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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14859
GARB OIL & POWER CORPORATION
----------------------------
(Exact name of small business issuer in its charter)
Utah 87-0296694
---- ----------
(State of other jurisdiction of (I.R.S. Employer Ident. No.)
incorporation or organization)
1588 South Main Street, Suite 200
Salt Lake City, Utah 84115
--------------------------
(Address of principal executive offices)
(801) 832-9865
--------------
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: No par value
common stock
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the Issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year: None.
As of September 28, 2000, the aggregate value of the common voting stock
held by non-affiliates of the Issuer, computed by reference to the average of
the bid and ask prices on such date, was $780,162.
As of September 28, 2000, the Issuer had outstanding 17,943,299 shares of
common stock (no par value).
Transitional Small Business Disclosure Format Yes X No
--- ---
PART I
ITEM 1. BUSINESS.
Business Development.
---------------------
Garb Oil & Power Corporation (the "Company")was incorporated under the
laws of the State of Utah on September 11, 1972, under the name "Garb-Oil
Corporation." The Company changed its name to "Garb Oil & Power Corporation
in 1985."
No material business developments occurred during the most recent fiscal
year; however, certain material historical developments are discussed below
under the heading "Business" to the extent that management believes such a
discussion will promote a further understanding of the past, present and
intended business operations of the Company.
Business.
---------
The Company is in the business of developing and marketing processes
that: (a) recover crumb rubber or other recyclable rubber, oil by-products,
commercially marketable char and steel from scrap tires, (b) recover, repair
and market truck tires of all sizes, and (c) utilize scrap tires and/or
municipal waste to generate steam for the production of electricity. In this
respect, the Company has designed a system that in management's opinion is
capable of recovering used rubber from large off road tires.
In 1999, the Company acquired certain assets from its sister
corporation, Garbalizer Machinery Corporation ("GMC"), including the rights to
manufacture and sell Garbalizer tire shredders. In addition, 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, 2000,
and at year end, 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 is completely unclear
if the Company will be able to continue in business if it does not receive
significant additional cash from operations or financing activities. The
Company cannot give any assurances that its plans to generate cash will be
successful or that the Company can continue as an on going concern.
OTR Tire Disintegrator System
-----------------------------
The Company has designed a system known as the "OTR Tire Disintegrator
System," which management believes will be capable of recovering used rubber
from large off road 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 that 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 on a variety of
off road equipment such as graders, bulldozers and mining equipment cannot be
processed directly by these shredders. Although these tires, which may weigh
from 400 pounds to nine tons each, are less numerous than standard tires, the
Company estimates that over 2,600,000 tons of large off road 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 large off road 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. However, mamagement believes that the rubber
particles will be of such high quality that landfill disposal or use as fuel
will be unnecessary.
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 will 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, and Patent No.
5,590,838 which expires January 7, 2014. An additional patent improvement has
been filed and is currently pending in the United States. The additional
patent improvement was granted in Canada on July 6, 1999, as Canadian Patent
No. 2,178,326, and will expire on 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 could
have exercised the option at any time. In April, 1999, the Company and Giant
amended the option to provide that the option would expire if not exercised by
April 29, 2000, plus applicable notice and grace periods. The option expired
in accordance with these terms, and all sums paid to the Company were retained
as liquidated damages in accordance with the terms of the option.
The option, as amended, gives Giant the opportunity to purchase an
exclusive license to use the Company's OTR Tire Disintegrator 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, GMC. See Part II, Item 12 "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 United States and
six foreign patents all of which have expired except one United States patent
and one Canadian patent. United States patent No 4927088 expires on May 22,
2007, and Canadian patent No. 1137949 expires on 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 (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.
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-shredable 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-shredable 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 the item or items that jammed or
stopped the shredder. This and several additional unique and beneficial
features of the Garbalizer Shredder reduce 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,
crumb rubber production or other processes that use shredded tires.
Management 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.
The Company's markets are the scrap tire disposal and recycling markets.
There are numerous companies worldwide that sell competitive products in these
markets. Management also believes that the design of the Garbalizer Shredder
is equivalent or superior to competitive designs. However, some of the
competitors are larger and better financed than the Company, and 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.
The Company advertises over the Internet and occasionally in printed
magazine publications. The Company has representatives in certain areas that
represent the Company on a percentage of sales basis. The Garbalizer
Shredders are offered in mobile and stationary models of various capacities,
but there were no new product lines introduced during the past fiscal year.
The Company can purchase mechanical, electrical, hydraulic components,
steel and other items that are used in manufacturing its products from
suppliers worldwide. Further, GMC 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. 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 Company intends to continue this practice in the future.
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 do not need 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.
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
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 its 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 its technology. Filing of a patent application does not indicate that any
third party has verified the validity of the technology.
The Agreement with Trenergy is for five years, 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
that no such licenses will 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.
Tire Repair and Resale Business
The Company's efforts have historically focused on reducing environmental
problems such as 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 joint ventures between used tire processing,
sales and 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 a 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 any 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.
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 project. The
Company and its joint venture partner determined that continuing with the
project until the litigation was resolved would not be economically feasible,
and the project was abandoned. With respect to the electrical power generation
process, these types of difficulties are not uncommon. 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.
Pyrolytic reduction of tires occurs when scrap tires are first shredded
into approximately three inch size pieces with a shredder developed by GMC.
The three inch pieces are 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, i.e., 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. In 1981, the Company
licensed the pilot plant, but then terminated the license. 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 pyrolysis process meets all environmental laws and regulations.
However, the permits needed to conduct this process are very hard to obtain
and are expensive. 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 two United States patents on the OTR Tire
Disintegrator System design. The patents expire in the years 2011 and 2014.
Additional patents are pending in the United States and Canada. 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:
---------------------- Expires
Pyrolysis Process Patent No. 4,402,791 09/30/00
Patent
A foreign patent has also been granted in Canada.
In connection with the Garbalizer Shredder design, the Company owns
United States patent No. 4,927,088 that expires on May 22, 2007, and Canadian
patent No. 1,137,949 that expires on December 21, 1999.
In addition to the above patents, the Company has the following patents
which relate to Tar Sand development:
Hydropulper & Classifier for Tar Patent No. 3,814,336
Sand Application
Improvement Patents for Tar Sands Patents No. 4,361,476
Process
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.
Employees
---------
The Company's President, John C. Brewer, it's Chief Engineer, Bill
Anderson, and its employed 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, 2000, 1999, and 1998, the Company
did not expend any funds on research and development activities.
Environmental Regulation
------------------------
Shredding and crumb rubber operations meet all environmental laws and
regulations, are clean and require very little effort to procure permits.
However, for power plants that use the shredded tires as fuel or pyrolysis
plant technology, the permitting process is much more difficult. Although both
of these processes meet all environmental laws and regulation, permits are
very hard to obtain. Further, due to risk assessments and other tests
required, permits can cost millions of dollars.
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. PROPERTIES.
The Company's executive offices have been located at 1588 South Main
Street, Suite 200, Salt Lake City, Utah 84115, for the past year. The offices
occupy approximately 1400 square feet. The premises are being leased from Utah
Auto Dealers Association, an unrelated third party, on a five year lease. UTTI
leases space in Salt Lake City from a third party to store its equipment and
inventory pursuant to a month-to-month lease. During the year ended June 30,
2000, the Company and UTTI paid approximately $16,056 to lease these
facilities.
ITEM 3. LEGAL PROCEEDINGS
None; not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to stockholders during the fourth quarter of the
fiscal year ended June 30, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market. The
representative bid and asked quotations are posted on the National Association
of Securities Dealers, Inc.'s ("NASD") OTC Bulletin Board under the symbol
"3GARB." On September 28, 1999, there were approximately 568 holders of record
of the common stock of the Company, and management believes there were
approximately 1,000 beneficial owners. During the years ended June 30, 2000,
1999 and 1998, the common stock was only sporadically traded. The following
table sets forth the range of high and low representative bid quotations for
the periods indicated as reported by Wilson-Davis, Inc., a market-maker in the
Company's stock.
