SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB




            [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 1998

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 0-14859

                          GARB OIL & POWER CORPORATION
                (Exact name of small business issuer as specified
                                 in its charter)


           Utah                                      87-0296694
(State of other jurisdiction of              (I.R.S. Employer Ident. No.)
incorporation or organization)

                  10 Exchange Place, Suite 507
                      Salt Lake City, Utah                   84111 
              (Address of principal executive offices)     (Zip Code)

                                 (801) 322-5410
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock (No par
value)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the Issuer was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.
                                                   YES  X      NO

     As of October  6, 1998,  the  aggregate  value of the voting  stock held by
non-affiliates  of the Issuer,  computed by  reference to the average of the bid
and ask price on such date was $913,725.

     As of September 28, 1998, the Issuer had outstanding  17,028,299  shares of
common stock (no par value).  Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-B is not contained herein,  and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State Issuer's revenues for its most recent fiscal year: $9,625.

                                     Page 1

<PAGE>

                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

         Garb Oil & Power  Corporation  (the  "Company")  is in the  business of
developing processes which will recover crumb rubber or other recyclable rubber,
oil  by-products,  commercially  marketable char and steel from scrap tires, and
processes  which will  utilize  scrap tires and/or  municipal  waste to generate
steam for the  production of  electricity.  The Company has designed a system it
believes  will be capable of  recovering  used rubber  from large,  off-the-road
(OTR) tires.  The Company has the rights to act as the  non-United  States agent
for a third party's unproven technology for the remediation of radioactive waste
and exclusive  rights to build its plants in the United  States and abroad.  The
Company is in the development stage.

         The Company's predecessor,  Garb-Oil Corporation,  was incorporated and
commenced  business on September 11, 1972,  under the laws of the State of Utah.
On January 15, 1981, all of its assets were acquired by a non-affiliated  public
company named Energy  Corporation  International,  which immediately  thereafter
changed its name to Garb-Oil  Corporation  of America and continued the business
operations   of  the   original   Garb-Oil   Corporation.   Energy   Corporation
International  was  incorporated  under the laws of the State of Utah on October
30,  1972,  as Autumn Day Inc.  and was formed for the purpose of  investing  in
patents,  franchises,   contract  rights  and  securities.  The  Company's  sole
investment  was  a  royalty  interest  in  certain  furniture  designs.   Energy
Corporation  International  did not engage in any significant  business activity
prior to its reorganization with Garb-Oil  Corporation.  The Company changed its
name to Garb Oil & Power Corporation on October 31, 1985.

OTR Tire Processing System

         The  Company  has  designed  a system it  believes  will be  capable of
recovering used rubber from large,  off-the-road  (OTR) tires. As of the date of
this report, the Company has substantially  completed the engineering and design
of the system,  but has not yet constructed a commercially  operating system. As
discussed  below,  the  Company  agreed to grant an  option to a third  party to
acquire a license  to  utilize  the OTR  system in a stated  territory,  but the
option holder may not exercise its option.

         Commercially available tire shredders,  including shredders made by the
Company's affiliate  Garbalizer  Machinery  Corporation ("GMC"), are designed to
process standard  automobile and truck tires, which may include  semi-trailer or
over-the-road tires. Tires used in a variety of off the road equipment,  such as
graders,  bulldozers,  mining  equipment,  etc. cannot be processed  directly by
these shredders. Although these tires, which may weigh from 400 pounds to 9 tons
apiece,  are less numerous than standard tires, the Company  estimates that over
3,000,000  tons of OTR tires  require  disposal in the United  States each year.
Current methods of disposal include landfilling and surface disposal,  which are
accepted only due to the lack of a viable  alternative.  Most states have passed
laws prohibiting landfilling or storage of whole tires.

                                        2
<PAGE>

         The  Company's  system,  known  as the  OTR  Tire  Disintegrator,  uses
mechanical  and  cryogenic  means to remove  the rubber  from OTR tires  without
shredding.  After  separation  of wire  and  other  non-rubber  components,  the
resulting  particles can then be used to produce crumb rubber. The particles can
also be used as fuel or safely  disposed of in a landfill,  although the Company
believes that the rubber particles will be of relatively high quality.

