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, 2000
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.)
1588 South Main Street, Suite 200
SALT LAKE CITY, UTAH 84115
--------------------------
(Address of Principal executive offices)
(801) 832-9865
--------------
(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
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The number of shares outstanding at December 31, 1999: 17,933,299
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
A. Results of Operations
The Company received revenue of $(none) in the three months ended March
31, 2000. General and Administrative expenses were ($150,094) in the current
year's nine month period compared to ($121,815) in the prior year period. After
inclusion of interest expense in the current year nine month period of $49,743
the Company incurred a net loss of ($15,610) compared to a net loss of
($123,412) after interest expense of $9,900 for the prior year period.
The auditor's report accompanying the Company's financial statements
for the year ended June 30, 1999, contains the following statement: "As
discussed in Note 1 to the consolidated financial statements, the Company's
operating losses since inception and the deficit accumulated during the
development stage raise substantial doubts about its ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note1."
In the nine months July 1, 1999 to March 31, 2000, Management has made
changes that will help ensure that the Company will continue as a going concern
(see notes to financial statements March 31, 2000). The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Garb Oil & Power Corporation (the "Company") is in the business of
developing processes which will utilize scrap tires and/or municipal waste to
generate steam for the production of electricity, and which will recover oil
by-products, commercially marketable char and steel from scrap tires. Through
its majority owned subsidiary Utah Truck Tires, Inc. ("UTTI"), the Company is in
the business of repairing and reconditioning truck tires for resale. The Company
has also designed a system it believes will be capable of recovering used rubber
from large, off-the-road (OTR) tires. The Company is in the development stage.
The Company's predecessor, Garb-Oil Corporation, was incorporated and
commenced business on September 11, 1972, under the laws of the State of Utah.
On January 15, 1981, all of its assets were acquired by a non-affiliated public
company named Energy Corporation International, which immediately thereafter
changed its name to Garb-Oil Corporation of America and continued the business
operations of the original Garb-Oil Corporation. Energy Corporation
International was incorporated under the laws of the State of Utah on October
30, 1972, as Autumn Day Inc. and was formed for the purpose of investing in
patents, franchises, contract rights and securities. The Company's sole
investment was a royalty interest in certain furniture designs. Energy
Corporation International did not engage in any significant business activity
prior to its reorganization with Garb-Oil Corporation. The Company changed its
name to Garb Oil & Power Corporation on October 31, 1985.
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
Garb Oil & Power Corporation (the "Company") is in the business of
developing and marketing processes which will recover crumb rubber or other
recyclable rubber, oil by-products, commercially marketable char and steel from
scrap tires, a system and process to recover, repair and market truck tires of
all sizes and processes which will utilize scrap tires and/or municipal waste to
generate steam for the production of electricity. During 1999, the Company
acquired certain assets from its sister corporation Garbalizer Machinery
Corporation, including the rights to manufacture and sell Garbalizer tire
shredders. The Company has designed a system that in its opinion is capable of
recovering used rubber from large, off-the-road (OTR) tires. The Company has the
rights to act as the non-United States agent for a third party's unproven
technology for the remediation of radioactive wastes and exclusive rights to
build its plants in the United States and abroad. The Company is in the
development stage.
The Company received no revenues in the fiscal year ended June 30, 1999
and at the end of the year its current liabilities exceeded its total assets by
approximately $877,000. The Company continues, as it has done in recent years,
to actively pursue sales of its OTR Tire Disintegrator System, Garbalizer tire
shredders and crumb rubber plants. These activities did not result in any sales
during fiscal 1999, and they may not result in any sales during fiscal 2000. The
Company has limited financial resources, and it may not be able to continue in
business if it does not receive significant additional cash from operations or
financing activities. The Company cannot give assurances that its plans to
generate cash will be successful.
The Company's predecessor, Garb-Oil Corporation, was incorporated and
commenced business on September 11, 1972, under the laws of the State of Utah.
The Company changed its name to Garb Oil & Power Corporation in 1985.
