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, 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 December 31, 1998: 17,028,299
<PAGE>
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, 1998. General and Administrative expenses were $57,566 in the current year's
first half compared to $96,750 in the prior year period. After inclusion of
interest expense in the current year six month period of $9,900 the Company
incurred a net loss of ($67,466) compared to a net loss of ($113,350) after
interest expense of $16,600 for the prior year period.
The auditor's report accompanying the Company's financial statements
for the year ended June 30, 1998, 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.
OTR Tire Processing System
The Company has designed a system it believes will be capable of
recovering used rubber from 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 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. cannot be 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 the United States 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 landfilling or storage of whole tires.
The Company's system, known as the OTR Tire Disintegrator, uses
mechanical and cryogenic means to remove the rubber from OTR tires without
shredding. After separation of wire and other non-rubber components, the
resulting particles can then be used to produce crumb rubber. The particles can
also be used as fuel or safely disposed of in a landfill, although the Company
believes that the rubber particles will be of relatively high quality.
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 has received United States Patent No. 5,299,748 on the
Disintegrator design
<PAGE>
which expires April 5, 2011 and Patent No. 5,590,838 which expires January 7,
2014. An additional patent improvement has been filed and currently pending.
The Company announced the availability of the Disintegrator in July,
1992 and has received numerous inquiries from potential buyers or users of the
Disintegrator. The Company's original intent was to retain ownership of the
Disintegrator, allowing its use by persons who purchase an exclusive territory
from the Company and who agree to pay the Company a share of any profits earned.
UTTI Tire Repair and Resale Business
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 operated through October 1996 at which
time it was discontinued. In managements opinion, UTTI operated long enough to
prove that an operation of this type could be viable and profitable.
The Company is proposing to establish used truck tire processing and
sales joint ventures with operators of tire shredders or OTR Tire
Disintegrators. Currently, most tire shredding operations separate usable tire
casings from the scrap tires received in bulk. These casings are then sold to
agents who in turn sell them to repair or retread dealers. By establishing a
joint venture which would operate from the shredder operator's facility, the
Company believes it can obtain casings at lower or no cost, while reducing its
overhead and increasing the revenues to the shredder operation. The Company does
not yet have any agreements to establish such joint ventures. If such joint
ventures are established, it is likely that the first such venture will be
operated using the equipment from the Salt Lake City facility. As with any
start-up operation, there is substantial uncertainty regarding its ability to
operate at a profit. There are no firm commitments for any such joint ventures
at this time.
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.
Used tires sold by truck tire repair facilities must meet minimum
standards imposed by the Department of Transportation. Management believes that
these tires are in substantial compliance with such requirements. Although
repair facilities generally sells its tires on an "as is" basis without
warranty, the facility may remain liable under state law for personal injury or
property damage resulting from any negligent tire repairs.
<PAGE>
A more complete record of the company's operating history is shown on
its 10KSB for fiscal year June 30, 1998.
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, 1998 the Company had a deficit in working capital
(current Liabilities in excess of current assets) of $715,938 and a current
ratio (ratio of current assets to current liabilities) of approximately .23. At
June 30, 1998, the Company had a deficit in working capital of $652,997 and a
current ratio of approximately .26.
Working capital at December 31, 1998 includes current assets consisting
of a receivable from related parties of $180,071. The related party receivable
has been outstanding, in varying amounts, since the quarter ended March 31,
1992. At December 31, 1998, the Company had cash on hand of $14.
Other than its short time office lease and accounts payable, the
company is not subject to any material commitments for capital expenditures.
