**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K/A**

**Amendment No. 1**

 

 

**xANNUAL REPORT PERSUANT SECTION 13 OR 15(d) OF THE SECURITIES**

|   | **EXCHANGE ACT OF 1934** |
|--------|--------------------------|

 

For the fiscal year ended June 30, 2009

 

**o TRANSITION REPORT PERSUANT SECTION 13 OR 15(d) OF THE SECURITIES**

**EXCHANGE ACT OF 1934**

 

|   | For the transition period from __________ to _______________. |
|--------|---------------------------------------------------------------|

 

 

Commission File No. 0-14859

 

**GARB OIL AND POWER CORPORATION**

(Exact name of registrant as specified in its charter)

 

| Utah                                                | 87-0296694                            |
|-----------------------------------------------------|---------------------------------------|
| (State or other jurisdiction of                     | (I.R.S. Employer Identification. No.) |
| incorporation or organization)                      |                                  |
|                                                |                                  |
| 1588 South Main Street, Suite 200                   |
| Salt Lake City, Utah  84115               |
| (Address of principal executive offices) (Zip Code) |
|                                                |
| Registrant’s Telephone Number: (801) 832-9865 |

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Name of each exchange on which registered

 

None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common stock (No par value)

 

Check whether the Issuer (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

(1) Yes xNo o (2) Yes xNo o

 

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not 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-K or any amendment to this Form 10-K. o

 

State Issuer's revenues for its most recent fiscal year: $0.00

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. 

 

As of October 7, 2009 aggregate market value was $245,936.

 

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|   | **APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY** |
|--------|-------------------------------------------------------|

**PROCEEDINGS DURING THE PRECEDING FIVE YEARS**

 

|   | Not applicable. |
|--------|-----------------|

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:

October 7, 2009

 

47,170,709

 

Transitional Small Business Disclosure Format (check one)

Yes xNo o

 

PART I

 

1. **DESCRIPTION OF BUSINESS**

 

Garb Oil & Power Inc., provides equipment and products to the waste processing, energy and recycling industries. We supply the enabling technologies for waste processing and recycling, from the single machines to entire plants, specializing but not limited to, Waste rubber, Municipal waste, Domestic waste, Waste to Energy, Electronic scrap and all derivatives relating to these industries,            including rubber power, fine rubber particles, alloys of rubber, TPE-V and rubber, Elastomers, Compounds and Technical rubber products from raw material, to processing, manufacturing and wholesaling available to both the recycling industry and/or original product manufacturers and producers.

 

During 1999, the Company acquired certain assets from its sister corporation Garbalizer Machinery Corporation, including the rights to manufacture and sell Garbalizer tire shredders. The Company has designed a system that in its opinion is capable of recovering rubber from used large, off-the-road (OTR) tires. The Company has the rights to act as the non-United States agent for a third party’s            unproven technology for the remediation of radioactive wastes and exclusive rights to build its plants in the United States and abroad. 

 

The Company received revenues of $0 in the fiscal year ended June 30, 2009 and at the end of the year its current liabilities exceeded its total assets by $2,888,129. 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 resulted in the sale and delivery of a shredder in            June 2005. The Company has limited financial resources, and it may not be able to continue in business if it does not receive significant additional cash from operations or financing activities. The Company cannot give assurances that its plans to generate cash will be successful. The Company’s predecessor, Garb-Oil Corporation, was incorporated and commenced business on September 11, 1972, under the laws of the State of Utah. The Company changed its name to Garb Oil &            Power Corporation in 1985.

 

**OTR Tire Processing System**

 

The Company has designed a system known as the OTR Tire Disintegrator System which it believes will be capable of recovering used rubber from large, off-the-road (OTR) tires. The Company has substantially completed the engineering and design of the OTR Tire Disintegrator System, but to date has not constructed a commercially operating system. Currently the company is in discussions with a company,            (INTERPIPE) located in the Ukraine, who has indicated an interest in completing the development of the OTR Tire Processing System for marketing in Eastern Europe. If an agreement is reached the Company would retain marketing rights for North America where the process would be marketed by the Company.

 

Although such discussions are underway there is no assurance that the discussions will result in an Agreement between the two companies or that the process would be successful if constructed by INTERPIPE. Due to INTERPIPE’S inability to secure funding from the Ukrainian Government to finance the OTR development the company cancelled negotiations with INTERPIPE and entered into an Agreement with            Xingcheng Machinery of Xingcheng, China PRC to develop the OTR system. Development is currently underway. 

 

Commercially available tire shredders, including shredders made by the Company, are designed to process standard automobile, truck tires and some OTR tires, which may include semi-trailer or over-the-road tires. Tires used in a variety of off the road equipment, such as graders, bulldozers, mining equipment, etc. cannot be processed directly by these shredders. Although these tires, which may weigh            from 400 pounds to 9 tons each, 

 

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are less numerous than standard tires, the Company estimates that over 2,600,000 tons of OTR tires of all sizes require disposal in the United States each year. 

 

Current methods of disposal include land filling and surface disposal, which are accepted only due to the lack of a viable alternative. Most states have passed laws prohibiting land filling or storage of whole tires.

 

The OTR Tire Disintegrator System uses mechanical means to remove the exterior rubber from OTR tire carcasses without shredding. After removal of non-rubber components, primary shredding and wire separation, the resulting particles are then processed into crumb rubber during secondary processing. The shredded particles could also be used as fuel or safely disposed of in a landfill, although the            Company believes that the rubber particles will be of such high quality that landfill disposal or use as fuel will be unnecessary or desirable.

 

The Company has prepared what it believes to be the final design of the OTR Tire Disintegrator System and has analyzed its expected performance. When the first OTR Tire Disintegrator System is built, it is expected that only slight modifications to the design could be required to maximize performance. It is also possible, although the Company does not anticipate this, that the OTR Tire Disintegrator            System will not perform as planned when built.

 

The Company has received United States Patent No. 5,299,748 on the OTR Tire Disintegrator System design which expires April 5, 2011, Patent No. 5,590,838 which expires January 7, 2014 and patent number 6,015,105 which expires January 18, 2018. An additional patent improvement has been filed and is currently pending in the United States. The pending patent improvement was granted in Canada on July 6,            1999 as Canadian Patent No. 2,178,326 which expires March 23, 2015 and an additional patent is pending.

 

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.

 

**Shredding Systems**

 

On March 19, 1999 the Company acquired a patented shredding system from its sister company, Garbalizer Machinery Corporation (“GMC”). See “Certain Relationships and Related Transactions”. This system became available when GMC merged with a Canadian Internet company, changed its name to RecycleNet, Inc. and ceased its shredder business.

 

The Company acquired from GMC all of its then existing assets, including the Garbalizer name and logo, patents, machinery designs and contract rights in exchange for assumption of all then existing indebtedness of GMC in the approximate amount of $500,000.

 

The system known as the “Garbalizer Shredder” has a thirty-year history of shredding automobile and truck tires in the United States, Canada and Europe. During this period of time, GMC acquired fourteen U.S., and six foreign patents all of which have expired. The Garbalizer Shredder employs a cutting method rather than the impact method embodied in hammer mills and grinders. This cutting            method consists of a rotatable shaft or pair of shafts, supported by bearings, upon which are fixed a series of blade holders at 120(Degree) or 180(Degree) intervals around the shaft. The blade holders to which blades are attached are positioned along the length of the shaft so that their tips form a helix which tends to position the tires for cutting. 

 

Spacers to which no cutting blades are attached are located between each blade holder mounted on the rotatable shaft so that the rotating blades and the spacers form the cutting mechanism of the Garbalizer Shredder when co-acting with stationary blade holders. 

 

The shredding mechanism for all of the electric-driven models is protected by fluid couplings, torque limiting couplings and overload relays in the electrical control system. If non-shreddable material is encountered within the Garbalizer Shredders, the torque limiting or fluid coupling and relays stop the machines and protect the Garbalizer Shredders from serious damage. The rotatable shaft or shafts            are driven by an electric motor or diesel electric system through a system of gear reducers. The diesel electric-driven mobile Garbalizer Shredder is protected from non-shreddable items by similar couplings and overload relays that stop the Garbalizer Shredder if it becomes overloaded or jammed. If this happens on any of the Garbalizer Shredders, it is simple to reverse the rotor and remove from the Garbalizer Shredder the item or items that jammed or stopped the machine. This, and            several additional unique and beneficial  features of the  Garbalizer Shredder, reduces the time and effort required  for maintenance.