OTR Tire Processing System
The Company has designed a system known as the OTR Tire Disintegrator
System which it believes will be capable of recovering used rubber from large,
off-the-road (OTR) tires. In 1998, the Company substantially completed the
engineering and design of the OTR Tire Disintegrator System, but has not yet
constructed a commercially operating system. As discussed below, the Company
granted an option to a third party to acquire a license to utilize the OTR Tire
Disintegrator System in a stated territory. The option holder may not be
successful in obtaining financing for the project.
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 these tires, which may weigh
from 400 pounds to 9 tons apiece, are less numerous than standard tires, the
Company estimates that over 2,600,000 tons of OTR tires of all sizes require
disposal in the United States each year. Current methods of disposal include
land filling 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 OTR Tire Disintegrator System uses mechanical means to remove the
exterior rubber from OTR tire carcasses without shredding. After removal of
non-rubber components, primary shredding and wire separation, the resulting
particles are then processed into crumb rubber during secondary processing. The
shredded particles could also be used as fuel or safely disposed of in a
landfill, although the Company believes that the rubber particles will be of
such high quality that landfill disposal or use as fuel will be unnecessary.
<PAGE>
The Company has prepared what it believes to be the final design of the
OTR Tire Disintegrator System and has analyzed its expected performance. When
the first OTR Tire Disintegrator System is built, it is expected that only
slight modifications to the design could be required to maximize performance. It
is also possible, although the Company does not anticipate this, that the OTR
Tire Disintegrator System will not perform as planned when built.
The Company has received United States Patent No. 5,299,748 on the OTR
Tire Disintegrator System design which expires April 5, 2011 Patent No.
5,590,838 which expires January 7, 2014 and Patent No. 6,015,105 which expires
January 18, 2017. An additional patent was granted in Canada on July 6, 1999 as
Canadian Patent No. 2,178,326 and will expire March 23, 2015.
The Company announced the availability of the OTR Tire Disintegrator
System in July, 1992. Although the Company has received and continues to receive
numerous inquiries from potential buyers or users of the OTR Tire Disintegrator
System, it has not built or sold an OTR Tire Disintegrator System. The Company's
original intent was to retain ownership of the OTR Tire Disintegrator System,
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. However, the
Company has decided to modify its requirements to allow others to purchase and
use the technology and machinery on a license and royalty based upon gross
sales.
On April 28, 1997, the Company granted Giant Tire Recyclers, Inc.
("Giant") a Nevada corporation, an option to acquire a license to use the OTR
Tire Disintegrator System. The price of the option was $150,000. Giant may
exercise the option at any time. In April, 1999 the Company and Giant amended
the option to provide that the option will expire if not exercised by April 29,
2000, plus applicable notice and grace periods.
The option, as amended, gives Giant the opportunity to purchase an
exclusive license to use the Company's OTR Tire Disintegrator System system in
the states of Arizona, New Mexico and Nevada for a license fee of $1,315,000,
less option payments prior to the time of exercise. The license fee includes two
OTR Tire Disintegrator System machines and tools and equipment suitable to
operate a truck tire repair business. If the option is not exercised, the
agreement provides that amounts paid for the option are non-refundable. The
Company cannot predict whether Giant will exercise the option. The Company
believes Giant may require substantial additional financing in order to exercise
the option.
Shredding Systems
On March 19, 1999 the Company acquired a patented shredding system from
its sister company, Garbalizer Machinery Corporation ("GMC"). See "Certain
Relationships and Related Transactions". This system became available when GMC
merged with a Canadian internet company, changed its name to RecycleNet, Inc.
and ceased its shredder business.
The Company acquired from GMC all of its then existing assets,
including the Garbalizer name and logo, patents, machinery designs and contract
rights in exchange for assumption of all then existing indebtedness of GMC in
the approximate amount of $500,000.
The system known as the "Garbalizer Shredder" has a thirty year history
of shredding automobile and truck tires in the United States, Canada and Europe.
During this period of time, GMC acquired fourteen U.S., and six foreign patents
all of which have expired except one U.S. patent, number 4927088 which expires
May 22, 2007.
