FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A TO
COMMISSION FILE NUMBER: 0-14859
GARB-OIL & POWER CORPORATION
(Exact name of small business issuer as specified in its charter)
UTAH 87-0296694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 EXCHANGE PLACE, SUITE #507
SALT LAKE CITY, UTAH 84111
(Address of Principal executive offices)
(801) 322-5410
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
The number of shares outstanding at March 31, 1998: 17,028,299
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) AND JUNE 30, 1997
ASSETS
March 31 June 30
1998 1997
(Unaudited)
---------- ----------
CURRENT ASSETS:
Cash in bank $ 19,366 $ 8,073
Accounts receivable -
related party 188,379 186,044
Inventory 60,465 73,925
---------- ----------
TOTAL CURRENT ASSETS 268,210 268,042
---------- ----------
PROPERTY AND EQUIPMENT 51,130 59,013
LESS: Accumulated Depreciation (37,221) (31,221)
---------- ----------
NET PROPERTY AND EQUIPMENT 13,909 27,792
---------- ----------
OTHER ASSETS:
Deposits 1,000 1,000
Patents - Net of Accumulated
Amortization 3,323 4,022
---------- ----------
TOTAL OTHER ASSETS 4,323 5,022
---------- ----------
TOTAL ASSETS $ 286,442 $ 300,856
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 93,312 $ 72,583
Accrued payroll taxes 1,592
Accrued payroll 300,000 264,000
Accrued Interest 76,500 61,650
Notes payable - related party 246,907 263,907
Deferred Revenue 150,000 53,000
---------- ----------
TOTAL CURRENT LIABILITIES $ 868,311 $ 715,140
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock - 20,000,000
shares authorized; No par
value; 17,028,299 shares issued
at March 31, 1998 and 17,028,299
shares at June 30, 1997 2,744,068 2,744,068
Accumulated deficit (27,178) (27,178)
Deficit accumulated during
development stage (3,298,759) (3,131,174)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (deficit) (581,869) (414,284)
---------- ----------
TOTAL LIABILITY AND EQUITY $ 286,442 $ 300,856
========== ==========
See notes to financial statements
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
(JANUARY 14, 1981) THROUGH MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
For the Period from
Inception of the
Development Stage
(January 14,1981)
Three Months Nine Months Through
Ended Mar. 31, Ended Mar. 31,
1998 1997 1998 1997 Mar. 31,1998
-------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES $ 4,665 $ -0- $ 4,665 $ 3,185 $ 1,111,028
LESS COST OF SALES 13,460 -0- 13,460 3,496 533,857
-------- -------- --------- --------- -----------
NET (8,795) None (8,795) (311) 577,171
-------- -------- --------- --------- -----------
GENERAL AND
ADMINISTRATIVE EXPENSES 38,970 48,481 135,720 112,028 3,333,145
-------- -------- --------- --------- -----------
INCOME(LOSS)FROM
OPERATIONS (47,765) (48,481) (144,515) (112,339) (2,755,974)
-------- -------- --------- --------- -----------
OTHER INCOME (EXPENSES):
Write-off and
abandonment of assets (401,457)
Gain on sale of assets 655
Interest income 147,810
Interest expense 6,471 8,649 23,071 24,019 (178,963)
Minority Interest in
losses of subsidiary 5,383
Loss on extinguishment
of debt (116,212)
-------- -------- --------- --------- -----------
Total other income
(expense) (6,471) (8,649) (23,071) (24,019) (542,784)
-------- -------- --------- --------- -----------
NET LOSS (54,236) (57,130) (167,586) (136,358) (3,298,759)
======== ======== ========= ========= ===========
LOSS PER SHARE $ (.003) $ (.003) $ (.010) $ (.007) $ (.194)
======== ======== ========= ========= ===========
<FN>
See notes to financial statements
</FN>
</TABLE>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (PERIOD OF INCEPTION
OF THE DEVELOPMENT STAGE) TO MARCH 31, 1998
For the Period from
Inception of the
Development Stage
Nine Months Ended (January 14, 1981)
March 31 Through
1998 1997 Mar. 31,1998
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(167,586) $(136,358) $(3,298,759)
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 6,699 9,270 99,112
Bad debt expense 266,750
Gain on sale of assets (655)
Write-off and abandonment
of assets 401,457
Loss on extinguishment of debt 116,212
Stock issued for services 122,251
Changes in assets and liabilities:
Accrued interest receivable (24,250)
Contract receivable (242,500)
Accounts receivable (2,335) (22,632) (165,778)
Income Tax refund 537
Inventory 13,460 2,880 62,494
Accounts payable 20,729 3,904 93,210
Accounts payable-related party (17,000) 30,000 246,907
Accrued payroll taxes 1,592 2,009 1,592
Accrued payroll 36,000 36,000 300,000
Accrued interest payable 14,850 14,850 286,159
Deferred Income 97,000 150,000
Advances payable-related party (120,106)
Other current liabilities 240,954
--------- --------- -----------
Net Cash used in
Operating activities 3,410 (60,077) (1,464,413)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 7,883 9,383
Construction in progress (2,937,790)
Purchase of treasury stock (10,009)
Purchase of other assets 65 (1,957,733)
Purchase property and Equipment (60,412)
--------- --------- -----------
Net Cash Used In Investing
Activities 7,883 65 (4,956,561)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Bank Loans 4,636,647
Sale of Common Stock 45,000 1,947,217
Contribution to Capital by
Parent Company 356,402
Principal Payment on Bank Loans (500,000)
--------- --------- -----------
Net Cash Provided by
Financing Activities - 45,000 6,440,266
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 11,293 (15,012) 19,292
Net Cash at Beginning of period 8,073 16,136 74
--------- --------- -----------
NET CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 19,366 $ 1,124 $ 19,366
========= ========= ===========
See Notes to Consolidated Financial Statements
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED) AND JUNE 30, 1997
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The balance sheet as of March 31, 1998 and the
related statements of operations and cash flows for the nine
months ended March 31, 1998 and 1997, have been prepared by
the Company, without audit. In the opinion of management,
all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at March 31,
1998, and for the nine months ended March 31, 1998 and 1997,
have been made.
Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these
financial statements be read in conjunction with the
financial statements and notes thereto included in the
Company's June 30, 1997, annual report on Form 10-KSB. The
results of operations for the nine months ended March 31,
1998 and 1997, are not necessarily indicative of the
operating results to be expected for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
A. Results of Operations
The Company received revenue of $ 4,665 in the nine
months ended March 31, 1998. General and Administrative
expenses were $ 135,720 in the current year's nine months
compared to $112,028 in the prior year period. After
inclusion of interest expense in the current year nine month
period of $23,071 the Company incurred a net loss of
($167,586) compared to a net loss of ($136,358) after
interest expense of $24,019 for the prior year period.
The auditor's report accompanying the Company's
financial statements for the year ended June 30, 1997
contains the following statement: As stated in the auditors
opinion to the financial statements, "the Company's
operating losses since inception and the deficit accumulated
during the development stage raise substantial doubt about
their ability to continue as a going concern."
As stated in the June 30, 1997 10 KSB management is
pursuing various avenues of generating revenues during the
next twelve months. The Company's efforts have historically
focused on reducing the environmental problems of disposing
of used tires by creating fuel, power or useful by-products
from the tires. Although such efforts have not resulted in
commercial operations, the Company's management has gained
extensive knowledge of the used tire distribution and
disposition business through such efforts. Based on this
experience, management discovered that a substantial number
of used truck tires were disposed of which could be made
usable through repair, retreading and reconditioning.
Management also believes that there is commercial demand for
such used tires. On May 20, 1994 the company formed UTTI as
a majority owned subsidiary to exploit this perceived
demand. UTTI is continuing to operate and produce used
truck tires for this market.
Management believes that there are two primary sources
for used truck tire demand. Used truck tires have, or are
perceived to have, a shorter usable life than comparable new
tires. However, due to the substantially lower cost of used
tires, the cost per usable mile is much lower for used
tires. Local and short haul truckers buy used tires because
of this lower cost per usable mile. The shorter usable life
is a negative factor for interstate long haul truckers.
However, interstate truckers do buy used tires as short term
replacements for tires irreparably damaged while on the
road.
UTTI purchases repairable used tires and recappable
tire carcasses from a number of sources. UTTI personnel
determine what repairs need to be made to the tire to make
it resalable, and direct the tire to the appropriate
workstation in UTTI's facility. After repairs and
recapping, UTTI then sells the tires to users, wholesalers,
distributors and retailers.
UTTI believes that its primary competition for used
tires are generally small operations that can repair only a
few tires at a time. UTTI is capable of repairing up to 100
truck tires per day. UTTI believes that its volume
capabilities will enable it to provide a steady, reliable
source of quality used tires which cannot be obtained from
the small operators. UTTI also believes that its economies
of scale will allow it to price its used tires
competitively.
UTTI began operations in June, 1994 at its facility in
Salt Lake City, Utah, although no revenues were received
prior to the June 30 fiscal year end. As with any start-up
operation, there is substantial uncertainty regarding its
ability to operate at a profit. If the Salt Lake City
facility does operate profitably, the Company may attempt to
open similar facilities at other locations across the
country.
Used tires sold by UTTI must meet minimum standards
imposed by the Department of Transportation. UTTI believes
that its tires are in substantial compliance with such
requirements. Although UTTI generally sells its tires on an
"as is" basis without warranty, UTTI may remain liable under
state law for personal injury or property damage resulting
from any negligent tire repairs.
Through operating UTTI since 1994 has given the
company the necessary experience to establish similar plants
elsewhere. There is a good and growing market for such
reusable tires in the dirt hauling and construction industry
worldwide. The company is now offering to establish these
truck tire recycling centers at all shredding installations
nationwide, where shredders and similar equipment is
marketed by its sister company, Garbalizer Machinery
Corporation (GMC). These truck tire recycling centers will
be owned by the company and operated by the shredding
facility owners in space leased from the facility operators.