 

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In operation, material to be shredded is placed on a conveyor and carried to the top of the hopper where it falls by gravity upon the rotating blade or blades or can be fed directly into the cutters by a patented controlled feeding system. The rotating blades position the material and cut it as it is forced between the stationary blades. The shredded material is then transported away from the machine            by conveyor to be used as tire derived fuel (TDF), crumb rubber production or other processes that use shredded tires.

 

The Garbalizer Shredders are offered in mobile and stationary models of various capacities.

 

The Company believes that acquisition of the Garbalizer Shredder system and related marketable items from GMC will benefit the Company by allowing it to quote complete recycling systems more economically and efficiently.

 

There are a number of companies that sell competitive products. The Company believes that the design of the Garbalizer Shredders is equivalent or superior to competitive designs. Some of the competitors are larger and better financed than the Company, and the Company believes certain competitors may have a competitive advantage on the sale of stand-alone shredders with respect to marketing prowess,            financing terms, cost and perceived customer support.

 

Historically, GMC had determined that it could manufacture the Garbalizer Shredders more economically on a contract basis with local machine shops in lieu of its own manufacturing facilities and personnel. The company has now discovered that the shredders can be built much more economically outside of the United States and would give the company better advantage to compete with larger and better            financed competitors. The Company has investigated this potential and decided that future shredders should be constructed outside of the United States to give the Company more flexibility in marketing.

 

During the third quarter of 2001 the Company began a new marketing strategy to market its products. The Company began, and is still continuing to establish distributorships in the United States and Internationally. As of June 30, 2009 the Company has established Distributorships in New Jersey with National Recycling Corporation that covers a three state area, New Jersey, New York and Delaware. A            Distributorship has been established in Virginia with Minority Tire Reclamation, Inc. that covers Virginia, North Carolina and Maryland. The Company will continue searching for dependable Companies to establish Distributorships throughout all of North America. Internationally the Company has concluded an Agreement with Micron SA of Odessa, Ukraine to manufacture and market its Shredders and other Technology throughout Eastern and Western Europe. All Machines and Equipment for the            European Market will be manufactured by Micron on a licensed basis and marketed jointly by Garb-Oil and Micron throughout the European market area. The Company has concluded a Distributorship with Representaciones Internacionales of Guadalajara, Mexico for all of South and Central America. 

 

All machines, Equipment and Technology for the South and Central America Distributorship will be manufactured in Mexico on a license basis with the marketing being done jointly by Garb-Oil and Representaciones Internacionales. It is anticipated and planned that all items sold by Garb-Oil Distributorships in the United States and Canada will be manufactured in Mexico. The Company has concluded a            Distributorship with The Princeton Group of Alhambra, CA for all of Asia. Machines, Equipment and Technology for the Asian market area will be manufactured in China. Certain Technology and Machinery owned by the Chinese Manufacturer for crumb rubber processing will be manufactured in China and purchased by Garb-Oil to be sold in all of the marketing areas inside and outside of the Asian market area. Because of the NAFTA Agreement and other International Agreements currently            existing, the Company is now able to establish these Distributorship agreements and contractually protect its technology and proprietary rights. These Agreements give the Company access to less expensive manufacturing and technology, which Management believes will make the Company more competitive and generate sales on a worldwide basis. As of June 30, 2008 the company management has determined that the company should take advantage of the benefits of such manufacturing and            marketing in future Company operations.

 

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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 sea, truck or railroad flat car. At the site, the major units can be field assembled with local construction or rigging workers who need have no previous experience with the Garbalizer Shredder. Location of the manufacturing facilities in close geographical proximity            to the installation sites of potential customers, is not considered by management to be a significant factor.

 

**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 new marketing strategy currently            being established by the Company has made available crumb rubber technology which heretofore was not available to the Company. 

 

If the Company is successful in selling a crumb rubber plant, it will be exposed to the risks of process engineering and equipment manufacturing concerns, including potential contract, warranty and liability claims. The Company has limited experience in engineering for or constructing crumb rubber plants. The Company relies on third parties including engineers and sub-contractors for the supply of a            majority of the equipment in the plant and the actual assembly and construction labor.

 

**Trenergy Radioactive Waste Technology**

 

On May 11, 1998, the Company entered into a Project Development and Construction Agreement with Trenergy Inc. (“Trenergy”). Pursuant to the Trenergy Agreement, the Company has been engaged to provide consulting and analysis regarding the potential commercial application of Trenergy’s unproven claimed technology to neutralize and remediate radioactive waste.

 

Trenergy has reported to the Company that the Trenergy technology has the potential of neutralizing radioactive waste. The Company has not verified Trenergy’s claims. If true, Trenergy’s technology would involve a substantial departure from current methodology and currently accepted scientific principles. Trenergy has informed the Company that it has applied for a patent on the Trenergy            technology. Filing of a patent application does not indicate that any third party has verified the validity of the technology.

 

The Trenergy Agreement is for a five-year term with renewal provisions and gives the Company the right to build all systems and plants for Trenergy on a cost plus basis which cannot exceed similar costs for similar projects. The Company is designated as Trenergy’s exclusive agent to exploit the Trenergy technology outside of the United States with the exception of the Republic of Belarus,            Ukraine, Romania, Macedonia, Greece and Hungary. Trenergy and the Company intend to equally share license revenues from potential licenses of the Trenergy technology in the Company’s territory; provided that Trenergy may negotiate the Company’s compensation for licenses where Trenergy had initial discussions with the licensee. No licenses for the Trenergy technology have been granted as of the date of this report and it is possible such licenses may not be granted in the            future.

 

Trenergy may not be able to establish the scientific validity or commercial viability of the Trenergy technology. Neither Trenergy nor the Company have the resources necessary to develop or evaluate the Trenergy technology without infusion of substantial capital or the joint venturing with third parties. Neither Trenergy nor the Company have any such arrangements in place. The Company plans to use            management time and financial resources pursuing possible transactions with the Trenergy technology for which the Company may receive no revenue. During the years 1998, 1999 and 2000 Trenergy had continued research on the process but at June 30, 2001 had not completed the “hot test” which would further prove if the process could be viable. As of June 30, 2009 the “hot test” had not been completed by Trenergy and is unable to complete it’s testing due to            lack of funds, and the Agreement the company had with Trenergy has expired.

 

**UTTI Tire Repair and Resale Business**

 

The Company’s efforts have historically focused on reducing the environmental problems of disposing of used tires by creating fuel, power or useful by-products from the tires. Although such efforts have not resulted in commercial operations, the Company’s management has gained extensive knowledge of the used tire distribution and  disposal business  through  such             efforts. On May  20,  1994  the  Company  formed  Utah  Truck  Tires,  Inc. 

 

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(“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 and as of June 30, 2002 both the Company and UTTI have decided that future operations for UTTI probably would not be re-started.

 

The Company is proposing to establish used tire processing and sales joint ventures with purchasers of tire shredders or OTR Tire Disintegrator Systems in the United States, 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 guaranteeing the loan for startup capital, its expertise and other intangible capital contributions. The remaining 45% of UTTI is owned by an investor who loaned $165,000 of seed capital to UTTI and who is an officer and director of UTTI.

 

**Co-generation and Electrical Power Generation**

 

Since 1982, the Company has been involved in planning and preparation for plants generating electricity or process steam to be fueled by scrap tires. The Company may build such plants alone or in joint venture with others. During the past fiscal year, the Company has concentrated its efforts on other aspects of its business and has held only very preliminary discussions regarding the possibility of            construction of such plants. To date the Company has not built a plant. However, with the current and projected acute energy shortage, management now believes that this technology is timely and has an improved potential for development.

 

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.

 

**Pyrolysis**

 

The pyrolysis patents granted the Company have expired and the Company has decided at this time no further research would be warranted. The Company concluded that although the process worked the markets for such plants are financially unfeasible at this time.

 

**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, 2014 and 2018. One patent has been issued in Canada that expires in 2015. 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.

 

In connection with the Garbalizer Shredder design, the Company owns United States patent number 4,927,088 that expired May 22, 2007 and Canadian patent number 1,137,949 that expired 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 Sand Application | Patent No. 3,814,336 |
|-------------------------------------------------------|----------------------|

| Improvement Patents for Tar Sands | Patent 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 CEO, John C. Brewer, its President, Matthew G. Shepard, and its Chief Engineer each devote 40 hours, or more, per week to the Company’s business, as well as one additional engineer. All additional work is performed on a sub-contract basis. UTTI currently has no employees and has no plans to hire employees in the foreseeable future.

