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, 1999
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, 1999: 17,928,299
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 (UNAUDITED) AND JUNE 30, 1998
ASSETS
MARCH 31 June 30
1999 1998
-------- ---------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $ 31,247 $ 5,954
Accounts receivable - related party - 195,474
Inventory 60,232 30,232
Marketable Securities 110,00 -
-------- ---------
TOTAL CURRENT ASSETS 201,479 231,660
--------- ---------
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 (30,337) (25,837)
-------- ---------
NET PROPERTY AND EQUIPMENT 12,624 17,124
-------- ---------
OTHER ASSETS:
Deposits - 1,000
Patents - Net of Accumulated Amortization 2,391 3,090
-------- ---------
TOTAL OTHER ASSETS 2,391 4,090
-------- ---------
TOTAL ASSETS $216,494 $ 252,874
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $205,645 $ 92,919
Deferred Income 150,000 150,000
Accrued payroll 348,000 312,000
Accrued Interest 154,990 81,450
Accrued Expenses 4,008 1,321
Notes payable - related parties 335,400 246,907
-------- ---------
TOTAL CURRENT LIABILITIES $1,198,043 $884,597
---------- --------
STOCKHOLDERS' EQUITY:
Common stock - 20,000,000 shares authorized;
No par value; 17,928,299 shares issued at
March 31, 1999 and 17,028,299 at June 30, 1998 2,804,068 2,744,068
Contribution to Capital 158,973
Accumulated deficit (27,178) (27,178)
Accumulated deficit-development stage (3,917,412) (3,348,613)
----------- ---------
TOTAL STOCKHOLDERS' EQUITY (deficit) (981,549) (631,723)
----------- ---------
$ 216,494 $ 252,874
=========== =========
</TABLE>
See notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
(JANUARY 14, 1981) THROUGH MARCH 31, 1999 (UNAUDITED)
For the Period from
Inception of the
Development Stage
Three months Nine Months (January 14,1981)
ended Mar. 31, ended Mar. 31, Through
1999 1998 1999 1998 Mar. 31, 1999
---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES 0 $4,665 0 $4,665 $1,115,988
LESS COST OF SALES 13,460 13,460 533,857
-------- ------ ------- ------- -----------
NET None (8,795) none 8,795 582,131
-------- ------ ------- ------- -----------
GENERAL AND
ADMINISTRATIVE EXPENSES 20,920 38,970 78,486 135,720 3,435,329
-------- ------ ------- ------- -----------
INCOME(LOSS)FROM
OPERATION (20,920) (47,765) (78,486) (144,515) (2,853,198)
OTHER INCOME (EXPENSES):
Loss - excess of
liabilities over
assets in
acquisition (note 1)
from Garbalizer
Machinery Corp. (471,409) - (471,409) - (471,409)
Write-off and
abandonment of assets (431,690)
Gain on sale of assets 5,364
Interest income 147,810
Interest expense (9,004) (6,471) (18,905) (23,071) (203,461)
Minority Interest in
losses of subsidiary 5,383
Loss on extinguishment
of debt (116,212)
Total other income
(Loss) (480,413) (6,471) (490,314) (23,071) (1,064,215)
-------- ------ ------- ------- -----------
NET LOSS (501,333) (54,236) (568,799) (167,586) $(3,917,413)
======== ====== ======= ======= ===========
LOSS PER SHARE $ (.029) $(.003) $ (.032) $ (.010) $ (.22)
======== ====== ======= ======= ===========
</TABLE>
See notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO MARCH 31, 1999
For the Period from
Inception of the
Development Stage
NINE MONTHS ENDED (January 14, 1981)
MARCH 31 Through
1999 1998 MAR. 31,1999
-------- ------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) $(568,799) (167,586) $(3,917,413)
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 5,199 6,699 105,921
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 195,474 (2,335) 45,130
Contract receivable (242,500)
Income Tax refund 537
Inventory (30,000) 13,460 32,494
Marketable Securities (110,000) (110,000)
Deposits 1,000 1,000
Accounts payable 112,726 20,729 205,543
Accrued payroll 36,000 36,000 348,001
Accrued interest 73,540 14,850 369,749
Advances payable (120,106)
Deferred income 97,000 128,000
Accrued payroll taxes 2,687 1,592 4,008
Accounts payable - related parties (17,000) -
Other current liabilities - - 240,954
Net Cash used in
Operating activities (282,173) 3,410 (2,001,392)
-------- ------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
No Change 7,883 (5,013,574)
-------- ------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loans - 4,136,647
Sale of common stock 60,000 2,007,217
Contributions to capital 158,973 515,375
Proceeds from notes payable -
Related party 88,493 386,900
-------- ------- ----------
Net cash provided by
Financing operations 307,466 - 7,046,139
-------- ------- ----------
NET INCREASE (DECREASE) IN CASH $ 25,293 $ 11,293 31,173
Net Cash at Beginning of period 5,954 8,073 74
-------- ------- ----------
NET CASH AT END OF PERIOD $ 31,247 $19,366 $ 31,247
======== ======= ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) AND JUNE 30, 1999
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The balance sheet as of March 31, 1999, and the related statements of
operations and cash flows for the nine months ended March 31, 1999 and 1998,
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, 1999, and for the nine months ended March 31, 1999 and 1998, 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.
Also see commentary for acquisition of Shredders Operation. The results of
operations for the nine months ended March 31, 1999 and 1998, are not
necessarily indicative of the operating results to be expected for the full
year.