Reusable truck tires will be provided at no charge to the
truck tire center by the shredding facility. Net profit
from the operation will be divided equally between the
facility operators and the company.
Although discussions are currently underway with
inquirers and purchasers of machinery from GMC no such
installations have been installed as of this date and there
is no guarantee that they will be profitable if installed.
The Company owns 55% of UTTI, which interest it
received in exchange for its expertise and other intangible
capital contributions. The remaining 45% of UTTI is owned
by an investor who loaned $165,000 of seed capital to UTTI
and who is an officer and director of UTTI. Employees of
UTTI may receive bonuses or incentives based upon the gross
sales or profits of UTTI.
The Company is also pursuing sales and construction of
Off the Road (OTR) Tire centers and crumb rubber plants in
the United States and foreign countries on which the Company
would earn a royalty.
Garbalizer Machinery Corporation is pursuing sales of
its shredders which, if successful, will allow GMC to repay
amounts it owes to the Company.
OTR TIRE PROCESSING SYSTEM
The Company has designed a system it believes will be
capable of recovering natural rubber from used and discarded
large, off-the-road (OTR) tires. As of the date of this
report, the Company has substantially completed the
engineering and design of the system, but has not yet
constructed a commercially operating machine or system.
Commercially available tire shredders, including
shredders made by the company's affiliate, Garbalizer
Machinery Corporation ("GMC"), are designed to process
standard automobile and truck tires, which may include semi-
trailer or over-the-road tires. Tires used in a variety of
off the road equipment, such as graders, bulldozers, mining
equipment, etc. are not processed directly by these
shredders. Although these tires, which may weigh from 400
pounds to 9 tons apiece, are less numerous than standard
tires, the Company estimates that over 3,000,000 tons of OTR
tires require disposal in North America each year. Current
methods of disposal include landfilling and surface
disposal, which are accepted only due to the lack of a
viable alternative. Most states have passed laws
prohibiting land filling or storage of whole tires.
The Company's system, known as the OTR Tire
Disintegrator, uses mechanical means to remove the exterior
rubber from OTR tires without shredding. After removal of
the exterior rubber from the tire the remaining tire carcass
is sheared into pieces, shredded and cryogenically processed
to produce crumb rubber. After separation of wire and other
non rubber components the resulting particles can then be
used to manufacture high quality rubber products.
The Company has prepared what it believes to be a
final design of the system and has analyzed the expected
performance of the system. When the first Disintegrator is
built, modifications to the design may be required to
maximize performance. It is also possible, although the
Company does not anticipate this, that the Disintegrator
will not perform as planned when built.
The Company announced the availability of the
Disintegrator in July, 1992 and has since received numerous
inquiries from potential buyers or users of the
Disintegrator. The Company's intent is to allow use of its
technology, by persons or companies who purchase an
exclusive territory or license from the Company and who
agree to pay the Company a percentage of gross sales. The
Company has not obtained any final agreements and funding
for licenses or for use of the Disintegrator as of the date
of this report. The Company is continuing to pursue the
licensing, or franchising of the Disintegrator and is
currently discussing its use with interested entities on a
world wide basis.
If any of such transactions occur, management believes
that the Company will have sufficient resources to operate
for the next twelve months and thereafter. The Company is
continuing to pursue debt or equity financing, but
management does not believe that substantial financing on
acceptable terms can be obtained prior to obtaining firm
commitments on any revenue generating transactions. There
is no assurance that the Company will be able to obtain
revenues from operations or to obtain additional financing.
If these are not available to the Company, the Company may
not be able to continue operations at even the minimal
levels of the last year. While management remains hopeful
that one or more transactions will proceed, no assurances
can be expressed as to the Company's continuing viability in
the absence of revenues or the infusion of additional cash.
The Company has received United States Patent No.
5,299,748 on the Disintegrator's design. An additional
patent has been allowed, but has not yet been issued.
B. Liquidity, Cash Flow and Capital Resources
$12,000 of wages payable to the company's President
were accrued, rather than paid, during the period.
At March 31, 1998 the Company had a deficit in working
capital (current Liabilities in excess of current assets) of
$600,101 and a current ratio (ratio of current assets to
current liabilities) of approximately .31. At June 30,
1997, the Company had a deficit in working capital of
$447,098 and a current ratio of approximately .37.
Working capital at March 31, 1998 includes current
assets consisting of a receivable from related parties of
$188,379. The related party receivable has been
outstanding, in varying amounts, since the quarter ended
March 31, 1992. At March 31, 1998, the Company had cash on
hand of $19,366.
Other than its short time office lease and accounts
payable, the company is not subject to any material
commitments for capital expenditures.
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No exhibits are being filed herewith.
During the quarter reported upon, the Company did not
file any reports on Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GARB OIL & POWER
CORPORATION
Date: May 11, 1998 By /S/ John C. Brewer
--------------------------
John C. Brewer, President
Principal Executive Officer
Date: May 11, 1998 By /S/ Charles Laver
--------------------------
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