 

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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, 2009 and 2008, the Company has not expended any funds on research and development activities.

 

**Environmental Regulation**

 

Neither the Company nor UTTI believe that any of its activities result in harmful discharge of 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 can comply with such regulations. 

 

**2.****DESCRIPTION OF PROPERTY**

 

The Company’s executive offices are located at 1588 South Main Street under a five year lease. The offices consist of approximately 2,400 square feet. The premises are being leased from Utah Automobile Dealers Association, an unrelated third party, on a monthly basis. UTTI leases space in Salt Lake City from a third party to store its equipment and inventory pursuant to a month-to-month lease.            

 

**3**. **LEGAL PROCEEDINGS**

 

Not Applicable.

 

**4.****SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Not Applicable. 

 

**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 OTC Bulletin Board under the symbol GARB. On August 2, 2002 there were approximately 568 holders of record of the common stock of the Company and the Company believes there were approximately 1,000 beneficial            owners.

 

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During the years ended June 30, 2009 and 2008, the stock was only sporadically traded. The following table sets forth the range of high and low representative bid quotations for the periods indicated.

 

|   | Period |
|--------|--------|

| (Fiscal Year) | High   |   | Low    |
|---------------|--------|--------|--------|
|          |   |   |   |   |
| 2008          |   |   |   |   |
| 1st Quarter   |   | .04    |   | .02 |
| 2nd Quarter   |   | .03    |   | .02 |
| 3rd Quarter   |   | .03    |   | .02 |
| 4th Quarter   |   | .04    |   | .02 |
|  

2009  |   |   |   |   |
| 1st Quarter   |   | .03    |   | .01 |
| 2nd Quarter   |   | .02    |   | .00 |
| 3rd Quarter   |   | .05    |   | .00 |
| 4th Quarter   |   | .01    |   | .01 |

 

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 the operations of the Company and dividends will not be declared for shareholders. The Company is not subject to any contractual restrictions on the payment of dividends.

 

**Sales of Unregistered Securities**

 

During the fiscal year ended June 30, 2009, 1,000,000 shares were issued for cash and 23,271,611 shares were issued in payment of loans payable by the Company. 

 

**6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

 

Management is pursuing 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, or potential purchasers, of Garbalizer shredders in establishing used and new tire marketing joint ventures. The Company continues to pursue the            licensing or leasing of the OTR Tire Disintegrator System. The Company 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. Management also believes that with the new marketing strategies that are now implemented the potential for machinery sales has increased. The Company is now in the process of marketing commodities imported from China through its Minority Distributor, Lone Willow, LLP            of Virginia.  The Company has submitted quotes for dry wall, cement and other building materials to Lone Willow which Lone Willow will market to users of such materials in the Eastern, North Eastern and South Eastern United States. Because of its Minority status Lone Willow has an opportunity to achieve a favorable position for sales to contractors involved in rebuilding in Louisiana, Mississippi, Texas and other areas.  Additional building materials and other            commodities are available to the Company from China if the Company and Its Distributor are successful in marketing the commodities. If any of such possible 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, are owed to the Company’s Chief Executive Officer, John Brewer or other shareholders of the Company. Current funding has come from operations and sales and the Company is currently in            negotiations with several investment sources for equity investment in the company, which if successful, will satisfy long-term operations and capital expenditures.  There are no guarantees that such negotiations will be successful.

 

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Operating expenses for the Company have been paid in part from short-term unsecured notes from shareholders. At June 30, 2009 the Company had a deficit in working capital (current liabilities in excess of current assets) of $2,888,129. The working capital deficit at June 30, 2008 was $2,821,170. The decrease in working capital was caused by the continued accrual of salary, interest            and other accounts payable for expenses, which the Company was unable to pay in cash.

 

Other than its short-term office lease and loans payable to affiliates and non-related parties, the Company, excluding UTTI, is not subject to any material commitments or capital expenditures. 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. UTTI is obligated to its minority            owner in the principal amount of $165,000, plus interest. Such loan is now due on demand. The Company also made advances to UTTI to pay its operating expenses during its start-up phase.

 

When shredding machines are sold the company requires that 50% of the total selling price be deposited with the company as protection against cancellation of the sales contract. The company has access to these funds and uses them to cover part of the manufacturing costs of the shredder. The company is also required to give a deposit to the manufacturer of the shredder, at the time the company            contracts with the manufacturer to build a machine. When the machine is finished and delivered to the buyer, it is completed and tested prior to delivery. At the time of shipment the buyer is required to pay the balance due on the sales contract. Because of the successful history of the company’s machine performance, the deposit requirement has not presented a problem in sales. For one year the buyer has a warranty to cover performance of the machine.

 

The Company received no revenue from sales during the current fiscal year. 

 

The Company derived a loss from operations before other income (expense) during the years ended June 30, 2009 and June 30, 2008 of $243,049 and $237,274, respectively. Total expenses for 2009 were $243,049 compared to $237,274 in 2008. Salaries, wages, commissions and consulting fees were $163,640 in 2009 compared to $163,157 in 2008. Rental expenses were $19,200 in 2009 and $16,200 in 2008. Total            expenses increased primarily because of increases in Salaries and Wages. If more of the Company’s plans for revenue producing activities come to fruition, expenses will rise accordingly.

 

Net loss for the year ended June 30, 2009 was $431,033 compared to a net loss of $400,018 in 2008. On a per share basis, the net loss for the year ended June 30, 2009 was ($0.02) compared to net loss of ($0.02) in 2008. Operating losses are expected to continue until such time, if ever, as the Company receives sufficient revenues from the sale of shredders, crumb rubber plants, the lease or license of            the OTR Tire Disintegrator System, or other operations. There is no assurance that the Company will ever be profitable. The ongoing losses have created substantial pressure on the Company’s liquidity. The Company has had to engage in less favorable borrowing arrangements with higher interest and borrowing costs, to meet its cash flow requirements.

 

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. For several years the tire repair equipment owned by UTTI has been            stored in facilities in Illinois for use by a company associated with Garb-Oil.  Consequently there has been no storage or rental expense related to the UTTI tire repair equipment during this time.  Current plans include use of this machinery at facilities owned by a purchaser of one of the company's shredders. Current negotiations are continuing regarding use of the tire repair machinery and the company is incurring no storage costs during these negotiations.

 

During the year ended June 30, 2009, the Company had a net decrease in cash of $8,072. The primary sources of cash were from additional loans from financing activities.

 

**Newly Issued Accounting Pronouncements**

 

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF No. 03-6-1”). Under FSP EITF No. 03-6-1, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid)            are participating securities, and should be included in the two-class method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company’s financial statements.

 

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations” and SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51". SFAS 141R will change how business acquisitions are accounted for and will impact  financial             statements both  on the acquisition  date and in subsequent  periods. SFAS 160 will change 

 

9

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the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective for the Company beginning July 1, 2009. Early adoption is not permitted. The Company is evaluating the impact these statements will have on its financial            statements.         

 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” an amendment of FASB Statement No. 13” (“SFAS 161”). SFAS 161 will enhance the current disclosure framework in SFAS No. 133 for derivative instruments and hedging activities. SFAS 161 is effective for the Company beginning July 1, 2009. The Company anticipates            that the adoption of SFAS 161 will not have a material impact on its financial statements.

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years            beginning after November 15, 2007. We are currently assessing the impact of SFAS No. 159 on our financial position and results of operations.

 

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes            in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The adoption of SFAS No. 158 had no impact on our financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fair value, establishes a framework for measuring fair value in generally GAAP, expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements.            However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for us would be the fiscal year beginning April 1, 2008. We are currently evaluating the impact of SFAS No. 157 but do not expect that it will have a material impact on our financial statements.

 

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108            requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The adoption of SAB No. 108 had no impact on our financial position and results of operations.

