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: September 30, 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 [ ]
The number of shares outstanding at September 30, 2000: 20,000,000
<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
September 30, 2000. General and Administrative expenses were ($51,635) in the
current year's first quarter compared to ($41,145) in the prior year period.
After inclusion of interest expense in the current year three month period of
$13,273, the Company incurred a net gain of $68,161 compared to a net loss of
($6,608).
The auditor's report accompanying the Company's financial statements
for the year ended June 30, 1999, contains the following statement: "The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the ordinary course of business. As shown in the consolidated
financial statements, during the years ended June 30, 1999 and 1998, the Company
has incurred net losses of $123,519 and $217,439, respectively, and as of June
30, 2000, the Company's deficit accumulated during the development stage was
$3,295,110. These factors, among others, indicate that the Company may be unable
to continue as a going concern for a reasonable period of time. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's ability to continue as a
going concern is dependent upon its ability to generate sufficient cash flows to
meet its obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain successful operations. Management is
continuing its efforts to obtain the necessary financing as may be required to
generate sufficient cash flows for future operations. During the year ended June
30, 1999, the Company received Recyclenet common shares in conjunction with the
reorganization and sale of Garbalizer Machinery Corporation. Management intends
to continue to sell the shares received in the transaction and use the funds
received from the sale of the securities to fund current and future operations."
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.
2
<PAGE>
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 which expires April 5, 2011 and Patent No. 5,590,838 which
expires January 7, 2014.
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.
Crumb Rubber
3
<PAGE>
On May 23, 1996, the Company entered into two agreements with Alberta
Recovery Technologies Ltd. ("ART"). Pursuant to one of the agreements, the
Company agrees to supply and install equipment that will process scrap tires in
to crumb rubber. The equipment will include equipment made by third parties and
the Company's affiliate GMC. Pursuant to the other agreement, the Company will
supply a Disintegrator to ART and grant ART the exclusive rights to use the
Disintegrator in Canada. In exchange for both of these agreements, ART has
agreed to pay the Company a total of $3,045,000 payable as follows: (1) An
initial non-refundable earnest payment of $30,450, (2) Within ninety days of the
execution of the agreement an additional $960,900 payment is due; which has yet
to be received by the Company, and (3) Within 30 to 60 days following the second
payment irrevocable letters of credit totaling $2,053,650 will be established by
ART. In September 1996, the Company and ART agreed to extend the due date of the
second payment until December 1996. The Company will draw on the letters of
credit as the equipment is delivered to ART. The original agreement also states
that beginning 36 months after initial startup, ART will pay the Company 10
percent of the gross sales derived from processing and selling off the road
tires for a period of seven years. The amended agreement changed the starting
date of the royalty to 6 months following the start of operations.
The Company believes that ART is attempting to obtain financing for the
Agreements. There is no assurance that ART will obtain financing or complete the
Agreements with the Company. Due to the uncertainties involved in this
transaction, the Company has not booked any revenue from the Agreements as of
June 30, 1996. The Company does not have firm commitments from the suppliers of
the equipment other than the Disintegrator which the Company has committed to
supply to ART. These agreements can be terminated by either party for failure to
meet any material provision of the Agreements.
UTTI Tire Repair and Resale Business
The Company's efforts have historically focussed 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. Although UTTI did demonstrate that there was
some demand for these used tires, UTTI incurred operating losses due principally
to overhead costs and high casing costs. The Company believes that the repair
and resale business should be operated in conjunction with a recycling plant,
where overhead costs can be shared with other operations and usable casings
obtained at relatively low or no cost. In 1996, UTTI ceased most active
operations other than the sale of repaired tires from inventory.
The Company is proposing to establish used 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 such as UTTI. By establishing a joint
venture which would operate from the shredder operator's facility, the Company
believes it can obtain casings at lower 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 by UTTI
in replacement of 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 venture.
4
<PAGE>
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 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.
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 $150,000 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 actively 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 design of the Disintegrator and has held only very preliminary
discussions regarding the possibility of construction of such plants.
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.
As a result of having received permits to construct the Rialto power
plant from the California South Coast Air Quality Management District, the
Company believes that its plants can comply with any currently applicable
pollution requirements. Although environmental permits were issued for the
construction of the Rialto project, litigation regarding compliance with
California environmental laws delayed completion of the project of years. The
Company eventually 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.
