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: December 31, 1997
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 December 31, 1997:
17,028,299
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 (UNAUDITED) AND JUNE 30, 1997
ASSETS
December 31 June 30
1997 1997
(Unaudited)
---------- ----------
CURRENT ASSETS:
Cash in bank $ 6,255 $ 8,073
Accounts receivable -
related party 200,657 186,044
Inventory 73,925 73,925
---------- ----------
TOTAL CURRENT ASSETS 280,837 268,042
---------- ----------
PROPERTY AND EQUIPMENT 51,130 59,013
LESS: Accumulated Depreciation (35,221) (31,221)
---------- ----------
NET PROPERTY AND EQUIPMENT 15,909 27,792
---------- ----------
OTHER ASSETS:
Deposits 1,000 1,000
Patents - Net of
Accumulated Amortization 3,556 4,022
---------- ----------
TOTAL OTHER ASSETS 4,556 5,022
---------- ----------
TOTAL ASSETS $ 301,302 $ 300,856
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 93,587 $ 72,583
Accrued payroll taxes 1,390
Accrued payroll 288,000 264,000
Accrued Interest 71,550 61,650
Notes payable - related party 246,907 263,907
Deferred Revenue 127,500 53,000
---------- ----------
TOTAL CURRENT LIABILITIES $ 828,934 $ 715,140
---------- -----------
STOCKHOLDERS' EQUITY:
Common stock - 20,000,000
shares authorized; No par
value; 17,028,299 shares
issued at December 31,
1997 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 (3,244,522) (3,131,174)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY
(deficit) (527,632) (414,284)
---------- ----------
TOTAL LIABILITY AND EQUITY
(deficit) $ 301,302 $ 300,856
========== ==========
See notes to financial statements
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
AND FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE (JANUARY
14, 1981) THROUGH DECEMBER 31, 1997 (UNAUDITED)
For the Period from
Inception of the
Development Stage
(January 14,1981)
Three months Six Months Through
ended Dec. 31, ended Dec. 31, Dec. 31,
1997 1996 1997 1996 1997
-------- -------- -------- ---------- ----------
Sales and Other
Revenues $ - $ - $ - $ 3,185 $1,106,363
Less Cost of Sales (3,496) (520,397)
-------- -------- -------- ---------- ----------
Net 0 0 0 (311) 585,966
-------- -------- -------- ---------- ----------
General and Administrative
Expenses 49,152 28,905 96,750 63,547 3,294,175
-------- -------- -------- ---------- ----------
Income(loss)from
Operation (49,152) (28,905) (96,750) (63,858) (2,708,209)
-------- -------- -------- ---------- ----------
Other Income (Expenses):
Write-off and
abandonment of assets (401,457)
Gain on sale of assets 655
Interest income 147,810
Interest expense (6,650) (9,725) (16,600) (15,370) (172,492)
Minority Interest in
losses of subsidiary 5,383
Loss on extinguishment
of debt (116,212)
-------- -------- -------- --------- -----------
Total other income
(expense) (6,650) (9,725) (16,600) (15,370) (536,313)
-------- -------- -------- --------- -----------
Net Loss (55,802) (38,630) (113,350) (79,228) (3,244,522)
======== ======== ======== ========= ===========
Loss Per Share $ (.003) $ (.002) $ (.007) $ (.005) $ (.019)
======== ======== ======== ========= ===========
See notes to financial statements
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO DECEMBER 31, 1997
For the Period From
Inception of the
Development Stage
Six Months Ended (January 14, 1981)
December 31 Through
1997 1996 Dec. 31,1997
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(113,350) $ (79,228) $(3,244,522)
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 4,466 6,180 96,879
Bad debt expense 266,750
Gain on sale of assets (655)
Loss on extinguishment of debt 401,457
Write-off and abandonment
of assets 116,212
Stock issued for services
& interest 122,251
Changes in assets and liabilities:
Accrued interest receivable (24,250)
Accounts receivable (14,613) (4,962) (178,156)
Contract receivable (242,500)
Income Tax refund 537
Inventory 0 2,880 49,034
Prepaid Expenses
Accounts payable 22,394 4,171 94,875
Deferred Revenue 74,500 53,000 127,500
Advanced payable (120,106)
Notes payable (17,000) 20,000 246,907
Accrued payroll taxes 1,149 -
Accrued payroll 24,000 24,000 288,000
Accrued interest payable 9,900 9,900 281,309
Other current liabilities 240,954
--------- --------- -----------
Net Cash used in
Operating activities (9,701) (15,910) (1,477,524)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 7,883 9,383
Construction in progress (2,937,790)
Purchase of treasury stock 65 (10,009)
Purchase of other assets (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 1,947,217
Contribution to Capital by
Parent Company 356,402
Principal Payment on Bank Loans (500,000)
--------- --------- -----------
Net Cash Provided by
Financing Activities - - 6,440,266
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (1,818) $ (15,845) $ 6,181
Net Cash and cash equivalents
at Beginning of period 8,073 16,136 74
--------- --------- -----------
NET CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,255 $ 291 $ 6,255
========= ========= ===========
See Notes to Consolidated Financial Statements
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997(UNAUDITED) AND JUNE 30, 1997
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The balance sheet as of DECEMBER 31, 1997, and the related statements
of operations and cash flows for the six months ended DECEMBER 31, 1997 and
1996, 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 DECEMBER 31, 1997, and for the six months ended DECEMBER 31,
1997 and 1996, 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 six months ended DECEMBER 31, 1997
and 1996, 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 $ -0- in the six months ended December
31, 1997. General and Administrative expenses were $96,750 in the current
year's first half compared to $63,547 in the prior year period. After
inclusion of interest expense in the current year six month period of $16,600
the Company incurred a net loss of ($113,530) compared to a net loss of
($79,228) after interest expense of $15,370 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 it's 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 December 31, 1997 the Company had a deficit in working capital
(current Liabilities in excess of current assets) of $548,097 and a current
ratio (ratio of current assets to current liabilities) of approximately .34.
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 December 31, 1997 includes current assets consisting
of a receivable from related parties of $200,657. The related party
receivable has been outstanding, in varying amounts, since the quarter ended
March 31, 1992. At December 31, 1997, the Company had cash on hand of
$6,255.
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: February , 1998 By /S/
John C. Brewer, President
Principal Executive Officer
Date: February , 1998 By /S/
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