 

**7.****FINANCIAL STATEMENTS**

[The remainder of this page was intentionally left blank]

 

10

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

 

**CONSOLIDATED FINANCIAL STATEMENTS**

 

**June 30, 2009 and 2008**

 

----

 

 

**C O N T E N T S**

 

| Report of Independent Registered Public Accounting Firm   | F-2    |
|-----------------------------------------------------------|--------|
|                                                      |   |
| Consolidated Balance Sheets                               | F-3    |
|                                                      |   |
| Consolidated Statements of Operations                     | F-5    |
|                                                      |   |
| Consolidated Statements of Stockholders' Equity (Deficit) | F-6    |
|                                                      |   |
| Consolidated Statements of Cash Flows                     | F-7    |
|                                                      |   |
| Notes to the Consolidated Financial Statements            | F-8    |

 

 

 

 

 

F-1

 

 

----

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders

Garb Oil & Power Corporation and Subsidiaries

Salt Lake City, Utah

 

We have audited the consolidated balance sheets of Garb Oil & Power Corporation and Subsidiaries as of June 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the two years then ended. 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 audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 provide a reasonable basis for our opinion.

 

In our opinion, 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 Jun 30, 2009 and 2008 and the results of their operations and their cash flows for the two years then ended, in conformity with U.S. generally accepted accounting principles. 

 

We were not engaged to examine management's assertion about the effectiveness of Garb Oil & Power Corporation and Subsidiaries' internal control over financial reporting as of June 30, 2009 and 2008 and, accordingly, we do not express an opinion thereon.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s continual net losses and large accumulated deficit, among other issues, 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.

 

/s/ HJ & Associates, LLC

 

HJ & Associates, LLC

Salt Lake City, Utah

October 13, 2009

 

 

 

 

F-2

 

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Consolidated Balance Sheets

 

 

| ASSETS                         |        |
|--------------------------------|-------------|
|                           |        |
|                           | June 30,    |   | June 30, |   |
|                           | 2009        |   | 2008 |   |
|                           | (Unaudited) |   |   |   |
| CURRENT ASSETS                 |        |   |   |   |   |   |
|                           |        |   |   |   |   |   |
| Cash                           | $           | -  |   |   | $ | 8,072  |
| Prepaid expenses               |        | 300  |   |   |   | 300  |
|                           |        |   |   |   |   |   |
| Total Current Assets           |        | 300  |   |   |   | 8,372  |
|                           |        |   |   |   |   |   |
| PROPERTY AND EQUPMENT          |        |   |   |   |   |   |
|                           |        |   |   |   |   |   |
| Office equipment               |        | 11,658  |   |   |   | 11,658  |
| Building improvements          |        | 8,022  |   |   |   | 8,022  |
| Less: accumulated depreciation |        | (19,680) |   |   |   | (19,680) |
|                           |        |   |   |   |   |   |
| Total Property and Equipment   |        | -  |   |   |   | - |
|                           |        |   |   |   |   |   |
|                           |        |   |   |   |   |   |
| TOTAL ASSETS                   | $           | 300  |   |   | $ | 8,372  |
|                                |             |  |  |  |  |  |  |

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3

 

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Consolidated Balance Sheets (Continued)

 

 

 

|                                                              | June 30, |             | June 30, |   |
|-------------------------------------------------------------------|----------|------------------|----------|--------|
|                                                              | 2009     |             | 2008     |   |
|                                                              |     |             |     |   |   |
| CURRENT LIABILITIES                                               |     |             |     |   |   |   |
|                                                              |     |             |     |   |   |   |
| Bank overdraft                                                    | $        | 5,538       |     | $      | -  |   |
| Accounts payable and accrued expenses                             |     | 72,162      |     |   | 53,192  |   |
| Notes payable – Note 7                                      |     | 533,820     |     |   | 533,820  |   |
| Accounts and notes payable – related parties – Note 3 |     | 405,438     |     |   | 650,875  |   |
| Accrued interest                                                  |     | 753,608     |     |   | 649,989  |   |
| Accrued interest – related parties – Note 3           |     | 103,205     |     |   | 59,666  |   |
| Wages payable                                                     |     | 1,014,658   |     |   | 882,000  |   |
|                                                              |     |             |     |   |   |   |
| Total Current Liabilities                                         |     | 2,,888,429  |     |   | 2,829,542  |   |
|                                                              |     |             |     |   |   |   |
| Total Liabilities                                                 |     | 2,888,429   |     |   | 2,829,542  |   |
|                                                              |     |             |     |   |   |   |
|                                                              |     |             |     |   |   |   |
| STOCKHOLDERS' EQUITY (DEFICIT)                                    |     |             |     |   |   |   |
|                                                              |     |             |     |   |   |   |
| Common stock; (no par value) 80,000,000 shares                    |     |             |     |   |   |
|     authorized; 47,170,709 and 22,899,098     |          |                  |          |        |  |  |
| shares outstanding, respectively                                  |     | 3,306,709   |     |   | 2,942,635  |   |
| Accumulated deficit                                               |     | (6,194,838)      |     |   | (5,763,805) |   |
|                                                              |     |             |     |   |   |   |
| Total Stockholders' Equity (Deficit)                              |     | (2,888,129)      |     |   | (2,821,170) |   |
|                                                              |     |             |     |   |   |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)               | $        | 300         |     | $      | 8,372  |
|                                                                   |          |                  |          |        |  |  |  |  |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Consolidated Statements of Operations 

 

 

|                         | For the Years Ended |
|------------------------------|---------------------|
|                         | June 30,            |
|                         | 2009                |   | 2008 |
|                         |                |   |   |   |   |
| SALES                        |                |   |   |   |   |
| Shredder sales               | $                   | -  |   | $ | -  |
| Other sales                  |                | -  |   |   | -  |
| Total Sales                  |                | -  |   |   | -  |
|                         |                |   |   |   |   |
| COST OF SALES                |                |   |   |   |   |
| Cost of shredders            |                | -  |   |   | -  |
| Other direct costs           |                | -  |   |   | -  |
| Total Cost of Sales          |                | -  |   |   | -  |
|                         |                |   |   |   |   |
| GROSS LOSS                   |                | -  |   |   | -  |
|                         |                |   |   |   |   |
| EXPENSES                     |                |   |   |   |   |
| Salary and wages             |                | 163,640  |   |   | 163,157  |
| Office                       |                | 825  |   |   | 2,494  |
| Rent                         |                | 19,200  |   |   | 16,200  |
| Telephone                    |                | 4,395  |   |   | 4,268  |
| Professional fees            |                | 37,500  |   |   | 27,887  |
| Insurance                    |                | 4,790  |   |   | 9,715  |
| Taxes and licenses           |                | 3,832  |   |   | 6,468  |
| Travel and entertainment     |                | -  |   |   | 512  |
| Advertising                  |                | -  |   |   | 950  |
| Depreciation                 |                | -  |   |   | -  |
| Repairs and maintenance      |                | 69  |   |   | 318  |
| Other                        |                | 8,808  |   |   | 5,305  |
| Total Expenses               |                | 243,049  |   |   | 237,274  |
|                         |                |   |   |   |   |
| OPERATING (LOSS)             |                | (243,049) |   |   | (237,274) |
|                         |                |   |   |   |   |
| OTHER INCOME (EXPENSES)      |                |   |   |   |   |
| Interest expense             |                | (187,984) |   |   | (162,186) |
| Loss on write-off of assets  |                | -  |   |   | (558) |
|                         |                |   |   |   |   |
| Total Other Income (Expense) |                | (187,984) |   |   | (162,774) |
|                         |                |   |   |   |   |
| NET LOSS                     | $                   | (431,033) |   | $ | (400,018) |
|                         |                |   |   |   |   |
| BASIC (LOSS) PER SHARE       | $                   | (0.02) |   | $ | (0.02) |
|                         |                |   |   |   |   |
| WEIGHTED AVERAGE NUMBER      |                |   |   |   |   |
| OF SHARES OUTSTANDING        |                | 24,845,488 |   |   | 22,899,098  |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

 

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Consolidated Statements of Stockholders’ Equity (Deficit) 

 

 

|                                                    | Common Stock |             | Accumulated |
|---------------------------------------------------------|--------------|------------------|-------------|
|                                                    | Shares       |             | Amount      |   | Deficit |
|                                                    |         |             |        |   |   |   |   |   |
| Balance, June 30, 2007                                  |         | 22,899,098  |        | $ | 2,942,635  |   | $ | (5,363,787) |
| Net loss for the year ended  June 30, 2008    |         | -                |        |   | - |   |   | (400,018) |
| Balance, June 30, 2008                                  |         | 22,899,098       |        | $ | 2,942,635 |   | $ | (5,763,805) |
| Shares issued for cash                                  |         | 1,000,000        |        |   | 15,000 |   |   | -  |
| Shares issued for pay loans   payable    |         | 23,271,611       |        |   | 349,074 |   |   | -  |
| Net loss for the period ended   June 30, 2009 |         | -           |        |   | -  |   |   | (431,033) |
|                                                    |         |             |        |   |   |   |   |   |
| Balance, June 30, 2009                                  |         | 47,170,709  |        | $ | 3,306,709  |   | $ | (6,194,838) |