Period
(Fiscal Year) High Low
------------- ---- ---
1998
1st Quarter .2188 .1875
2nd Quarter .2188 .0938
3rd Quarter .14 .10
4th Quarter .52 .11
1999
1st Quarter .18 .17
2nd Quarter .09 .08
3rd Quarter .14 .13
4th Quarter .13 .11
2000
1st Quarter .11 .09
2nd Quarter .10 .06
3rd Quarter .18 .06
4th Quarter .14 .08
The foregoing over-the-counter quotations are inter-dealer quotations
without retail mark-ups, mark-downs or commissions and may not represent
actual transactions.
Dividends
---------
No cash dividends have been paid by the Company in the past, and
dividends are not contemplated in the foreseeable future. Utah law currently
prohibits the payment of dividends since the Company's liabilities exceed its
assets. Dividends will be dependent directly upon the earnings of the
Company, financial needs, and other similar unpredictable factors. For the
foreseeable future, it is anticipated that any earnings that may be generated
from the operations of the Company will be used to finance its operations and
dividends will not be declared for shareholders. The Company is not subject
to any contractual restrictions on the payment of dividends.
Recent Sales of Unregistered Securities
-----------------------------------------
During the year ended June 30, 2000, the Company reflected the issuance
of 10,000 shares of its common stock that were never cancelled by its transfer
agent. The shares were valued at $0.10 per share. No underwriting commissions
or similar fees were paid in connection with the sale. The Company believes
the offer and sale was exempt from registration requirements of Section 5 of
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
Sales of "restricted securities" under Rule 144 of the Securities and
Exchange Commission by members of management and other could have a
substantial adverse effect on the present limited market for the Company's
common stock. See Part II, Item 11.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
-----------------
The Company is considered to be in the development stage. Therefore,
management cannot say with certainty when significant revenues will be
received from the Company's business.
The auditor's report accompanying the Company's financial statements for
the year ended June 30, 2000, contains the following statement: "As discussed
in Note 1 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. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty."
As discussed further in Part II, Item 12, in exchange for the Company's
assumption of GMC's net liabilities, Garbalizer Corporation of America
("GCA")transferred 1,061,668 shares of RecycleNet, Inc. ("RecycleNet") common
stock to the Company. As of June 30, 2000, the Company had 460,800 of these
shares remaining with a fair value of $82,944. These shares could be
liquidated and utilized for settling various Company obligations. Management
is pursuing other avenues of generating cash or revenues during the next
twelve months. The Company is pursuing sales of the crumb rubber plants on
which the Company would earn a commission. The Company is also attempting to
interest purchasers of Garbalizer Shredders in establishing used tire joint
ventures. The Company continues to pursue the licensing or leasing of the OTR
Tire Disintegrator System, and is exploring the synergies of its businesses
- such as offering to joint venture a UTTI-type operation with the purchaser
of a crumb rubber plant. If any of such potential transactions occur,
management believes that the Company would have sufficient resources to
operate for the next twelve months. There is no assurance that the Company
will be able to obtain cash flow from operations or to obtain additional
financing. If these are not available to the Company, the Company may not be
able to continue operations. While management remains hopeful that one or more
transactions will proceed, no assurances can be expressed as to the Company's
continuing viability in the absence of revenues. Substantially all of the
Company's existing liabilities, other than trade payables and deferred
revenue, are owed to John Brewer or other shareholders of the Company.
Result of Operations
---------------------
The start-up costs for UTTI were financed with a loan in the principal
amount of $165,000 from the minority shareholder of UTTI, who is also an
officer and director of UTTI. Operating expenses for the Company have been
paid in part from short-term unsecured notes from shareholders. At June 30,
2000, the Company had a deficit in working capital (current liabilities in
excess of current assets) of $918,715. The working capital deficit at June 30,
1999, was $890,470. The decrease in working capital was caused by the
continued accrual of salary, accounts payable for expenses which the Company
was unable to pay in cash and additional short-term unsecured notes incurred
as part of the assumption of GMC liabilities.
Other than its short term office lease and loans payable to affiliates,
the Company, excluding UTTI, is not subject to any material commitments or
capital expenditures. UTTI is obligated to its minority owner in the principal
amount of $165,000. Such loan is now due on demand. The Company also made
advances to UTTI to pay its operating expenses during its start-up phase.
During the years ended June 30, 2000 and 1999, the Company recorded no
revenue from the sale of tires from inventory by UTTI compared to tire sales
of $4,625 in fiscal 1998.
The Company incurred a loss from operations before other income (expense)
and extraordinary items during the year ended June 30, 2000 of $202,551
compared to losses of $194,275 and $163,251 for the years ended June 30, 1999
and 1998, respectively. Total expenses for 2000 were $202,551 compared to
$194,275 in 1999 and $172,876 in 1998. Salaries and wages were $102,414 for
2000 compared to $76,073 for 1999 and $77,934 for 1998. Rental expenses were
$23,256 in 2000, $14,716 in 1999 and $27,636 in 1998. Rental expense
decreased in 1999 due to UTTI giving up their lease on its facility in March
1999. Rental expense increased in 1998 as a result of UTTI's facility and
increased use of the offices shared with GMC. UTTI incurred $13,460 of direct
costs of sales in 1998. If any of the Company's plans for revenue producing
activities come to fruition, expenses will rise accordingly.
Net income for the year ended June 30, 2000 was $177,022 compared to net
losses of $123,519 and $217,439 for the years ended June 30, 1999 and 1998,
respectively. The 1998 net loss includes a $30,233 charge for the write down
of shredder blades and gears held in inventory. On a per share basis, the net
income for the year ended June 30, 2000 was $0.01 compared to net losses of
($0.01) in 1999 and 1998. Operating losses are expected to continue until
such time, if ever, as the Company receives revenues from the sale of a crumb
rubber plant, the lease or license of the OTR Tire Disintegrator System, or
other operations. There is no assurance that the Company will ever be
profitable.
UTTI is 55% owned by the Company and operates at a loss. UTTI's losses
have exceeded the equity capital contributed by the minority shareholder.
Therefore, in preparing its consolidated statements of operations, the Company
does not adjust its consolidated net loss by the minority shareholder's
interest in the UTTI loss.
Liquidity
---------
During the year ended June 30, 2000, the Company had a net increase in
cash of $20,117. The increases in accrued salaries and interest payable were
the primary sources of cash for operations for the year. The sale of
RecycleNet's common stock was the primary source of cash from financing and
investing activities. These proceeds included $206,082 of cash for the sale
of 1,064,200 shares and $82,159 for 250,000 shares given to two shareholders
for debt cancellation, and to a consultant for various services rendered. Such
financing sources may not be available on an ongoing basis if the Company does
not begin to generate revenue.
ITEM 7. FINANCIAL STATEMENTS.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
<PAGE>
C O N T E N T S
Independent Auditors' Report - HJ & Associates, LLC. . . . . . . . . . F-2
Independent Auditors' Report - Hansen, Barnett and Maxwell . . . . . . F-3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Operations and Comprehensive Income . . . . F-6
Consolidated Statements of Stockholders' Equity (Deficit). . . . . . . F-8
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . F-11
Notes to the Consolidated Financial Statements . . . . . . . . . . . F-13
<PAGE>
To the Stockholders
Garb Oil and Power Corporation and Subsidiaries
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Garb Oil &
Power Corporation and Subsidiaries (a development stage company) as of June
30, 2000, and the related consolidated statements of operations and
comprehensive income (loss), stockholders' equity (deficit), and cash flows
for the year ended June 30, 2000. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Garb Oil & Power Corporation and Subsidiaries as of June 30, 2000
and the results of their operations and their cash flows for the year ending
June 30, 2000, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is a
development stage enterprise engaged in developing technology related to
production of electricity by burning used rubber, pyrolysis (extraction of
oil, carbon and steel from used tires). 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 doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
September 1, 2000
<PAGE>
To the Stockholders
Garb Oil and Power Corporation and Subsidiaries
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of Garb Oil &
Power Corporation and Subsidiaries (a development stage company) as of June
30, 1999, and the related consolidated statements of operations, comprehensive
income (loss), stockholders' deficit, and cash flows for each of the two years
in the period ended June 30, 1999, and for the period from January 14, 1981
(date of inception of the development stage) through June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements of Garb Oil & Power
Corporation and Subsidiaries (a development stage company) for the year ended
June 30, 1993 and for the four years in the period ended June 30, 1993 were
audited by other auditors whose report dated September 28, 1993, did not
express an opinion on the financial statements for June 30, 1993 and included
an explanatory paragraph that described the uncertainty regarding the basis of
presentation discussed in Note 1 to the consolidated financial statements.