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.
5
<PAGE>
During the first half of 1981 a demonstration-test facility was built
in Mountlake Terrace, Washington. This test facility has been used to test
various construction materials that will be used in the full size commercial
plants. The test facility has been 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.
Since 1981 the Company's licensee American Buckeye Synfuels Corporation
has attempted to obtain financing for construction of a pyrolysis plant that
would use the Garb-Oil process on a commercial basis. The Company has sold the
non-exclusive rights to exploit the pyrolysis technology within the state of
West Virginia to American Buckeye Synfuels Corporation. The licensee had also
agreed to purchase the pilot pyrolysis plant. Due to the repeated failure of the
licensee to satisfy the conditions for sale of the plant and grant of the
license rights, during Fiscal 1992 the entire $242,500 receivable plus $24,250
of 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.
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 September 30, 2000 the Company had working capital (current assets
in excess of current liabilities) of $93,095 and a current ratio (ratio of
current assets to current liabilities) of approximately 1.19. At June 30, 2000,
the Company had a deficit in working capital of $343,668 and a current ratio of
approximately .30.
Other than its short time office lease and accounts payable, the
company is not subject to any material commitments for capital expenditures.
6
<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: October 25, 2000 By /s/ John C. Brewer
-----------------------------
John C. Brewer, President
Principal Executive Officer
Date: October 25, 2000 By /s/ Charles Laver
-----------------------------
Charles Laver, Treasurer
Principal Financial and
Accounting Officer
7
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND JUNE 30, 2000
ASSETS
Sept 30, June 30,
2000 2000
(Unaudited)
-------------- --------------
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $ 79,008 $ 34,006
Inventory 30,232 30,232
Investment in available -
for sale securities (note 2) 457,500 82,943
Accounts Receivable-Broker 8,361 0
-------------- --------------
TOTAL CURRENT ASSETS 575,101 147,181
-------------- --------------
PROPERTY AND EQUIPMENT:
Office Equipment 11,658 11,658
Tools and Equipment 30,099 30,099
Building Improvements 8,022 8,022
-------------- --------------
Total Property and Equipment 49,779 49,779
LESS: Accumulated Depreciation (41,176) (39,176)
-------------- --------------
NET PROPERTY AND EQUIPMENT 8,603 10,603
-------------- --------------
OTHER ASSETS:
Deposit 300 -
Patents - Net of Accumulated Amortization 993 1,226
-------------- --------------
TOTAL ASSETS $ 584,997 $ 159,010
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 49,005 $ 65,062
Notes payable - related parties 233,493 233,493
Accrued Interest 197,019 190,014
Accrued expenses 2,489 2,280
-------------- --------------
TOTAL CURRENT LIABILITIES $ 482,006 $ 490,849
-------------- --------------
SUBORDINATED LOANS - LONG TERM:(note 4)
Cash loans 147,160 167,047
Wages payable 420,000 408,000
-------------- --------------
Total Subordinated Loans
Long-term 567,160 575,047
-------------- --------------
STOCKHOLDERS' EQUITY:
Common stock - (No par value) 20,000,000
shares Authorized 20,000,000 shares
and 20,000,000 Shares issued and
outstanding respectively 2,632,458 2,332,458
Unrealized gain on available
for sale securities 157,500 82,944
Accumulated deficit - prior to
development stage (27,178) (27,178)
Accumulated deficit during the
development stage (3,226,949) (3,295,110)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY (464,169) (906,886)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 584,997 $ 159,010
=============== ==============
</TABLE>
See notes to consolidated financial statements
F-1
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO SEPTEMBER 30, 2000
For the Period from
Inception of the
Development Stage
Three months (January 14, 1981)
ended Sep. 30, Through
2000 1999 Sep. 30, 2000
---- ----- -------------
<S> <C> <C> <C>
SALES AND OTHER REVENUES $ 0 $ 0 $ 1,115,988
LESS COST OF SALES 0 0 533,857
---------- --------- -----------
NET 0 0 582,131
---------- --------- -----------
GENERAL AND
ADMINISTRATIVE EXPENSES 51,635 41,145 3,805,305
---------- --------- -----------
INCOME(LOSS)FROM
OPERATION (51,635) (41,145) (3,223,174)
---------- --------- -----------
OTHER INCOME (EXPENSES):
Write-off and abandonment of assets (431,690)
Gain on sale of assets 133,069 47,121 529,234
Interest income 147,810