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-6

 

 

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GARB OIL & POWER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

 

 

|                                                           | For the Years Ended |
|----------------------------------------------------------------|---------------------|
|                                                           | June 30,            |
|                                                           | 2009                |   | 2008 |
|                                                           |                |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                           |                |   |   |   |   |
|                                                           |                |   |   |   |   |
| Net loss                                                       | $                   | (431,033) |   | $ | (400,018) |
| Adjustments to reconcile net loss to net cash provided         |                |   |   |   |   |
| (used) in operating activities:                                |                |   |   |   |   |
| Depreciation                                                   |                | -  |   |   | - |
| Adjustment for misclassified asset                             |                | -  |   |   | 558 |
| Changes in current assets and liabilities:                     |                |   |   |   |   |
| Prepaid expenses                                               |                | -  |   |   | 143 |
| Accounts payable and accrued expenses                          |                | 18,970  |   |   | 2,047 |
| Accrued payroll                                                |                | 132,658  |   |   | 93,000 |
| Accrued interest payable and accrued interest                  |                |   |   |   |   |
| payable - related party                                        |                | 147,158  |   |   | 137,301 |
|                                                           |                |   |   |   |   |
| Net Cash Used by Operating Activities                          |                | (132,247) |   |   | (166,969) |
|  

CASH FLOWS FROM INVESTING ACTIVITIES                   |                |   |   |   |   |
|  

Net Cash Provided by Investing Activities              |                | -  |   |   | -  |
|                                                           |                |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                           |                |   |   |   |   |
|                                                           |                |   |   |   |   |
| Bank overdraft                                                 |                | 5,538  |   |   | - |
| Common stock issued for cash                                   |                | 15,000  |   |   | - |
| Common stock issued for payment of notes payable-related party |                | 349,074  |   |   | - |
| Proceeds from notes payable-related party                      |                | 96,771  |   |   | 176,681 |
| Payment of notes payable-related party                         |                | (342,208) |   |   | (5,000) |
|  

Net Cash Provided by Financing Activities              |                | 124,175  |   |   | 171,681 |
|                                                           |                |   |   |   |   |
| NET (DECREASE) INCREASE IN CASH                                |                | (8,072) |   |   | 4,712 |
|                                                           |                |   |   |   |   |
| NET CASH AT BEGINNING OF PERIOD                                |                | 8,072  |   |   | 3,360  |
|                                                           |                |   |   |   |   |
| NET CASH AT END OF PERIOD                                      | $                   | -  |   | $ | 8,072  |
|                                                           |                |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION               |                |   |   |   |   |
|                                                           |                |   |   |   |   |
| Cash paid for interest                                         | $                   | 31,030 |   | $ | 25,089  |
| Cash paid for income taxes                                     | $                   | - |   | $ | -  |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

F-7

 

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

| 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 had 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 Company exited the development stage on June 30, 2004.

 

The accompanying consolidated 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 consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 - Going Concern

 

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, 2009 and 2008, the Company has incurred a net loss of $431,033 and $400,018,            respectively, and as of June 30, 2009, the Company’s accumulated deficit was $6,194,838. 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, and is in serious negotiations with a foreign company            to acquire control of the company and provide needed financing and managerial changes. The company sells tire shredders and sold one machine in the prior fiscal year. The Company also imports new tires from China to be sold through Black Minority Distributors. The company has imported and sold two orders of new tires for a total of $305,400 in recent years.  A new scrap-tire processing machine owned by the company is being developed in China and the pilot model has yet to            be completed. In the Business Description section of the 10K report the machine is described and discussed as the OTR Disintegrator machine to process large Off the Road Tires used in the mining, road construction and related industries. There are hundreds of millions of these large scrap tires stored worldwide at various 

 

 

F-8

 

 

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**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

NOTE 1 -       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

mining sites that can be recycled if the machine proves successful when completed and tested. Currently there are no machines available that are capable of processing these large tires. Current plans to utilize this machine have been made by the company to sell or lease the machines with a continuing royalty to be paid the company each year for a seven-year period. Representatives            of the company have contacted the companies who have the stockpiled OTR scrap tires and have received much interest and indications that the companies would like to become involved when the machines are ready for operation.

 

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. 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. Depreciation expense for the years ended June 30, 2009 and 2008, was $0 and $0, respectively.

 

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.

 

|   | f. Revenue Recognition |
|--------|------------------------|

 

Revenue is recognized when the sales amount is determined, shipment of goods to the customer has occurred, and collection is reasonably assured. 

 

g. Advertising Costs

 

The Company expenses all advertising costs as incurred. Advertising expense was $0 and $950 for the years ending June 30, 2009 and 2008, respectively.

 

h. 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.

 

F-9

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

NOTE 1 -       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

i. 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 Years Ended |
|-------------------------------------|---------------------|
|                                | June 30,            |
|                                | 2009                |   | 2008 |
|                                |                |   |   |   |   |
| Net income (loss) (numerator)       | $                   | (431,033) |   | $ | (400,018) |
|                                |                |   |   |   |   |
| Weighted average shares outstanding |                |   |   |   |   |
| (denominator)                       |                | 24,845,488 |   |   | 22,899,098  |
|                                |                |   |   |   |   |
| Basic income (loss) per share       | $                   | (0.02) |   | $ | (0.02) |

 

j. 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, prepaid expenses, trade accounts payable 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, 2009. 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.

 

k. Concentration of Credit Risk

 

The Company maintains cash in federally insured bank accounts. At times these amounts exceed insured limits. The Company does not anticipate any losses from these deposits.

 

l. Newly Issued Accounting Pronouncements

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF No. 03-6-1”). Under FSP EITF No. 03-6-1, unvested share-based payment awards that contain rights to receive nonforfeitable dividends            (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company’s financial statements.

 

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations” and SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51". SFAS 141R will change how business acquisitions are accounted for and will impact financial            statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141R and SFAS 160 are effective for the Company beginning July 1, 2009. Early adoption is not permitted. The Company is evaluating the impact these statements will have on its financial            statements.                 

 

F-10

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

NOTE 1 -       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” an amendment of FASB Statement No. 13” (“SFAS 161”). SFAS 161 will enhance the current disclosure framework in SFAS No. 133 for derivative instruments and hedging activities. SFAS 161 is effective for the Company beginning July 1, 2009. The            Company anticipates that the adoption of SFAS 161 will not have a material impact on its financial statements.

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is            effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS No. 159 on our financial position and results of operations.

 

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and            to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The adoption of SFAS No. 158 had no impact on our financial position and results of operations.

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fair value, establishes a framework for measuring fair value in generally GAAP, expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair            value measurements. However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for us would be the fiscal year beginning April 1, 2008. We are currently evaluating the impact of SFAS No. 157 but do not expect that it will have a material impact on our financial statements.

 

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial            statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The adoption of SAB No. 108 had no impact on our financial position and results of operations.

 

m. Income Taxes

Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating 

 

F-11

 

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

NOTE 1 -        ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Continued)

 

loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the            deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which,            based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable            taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statement of income.

 

| NOTE 2 - | 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. Utah Truck Tire, Inc. is currently dormant, having no revenues and incurring minimal expenses during the years ended June 30, 2009 and 2008. Utah Truck Tire, Inc. was primarily in the business of selling retread diesel truck tires.

 

| NOTE 3 - | RELATED PARTY TRANSACTIONS |
|----------|----------------------------|

 

The Company executed an employment agreement with its then President, currently its CEO, on May 1, 1986. The agreement is of a continuing nature and specifies no date of termination. Under the terms of the agreement, the CEO’s salary was stated at $48,000 per year and is reviewed by the Board of Directors annually. The salary amount in the previously executed employment            agreement did not change after the officer’s change in title. As of June 30, 2009 and 2008, the current CEO was owed accrued salary of $840,000 and $792,000, respectively.