Our opinion, insofar as it relates to the amounts for those years, is based
solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Garb Oil & Power Corporation and
Subsidiaries (a development stage company) as of June 30, 1999 and the results
of their operations and their cash flows for each of the two years in the
period ending June 30, 1999 and cumulative for the period from January 14,
1981 through June 30, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is a
development state enterprise engaged in developing technology related to
production of electricity by burning used rubber, pyrolysis (extraction of
oil, carbon, and steel from used tires). 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 doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Hansen, Barnett & Maxwell
Salt Lake City, Utah
September 10, 1999
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
June 30, 2000 and 1999
<CAPTION>
ASSETS
June 30,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash in bank $ 34,006 $ 13,889
Inventory 30,232 30,232
Investment in available-for-sale securities 82,943 290,625
Total Current Assets 147,181 334,746
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 (39,176) (31,876)
Net property and equipment 10,603 11,085
OTHER ASSETS
Patents - net of accumulated amortization 1,226 2,158
Total Other Assets 1,226 2,158
TOTAL ASSETS $ 159,010 $ 347,989
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
June 30, 2000 and 1999
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30,
2000 1999
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 65,062 $ 73,998
Notes payable - related parties 400,540 474,855
Deferred income - 150,000
Accrued interest 190,014 162,594
Accrued expenses 2,280 3,769
Wages payable 408,000 360,000
Total Current Liabilities 1,065,896 1,225,216
Total Liabilities 1,065,896 1,225,216
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; (no par value) 20,000,000
shares authorized; 17,943,299 and
17,933,299 shares authorized and
outstanding, respectively 2,332,458 2,331,458
Unrealized gain on available-for-sale
securities 82,944 290,625
Accumulated deficit - prior to development
stage (27,178) (27,178)
Accumulated deficit during the development
stage (3,295,110) (3,472,132)
Total Stockholders' Equity (Deficit) (906,886) (877,227)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 159,010 $ 347,989
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Income
<CAPTION>
From
Inception
of the
Development
Stage on
January 14,
For the Years Ended 1981 Through
June 30, June 30,
2000 1999 1998 2000
<S> <C> <C> <C> <C>
REVENUES
Tire sales $ - $ - $ 4,625 $ 117,932
Equipment sales - - - 595,723
Other revenues - - 5,000 402,333
Total Revenues - - 9,625 1,115,988
EXPENSES
Cost of sales - - 13,460 60,020
Cost of equipment - - - 473,837
Bad debt - - - 266,750
Salary and wages 102,414 76,073 77,934 1,502,946
Sales commissions - - 2,750 27,785
Office 8,066 5,142 7,955 154,150
Rent 23,256 14,716 27,636 239,891
Telephone 4,283 1,545 3,957 106,298
Professional fees 26,930 69,737 17,313 479,634
Finders' fee - - - 145,000
Insurance 5,652 1,705 5,052 88,161
Taxes and licenses 5,361 6,548 3,305 110,022
Travel 3,836 5,721 3,416 221,146
Promotion and entertainment - - - 14,053
Testing - - - 27,073
Advertising 1,269 5,133 200 145,816
Amortization 932 932 932 53,034
Depreciation 7,300 6,039 7,377 62,891
Consulting fee - - - 19,737
Stockholders' meetings - - - 670
Parking 330 440 990 11,544
Subcontractors - - - 40,138
Auto expense - - - 4,417
Repairs and maintenance - - 116 3,982
Other 12,922 544 483 28,531
Total Expense $202,551 $194,275 $172,876 $4,287,526
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations and Comprehensive Income (Continued)
<CAPTION>
From
Inception
of the
Development
Stage on
January 14,
For the Years Ended 1981 Through
June 30, June 30,
2000 1999 1998 2000
<S> <C> <C> <C> <C>
OPERATING LOSS $(202,551) $(194,275) $(163,251) $(3,171,538)
OTHER INCOME (EXPENSES)
Write-off and abandonment
of assets - - (30,233) (431,690)
Gain on sale of assets 288,241 102,560 4,709 396,165
Interest income - - - 147,810
Interest expense (65,978) (31,804) (28,664) (282,338)
Minority interest in losses
of subsidiary - - - 5,383
Income from expired option 150,000 - - 150,000
Total Other Income
(Expense) 372,263 70,756 (54,188) (14,670)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 169,712 (123,519) (217,439) (3,186,208)
EXTRAORDINARY ITEMS
Loss on extinguishment of
debt - - - (116,212)
Gain on forgiveness of debt 7,310 - - 7,310
Total Extraordinary Gain
(Loss) 7,310 - - (108,902)
NET INCOME (LOSS) 177,022 (123,519) (217,439) (3,295,110)
OTHER COMPREHENSIVE INCOME
Unrealized income sale on
available for sale
securities (207,681) 290,625 - 82,944
Total Other Comprehensive
Income (Loss) (207,681) 290,625 - 82,944
COMPREHENSIVE INCOME (LOSS)$ (30,659) $ 167,106 $(217,439) $(3,212,166)
BASIC INCOME (LOSS) PER
SHARE $ 0.01 $ (0.01) $ (0.01)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 17,943,299 17,411,573 17,028,299
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Unrealized
Gain on
Common Stock Investment Accumulated
shares Amount In Securities Deficit
<S> <C> <C> <C> <C>
Balance, January 14, 1981 12,833,333 $ 61,894 $ - $(27,178)
Stock issued to satisfy current
liabilities:
June 1983 - $2.94 per share 82,000 240,889 - -
Stock issued to satisfy related
party liabilities:
November 1993-$0.20 per share 64,310 12,882 - -
December 1993-$0.14 per share 87,000 12,200 - -
November 1994-$0.21 per share 25,000 5,342 - -
Stock issued for services:
May 1981-$0.20 per share 5,000 8,000 - -
May 1983-$1.50 per share 50,000 75,000 - -
August 1992-$0.15 per share 25,000 3,750 - -
December 1992-$0.15 per share 4,000 600 - -
November 1994-$0.21 per share 4,000 855 - -
January 1995-$0.21 per share 76,167 16,276 - -
February 1995-$0.21 per share 10,000 2,137 - -
Stock issued for cash:
March 1981-$0.70 per share 10,000 7,000 - -
April 1981-$0.42 per share 192,834 80,000 - -
June 1981-$1.31 per share 27,518 35,945 - -
March 1983-$0.75 per share 14,000 10,500 - -
April 1983-$1.00 per share 50,000 50,000 - -
June 1983-$3.04 per share 30,000 91,272 - -
September 1984-$1.00 per
share 200,000 200,000 - -
November 1984-$0.95 per share 105,470 100,000 - -
April 1986-$1.27 per share 770,000 980,000 - -
May 1992-$0.234 per share 208,334 50,000 - -
December 1992-$0.15 per share 50,000 7,500 - -
February 1993-$0.15 per share 100,000 15,000 - -
March 1993-$0.15 per share 100,000 15,000 - -
May 1993-$0.15 per share 100,000 15,000 - -
June 1993-$0.25 per share 100,000 25,000 - -
August 1993$0.20 per share 100,000 20,000 - -
October 1993-$0.07 to $0.15
per share 250,000 25,000 - -
November 1993-$0.25 per share 20,000 5,000 - -
December 1993-$0.15 to $0.20
per share 180,000 32,500 - -
January 1994-$0.25 per share 20,000 5,000 - -
February 1995-$0.20 per share 50,000 10,000 - -
March 1995-$0.20 to $0.22
per share 263,000 56,500 - -
May 1995-$0.25 per share 20,000 5,000 - -
June 1995-$0.20 per share 25,000 5,000 - -
Contributed capital - 356,402 - -
Purchase of treasury stock - - - -
Retirement of treasury stock (10,000) (10,009) - -
Net loss from January 14, 1981
through June 30, 1995 - - - -
Balance, June 30, 1995 16,241,966 $ 2,632,435 $ - $(27,178)