Interest expense (13,273) (12,584) (295,611)
Minority Interest in
losses of subsidiary 5,383
Income from failure to
exercise options 150,000
Loss on extinguishment
of debt (116,212)
-----------
Gain on forgiveness of
debt 7,310
-----------
Total other income (loss) $ 119,796 34,537 (3,776)
---------- --------- -----------
NET INCOME (LOSS) $ 68,161 $ (6,608) $(3,226,950)
========== ========= ===========
GAIN (LOSS) PER SHARE $ .003 $ (.001) $ (.016)
========== ========= ===========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND FOR THE PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION
OF THE DEVELOPMENT STAGE) TO SEPTEMBER 30, 2000
For the Period from
Inception of the
Development Stage
THREE MONTHS ENDED (January 14, 1981)
SEPTEMBER 30, Through
2000 1999 SEP. 30, 2000
--------- --------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) $ 68,160 $ (6,608) $ (3,226,950)
Adjustments to reconcile net cash
provided by (used in) operating activities:
Depreciation and amortization 2,233 1,733 118,158
Bad debt expense 266,750
Gain on sale of assets 155,045
Loss on extinguishment of debt 116,212
Write-off and abandonment of assets 431,690
Stock issued for services & interest 175,261
Changes in current assets and liabilities:
Accrued interest receivable (24,250)
Accounts receivable (138,699)
Contract receivable (242,500)
Income Tax refund 537
Deposits (300) (300)
Inventory (17,389) 62,494
Accounts payable (16,057) 42,387
Differed Income (22,000)
Advances payable (120,106)
Accrued Expenses 209 (3,035)
Accounts Receivable Broker (8,361) (8,361)
Accrued payroll 12,000 12,000 420,000
Accrued interest payable 7,005 7,605 387,682
Other current liabilities - 240,954
--------- --------- -------------
Net Cash used in Operating activities 64,889 (2,660) (1,632,000)
--------- --------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress (2,937,790)
Cash acquired from Garbalizer Machinery 899
Net (advances) payment (to)/from related party (19,887) (107,810)
Purchase of treasury stock (10,009)
Increase (decrease) of other assets (1,956,733)
Purchase of property and equipment (67,230)
Proceeds from sale of available for sale securities 50,000
Proceeds from sales of assets 9,500
--------- --------- -------------
Net Cash Provided by (Used In) Investing Activities (19,887) - (5,019,173)
--------- --------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes
payable - related party 229,841
Proceeds from bank loans 4,636,647
Sale of common stock 2,007,217
Contributions to capital by parent company 356,402
Principal payments on bank loans (500,000)
--------- --------- -------------
Net Cash Provided By Financing Activities - - 6,730,107
--------- --------- -------------
Net Increase (Decrease) In Cash And Cash Equivalents $ 45,002 $ (2,660) 78,934
Net Cash Beginning of period 34,006 13,889 74
--------- --------- -------------
Net Cash at End of Period $ 79,008 $ 11,229 $ 79,008
========= ========= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
GARB-OIL & POWER CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000(UNAUDITED) AND JUNE 30, 2000
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The balance sheet as of SEPTEMBER 30, 2000, and the related statements
of operations and cash flows for the three months ended September 30,
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 September 30, 2000,
and for the three months ended September 30, 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, 2000, annual report on Form 10-KSB. The results of operations for
the three months ended September 30, 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. During the current quarter 400,000
shares of RecycleNet (at a market value of $.75) were traded to Garb
Oil for 2,056,701 shares of Garb Oil at $.148. Market value of Garb Oil
was $.09.
Note 3 - Notes Payable - Related Parties
See note 5 to the audited financial statements June 30, 2000.
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 September 30, 1999 this Officer and stockholder agreed
to subordinate these loans to all creditors for a period of two years.
Note 5 - Going Concern
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as
a going concern. As of September 30, 2000, the Company has 600,000
shares of RecycleNet Corporation stock. These shares are marketable
securities that could be sold by the Company to produce cash flow and
assist with the various Company obligations. The Company is pursuing
different avenues of generating cash flows, which include the sale of
crumb rubber plants, sale of Garbalizer shredders, licensing of truck
tire repair centers and licensing or leasing the OTR Tire Disintegrator
System.
F-4