 

The company also executed an employment agreement with its President on January 9, 2006. As of June 30, 2009 and 2008, the President was owed 

 

F-12

 

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

| NOTE 3 - | RELATED PARTY TRANSACTIONS (continued) |
|----------|----------------------------------------|

 

accrued salary of $135,000 and $90,000, respectively.

 

During the years ended June 30, 2009 and 2008, notes payable-related parties decreased $245,437 and increased $176,681, respectively. On June 10, 2009, 23,271,611 shares of common stock were issued at the then fair market value of $.015 per share in payment of related-party loans and accrued interest due to the company’s CEO, decreasing the balance of notes payable-related            parties. The prior year increase was due to additional proceeds from notes payable. 

 

Accounts payable and notes payable to related parties consisted of the following at June 30, 2009 and 2008:

 

|                                        | 2009   |          | 2008   |
|---------------------------------------------|--------|---------------|--------|
|                                        |   |          |   |   |   |
| Accounts payable to a related party,        |   |          |   |   |   |
| due on demand, no interest, unsecured       | $      | 180,000  |   | $ | 180,000  |
|                                        |   |          |   |   |   |
| Accounts payable to a related party,        |   |          |   |   |   |
| due on demand, variable interest, unsecured |   | -        |   |   | 255,437  |
|                                        |   |          |   |   |   |
| Notes payable to a related party, due on    |   |          |   |   |   |
| demand, plus interest at 18% per annum,     |   |          |   |   |   |
| unsecured                                   |   | 188,075  |   |   | 173,075  |
|                                        |   |          |   |   |   |
| Note payable to a related party, due on     |   |          |   |   |   |
| demand, plus interest at 8% per annum,      |   |          |   |   |   |
| unsecured                                   |   | 25,000   |   |   | 30,000  |
|                                        |   |          |   |   |   |
| Note payable to a related party, due on     |   |          |   |   |   |
| demand, plus interest at 5% per month,      |   |          |   |   |   |
| unsecured                                   |   | 12,363   |   |   | 12,363  |
|                                        |   |          |   |   |   |
|                                        |   | 405,438  |   |   | 650,875  |
|                                        |   |          |   |   |   |
| Less: Current Portion                       |   | (405,438)     |   |   | (650,875) |
|                                        |   |          |   |   |   |
| Long-Term Notes Payable to Related Parties  | $      | -        |   | $ | -  |

 

 

The aggregate principal maturities of notes payable to related parties are as follows:

 

| Year Ended          |   |    |
|---------------------|--------|---------|
| June 30,            | Amount |
|                |   |    |
| 2010                | $      | 405,438 |
| 2011                |   | -       |
| 2012                |   | -       |
| 2013                |   | -       |
| 2014 and thereafter |   | -       |
| Total               | $      | 405,438 |

 

 

As of June 30, 2009 and 2008, accrued interest related to the related party notes payable was $103,205 and $59,666, respectively. Interest expense related to the related party notes payable for the years ended June 30, 2009 and 2008 was $81,435 and $59,395, respectively. 

 

F-13

 

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 
| NOTE 4 - | INCOME TAXES |
|----------|--------------|

 

Effective January 1, 2007 we adopted FASB Interpretation No.48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 "(“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in accordance with SFAS No. 109, “Accounting for Income Taxes .” FIN 48 is a comprehensive model for how a company            should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. If an income tax position exceeds a more likely than not (greater than 50%) probability of success upon tax audit, the company will recognize an income tax benefit in its financial statements. Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with            jurisdictional tax laws. We did not have any unrecognized tax benefits and there was no effect on our financial condition 

 

or results of operations as a result of implementing FIN 48. We file income tax returns in the U.S. federal and state of Utah jurisdictions. We are no longer subject to tax examinations for years before 2004. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. Our policy is that we recognize interest and penalties accrued            on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN 48, we did not have any accrued interest or penalties, associated with any unrecognized tax benefits, nor was any interest expense recognized during the period. Our effective tax rate differs from the federal statutory rate primarily due to non-deductible expenses and is offset somewhat by state tax credits.

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred            tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax liabilities consist of the following components as of June 30, 2009 and 2008.

 

|                     | 2009              |        | 2008    |
|--------------------------|-------------------|-------------|---------|
|                     |              |        |    |   |   |
| Deferredtax assets:      |              |        |    |   |   |
|                     | NOL carryover     | $           | 985,221 |   | $ | 887,107 |
|                     | Related parties   |        | 40,250  |   |   | 39,814 |
|                     | Accrued wages     |        | 395,717 |   |   | 343,980 |
|                     | Capital carryover |        | -       |   |   | - |
|                     |              |        |    |   |   |
| Deferredtax liabilities: |              |        |    |   |   |
|                     | Depreciation      |        | -       |   |   | - |
|                     |              |        |    |   |   |
| Valuation allowance      |              | (1,421,188) |    |   | (1,270,901) |
|                     |              |        |    |   |   |
| Net deferred tax asset   | $                 | -      |    | $ | -  |

 

 

F-14

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

| NOTE 4 - | INCOME TAXES (continued) |
|----------|--------------------------|

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended June 30, 2009 and 2008 due to the following:

 

|                    | 2009   |      | 2008   |
|-------------------------|--------|-----------|--------|
|                    |   |      |   |   |   |
| Book income             | $      | (167,986) |   | $ | (156,007) |
|                    |   |      |   |   |   |
| Meals and entertainment |   | -         |   |   | 100 |
| Other                   |   | 1,155     |   |   | 363 |
| Valuation allowance     |   | 166,831   |   |   | 155,544 |
|                    |   |      |   |   |   |
|                    | $      | -    |   | $ | -  |

 

At June 30, 2009, the Company had net operating loss carryforwards of approximately $2,480,000 that may be offset against future taxable income from the year 2009 through 2029. No tax benefit has been reported in the June 30, 2009 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. 

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

 

| NOTE 5 - | COMMITMENTS |
|----------|-------------|

 

The Company executed an employment agreement with its then President, currently its CEO, on May 1, 1986. The agreement is of a continuing nature and specifies no date of termination. Under the terms of the agreement, the CEO’s salary was stated at $48,000 per year and is reviewed by the Board of Directors annually. The salary amount in the previously executed employment            agreement did not change after the officer’s change in title. As of June 30, 2009 and 2008, the current CEO was owed accrued salary of $840,000 and $792,000, respectively.

 

The company also executed an employment agreement with its President on January 9, 2006. As of June 30, 2009 and 2008, the President was owed accrued salary of $135,000 and $90,000, respectively.

 

| NOTE 6 - | OPERATING LEASES |
|----------|------------------|

 

The Company shares office space with Garbalizer Corporation of America and Commodities Trading 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 $19,200 and $16,200 for the years ended June 30, 2009 and 2008, respectively.

 

| NOTE 7 - | NOTES PAYABLE |
|----------|---------------|

 

During the years ended June 30, 2009 and 2008, notes payable decreased $0 and $5,000, respectively. The changes are due to payments of and proceeds from additional notes payable, as well as reclassifications of note payable balances.

 

F-15

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

| NOTE 7 - | NOTES PAYABLE (continued) |
|----------|---------------------------|

 

Notes payable consisted of the following at June 30, 2009 and 2008:

 

|                                          | 2009   |          | 2008   |
|-----------------------------------------------|--------|---------------|--------|
|                                          |   |          |   |   |   |
| Note payable, due on demand, plus interest    |   |          |   |   |   |
| at 12% per annum, unsecured                   | $      | 68,493   |   | $ | 68,493  |
|                                          |   |          |   |   |   |
| Note payable, due on demand, plus interest    |   |          |   |   |   |
| at 12% per annum, unsecured                   |   | 165,000  |   |   | 165,000  |
|                                          |   |          |   |   |   |
| Notes payable, due on demand, plus interest   |   |          |   |   |   |
| at 10% per annum, unsecured                   |   | 20,000   |   |   | 20,000  |
|                                          |   |          |   |   |   |
| Note payable, due on demand, plus interest    |   |          |   |   |   |
| at 12%, unsecured                             |   | 18,000   |   |   | 18,000  |
|                                          |   |          |   |   |   |
| Note payable, due on demand, plus interest    |   |          |   |   |   |
| at $500 per week, secured by sales contract   |   |          |   |   |   |
| and officer guarantee                         |   | 35,000   |   |   | 35,000  |
|                                          |   |          |   |   |   |
| Note payable, due on demand, 12% interest,    |   |          |   |   |   |
| one time loan fee of $33,000, unsecured       |   | 28,000   |   |   | 28,000  |
|                                          |   |          |   |   |   |
| Note payable, due on demand, plus interest    |   |          |   |   |   |
| at 18% per annum Oct. 7, 2005 through Jan.    |   |          |   |   |   |
| 6, 2006 then $500 per week through April 1,   |   |          |   |   |   |
| 2009, then $5,000 per month, secured by       |   |          |   |   |   |
| company stock owned by stockholder            |   | 129,327  |   |   | 129,327  |
|                                          |   |          |   |   |   |
| Note payable, due January 6, 2007, one time   |   |          |   |   |   |
| loan fee of one million shares, secured by    |   |          |   |   |   |
| all company assets including future sales of  |   |          |   |   |   |
| cement and urea by a related company          |   | 50,000   |   |   | 50,000  |
|                                          |   |          |   |   |   |
| Note payable, due August 1, 2006, 12%         |   |          |   |   |   |
| interest, one time loan fee of $2,500,        |   |          |   |   |   |
| secured by all company assets                 |   | 10,000   |   |   | 10,000  |
|                                          |   |          |   |   |   |
| Note payable, due July 26, 2006, no interest, |   |          |   |   |   |
| one time loan fee of $500, unsecured          |   | 5,000    |   |   | 5,000  |
|                                          |   |          |   |   |   |
| Note payable, due September 5, 2006, plus     |   |          |   |   |   |
| interest at 5% per month, unsecured           |   | 2,250    |   |   | 2,250  |
|                                          |   |          |   |   |   |
| Note payable, due September 5, 2006, plus     |   |          |   |   |   |
| time loan fee of 100,000 stock options and    |   |          |   |   |   |
| interest at 5% per month, unsecured           |   | 2,750    |   |   | 2,750  |
|                                          |   |          |   |   |   |
|                                          |   | 533,820  |   |   | 533,820  |
|                                          |   |          |   |   |   |
| Less: Current Portion                         |   | (533,820)     |   |   | (533,820) |
|                                          |   |          |   |   |   |
| Long-Term Notes Payable                       | $      | -        |   | $ | -  |

 

 

F-16

 

----

**GARB OIL & POWER CORPORATION AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

June 30, 2009 and 2008

 

NOTE 7 -        NOTES PAYABLE (Continued)

 

The aggregate principal maturities of notes payable are as follows:

 

| Year Ended          |   |    |
|---------------------|--------|---------|
| June 30,            |   | Amount  |
|                |   |    |
| 2010                | $      | 533,820 |
| 2011                |   | -       |
| 2012                |   | -       |
| 2013                |   | -       |
| 2014 and thereafter |   | -       |
| Total               | $      | 533,820 |

 

As of June 30, 2009 and 2008, accrued interest related to notes payable was $753,608 and $649,989, respectively. Interest expense related to notes payable for the years ended June 30, 2009 and 2008 was $103,619 and $102,791, respectively. 

 

NOTE 8 -       SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through October 13, 2009, which is the date the financial statements were available to be issued. There are no material subsequent events to be reported.

 

 

F-17

----

**8. CHANGES IN ACCOUNTANTS AND DISAGREEMENTS WITH ACCOUNTANTS ON**

|   | **ACCOUNTING AND FINANCIAL DISCLOSURE** |
|--------|-----------------------------------------|

Not applicable except as previously reported.

 

**8A. CONTROLS AND PROCEDURES**

|   | (a) | Disclosure Controls and Procedures: |
|--------|-----|-------------------------------------|

Based on an evaluation as of the date of the end of the period covered by our report, our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that our            disclosure controls and procedures contained significant internal control weaknesses that, in the aggregate, represent material weaknesses, as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures            designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

|   | (b) | Management’s Annual Report on Internal Control Over Financial Reporting: |
|--------|-----|--------------------------------------------------------------------------------|

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f).  Management conducted an evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2008, using the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring            Organizations of the Treadway Commission (COSO).  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  

In connection with the preparation of our financial statements for the year ended June 30, 2009, certain significant internal control deficiencies became evident to management that, in the aggregate, represent material weaknesses, including,

|   | i. | Lack of independent directors for our audit committee; |
|--------|----|--------------------------------------------------------|

|   | ii. | Insufficient control processes for recording and approving journal entries; |
|--------|-----|-----------------------------------------------------------------------------|

|   | iii. | Insufficient policies and procedures over various financial statement areas; |
|--------|------|------------------------------------------------------------------------------|

|   | iv. | Lack of an audit committee financial expert; |
|--------|-----|----------------------------------------------|

|   | v. | Failure to correctly record transactions and failure to timely complete documentation, testing and evaluation of internal accounting and financial reporting controls, resulting in untimely completion of accounting, preparation of financial statements and preparation of this annual report. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Although these weaknesses persisted during much of the current fiscal year, a consulting firm was engaged after year end to assist the company in improving its internal control.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect financial statement misstatements on a timely basis. A deficiency in design exists when a control necessary to meet the control objective is missing, or when an existing control is not properly designed so that            even if the control operates as designed, the control objective would not be met. A deficiency in operation exists when a properly designed control does not operate as designed or when the person performing the control does not possess the necessary authority or competence to perform the control effectively.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. 

 

11

 

----

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

This Annual Report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this            annual report.

 

|   | c) | Changes in Internal Control Over Financial Reporting |
|--------|----|------------------------------------------------------|

There has been significant change in our internal control over financial reporting that occurred during our most recent fiscal quarter (our first fiscal quarter of our new reporting year) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. After the end of the current reporting period, Cadence Consulting was engaged to assist            management in improving internal control over financial reporting. Implementation of various systems and procedures will significantly improve our internal control. Examples of such systems and procedures include: Period End Closing Checklists describing improved financial information review procedures, checklists for improved review of application of Generally Accepted Accounting Principles and SEC reporting principles, and use of Risk and Control matrix to more formally evaluate            and document evaluation of internal control.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of            financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

(a)        Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

 

(b)        Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant;            and

 

(c)        Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

 

8B. OTHER INFORMATION

None

**PART III**

 

**9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; 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.

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     |   | 86  |   | CEO, CFO, Chairman of the Board of Directors |
| Matthew G. Shepard |   | 34  |   | President                                    |
| Bill Vee Anderson  |   | 57  |   | Vice-President and Director                  |

 

12

 

 

----

 

John C. Brewer had 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 Garbalizer Corporation of America which is a major shareholder of the Company. Mr. Brewer devotes            approximately 40 hours per week to the Company as well as additional time to his other business interests. On January 13, 2006, the Board of Directors appointed Matthew G. Shepard President and director, retaining Mr. Brewer as its CEO. 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 design 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.

**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 SEC regulation 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, 2009 all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with.

**10. EXECUTIVE COMPENSATION**

There is shown below information concerning the compensation of the Company’s chief executive officer for the fiscal year ended June 30, 2009. Compensation for the other highly compensated executive officers is not required nor presented as no such executive officer’s salary and bonus exceeded $100,000.

 

SUMMARY COMPENSATION TABLE

 

| Name and Principal Position   |   | Fiscal Year |   | Annual Compensation Salary ($) |   |
|-------------------------------|--------|-------------|--------|--------------------------------|--------|
|                          |   |        |   |                           |   |   |
| John C. Brewer, CEO & CFO |   | 2009        |   | $                              | 48,000 |   |
|                          |   | 2008        |   |                           | 48,000 |   |

 

No officer received any form of non-cash compensation from the Company in the fiscal year ended June 30, 2009 or currently receives any such compensation. The Company does provide medical insurance to Mr. Brewer.

 

The Company executed an employment agreement with its then President, currently its CEO, on May 1, 1986. The agreement is of a continuing nature and specifies no date of termination. Under the terms of the agreement, the CEO’s salary was stated at $48,000 per year and is reviewed by the Board of Directors annually. The salary amount in the previously executed employment agreement did not change            after the officer’s change in title. 

 

The company also executed an employment agreement with its President on January 9, 2006. The agreement was for one year with an annual salary of $45,000. As of June 30, 2009 and 2008, the President was owed accrued salary of $135,000 and $90,000, respectively.

 

All or substantially all of such compensation is currently being accrued rather than paid in cash.