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Deficit Treasury
Accumulated Stock
During the Number
Development of
Stage Shares Amount
<S> <C> <C> <C>
Balance, January 14, 1981 $(2,829,005) $ - $ -
Stock issued to satisfy current
liabilities:
June 1983 - $2.94 per share - - -
Stock issued to satisfy related
party liabilities:
November 1993-$0.20 per share - - -
December 1993-$0.14 per share - - -
November 1994-$0.21 per share - - -
Stock issued for services:
May 1981-$0.20 per share - - -
May 1983-$1.50 per share - - -
August 1992-$0.15 per share - - -
December 1992-$0.15 per share - - -
November 1994-$0.21 per share - - -
January 1995-$0.21 per share - - -
February 1995-$0.21 per share - - -
Stock issued for cash:
March 1981-$0.70 per share - - -
April 1981-$0.42 per share - - -
June 1981-$1.31 per share - - -
March 1983-$0.75 per share - - -
April 1983-$1.00 per share - - -
June 1983-$3.04 per share - - -
September 1984-$1.00 per
share - - -
November 1984-$0.95 per share - - -
April 1986-$1.27 per share - - -
May 1992-$0.234 per share - - -
December 1992-$0.15 per share - - -
February 1993-$0.15 per share - - -
March 1993-$0.15 per share - - -
May 1993-$0.15 per share - - -
June 1993-$0.25 per share - - -
August 1993$0.20 per share - - -
October 1993-$0.07 to $0.15
per share - - -
November 1993-$0.25 per share - - -
December 1993-$0.15 to $0.20
per share - - -
January 1994-$0.25 per share - - -
February 1995-$0.20 per share - - -
March 1995-$0.20 to $0.22
per share - - -
May 1995-$0.25 per share - - -
June 1995-$0.20 per share - - -
Contributed capital - - -
Purchase of treasury stock 10,000 (10,009)
Retirement of treasury stock - (10,000) (10,009)
Net loss from January 14, 1981
through June 30, 1995 (2,829,005) - -
Balance, June 30, 1995 (2,829,005) - -
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
Unrealized
Gain on
Common Stock Investment Accumulated
shares Amount In Securities Deficit
<S> <C> <C> <C> <C>
Balance, June 30, 1995 16,241,966 $2,632,435 $ - $(27,178)
Stock issued for services:
September 1995-$0.13 per share 20,000 2,684 - -
Stock issued for cash:
July 1995-$0.25 per share 40,000 10,000 - -
December 1995-$0.10 per share 250,000 25,000 - -
May 1996-$0.12 to $0.25 per
share 90,000 16,000 - -
Net loss for the period ended
June 30, 1996 - - - -
Balance, June 30, 1996 16,641,966 2,686,119 - (27,178)
Stock issued for services:
May 1997-$0.15 per share 86,333 12,949 - -
Stock issued for cash:
January 1997-$0.15 per share 300,000 45,000 - -
Net loss for the period ended
June 30, 1997 - - - -
Balance June 30, 1997 17,028,299 2,744,068 - (27,178)
Net loss for the period ended
June 30, 1998 - - - -
Balance June 30, 1998 17,028,299 2,744,068 - (27,178)
Stock issued for services:
October 1998-$0.09 per share 5,000 450 - -
Stock issued for cash
January 1999-$0.05 to $0.10
per share 770,000 47,000 - -
February 1999-$0.10 per share 130,000 13,000 - -
Distribution from majority
shareholder - (473,060) - -
Change in unrealized gain on
investment in securities, net of tax - - 290,625 -
Net loss for the period ended
June 30, 1999 - - - -
Balance June 30, 1999 17,933,299 $ 2,331,458 $ 290,625$(27,178)
</TABLE>
<PAGE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Deficit Treasury
Accumulated Stock
During the Number
Development of
Stage Shares Amount
<S> <C> <C> <C>
Balance, June 30, 1995 $(2,829,005) $ - $ -
Stock issued for services:
September 1995-$0.13 per share - - -
Stock issued for cash:
July 1995-$0.25 per share - - -
December 1995-$0.10 per share - - -
May 1996-$0.12 to $0.25 per
share - - -
Net loss for the period ended
June 30, 1996 (124,871) - -
Balance, June 30, 1996 (2,953,876) - -
Stock issued for services:
May 1997-$0.15 per share - - -
Stock issued for cash:
January 1997-$0.15 per share - - -
Net loss for the period ended
June 30, 1997 (177,298) - -
Balance June 30, 1997 (3,131,174) - -
Net loss for the period ended
June 30, 1998 (217,439) - -
Balance June 30, 1998 (3,348,613) - -
Stock issued for services:
October 1998-$0.09 per share - - -
Stock issued for cash
January 1999-$0.05 to $0.10
per share - - -
February 1999-$0.10 per share - - -
Distribution from majority
shareholder - - -
Change in unrealized gain on
investment in securities, net of tax - - -
Net loss for the period ended
June 30, 1999 (123,519) - -
Balance June 30, 1999 $(3,472,132) $ - $ -
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
Unrealized
Gain on
Common Stock Investment Accumulated
shares Amount In Securities Deficit
<S> <C> <C> <C> <C>
Balance June 30, 1999 17,933,299 $2,331,485 $ 290,625 $(27,178)
Issuance of common stock for
lost treasury shares at $0.10 per
share 10,000 1,000 - -
Change in unrealized gain on
investment in securities,
net of tax - - (207,681) -
Net income for the period ended
June 30, 2000 - - - -
Balance, June 30, 2000 17,943,299 $2,332,458 $ 82,944 $(27,178)
<PAGE>
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Deficit Treasury
Accumulated Stock
During the Number
Development of
Stage Shares Amount
<S> <C> <C> <C>
Balance June 30, 1999 $(3,472,132) $ - $ -
Issuance of common stock for
lost treasury shares at $0.10 per
share - - -
Change in unrealized gain on
investment in securities,
net of tax - - -
Net income for the period ended
June 30, 2000 177,022 - -
Balance, June 30, 2000 $(3,295,110) $ - $ -
</TABLE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
<CAPTION>
From
Inception
of the
Development
Stage on
January 14,
For the Years Ended 1981 Through
June 30, June 30,
2000 1999 1998 2000
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 177,022 $ (123,519) $ (217,439) $(3,295,110)
Adjustments to reconcile
net cash provided by
(used in) operating
activities:
Depreciation and amortization 8,232 6,971 8,309 115,925
Bad debt expense - - - 266,750
Gain on sale of asset - - (4,709) (5,364)
Gain on sale of available-
for-sale securities - (102,560) - (102,560)
Write-off
and abandonment of assets - - 30,233 431,690
Loss on extinguishment of debt - - - 116,212
Stock issued for services and
interest - 450 - 122,701
Available for sale securities
issued for services - 52,560 - 52,560
Treasury stock expensed 1,000 - - 1,000
Changes in current assets and
liabilities:
Accrued interest receivable - - - (24,250)
Accounts receivable - 11,645 - 11,645
Accounts receivable -
related party - - - (150,344)
Contract receivable - - - (242,500)
Income tax refund receivable - - - 537
Inventory - - 13,460 62,494
Accounts payable (8,936) 8,371 (14,473) 57,444
Deferred income (150,000) - 75,000 (22,000)
Advances payable -
related party - - - (120,106)
Accrued expenses (1,489) (3,076) 1,321 (3,244)
Accrued payroll 48,000 48,000 48,000 408,000
Accrued interest payable 27,420 22,239 59,609 380,677
Other current liabilities - - - 240,954
Net Cash Provided (Used)
by Operating Activities 101,249 (78,919) (689) (1,696,889)
CASH FLOWS FROM INVESTING ACTIVITIES
Construction in progress - - - (2,937,790)
Cash acquired from Garbalizer
Machinery - 899 - 899
Net (advances) payments (to)
/from related party (4,314) (26,479) (9,430) (87,923)
Purchase of treasury stock - - - (10,009)
Increase (decrease) of other
assets - 1,000 - (1,956,733)
Purchase of property and
equipment (6,818) - - (67,230)
Proceeds from sale of