         The Company has  prepared  what it believes to be a final design of the
system and has analyzed the expected  performance of the system.  When the first
Disintegrator is built,  modifications to the design may be required to maximize
performance. It is also possible, although the Company does not anticipate this,
that the disintegrator will not perform as planned when built.

         The Company has  received  United  States  Patent No.  5,299,748 on the
Disintegrator  design which expires April 5, 2011 and Patent No. 5,590,838 which
expires January 7, 2014.

         The Company  announced the  availability of the  Disintegrator in July,
1992 and has received  numerous  inquiries from potential buyers or users of the
Disintegrator.  The  Company's  original  intent was to retain  ownership of the
Disintegrator,  allowing its use by persons who purchase an exclusive  territory
from the Company and who agree to pay the Company a share of any profits earned.

         On April 28,  1997,  the Company  granted  Giant Tire  Recyclers,  Inc.
(Giant)  a Nevada  corporation,  an  option  to  acquire  a  license  to use the
Company's OTR Disintegrator  system. The price of the option was set at $150,000
payable as  follows:  1) an initial  payment of  $15,000,  and 2) the  remaining
$135,000  was due within  ten  months of the  execution  of the  agreement.  The
Company  received  the final  option  payment on February  28,  1998.  Giant may
exercise the option at any time. The option will expire one year after the final
option  payment  was  received.  Giant  has  asserted  that  it is  entitled  to
additional  time to  exercise  the option  and that the  option  covers a larger
territory than stated in the options. The Company disputes Giant's assertion.

         The option gives Giant the opportunity to purchase an exclusive license
to use the  Company's  OTR  Disintegrator  system in the states of Arizona,  New
Mexico and Nevada for a license fee of $950,000,  less option  payments prior to
the time of exercise.  The license fee includes  one  Disintegrator  machine and
tools and  equipment  suitable to operate a truck tire repair  business.  If the
option is exercised, the Company intends to obtain the truck tire equipment from
its UTTI subsidiary. If the option is not exercised, the agreement provides that
amounts  paid for the option are  non-refundable.  The  Company  cannot  predict
whether Giant will exercise the option.  The Company  believes Giant may require
substantial  additional financing in order to exercise the option. If Giant does
not exercise the option by February 28, 1998,  the Company  believes  that Giant
will dispute the expiration date of the option and the non-refundable  nature of
the $150,000 paid for the option.

                                        3
<PAGE>

Crumb Rubber Plants

         The  Company  is  marketing  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
and shredders  purchased from the Company's  affiliate GMC. The Company  entered
into an agreement to sell one such plant, but the buyer defaulted.  See "Alberta
Recovery Technologies" below. As of the date of this report, the Company has not
sold any crumb rubber plants.

         If the Company is successful  in selling a crumb rubber plant,  it will
be exposed to the risks of a process  engineering  and  equipment  manufacturing
concern,  including  potential  contract,  warranty and  liability  claims.  The
Company does not have any experience in engineering or constructing crumb rubber
plants. The Company will rely on third parties as sub-contractors for the supply
of a  majority  of the  equipment  in the  plant  and the  actual  assembly  and
construction labor.

Alberta Recovery Technologies

         On May 23, 1996, the Company  entered into two agreements  with Alberta
Recovery  Technologies  Ltd.  ("ART").  Pursuant to one of the  agreements,  the
Company  agreed to supply and install  equipment  that would process scrap tires
into crumb rubber.  Pursuant to the other agreement,  the Company would supply a
Disintegrator to ART and grant ART the exclusive rights to use the Disintegrator
in Canada.  Due to ART's  failure to pay amounts due under the  Agreements,  the
Company terminated the Agreements during the year ended June 30, 1997.

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 and gives the Company
the right to build all  systems  and plants for  Trenergy  on a cost basis which
cannot exceed similar costs for similar  projects.  The Company is designated as

                                        4
<PAGE>

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  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 will 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 may expend management time and financial  resources  pursuing
possible  transactions  with the  Trenergy  technology  for  which  the  Company
receives no revenue.