 

Other than as set forth above the Company has no employment agreement with any of its officers or directors and has no retirement, profit sharing, pension or insurance plans covering them.

13

 

 

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**11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

The following table sets forth certain information with respect to the beneficial ownership of the Company’s common stock as of June 30, 2009, (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 |
|-------------------------------------------------------------------------------------------------------------|--------|------------|--------|------------------|
| John C. Brewer1588 S. Main StSalt Lake City, UT                                                             |   | 23,271,611 |   | 49.33%           |
|                                                                                                        |   |       |   |             |
| Garbalizer Corporationof America (Notes 1,3 & 4)Newhouse Office Building, Suite 507Salt Lake City, Utah |   | 9,788,291  |   | 20.75%           |
|                                                                                                        |   |       |   |             |
| Bill Anderson 1588 S. Main St., Suite 200Salt Lake City, Utah                                               |   | 306,000    |   | 0.65%            |
|                                                                                                        |   |       |   |             |
| Commodities Trading Corporation 1588 S. Main St., Suite 200 (Note 1)Salt Lake City Utah                     |   | 500,000    |   | 1.06%            |
|                                                                                                        |   |       |   |             |
| All directors and officers as a group                                                                       |   | 33,865,902 |   | 71.79%           |

 

(3 entities; Garbalizer, Commodities Trading and Bill Anderson – see notes 1, 3 & 4)

 

(1)               John C. Brewer beneficially owns 98% of the outstanding common stock of Garbalizer Corporation of America (“GCA”). John Brewer also owns 100% of the outstanding common stock of Commodities Trading Corporation (“CTC”).

(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 9,788,291 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.

The Company is unaware of any arrangements which may result in a change in control of the Company. 

 

**12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

The Company executed an employment agreement with its CEO on May 1, 1986. The agreement is of a continuing nature and specifies no date of termination. Under the terms of the agreement, the CEO’s salary is $48,000 per year and is reviewed by the Board of Directors annually. As of June 30, 2009 and 2008, the CEO was owed accrued salary of $840,000 and $792,000, respectively. The Company executed            an employment agreement with its current President on January 9, 2006. The agreement is of a continuing nature and specifies no date of termination. Under the terms of the agreement, the President’s salary is $45,000 per year and is reviewed by the Board of Directors annually. As of June 30, 2009 and 2008, the President was owed accrued salary of $135,000 and $90,000, respectively. 

 

14

 

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During the years ended June 30, 2009 and 2008, notes payable - related parties decreased $245,437 and increased $176,681, respectively. The changes are due to issuance of 23,271,611 shares of common stock to John C. Brewer, CEO and director, in payment of accrued loans payable, and additional proceeds from notes payable. Some payments were made on notes payable and additional funds were borrowed            during the years ended June 30, 2009 and 2008. 

 

Accounts payable and notes payable to related parties consisted of the following at June 30, 2009:

 

| Accounts payable to a related party, due on demand, no interest. |   |   |    |
|------------------------------------------------------------------|--------|--------|---------|
| unsecured                                                        |   | $      | 180,000 |
|                                                             |   |   |    |
| Note payable to a related party, due on demand, plus interest    |   |   |    |
| at 18% per annum, unsecured                                      |   |   | 188,075 |
|                                                             |   |   |    |
| Note payable to a related party, due on demand, plus interest    |   |   |    |
| at 8% annum, unsecured.                                          |   |   | 25,000  |
|                                                             |   |   |    |
| Note payable to a related party, due on demand, plus interest    |   |   |    |
| at 5% per month, unsecured.                                      |   |   | 12,363  |
|                                                             |   |   |    |
|                                                             |   | $      | 405,438 |

 

As of June 30, 2009 and 2008, accrued interest related to the related party notes payable was $103,205 and $59,666, respectively. Interest expense related to the related party notes payable for the years ended June 30, 2009 and 2008 was $81,435 and $59,395, respectively.

 

**13. EXHIBITS**

 

a. The following financial statements and schedules are filed herewith.

Garb Oil & Power Corporation

|   | Consolidated Balance Sheet - June 30, 2009. |
|--------|---------------------------------------------|

|   | Consolidated Statements of Operations - For the Years Ended June 30, 2009 and 2008. |
|--------|-------------------------------------------------------------------------------------|

Consolidated Statements of Stockholders’ Equity (Deficit) - For the Years Ended June 30, 2009 and 2008.

|   | Consolidated Statements of Cash Flows For the Years Ended June 30, 2009 and 2008. |
|--------|-----------------------------------------------------------------------------------|

 

15

 

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b. The following exhibits are filed herewith or incorporated herein by reference. The SEC 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 |   | Exhibit 10.5 of Registration |
|            |   |   | with John Brewer |   | Statement on Form 10, File No. 0-14859 |
|            |   |   |   |   |   |
| 10              | 10.2 |   | Agreement with Giant Tire |   | Exhibit 10.4 of Form 10-KSB for |
|            |   |   | Recyclers, Inc. |   | June 30, 1997 |
|            |   |   |   |   |   |
| 10              | 10.3 |   | Project Development and |   | Exhibit 10.1 of Form 8-K dated |
|            |   |   | Construction Agreement |   | May 11, 1998 |
|            |   |   | with Trenergy, Inc. |   |   |
|            |   |   |   |   |   |
| 10              | 10.4 |   | Extension Agreement with |   | Filed EX 10-4 of Form 10-KSB for |
|            |   |   | Giant Tire Recyclers, Inc. |   | June 30, 2001 |
|            |   |   |   |   |   |
| 10              | 10.4 |   | Agreement between Garbalizer Machinery |   | Filed herewith |
|            |   |   | Corporation and the Company |   |   |
|            |   |   |   |   |   |
| 21              | 21.1 |   | List of Subsidiaries |   | Exhibit 21.1 of Form 10-KSB for |
|            |   |   |   |   | June 30, 1995 |
|            |   |   |   |   |   |
| 31              | 31.1 |   | Certification Pursuant to Section 302 of |   | Filed herewith |
|            |   |   | the Sarbanes-Oxley Act of 2002 |   |   |
|            |   |   |   |   |   |
| 32              | 32.1 |   | Certification Pursuant to 18 U.S.C. Section |   | Filed herewith |
|            |   |   | 1350 as Adopted Pursuant to Section 906 |   |   |
|            |   |   | of the Sarbanes-Oxley Act of 2002 |   |   |

 

16

 

 

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**14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

The following is a summary of the fees billed to Garb Oil by its principal accountants during the fiscal years ended June 30, 2009, and June 30, 2008:

 

| Fee Category       |   | 2009   |   | 2008   |
|--------------------|--------|--------|--------|--------|
|               |   |   |   |   |   |   |
| Audit Fees         |   | $      | 16,900 |   | $ | 22,600 |
| Audit-related Fees |   | $      | -      |   | $ | - |
| Tax Fees           |   | $      | -      |   | $ | - |
| All other fees     |   | $      | -      |   | $ | - |
|               |   |   |   |   |   |   |
| Total Fees         |   | $      | 16,900 |   | $ | 22,600 |

 

Audit fees. Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and the review of financial statements included in our Forms 10-QSB or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

 

Audit-related fees. Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."

 

Tax fees. Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.

 

All other fees. Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees" and "Tax fees" above. 

 

17

 

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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, Chief Executive Officer and Chief Financial Officer |
|                                 |                                                                |
| DATED this 26th Day of October, 2009 |

 

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: October 26, 2009 | By: /s/ John C. Brewer                  |
|------------------------|-----------------------------------------|
|                   | John C. Brewer, Chief Executive Officer |

 

 

|   | 2. And by its principal financial officer and principal accounting officer. |
|--------|-----------------------------------------------------------------------------|

 

| Date: October 26, 2009 | By: /s/ John C. Brewer                  |
|------------------------|-----------------------------------------|
|                   | John C. Brewer, Chief Financial Officer |

 

 

|   | 3. And by a majority of its Board of Directors. |
|--------|-------------------------------------------------|

 

| Date: October 26, 2009         | By: /s/ John C. Brewer                                 |
|--------------------------------|--------------------------------------------------------|
|  

                  | John C. Brewer, Director 

                       |
| Date: October 26, 2009

  | By: /s/ Matthew G. ShepardMatthew G. Shepard, Director |

 

| Date: October 26, 2009 | By: /s/ Bill Vee Anderson   |
|------------------------|-----------------------------|
|                   | Bill Vee Anderson, Director |

 

18