available for sale securities - 50,000 - 50,000
Proceeds from sales of assets - - 8,000 9,500
Net Cash Provided (Used)
by Investing Activities $(11,132) $ 25,420 $(1,430) $(4,999,286)
</TABLE>
<PAGE>
<TABLE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<CAPTION>
From
Inception
of the
Development
Stage on
January 14,
For the Years Ended 1981 Through
June 30, June 30,
2000 1999 1998 2000
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments
on) notes payable -
related party $ (70,000) $ 1,434 $ - $ 229,841
Proceeds from bank loans - - - 4,636,647
Sale of common stock - 60,000 - 2,007,217
Contribution to capital by
parent company - - - 356,402
Principal payments on bank loans - - - (500,000)
Net Cash Provided (Used) by
Financing Activities (70,000) (61,434) - 6,730,107
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 20,117 7,935 (2,119) 33,932
NET CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 13,889 5,954 8,073 74
NET CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 34,006 $13,889 $5,954 $ 34,006
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Securities issued for debt $ 70,000 $ - $ - $ 70,000
Cash paid for interest $ 37,902 $ 9,564 $3,864 $142,558
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
a. Organization
Garb Oil & Power Corporation (Garb Oil) is a majority owned
subsidiary of Garbalizer Corporation of America and was dormant at
January 13, 1981. Since January 14, 1981, Garb Oil has been
considered to be in the development stage. Development stage
activities have consisted of raising capital, purchasing property and
developing technology related to production of electricity by the
burning of used rubber, pyrolysis (extraction of oil, carbon, and
steel from used tires), the recovery of used rubber from large off-
the-road tires and repair and sale of used truck tires.
The accompanying financial statements include Garb Oil and its
wholly-owned subsidiary, Rialto Power Corporation (which was
dissolved by the State of California), and its 55% owned subsidiary,
Utah Truck Tire, Inc.; which are collectively referred to as the
Company. The following is a summary of the significant accounting
policies.
b. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
c. Basis of Presentation
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.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(Continued)
d. Principles of Consolidation
The consolidated financial statements include the accounts of Garb
Oil and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company has
recognized all of the losses of Utah Truck Tire in its statement of
operations, with no offset to minority interest.
e. Inventory
Inventory is carried at the lower of cost or market, cost being
determined on the first-in first-out basis, and consists of tires,
blades and miscellaneous parts and supplies.
f. Patents
Patents are carried at cost and are being amortized over a 17-year
life.
g. Property and Equipment
Property and equipment is recorded at cost and is depreciated using
the straight-line method based on the expected lives of the assets
which range from five to ten years.
The Company records impairment losses when indicators of impairment
are present and undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount.
h. Advertising Costs
The Company expenses all advertising costs as incurred. Advertising
expense was $1,270, $5,133 and $200 for the years ending June 30,
2000, 1999 and 1998, respectively.
i. Income Taxes
The Company recognizes the amount of income taxes payable or
refundable for the current year and recognizes deferred tax assets
and liabilities for the future tax consequences attributable to
differences between the financial statement amounts of certain assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years those temporary differences are
expected to be recovered or settled. Deferred tax assets are reduced
by a valuation allowance to the extent that uncertainty exists as to
whether the deferred tax assets will ultimately be realized.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(Continued)
j. Basic Income (Loss) Per Share
The following is an illustration of the reconciliation of the
numerators and denominators of the basic loss per share calculation:
For the
Year Ended
June 30,
2000 1999 1998
Net income (loss) (numerator) $ 177,022 $(123,519) $ (217,439)
Weighted average shares
outstanding (denominator) 17,943,299 17,411,573 17,028,299
Basic income (loss) per share $ 0.01 $(0.01) $(0.01)
k. Financial Instruments
Cash equivalents include highly liquid short-term investments with
original maturities of three months or less, readily convertible to
known amounts of cash. The amounts reported as cash and equivalents,
receivables, other assets, trade accounts payable, deferred revenue
and notes payable to related parties are considered to be reasonable
approximations of their fair values. The fair value estimates
presented herein were based on market information available to
management as of June 30, 2000. The use of different market
assumptions and/or estimation methodologies could have a material
effect on the estimated fair value amounts. The reported fair values
do not take into consideration potential expenses that would be
incurred in an actual settlement.
l. Reclassification
Certain previously reported amounts have been reclassified to conform
to the June 30, 2000 presentation.
NOTE 2 - DISTRIBUTION TO MAJORITY SHAREHOLDER
In March 1999, the Company and the Company's majority shareholder,
Garbalizer Corporation of America (GCA), were parties to the
reorganization and sale of GCA's subsidiary, Garbalizer Machinery
Corporation (GMC). The reorganization was accomplished by GMC
transferring all of its assets and liabilities to the Company, by GMC
merging with Recyclenet, Inc. in exchange for approximately 90% of
its common stock being issued to the former Recyclenet, Inc.
shareholders and by GMC changing its name to Recyclenet, Inc. GCA
retained approximately 10% of the common stock of Recyclenet, Inc.
after the reorganization. In exchange for the Company's assumption
of GMC's net liabilities, GCA transferred 1,061,668 shares of
Recyclenet, Inc. common stock (approximately 2% of the outstanding
common shares after the reorganization) to the Company. The assets
and liabilities transferred to the Company, including the Company's
receivable from GMC which was effectively forgiven, were as follows:
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 2 - DISTRIBUTION TO MAJORITY SHAREHOLDER
(Continued)
Cash $ 899
Accounts receivable 11,645
Accounts payable (10,584)
Accrued expenses (61,359)
Payable to related parties (103,215)
Notes payable (88,493)
Net liabilities assumed (251,107)
Receivable from GMC forgiven (221,953)
Net Liabilities Assumed and Receivable Forgiven $(473,060)
The common shares of Recyclenet, Inc. received from GCA were recorded
at zero which was the historical cost of GCA's investment in GMC
after the transfer of GMC's net liabilities to the Company. The
liabilities assumed, net of the assets received, were recorded as a
distribution of stockholders' equity to GCA and was recorded at the
historical carrying values of the assets and liabilities to GMC which
were also equal to their fair values.