<PAGE>
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(Degree) or 180(Degree) 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 Garbalizer 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 Garbalizer Shredders, the torque limiting or fluid coupling and relays stop
the machines and protect the Garbalizer Shredders from serious damage. The
rotatable shaft or shafts are driven by an electric motor or diesel electric
system through a system of gear reducers. The diesel electric-driven mobile
Garbalizer Shredder is protected from non-shreddable items by similar couplings
and overload relays that stop the Garbalizer 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 Garbalizer 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 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 production or other processes that use shredded tires.
The Garbalizer Shredders are offered in mobile and stationary models of
various capacities.
The Company believes that acquisition of the Garbalizer Shredder system
and related marketable items from GMC will benefit the Company by allowing it to
quote complete recycling systems more economically and efficiently.
There are a number of companies that sell competitive products. The
Company believes that the design of the Garbalizer Shredders is equivalent or
superior to competitive designs. Some of the competitors are larger and better
financed than the Company, and the Company believes certain competitors may have
a competitive advantage on the sale of stand-alone shredders with respect to
marketing prowess, financing terms, cost and perceived customer support.
Historically, GMC had determined that it could manufacture the
Garbalizer Shredders more economically on a contract basis with local machine
shops in lieu of its own manufacturing facilities and personnel. The Company
intends to continue this practice.
There are several machine shops located near the Company's offices 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 Garbalizer Shredder from standard
alloy steel stock. The gear reducer, bearings, electric motor and related drive
components are standard items available from several suppliers. The completed
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.
<PAGE>
Crumb Rubber Plants
The Company markets plants and equipment to process scrap passenger car
and light truck tires into crumb rubber. The Company is marketing such plants
worldwide on a "turn-key" basis. The equipment for such plants will include
third party equipment, equipment made to the Company's specifications, shredders
and other items provided by the Company. The Company entered into an agreement
to sell one such plant in 1996, but the buyer defaulted. As of the date of this
report, the Company has not sold any crumb rubber plants.
If the Company is successful in selling a crumb rubber plant, it will
be exposed to the risks of process engineering and equipment manufacturing
concerns, including potential contract, warranty and liability claims. The
Company has limited experience in engineering for or constructing crumb rubber
plants. The Company relies on third parties including engineers and
sub-contractors for the supply of a majority of the equipment in the plant and
the actual assembly and construction labor.
Trenergy Radioactive Waste Technology
On May 11, 1998, the Company entered into a Project Development and
Construction Agreement with Trenergy Inc. ("Trenergy"). Pursuant to the Trenergy
Agreement, the Company has been engaged to provide consulting and analysis
regarding the potential commercial application of Trenergy's unproven claimed
technology to neutralize and remediate radioactive waste.
Trenergy has reported to the Company that the Trenergy technology has
the potential of neutralizing radioactive waste. The Company has not verified
Trenergy's claims. If true, Trenergy's technology would involve a substantial
departure from current methodology and currently accepted scientific principles.
Trenergy has informed the Company that it has applied for a patent on the
Trenergy technology. Filing of a patent application does not indicate that any
third party has verified the validity of the technology.
The Trenergy Agreement is for a five-year term with renewal provisions
and gives the Company the right to build all systems and plants for Trenergy on
a cost plus basis which cannot exceed similar costs for similar projects. The
Company is designated as Trenergy's exclusive agent to exploit the Trenergy
technology outside of the United States with the exception of the Republic of
Belarus, Ukraine, Romania, Macedonia, Greece and Hungary. Trenergy and the
Company intend to equally share license revenues from potential licenses of the
Trenergy technology in the Company's territory; provided that Trenergy may
negotiate the Company's compensation for licenses where Trenergy had initial
discussions with the licensee. No licenses for the Trenergy technology have been
granted as of the date of this report and it is possible such licenses may not
be granted in the future.
Trenergy may not be able to establish the scientific validity or
commercial viability of the Trenergy technology. Neither Trenergy nor the
Company have the resources necessary to develop or evaluate the Trenergy
technology without infusion of substantial capital or the joint venturing with
third parties. Neither Trenergy nor the Company have any such arrangements in
place. The Company plans to use management time and financial resources pursuing
possible transactions with the Trenergy technology for which the Company may
receive no revenue.