UTTI Tire Repair and Resale Business

         The  Company's  efforts  have  historically  focussed on  reducing  the
environmental  problems of  disposing of used tires by creating  fuel,  power or
useful  by-products  from the tires.  Although such efforts have not resulted in
commercial  operations,  the Company's management has gained extensive knowledge
of the used tire distribution and disposal business through such efforts. On May
20, 1994 the Company formed Utah Truck Tires,  Inc. ("UTTI") as a majority owned
subsidiary to exploit the perceived demand for repaired and retreaded commercial
truck tires.  Although UTTI did demonstrate that there was some 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
should be operated in conjunction with a recycling  plant,  where overhead costs
can be shared with other operations and usable carcasses  obtained at relatively
low cost. In 1996, UTTI ceased active operations.

         The Company is proposing to establish  used tire  processing  and sales
joint ventures with operators of tire shredders or OTR Tire Disintegrators.  The
Company does not have any agreements to establish such joint  ventures.  If such
joint ventures are established, it is likely that the first such venture will be
operated  by UTTI in  replacement  of the Salt Lake City  facility.  As with any
start-up operation,  there is substantial  uncertainty  regarding its ability to
operate at a profit. There are no firm commitments for any such joint venture.

         The Company  owns 55% of UTTI,  which  interest it received in exchange
for its expertise and other intangible capital contributions.  The remaining 45%
of UTTI is owned by an investor who loaned  $150,000 of seed capital to UTTI and
who is an officer and director of UTTI.

Co-generation and Electrical Power Generation

         Since 1982,  the Company has been involved in planning and  preparation
for plants generating  electricity or process steam to be fueled by scrap tires.
Such plants may be built by the Company  alone or in joint  venture with others.

                                        5
<PAGE>

During the past fiscal year, the Company has  concentrated its efforts on design
of the  Disintegrator and has held only very preliminary  discussions  regarding
the possibility of construction of such plants.

         The design which the Company developed for these plants calls for scrap
tires to be shredded into hand sized pieces.  The shredded tires are then burned
in a  fluidized  bed  combustor  to  produce  steam,  which  may be used for the
generation of electricity  or may be used as process steam in nearby  industrial
plants.

         As a result of having  received  permits to construct  the Rialto power
plant from the South Coast Air Quality Management District, the Company believes
that its plants can comply with any currently applicable pollution requirements.
Although  environmental  permits were issued for the  construction of the Rialto
project,  litigation  regarding  compliance with California  environmental  laws
delayed completion of the project for years. The Company  eventually  determined
that continuing the litigation until the legal  authorization to use the permits
which  had  been  issued  was  finally  affirmed  by  the  courts  would  not be
economically feasible, and the project was abandoned.  There can be no assurance
that  plants  planned by the  Company in the  future  will not become  similarly
embroiled in litigation.

Pyrolysis

         In  addition  to the  direct  use of  tires as fuel,  the  Company  has
developed and patented the Garb-Oil Processes for pyrolytic reduction of tires.

         The Garb-Oil processes are in summary form as follows:  Scrap tires are
first  shredded  into  approximately  three  inch size  pieces  with a  shredder
developed  by GMC,  then heated in an oxygen free  environment  (processed  in a
Garb-Oil  Pyrolytic  Furnace) to reduce the shredded  particles into hydrocarbon
gases  and  char.  Part of the  hydrocarbon  gas is  condensed  to  recover  oil
by-products.  The  remaining  gases  (ethane,  methane,  butane and propane) are
stored for use as fuel in the pyrolytic system.  The char is crushed to liberate
the metal for magnetic  recovery to be sold to the steel industry as scrap.  The
crushed  char can be used as a  carbon  additive  to  manufacture  solid  rubber
products or used as additive in the polymer industries or as low grade activated
carbon.

         During the first half of 1981 a  demonstration-test  facility was built
in  Mountlake  Terrace,  Washington.  This test  facility  has been used to test
various  construction  materials  that will be used in the full size  commercial
plants. The test facility has been moved to Huntington,  West Virginia. Although
the test facility reduces tires by pyrolysis as designed,  there is no guarantee
that a full-scale  production  facility will ever be built or, if built, that it
will operate on an economically and technically sound basis.