NOTE 3 - INVESTMENT IN SECURITIES AND OTHER COMPREHENSIVE INCOME
The Recyclenet shares owned by the Company are classified as
available-for-sale and are stated at fair value. At June 30, 2000,
the available-for-sale securities consisted of the following:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
Common stock $ - $82,944 $ - $ 82,944
Proceeds from sales of securities and the resulting gross realized
gains and losses were as follows:
For the Years Ending
June 30,
2000 1999
Proceeds from sales of securities $ 288,241 $ 102,560
Gross realized gains $ 288,241 $ 102,560
Gross realized losses - -
Net Gain from Sale of Investments $ 288,241 $ 102,560
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 3 - INVESTMENT IN SECURITIES AND OTHER COMPREHENSIVE INCOME (Continued)
Other comprehensive income is only relevant for the year ending June
30, 2000 and for the period from inception through June 30, 2000 and
consists of the change in net unrealized holding gains and losses on
securities classified as available for sale and their related income
tax benefit as follows:
Before-Tax Tax Net-of-Tax
Amount Benefit Amount
For the year ended June 30, 2000:
Unrealized net holding gains $ 290,625 $ - $ 290,625
Reclassification adjustment
for net gains included in
net income (207,681) - (207,681)
Other comprehensive Income $ 82,944 $ - $ 82,944
Cumulative for the period January
14, 1981 (date of inception)
through June 30, 2000:
Unrealized net holding gains $ 290,625 $ - $ 290,625
Reclassification adjustment for
net gains included in net income (207,681) - (207,681)
Other comprehensive Income $ 82,944 $ - $ 82,944
A provision for income taxes has not been assessed against the
unrealized gain on securities because of the current NOL's of the
Company. Any gain on the sale of the securities will be offset
against these NOL's.
NOTE 4 - UTAH TRUCK TIRE, INC.
Utah Truck Tire, Inc. was formed May 20, 1994, and on May 24, 1994
the Company was issued 55% (55 shares) of the outstanding shares of
Utah Truck Tire, Inc. in exchange for the Company's experience,
expertise and reputation in dealing with tire and rubber products.
The remaining 45% (45 shares) was issued to a director of Utah Truck
Tire, Inc. for a commitment to loan Utah Truck Tire, Inc. $150,000
(see Note 5). Utah Truck Tire, Inc. is currently dormant, having no
revenues and incurring minimal expenses during the years ended June
30, 2000 and 1999. Utah Truck Tire, Inc. was primarily in the
business of selling retread diesel truck tires.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 5 - PAYABLE TO RELATED ENTITIES, OFFICERS AND SHAREHOLDERS
During the period July 1998 through March 1999 and for the years
ended June 30, 1998 and 1997, the Company made non-interest bearing
advances to Garbalizer Machinery Corporation (GMC), a sister
corporation, in the amounts of $34,094, $27,521, and $34,771,
respectively. Payments on these advances totaled $60,573, $14,091,
and $9,164 for the years ended June 30, 1999, 1998 and 1997. As
discussed in Note 2, in March 1999, GMC merged with an unrelated
company and transferred all assets and liabilities to the Company
which include the above mentioned receivable totaling $221,953. The
related party receivable/payable has been eliminated in the
accompanying financial statements.
Prior to July 1, 1992 through June 30, 1999, the Company borrowed
$68,147, which includes $1,434, $24,403 and $1,438 during the three
years ending June 30, 1999, 1998 and 1997, from an officer under a
note payable for various purchases on behalf of the Company. As part
of the assumption of GMC's liabilities, the Company assumed an
additional $103,215 payable to this officer for various purchases on
behalf of GMC. The Company paid all interest charges (currently at
approximately 9%), relating to these purchases. These payables were
due on demand, but as of June 30, 1999, no principal payments had
been made.
Prior to June 30, 1996, a shareholder advanced to the Company
$35,000 under short-term, non-interest bearing notes which were due
on demand. During the year ended June 30, 1997, an additional
$10,000 was advanced. During the year ended June 30, 1998, $5,000 of
interest was added to these advances. As part of the assumption of
GMC's liabilities, the note which was due on demand. During the
period ending June 30, 2000, the Company issued RecycleNet shares to
extinguish the note.
Prior to June 30, 1996, the Company borrowed $165,000 from an
officer. Interest accrues at the rate of 12% and the amount is due
on demand and is unsecured. No payments had been made as of June 30,
2000.
As part of the assumption of GMC's liabilities, the Company assumed a
$10,000 note payable from a shareholder. This note was paid for as
of June 30, 2000 as the Company issued the shareholder shares of
RecycleNet stock.
As part of the assumption of GMC's liabilities, the Company assumed a
12% note payable from an individual with an outstanding balance of
$68,493. The note was originally for $150,000 and was due in 1992.
The Company has not made any principal payments since assuming this
note.
During the year ended June 30, 1995, the Company borrowed $12,000
from a shareholder under short term, non-interest bearing notes
payable which were due on demand. An additional $10,000 was loaned
to the Company during the year ended June 30, 1997. During 1998, the
notes were converted to a payment on an option agreement as discussed
in Note 7.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 6 - INCOME TAXES
The Company does not have a current or deferred provision for income
taxes for the years ended June 30, 2000 or 1999. The following
presents the components of the deferred tax asset for the Company.
June 30,
2000 1999
Benefit of operating loss carryforwards $ 744,673 $ 831,230
Inventory reserve 11,277 11,790
Accrued salaries 152,184 93,600
Accrued interest 45,152 41,438
Depreciation 2,093 2,086
Total deferred tax assets 955,379 980,144
Less: valuation allowance (955,379) (980,144)
Net Deferred Tax Asset $ - $ -
The valuation allowance has decreased $24,765 and $74,127 for the
years ended June 30, 2000 and 1999, respectively. The decrease in
valuation during 2000 is due to the utilization of federal and state
NOL's offset by the increase in various accruals to
officers/shareholders to be paid and deducted for tax purposes in
future periods. The Company and its subsidiaries have federal net
operating loss carryforwards of $2,171,708 that expire, if unused, in
years 2001 through 2020.
The following is a reconciliation of the income tax at the federal
statutory tax rate with the provision for income taxes for the years
ended:
June 30,
2000 1999
Income tax expense (benefit) at statutory
Rate (34%) $ 60,187 $ (41,997)
Change in deferred tax asset valuation (66,029) 46,084
State tax net of federal benefit 5,842 (4,076)
Effect due to change in tax rates - -
Other - (11)
Provision for Income Taxes $ - $ -
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 7 - COMMITMENTS
On April 28, 1997, the Company granted Giant Tire Recyclers, Inc.
(Giant), a Nevada corporation, an option to acquire a license to use
the Company's OTR disintegrator system. The price of the option was
set at $150,000 payable as follows: 1) an initial payment of
$15,000, and 2) the remaining $135,000 was due within ten months of
the execution of the agreement. The Company received $150,000 as of
June 30, 1998 consisting of $128,000 in cash and assigned $22,000 as
a payment on a note payable to a shareholder. Giant may exercise the
option at any time. The option was initially to expire in April
1999, but an extension was granted through April 2000. The above
contract gives Giant the opportunity to purchase an exclusive license
to use the Company's OTR Disintegrator System for a license fee of
$1,315,000, less option payments prior to the time of exercise. The
contract has since expired and, accordingly, the $150,000 has been
recorded as income.
On May 23, 1996, the Company entered into two agreements with Alberta
Recovery Technologies Ltd. whereby the Company agreed to manufacture
and install equipment. An initial non-refundable earnest payment of
$30,519 was paid and was included as deferred revenue at June 30,
1996. This agreement was terminated in 1998 for failure to meet the
provisions of the agreement, the $30,519 non-refundable down payment
classified as deferred revenue was transferred to other revenue
during the period ended June 30, 1998.
The Company executed an employment agreement with its President on
May 1, 1986. The agreement is of a continuing nature and specifies
no date of termination. Under the terms of the agreement, the
President's salary is $48,000 per year and is reviewed by the Board
of Directors annually.