UTTI Tire Repair and Resale Business
<PAGE>
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 disposal business through such efforts. On May
20, 1994 the Company formed Utah Truck Tires, Inc. ("UTTI") as a majority owned
subsidiary to exploit the perceived demand for repaired and retreaded commercial
truck tires. Although UTTI did demonstrate that there was a demand for these
used tires, UTTI incurred operating losses due principally to overhead costs and
high carcass costs. The Company believes that the repair and resale business
could be commercially viable if operated in conjunction with a recycling plant,
where overhead costs can be shared with other operations and usable carcasses
obtained at relatively low cost. In 1996, UTTI ceased active operations.
The Company is proposing to establish used tire processing and sales
joint ventures with purchasers of tire shredders or OTR Tire Disintegrator
Systems, to date the Company does not have any agreements to establish such
joint ventures. As with any start-up operation, there is substantial uncertainty
regarding its ability to operate at a profit.
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.
Co-generation and Electrical Power Generation
Since 1982, the Company has been involved in planning and preparation
for plants generating electricity or process steam to be fueled by scrap tires.
Such plants may be built by the Company alone or in joint venture with others.
During the past fiscal year, the Company has concentrated its efforts on other
aspects of its business and has held only very preliminary discussions regarding
the possibility of construction of such plants. To date the Company has not
built a plant.
The design which the Company developed for these plants calls for scrap
tires to be shredded into hand sized pieces. The shredded tires are then burned
in a fluidized bed combustor to produce steam, which may be used for the
generation of electricity or may be used as process steam in nearby industrial
plants.
The Company received permits to construct the Rialto power plant from
the South Coast Air Quality Management District, which determined that the
project met all existing applicable pollution requirements. Based on this, the
Company believes that a plant could be engineered to meet current pollution
requirements. Although environmental permits were issued for the construction of
the Rialto project, litigation with private citizens regarding compliance with
California environmental laws delayed completion of the projects for years. The
Company and it's joint venture partner determined that continuing the litigation
until the legal authorization to use the permits which had been issued was
finally affirmed by the courts would not be economically feasible, and the
project was abandoned. There can be no assurance that plants planned by the
Company in the future will not become similarly embroiled in litigation.
Pyrolysis
In addition to the direct use of tires as fuel, the Company has
developed and patented the Garb-Oil Processes for pyrolytic reduction of tires.
<PAGE>
The Garb-Oil processes are in summary form as follows: Scrap tires are
first shredded into approximately three inch size pieces with a shredder
developed by GMC, then heated in an oxygen free environment (processed in a
Garb-Oil Pyrolytic Furnace) to reduce the shredded particles into hydrocarbon
gases and char. Part of the hydrocarbon gas is condensed to recover oil
by-products. The remaining gases (ethane, methane, butane and propane) are
stored for use as fuel in the pyrolytic system. The char is crushed to liberate
the metal for magnetic recovery to be sold to the steel industry as scrap. The
crushed char can be used as a carbon additive to manufacture solid rubber
products or used as additive in the polymer industries or as low grade activated
carbon.
During 1981 a demonstration-test facility was built in Mountlake
Terrace, Washington. This test facility was used to test various construction
materials that would be used in full size commercial plants. The test facility
was later moved to Huntington, West Virginia. Although the test facility reduces
tires by pyrolysis as designed, there is no guarantee that a full-scale
production facility will ever be built or, if built, that it will operate on an
economically and technically sound basis. The Company in 1981 licensed the pilot
plant, but terminated the license and during Fiscal 1992 the entire receivable
plus accrued interest thereon was written off to bad debt expense. The
demonstration plant is being stored in Huntington, West Virginia while the
Company attempts to find a purchaser for the plant.
The Company has not commercially exploited the pyrolysis technology to
date and does not believe that the pyrolysis technology is financially feasible
without heavy subsidies from governmental sources or other entities.
Patents, Trademarks and Proprietary Data
The Company has received three United States patents on the OTR Tire
Disintegrator System design. The patents expire in the year 2011, 2014 and 2017.
