------------
                                     99.2                   Statement Regarding Certification Pursuant
                                                            to 18 U.S.C. Section 1350 by Barry S. Baer,  Chief
                                                            Financial Officer
                    --------------------------------------- ---------------------------------------------------------
</TABLE>