NOTE 8 - CONTRACT RECEIVABLE
In August 1988, the Company sold to an unrelated corporation, a plant
and technology related to the extraction of oil by-products, steel,
and resulting gases from scrap tires in exchange for a contract
receivable in the amount of $242,500. The contract bore interest at
8% and, as extended on September 1, 1991, was due in full on March 1,
1992. As no payments were received by the Company since the contract
was entered into in August 1998, the contract receivable and related
accrued interest receivable of $24,250 were written off as
uncollectible during the year ended June 30, 1992. The Company is
attempting to locate other parties who may be interested in
purchasing the plant and related technology. No value was assigned
to such plant and related technology as of June 30, 2000 and 1999 due
to the uncertainty of the realization of any significant value.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 9 - INVESTMENT IN RIALTO POWER CORPORATION
The Company entered into a joint venture with DITT, S.A., a French
Corporation (DITT), on December 2, 1985, for the purpose of
constructing a 35-megawatt electrical generating plant fueled by
scrap tires (the project). The Company received 50% of the common
stock of Rialto Power Corporation (Rialto), a corporation formed for
the purpose of the joint venture, in exchange for equipment and
other assets. The remaining 50% of the common stock of Rialto was
issued to DITT in consideration of an arrangement whereby DITT would
arrange and guarantee a $4,000,000 line of credit from a bank to
Rialto and construct a power plant.
Rialto had drawn the entire line of credit as of May 1987 at which
time the joint venture agreement was terminated. Pursuant to the
termination of the agreement, DITT transferred to Garb Oil all of
its stock in Rialto making Garb Oil the sole shareholder of Rialto.
The line of credit was called by the bank and, under the terms of
the line of credit, DITT, as guarantor, paid the bank. As
consideration for this payment, Rialto executed a note payable at
10% to DITT collateralized by all of the assets of Rialto. The note
was due on December 31, 1988.
In November 1989, Rialto agreed to convey the collateralized assets
to DITT in satisfaction of the note and related interest payable.
Such assets represented substantially all costs of the project. The
carrying value of the related assets and liabilities at the date of
the conveyance were as follows:
Land $ 1,384,126
Construction in progress 2,937,790
Other assets 140,633
Total assets conveyed 4,462,549
Less: note and related interest payable 4,346,337
Loss Recognized on Extinguishment of Debt $ 116,212
Due to the ongoing legal actions regarding certain permits issued
with respect to the Rialto project and the adverse effect of related
delays, the Company could not proceed with any further construction
or development of the project. The State of California dissolved
Rialto Power Company. The Company may pursue the construction of
other waste-to-energy projects in areas believed to have more
favorable regulatory environments. The Company does not have any
firm agreements for the construction of such additional plants.
NOTE 10 - OPERATING LEASES
The Company shares office space with Garbalizer Machinery
Corporation under a lease agreement on a month-to-month basis. The
Company also leases facilities on a month-to-month basis. Rental
expense relating to these operating leases was $23,256, $14,716 and
$27,636 for the years ended June 30, 2000, 1999 and 1998,
respectively.
<PAGE>
GARB OIL & POWER CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2000
NOTE 11 - SUPPLEMENTAL CASH FLOWS
During the year ended June 30, 1999, the Company and The Company's
majority shareholder, Garbalizer Corporation of America (GCA), were
parties to the reorganization and sale of GCA's subsidiary,
Garbalizer Machinery Corporation (GMC). See Note 2 for a discussion
of the acquisition.
During the year ended June 30, 1998, the holders of a $22,000 note
payable applied the balance as a payment on an option agreement it
purchased from the Company in 1997.
During the year ended June 30, 1997, the Company issued 86,333
shares of common stock valued at $12,949 for services rendered.
<PAGE>
ITEM 8. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable except as previously reported.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The term of office of each director is one (1) year or until his
successor is elected at the Company's annual meeting and qualified. The term
of office for each officer of the Company is at the pleasure of the Board of
Directors. The Board of Directors has no nominating, auditing or compensation
committee.
Identification of Directors and Executive Officers
--------------------------------------------------
The following table sets forth the names, ages, and positions with the
Company of the directors and officers of the Company.
Name Age Position
---- --- --------
John C. Brewer 78 President, Chairman of
the Board of Directors
and Director
Bill Vee Anderson 49 Vice-President, Director
Charles Laver 77 Secretary and Director
John C. Brewer has been the President and a director of the Company
since January, 1981, and from 1972 until January, 1981, was President and a
director of the Company's predecessor Garb-Oil Corporation. Mr. Brewer also
serves as President, Chairman of the Board of Directors and a director of
GCA which was the majority shareholder of the Company. Until March, 1999, Mr.
Brewer was a director of, and Garbalizer Corporation of America was the
majority shareholder of, GMC Corporation, a public non-reporting company.
Mr. Brewer devotes approximately 40 hours per week to the Company as well as
additional time to his other business interests.
Bill Vee Anderson has been Vice President and a director of the Company
since September 1993. He has been employed by the Company as a Chief Engineer
since February 1990. Prior to joining the Company, Mr. Anderson spent five
years as a Design Engineer at Sperry Univac. Prior to that, he was a Design
Engineer with Bell Telephone Laboratories. Mr. Anderson declared personal
bankruptcy in July, 1992, and agreed to a payment plan whereby his creditors
have been or will be paid the full amount of his indebtedness.
Charles Laver, CPA, has been the Secretary and a director of the Company
since January, 1981, and from 1972 until January, 1981, was Secretary and a
director of Garb-Oil Corporation. Mr. Laver's principal occupation for the
last 30 years has been a self-employed Certified Public Accountant. Mr. Laver
will devote such time as may be necessary from time to time as an officer and
a director of the Company including but not limited to regular and
special meetings of the board of directors.
Compliance With Section 16(a)
-----------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten-percent shareholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 2000, all Section
16(a) filing requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with except as follows:
John C. Brewer filed a Form 4 on October 12, 1999, reporting a change in
the number of shares of the Company indirectly owned by him. The Form 4 should
have been filed on April 12, 1999.
Charles Laver filed a Form 4 on October 12, 1999, reporting a change in
the number of shares of the Company indirectly owned by him. The Form 4 should
have been filed on April 12, 1999.
ITEM 10. EXECUTIVE COMPENSATION
The following information concerning the compensation of the Company's
Chief Executive Officer for the fiscal years ended June 30, 2000, 1999 and
1998, and compensation for the directors and other executive officers is not
required to be presented as no such director's or executive officer's salary
and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Position Fiscal Year Salary ($)
--------------------------- ----------- ----------
John C. Brewer 2000 $48,000
President and CEO 1999 48,000
1998 48,000
During the current fiscal year, the Company is paying and it is
anticipated that the Company will continue to pay a salary to Mr. Brewer in
the amount of $48,000 per annum for 40 hours per week of Mr. Brewer's time.
The Company has an Employment Agreement with Mr. Brewer (See Part III, Item
13). All or substantially all of such compensation is currently being accrued
rather than paid in cash. The Company does provide medical insurance to Mr.
Brewer.
During the current fiscal year, the Company paid and it is anticipated
that the Company will continue to pay a salary to Mr. Anderson in the amount
of $34,000 per annum for 40 hours per week of Mr. Anderson's time.
Other than as set forth above, the Company has no employment agreements
with any of its officers or directors and has no retirement, profit sharing,
pension or insurance plans covering them.
The Company issued no options during the fiscal years ended June 30,2000
or 1999, and none are outstanding.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of September 28, 2000
(i) each person known by the Company to own more than five percent (5%) of the
Company's outstanding stock, (ii) each director of the Company and (iii) all
officers and directors as a group.
Name and Address Amount Percent of Class
Garbalizer Corporation 8,131,590 45.3%
of America (Note 1)
Newhouse Office Building, Suite 507
Salt Lake City, Utah
Ralph C. Alexander 933,343 5.2%
152 Hall Street
Spartanburg, South Carolina
A/S Parkveien 55 1,050,000 5.9%
c/o Hoegh Invest A/S (Note 2)
P.O. Box 2416 Solli
0202 Oslo 2, Norway
John C. Brewer (Note 3) 8,131,590 45.3%
Newhouse Office Building, Suite 507
Salt Lake City, Utah
Charles Laver (Note 4) 8,152,336 45.4%
Newhouse Office Building, Suite 507
Salt Lake City, Utah
Bill Anderson 6,000 *
Newhouse Office Building, Suite 507
Salt Lake City, Utah
All directors and 8,158,336 45.5%
officers as a group
(3 individuals)
* less than 1%
(1) John C. Brewer beneficially owns 98% of the outstanding common
stock of GCA.