An additional patent was issued in Canada which expires in 2015..
The Company does not hold patents on the plant and process to be used
in connection with its proposed electricity, co-generation plants or nuclear
remediation.
The Company owns the following unexpired patents in connection with the
Garb-Oil Pyrolysis Process: United States Patents:
Pyrolysis Process Patent No. 4,402,791 Patent Expires 09/30/00
A foreign patent has also been granted in Canada.
In connection with the Garbalizer Shredder design, the Company owns
United States patent number 4,927,088 that expires May 22, 2007.
In addition to the above patents, the Company has the following patents
which relate to Tar Sand development:
Hydropulper & Classifier for Tar Sand Application Patent No. 3,814,336
Improvement Patents for Tar Sands Process Patent No. 4,361,476
The Company plans to exploit these patents if and when the board of
directors of the Company determines that the financing and timing is
appropriate. It is not expected that such exploitation will occur in the
foreseeable future and accordingly the patents have not been considered
important to the Company's immediate future.
<PAGE>
Employees
The Company's president, John C. Brewer, it's Chief Engineer and
Secretary each devote 40 hours, or more, per week to the Company's business. All
additional work is performed on a contract basis. UTTI currently has no
employees and has no plans to hire employees in the foreseeable future.
Additional personnel will be required when the Company expands its
business or enters into agreements for construction of power plants, crumb
rubber and OTR plants. The Company does not anticipate problems in finding
suitable additional personnel.
The Company believes its relationship with its employees to be good.
The Company is not a party to any collective bargaining agreement.
Research and Development
During the fiscal years ended June 30, 1999, 1998, and 1997, the
Company has not expended any funds on research and development activities.
Environmental Regulation
UTTI does not believe that its activities result in any discharge or
pollutants in the air, water or soil.
Any power plants built by the Company in the future utilizing tires as
fuel will be required to comply with state and federal regulations regarding the
discharge of pollutants into the atmosphere. The Company believes that the
plants will comply with such regulations. The Company's Rialto Power Corporation
("RPC") subsidiary was engaged in litigation from 1987 until abandonment of the
project in 1989 to determine whether RPC complied with all necessary
requirements to obtain environmental permits which had been issued for the
construction of its plant. Although on all issues in which a final determination
was rendered, RPC was found to have satisfied all such requirements which the
courts and administrative agencies determined must be complied with, there is no
assurance that the undecided issues would have been resolved in RPC's favor, or
that the decisions would not have been overturned on further appeal, if RPC had
attempted to continue the project.
ITEM 2. DESCRIPTION OF PROPERTY
After more than twenty one years at the same location the Company has
moved it's executive offices to 1588, South Main Street, Second Floor, Suite
200, Salt Lake City, Utah 84115 with an office area of approximately 1300 square
feet. The premises are being leased from Utah Auto Dealers Association an
unrelated third party, on a monthly basis. UTTI leases space in Salt Lake City
from a third party to store its equipment and inventory pursuant to a
month-to-month lease.
B. Liquidity, Cash Flow and Capital Resources
$36,000 of wages payable to the company's President were accrued,
rather than paid, during the period.