5
<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 nine months ended March
31, 1999. General and Administrative expenses were $78,486 in the current year's
nine months compared to $135,720 in the prior year period. Interest expense in
the current year nine month period of $18,905 compared to $23,071 in the prior
year period. The Company incurred a net loss of ($568,799) compared to a net
loss of ($167,586) for the prior year period. The company incurred an
extraordinary expense of $471,409 as a result of acquiring the assets and
liabilities of it's sister company, Garbalizer Machinery Corporation.
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, 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 OTR 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.
6
<PAGE>
The Company has received United States Patent No. 5,299,748 on the
Disintegrator design 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.
Shredding Systems
On March 19, 1999 the Company acquired a patented shredding system from
its sister company, Garbalizer Machinery Corporation. This system became
available when Garbalizer Machinery Corporation merged with a Canadian Internet
Company, changed its name to RecycleNet and ceased its shredder business.
The system known as the "Garbalizer Shredder" has a successful thirty
year history of shredding automobile and truck tires in the United States,
Canada and Europe. During this period of time, Garbalizer Machinery acquired
fourteen U.S., and six foreign patents all of which have expired except two U.S.
and one Canadian patent. U.S. patent number 4350308 expires September 21, 1999
and U.S. patent number 4927088 expires May 22, 2007. Canadian patent number
1137949 expires December 21, 1999.
The Garbalizer shredder employs a cutting method rather than the impact
method embodied in hammer mills and grinders. This cutting method consists of a
rotatable shaft or pair of shafts, supported by bearings, upon which are fixed a
series of blade holders at 120(0) or 180(0) intervals around the shaft. The
blade holders to which blades are attached are positioned along the length of
the shaft so that their tips form a helix which tends to position the tires for
cutting. Spacers to which no cutting blades are attached are located between
each blade holder mounted on the rotatable shaft so that the rotating blades and
the spacers form the cutting mechanism of the Shredder when co-acting with
stationary blade holders.
The shredding mechanism for all of the electric-driven models is
protected by fluid couplings, torque limiting couplings and overload relays in
the electrical control system. If non-shreddable material is encountered within
the Shredders, the torque limiting or fluid coupling and relays stop the
machines and protect the Shredders from serious damage. The rotatable shaft or
shafts are driven by an electric motor or diesel electric through a system of
gear reducers. The diesel electric-driven mobile Shredder is protected from
non-shreddable items by similar couplings and overload relays that stop the
Shredder if it becomes overloaded or jammed. If this happens on any of the
Garbalizer shredders, it is simple to reverse the rotor and remove from the
Shredder the item or items that jammed or stopped the machine. This and several
additional unique and beneficial features of the Garbalizer Shredder reduces the
time and effort required for maintenance.
In operation, material to be shredded is placed on a conveyor and
carried to the top of the hopper where it falls by gravity upon the rotating
blade or blades or can be fed directly into the
7
<PAGE>
cutters by a patented controlled feeding system. The rotating blades position
the material and cut it as it is forced between the stationary blades. The
shredded material is then transported away from the machine by conveyor to be
used as tire derived fuel (TDF), crumb rubber or other processes that use
shredded tires.
Although there are no guarantees that acquisition of the shredder
system and related marketable items from Garbalizer Machinery will appreciably
help or benefit the Company, management believes that this addition will now
allow it to quote complete systems more economically which should help market
the processes.
Manufacture
There are several machine shops locally with the required manufacturing
and production capabilities to produce multiple shredders on a timely basis.
The Garbalizer Shredder takes approximately four to five months to
construct. It is manufactured and assembled from stock alloy steel, gear
reducers, drive units and motors. Any heavy equipment machine shop with standard
machine technology can manufacture the shaft, blade holders, blades, spacers,
hopper, structural frame and supports for the Shredder from standard alloy steel
stock. The gear reducer, bearings, electric motor and related drive components
are standard items available from several suppliers. These components are
assembled into major units for shipping to the installation site by truck or
railroad flat car. At the site, the major units can be field assembled with
local construction or rigging workers who need have no previous experience with
the Garbalizer Shredder. Location of the manufacturing facilities in close
geographical proximity to the installation sites of potential customers is not
considered by management to be a significant factor. Shredders previously sold
by Garbalizer Machinery were manufactured by local machinery manufacturers, on a
contract basis and historically have all operated very successfully.
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
8
<PAGE>
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.
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 March 31, 1999 the Company had a deficit in working capital (current
Liabilities in excess of current assets) of $996,564 and a current ratio (ratio
of current assets to current liabilities) of approximately .17 compared to
$600,101 for the prior years period and a current ratio of approximately .31.
Working capital at Mar 31, 1999 includes current assets consisting of a
receivable from related parties of $- 0 -. The related party receivable has been
outstanding, in varying amounts, since the quarter ended March 31, 1992. At
March 31, 1999, the Company had cash on hand of $31,247.
Other than its short time office lease and accounts payable, the
company is not subject to any material commitments for capital expenditures.
9
<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: May 11, 1999 By /s/ Johh C. Brewer
-----------------------------
John C. Brewer, President
Principal Executive Officer
Date: May 11, 1999 By /s/ Charles Laver
-----------------------------
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 31,247
<SECURITIES> 110,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60,232
<CURRENT-ASSETS> 201,479
<PP&E> 42,961
<DEPRECIATION> (30,337)
<TOTAL-ASSETS> 216,494
<CURRENT-LIABILITIES> 1,198,043
<BONDS> 0
0
0
<COMMON> 2,804,068
<OTHER-SE> (3,785,617)
<TOTAL-LIABILITY-AND-EQUITY> 216,494
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (78,486)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18,905)
<INCOME-PRETAX> (97,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (471,409)
<CHANGES> 0
<NET-INCOME> (568,800)
<EPS-PRIMARY> (.032)
<EPS-DILUTED> (.032)
</TABLE>