(2) In September, 1988 A/S Parkveien 55 filed a Schedule 13D stating
its beneficial ownership of 1,800,000 shares owned of record and beneficially
by it. The Schedule 13D also indicates that an additional 478,000 shares (3.3%
of the class) were beneficially owned by two Norwegian corporations having
common control or ownership with A/S Parkveien 55. During a prior fiscal year,
1,500,000 shares held of record by A/S Parkveien 55 at the time of the
Schedule 13D filing were transferred of record to Christiana Bank, Oslo,
Norway and neither A/S Parkveien 55 nor the other corporations listed on the
Schedule 13D currently own shares of record. A/S Parkveien 55 did not inform
the Company of a change in beneficial ownership as result of such change in
record ownership and the table therefore reflects beneficial ownership stated
in the Schedule 13D as adjusted for subsequent sales by Christiana Bank.
(3) Consists of 8,131,590 shares held by GCA in which Mr. Brewer may be
deemed to share beneficial ownership as a result of his position as a director
and principal shareholder of GCA.
(4) Consists of 8,131,590 shares held by GCA in which Mr. Laver may be
deemed to share beneficial ownership as a result of his position as a director
of GCA, and 20,746 shares owned of record by Mr. Laver.
The Company is unaware of any arrangements which may result in a change
in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 19, 1999 the Company acquired all rights to the Garbalizer
Shredder and related assets from GMC in exchange for assumption of
liabilities. In connection with the sale, GMC was reorganized into
RecycleNet. The reorganization was accomplished by GMC transferring all
of its assets and liabilities to the Company, by merging with RecycleNet
in exchange for approximately 90% of its common stock being issued to
the former RecycleNet shareholders and by GMC changing its name to
"RecycleNet, Inc." Prior to the change in control, Garbalizer Corporation of
America ("GCA") owned a majority of the GMC shares and the Board of Directors
of the Company was the same as the Board of Directors of GMC. GCA retained
approximately 10% of the common stock of RecycleNet after the reorganization.
Although the persons acquiring control of GMC are not affiliated with the
Company, the terms of the sale of assets to the Company were not determined at
arms length. The Company assumed $473,060 more in liabilities than assets on
the acquisition, which was accounted for as a distribution from GCA to the
Company. In exchange for the Company's assumption of GMC's net liabilities,
GCA transferred 1,061,668 shares of RecycleNet common stock to the Company.
The common shares of RecycleNet received from GCA were recorded with a zero
basis which was the historical cost of GCA's investment in GMC.
During the period July 1998 through March 1999 and for the years ended
June 30, 1998 and 1997, the Company made non-interest bearing advances to GMC
in the amounts of $34,094, $27,521, and $34,771, respectively. Payments on
these advances totaled $60,573, $14,091, and $9,164 for the years ended June
30, 1999, 1998 and 1997. As discussed above, in March 1999, GMC merged with
an unrelated Company and transferred all assets and liabilities to the
Company, which include the above mentioned receivable totaling $221,953.
Prior to June 30, 1996, a shareholder advanced to the Company $35,000
under short-term, non-interest bearing notes which were due on demand. During
the year ended June 30, 1997 an additional $10,000 was advanced. During the
year ended June 30, 1998, $5,000 of interest was added to these advances. As
part of the assumption of GMC's liabilities, the Company assumed an
additional $10,000 short-term, non-interest bearing note which was due
on demand. During the period ending June 30, 2000, the Company issued
RecycleNet common stock to extinguish the note.
As part of the assumption of GMC's liabilities, the Company assumed a
$10,000 note payable from a shareholder. The note was paid for as of June 30,
2000, as the Company exchanged shares of RecycleNet common stock.
As part of the assumption of GMC's liabilities, the Company assumed a 12%
note payable from an individual with an outstanding balance of $68,493. The
note was originally for $150,000 and was due in 1992. The Company has not made
any principal payments since assuming this note.
During the year ended June 30, 1995, the Company borrowed $12,000 from a
shareholder under short term, non-interest bearing notes payable which were
due on demand. An additional $10,000 was loaned to the Company during the
year ended June 30, 1997. During 1998, the notes were converted to a payment
on an option agreement.
The Company's President is entitled to an annual salary of $48,000.
During 1993 through 2000, substantially all of such salary was accrued rather
than paid in cash. Such accrued wages are unsecured and do not bear interest.
As of June 30, 2000, the balance of accrued salary to the president was
$408,000. This is in addition to the $68,147 owed to the Company's President
for advances to the Company. As part of the assumption of GMC's liabilities,
the Company assumed an additional $103,215 payable to this officer for various
purchases on behalf of GMC. The Company paid all interest charges (currently
at approximately 9%) relating to these purchases. These payables were due on
demand; however, as of June 30, 2000, no principal payments had been made.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. The following financial statements and schedules are filed
herewith.
Garb Oil & Power Corporation
Consolidated Balance Sheets - June 30, 2000 and 1999.
Consolidated Statements of Operations and Comprehensive Income
for the Years Ended June 30, 2000, 1999, 1998 and for the Period
from January 14, 1981 (Date of Inception of the Development
Stage)to June 30, 2000
Consolidated Statements of Stockholders' Equity - For
the period from Inception of the Development Stage
(January 14, 1981) through June 30, 2000
Consolidated Statements of Cash Flows For the Years Ended
June 30, 2000, 1999, 1998 and for the Period from January
14, 1981 (Date of Inception of the Development Stage) to
June 30, 2000
Notes
b. During the fourth quarter of the year reported. the Company
filed no Forms 8-K.
c. The following exhibits are filed herewith or incorporated herein
by reference from prior filings. The Securities and Exchange Commission No.
refers to the Exhibit Table in Item 601 of Regulation S-B.
Section Exhibit
No. No. Description Location
------ ----- ------------------------- -------------------------
3 3.1 Articles of Incorporation Exhibit 3.1 of Registration
(as amended) Statement on Form 10, File
No. 0-14859
3 3.2 By-Laws Exhibit 3.2 of Registration
Statement on Form 10, File
No. 0-14859
10 10.1 Employment Agreement with Exhibit 10.5 of Registration
John Brewer Statement on Form 10, File
No. 0-14859
10 10.2 Agreement with Giant Tire Exhibit 10.4 of Form 10-KSB
Recyclers, Inc. for June 30, 1997
10 10.3 Project Development and Exhibit 10.1 of Form 8-K
Construction Agreement dated May 11, 1998
with Trenergy, Inc.
10 10.4 Extension Agreement with Exhibit 10.4 of the 10KSB
Giant Tire Recyclers, Inc. for June 30, 1997
10 10.5 Agreement between Exhibit 10.5 of the 10KSB
Garbalizer Machinery for June 30, 1999
Corporation and the
Company
21 21.1 List of Subsidiaries Exhibit 21.1 of Form 10-KSB
for June 30, 1995
27 27 Financial Data Schedule Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GARB OIL & POWER CORPORATION
By: /s/ John C. Brewer
------------------------------
John C. Brewer, President
DATED this 28th day of September, 2000
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the date indicated.
1. By its principal executive officer.
Date: 9/28/2000 /s/ John C. Brewer
------------------------------
John C. Brewer, President
2. And by its principal financial officer and principal
accounting officer.
Date: 9/28/2000 /s/ Charles Laver
------------------------------
Charles Laver, Treasurer
3. And by a majority of its Board of Directors.
Date: 9/28/2000 /s/ John C. Brewer
------------------------------
John C. Brewer, Director
Date: 9/28/2000 /s/ Charles Laver
------------------------------
Charles Laver, Director
Date: 9/28/2000 /s/ Bill Vee Anderson
------------------------------
Bill Vee Anderson, Director
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