At March 31, 2000 the Company had a deficit in working capital (current
Liabilities in excess of current assets) of $56,109 and a current ratio (ratio
of current assets to current liabilities) of approximately .88. At June 30,
1999, the Company had a deficit in working capital of $890,470 and a current
ratio of approximately .27. Other than its 5 year office lease and accounts
payables, 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: May 15, 2000 By /s/ John C. Brewer
-------------------------------
John C. Brewer, President
Principal Executive Officer
Date: May 15, 2000 By /s/ Charles Laver
-------------------------------
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
March 31, 2000 AND JUNE 30, 1999
ASSETS
March 31 June 30
2000 1999
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $17,307 $13,889
Inventory 30,232 30,232
Investment in available -
for sale securities (note 2) 382,500 290,625
----------- -----------
TOTAL CURRENT ASSETS 430,039 334,746
----------- -----------
PROPERTY AND EQUIPMENT:
Office Equipment 11,658 8,115
Tools and Equipment 30,099 30,099
Building Improvements 8,022 4,747
----------- -----------
Total Property and Equipment 49,779 42,961
LESS: Accumulated Depreciation (37,176) (31,876)
----------- -----------
NET PROPERTY AND EQUIPMENT 12,603 11,085
----------- -----------
OTHER ASSETS:
Patents - Net of Accumulated Amortization 1,459 2,158
----------- -----------
TOTAL ASSETS $ 444,101 $ 347,989
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $67,264 $ 73,998
Notes payable - related parties (note 3) 233,493 303,493
Accrued Interest (note 3) 183,009 162,594
Accrued expenses 2,382 3,770
----------- -----------
Deferred income (note 5) 150,000 150,000
TOTAL CURRENT LIABILITIES $636,148 $693,855
----------- -----------
SUBORDINATED LOANS - LONG TERM:
Cash loans (note 4) $169,168 $ 171,361
Wages payable (note 4) 396,000 360,000
----------- -----------
Total Long-term Liabilities 565,168 531,361
----------- -----------
STOCKHOLDERS' DEFICIT:
Common stock - 20,000,000 shares authorized;
No par value; 17,933,299 shares issued
at December 31, 1999 and at June 30, 1999 2,331,458 2,331,458
Paid in capital 96,865
Unrealized gain on available
for sale securities (note 2) 329,381 290,625
Accumulated deficit - prior to
development stage (27,178) (27,178)
Accumulated deficit during the
development stage $(3,487,741) $(3,472,132)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (757,215) (877,227)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 444,101 $ 347,989
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-1
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE (JANUARY 14, 1981)
THRU MARCH 31, 2000 (UNAUDITED)
For the Period from
Inception of the
Development Stage
Three Months Ended Nine Months Ended (January 14, 1981)
March 31, 2000 March 31, 2000 Through
2000 1999 2000 1999 March 31, 2000
--------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
SALES AND OTHER REVENUES 0 0 0 0 $1,115,988
LESS COST OF SALES 0 0 0 0 533,857
--------- --------- --------- -------- -----------
NET 0 0 0 0 582,131
--------- --------- --------- -------- -----------
GENERAL AND
ADMINISTRATIVE EXPENSES 44,700 64,249 150,094 121,815 3,701,212
--------- --------- --------- -------- -----------
INCOME(LOSS)FROM
OPERATION (44,700) (64,249) (150,094) (121,815) (3,119,081)
--------- --------- --------- -------- -----------
OTHER INCOME (EXPENSES):
Write-off and
abandonment of assets (431,690)
Gain on sale of assets 105,072 32,034 184,227 32,034 292,151
Interest income - - - 147,810
Interest expense (13,428) (23,731) (49,743) (33,651) (266,103)
Minority Interest in
losses of subsidiary 5,383
Loss on extinguishment
of debt (116,212)
--------- --------- --------- -------- -----------
Total other income (loss) $ 91,644 $ 8,303 $ 134,484 $ (1,617) $ (368,661)
--------- --------- --------- -------- -----------
NET LOSS $ 46,944 $(55,946) $ (15,610) $(123,432) $(3,487,742)
======== ======== ========= ========= ===========
LOSS PER SHARE $( .0026) $(.003) $ (.001) $ (.007) $ (.019)
======== ======== ========= ========= ===========
</TABLE>
See notes to financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO MARCH 31, 2000
For the Period from
Inception of the
Development Stage
NINE MONTHS ENDED (January 14, 1981)
MARCH 31 Through
2000 1999 MARCH 31, 2000
---- ---- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) $ (15,609) $(568,799) $(3,487,741)
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 5,999 5,199 113,692
Bad debt expense 266,750
Gain on sale of assets (5,364)
Gain on sale of available-for sale
securities (102,560)