<PAGE>
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 10, 1999 By /s/ John C. Brewer
---------------------------
John C. Brewer, President
Principal Executive Officer
Date: February 10, 1999 By /s/ Charles Laver
---------------------------
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 (UNAUDITED) AND JUNE 30, 1998
ASSETS
DECEMBER 31 June 30
1998 1998
---------- ---------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $ 14 $ 5,954
Accounts receivable - related party 180,071 195,474
Inventory 30,232 30,232
---------- ---------
TOTAL CURRENT ASSETS 210,317 231,600
---------- ---------
PROPERTY AND EQUIPMENT
Office equipment 8,115 8,115
Tools and equipment 30,099 30,099
Building improvements 4,747 4,747
---------- ---------
Total properties and equipment 42,961 42,961
LESS: Accumulated Depreciation (28,837) (25,837)
---------- ---------
NET PROPERTY AND EQUIPMENT 14,124 17,124
---------- ---------
OTHER ASSETS:
Deposits - 1,000
Patents - Net of Accumulated Amortization 2,624 3,090
---------- ---------
TOTAL OTHER ASSETS 2,624 4,090
---------- ---------
TOTAL ASSETS $ 227,065 $252,874
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 101,998 $ 92,919
Deferred Income 150,000 150,000
Accrued payroll 336,000 312,000
Accrued Interest 91,350 81,450
Accrued Expenses 1,321
Notes payable - related parties 246,907 246,907
---------- ---------
TOTAL CURRENT LIABILITIES $ 926,255 $ 884,597
---------- ---------
STOCKHOLDERS' EQUITY:
Common stock - 20,000,000 shares authorized;
No par value; 17,028,299 shares issued at
December 31, 1998 and June 30, 1998 2,744,068 2,744,068
Accumulated deficit (27,178) (27,178)
Deficit accumulated during
development stage (3,416,080) (3,348,613)
---------- ---------
TOTAL STOCKHOLDERS' EQUITY (deficit) (699,190) (631,723)
---------- ---------
TOTAL LIABILITY AND EQUITY (deficit) $ (227,065) $(252,874)
========== =========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
ND FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
(JANUARY 14, 1981) THROUGH DECEMBER 31, 1998 (UNAUDITED)
For the Period from
Inception of the
Development Stage
Three months Six Months (January 14, 1981)
ended Dec. 31, ended Dec. 31, Through
1998 1997 1998 1997 Dec. 31,1998
---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES 0 0 0 0 $1,115,988
LESS COST OF SALES 533,857
NET 0 0 0 0 582,131
------ ------ ------ ------- ---------
GENERAL AND
ADMINISTRATIVE EXPENSES 27,942 49,152 57,566 96,750 3,414,409
------ ------ ------ ------- ----------
INCOME(LOSS)FROM
OPERATION (27,942) (49,152) (57,566) (96,750) (2,832,278)
OTHER INCOME (EXPENSES):
Write-off and
abandonment of assets (431,690)
Gain on sale of assets 5,364
Interest income 147,810
Interest expense (4,950) (6,650) (9,900) (16,600) (194,456)
Minority Interest in
losses of subsidiary 5,383
Loss on extinguishment
of debt (116,212)
Total other income
(Loss) (4,950) (6,650) (9,900) (16,600) (583,801)
------- ------- ------- -------- ---------
NET LOSS (32,892) (55,802) (67,466) (113,350) $(3,416,080)
LOSS PER SHARE $(.002) $(.003) $(.004) $(.007) $ (.20)
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO DECEMBER 31, 1998
For the Period from
Inception of the
Development Stage
SIX MONTHS ENDED (January 14, 1981)
DECEMBER 31 Through
1998 1997 DEC. 31, 1998
---- ---- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) $(67,466) $(113,350) $(3,416,080)
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 3,466 4,466 104,188
Bad debt expense 266,750
Gain on sale of assets (5,364)
Loss on extinguishment of debt 116,212
Write-off and abandonment of assets 431,690
Stock issued for services & interest 122,251
Changes in assets and liabilities:
Accrued interest receivable (24,250)
Accounts receivable 16,403 (14,613) (133,941)
Contract receivable (242,500)
Income Tax refund 537
Inventory 62,494
Accounts payable 7,758 22,394 101,896
Advances payable (120,106)
Deferred income 74,500 128,000
Accrued payroll 24,000 24,000 336,001
Accrued interest payable 9,900 9,900 306,109
Other current liabilities 240,954
Notes payable (17,000) -
Net Cash used in
-------- -------- -----------
Operating activities (5,939) (9,701)
-------- -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
No Change 7,883 (5,013,574)
-------- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
No Change 6,738,673
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $(5,939) $( 1,818) (60)
Net Cash at Beginning of period 5,954 8,073 74
-------- -------- -----------
NET CASH AT END OF PERIOD $ 14 $ 6,255 $ 14
======== ======== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998(UNAUDITED) AND JUNE 30, 1998
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The balance sheet as of DECEMBER 31, 1998, and the related statements
of operations and cash flows for the six months ended DECEMBER 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 DECEMBER 31, 1998, and for the six months ended DECEMBER 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, 1998, annual report on Form 10-KSB.
The results of operations for the six months ended DECEMBER 31, 1998 and 1997,
are not necessarily indicative of the operating results to be expected for the
full year.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 180,071
<ALLOWANCES> 0
<INVENTORY> 30,232
<CURRENT-ASSETS> 210,317
<PP&E> 42,961
<DEPRECIATION> (28,837)
<TOTAL-ASSETS> 227,065
<CURRENT-LIABILITIES> 926,255
<BONDS> 0
0
0
<COMMON> 2,744,068
<OTHER-SE> (3,443,258)
<TOTAL-LIABILITY-AND-EQUITY> 227,065
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (57,566)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,900
<INCOME-PRETAX> (67,466)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,466)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.002)
</TABLE>