Gain on marketable securities 38,756 38,756
Loss on extinguishment of debt 116,212
Write-off and abandonment of assets 431,690
Stock issued for services & interest 122,701
Available for sale securities
issued for services 52,560
Changes in assets and liabilities:
Accrued interest receivable (24,250)
Accounts receivable 11,645
Contract receivable (242,500)
Accounts receivable-related party 195,474 (150,344)
Income Tax refund 537
Inventory (30,000) 62,494
Accounts payable (8,122) 116,413 58,258
Advances payable (120,106)
Accrued payroll 36,000 36,000 396,000
Accrued expenses (1,755)
Accrued interest payable 20,415 73,540 373,672
Other current liabilities 240,954
Deferred income 128,000
------------ ------------- -------------
Net Cash used in
Operating activities $77,439 $( 172,173) $(1,720,699)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress $(2,937,790)
Cash acquired from Garbalizer Machinery 899
Net (advances) payment
(to)/from related party (2,193) (85,802)
Purchase of treasury stock (10,009)
Increase (decrease) of other assets (1,956,733)
Purchase of property and equipment (6,818) (67,230)
Purchase of marketable securities (91,875) (110,000) (91,875)
Proceeds from sale of available
for sale securities 50,000
Proceeds form sales of assets 9,500
------------ ------------- -------------
(Net Cash Provided by (Used In)
Investing Activities $(100,886) $(110,000) $(5,089,040)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) notes
payable - related party (70,000) 88,493 229,841
Proceeds from bank loans 60,000 4,636,647
Sale of common stock 158,973 2,007,217
Contributions to capital by parent company 96,865 453,267
Principal payments on bank loans (500,000)
------------ ------------- -------------
Net Cash Provided By Financing Activities $26,865 $307,466 $6,826,972
------------ ------------- -------------
Net Increase (Decrease) In Cash And Cash Equivalents $ 3,418 $(25,293) $ 17,233
Net Cash at Beginning of period 13,889 5,954 74
------------ ------------- -------------
Net Cash at End of Period $ 17,307 $ 31,247 $ 17,307
============ ============= =============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000(UNAUDITED) AND JUNE 30, 1999
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The balance sheet as of March 31, 2000, and the related statements of
operations and cash flows for the nine months ended March 31, 2000 and 1999,
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, 2000, and for the nine months ended March 31, 2000 and 1999, 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, 1999, annual report on Form 10-KSB.
The results of operations for the nine months ended March 31, 2000 and 1999, are
not necessarily indicative of the operating results to be expected for the full
year.
Note 2 - Investment in Securities
The Recyclenet shares owned by the Company are classified as available
for sale securities and are stated at fair value. They are carried on
the books at the cost to GCA (Parent Company) which were then given to
Garb-Oil as a contribution to capital. The excess of market over cost
is carried as unrealized gain.
Note 3 - Notes Payable - Related Parties
See note 5 to the audited financial statements June 30, 1999.
These notes payable plus the interest accrued are payable to major
stockholders of the Company. While they are properly classified as
current, it is unlikely any demand for payment will be made.
Note 4 - Subordinated Loans - Long Term
These amount were carried as current liabilities on the financial
statements June 30, 1999 and are payable to the Company's largest
stockholder. On September30, 1999 this Officer and stockholder agreed
to subordinate these loans to all creditors for a period of two years.
Note 5 - Deferred Income
See note 7 to financial statements June 30, 1999.
This amount was carried as a current liability on the financial
statements June 30, 1999. The option expired April 28, 2000 and was not
exercised. The $150,000 option fee will be shown as income in the
quarter ending June 30, 2000.
F-4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,307
<SECURITIES> 382,500
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 30,232
<CURRENT-ASSETS> 430,039
<PP&E> 49,779
<DEPRECIATION> (37,176)
<TOTAL-ASSETS> 444,101
<CURRENT-LIABILITIES> 486,148
<BONDS> 565,168
0
0
<COMMON> 2,331,458
<OTHER-SE> (2,938,673)
<TOTAL-LIABILITY-AND-EQUITY> 444,101
<SALES> 0
<TOTAL-REVENUES> 184,227
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 150,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,743
<INCOME-PRETAX> 15,610
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,610)
<EPS-BASIC> (.001)
<EPS-DILUTED> (.001)
</TABLE>