         Since 1981 the Company's licensee American Buckeye Synfuels Corporation
has attempted to obtain  financing for  construction  of a pyrolysis  plant that
would use the Garb-Oil  process on a commercial  basis. The Company has sold the
non-exclusive  rights to exploit the  pyrolysis  technology  within the state of

                                        6
<PAGE>

West Virginia to American  Buckeye Synfuels  Corporation.  The licensee had also
agreed to purchase the pilot pyrolysis plant. Due to the repeated failure of the
licensee  to  satisfy  the  conditions  for sale of the  plant  and grant of the
license rights,  during Fiscal 1992 the entire $242,500  receivable plus $24,250
of  accrued  interest  thereon  was  written  off  to  bad  debt  expense.   The
demonstration  plant is being  stored in  Huntington,  West  Virginia  while the
Company attempts to find a purchaser for the plant.

         The Company has not commercially  exploited the pyrolysis technology to
date.

Patents, Trademarks and Proprietary Data

         The Company has received two United States patents on the Disintegrator
design. The patents expire in the year 2011 and 2014.

         The Company  does not hold  patents on the plant and process to be used
in connection with its proposed electricity and co-generation plants.

         The Company owns the following unexpired patents in connection with the
Garb-Oil Pyrolysis Process:

United States Patents:
                                                                   Expires

         Pyrolysis Process      Patent No.  4,402,791              09/30/00
         Patent

         A foreign patent has also been granted in Canada.

         In addition to the above patents, the Company has the following patents
which relate to Tar Sand development:

         Hydropulper & Classifier for Tar       Patent No.  3,814,336
         Sands Application

         Improvement Patent 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

                                        7
<PAGE>

         The Company's president, John C. Brewer, devotes approximately 40 hours
per week to the Company. The Company's chief engineer and secretary also perform
work for GMC, and their wages are  apportioned  between the two  companies.  All
additional work is performed on a contract  basis.  UTTI does not currently have
any employees.

         Additional  personnel  will be  required  if the  Company  expands  its
business or enters into agreements for the construction of a power plant 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, 1998, 1997 and 1996, the Company
has not expended any funds on research and development activities.

Environmental Regulation

         UTTI does not believe that its  activities  result in any  discharge 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 will comply with such regulations. The Company's Rialto Power Corporation
("RPC")  subsidiary was engaged in litigation from 1987 until abandonment of the
project  in  1989  to  determine   whether  RPC  complied   with  all  necessary
requirements  to obtain  environmental  permits  which had been  issued  for the
construction of its plant. Although on all issues in which a final determination
was rendered,  RPC was found to have satisfied all such  requirements  which the
courts and administrative agencies determined must be complied with, there is no
assurance that the undecided  issues would have been resolved in RPC's favor, or
that the decisions would not have been overturned on further appeal,  if RPC had
attempted to continue the project.


ITEM 2.   DESCRIPTION OF PROPERTY

         The  Company's  executive  offices  have  been  located  at Suite  507,
Newhouse Office Building,  #10 Exchange Place, Salt Lake City, Utah for the past
fifteen years.  The offices occupy  approximately  908 square feet, of which 608
square feet are shared with  Garbalizer  Corporation  of America and  Garbalizer
Machinery  Corp.  and the  remainder  of which  are  shared  with the  Company's
subsidiaries.  The premises are being leased from SCM Land Company, an unrelated
third party,  on a monthly basis.  The Company's share of the rent is determined
by mutual agreement of the Company and GMC based upon management's estimation of

                                        8
<PAGE>

the  relative  activities  of  the  entities.   This  is  not  an  arm's  length
negotiation. UTTI leases space in Salt Lake City from a third party to store its
equipment  and inventory  pursuant to a  month-to-month  lease.  During the year
ended June 30, 1998, the Company and UTTI paid $27,636 in rent.


ITEM 3.  LEGAL PROCEEDINGS

         Not Applicable.


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

         No shareholder meetings were held during the fourth quarter of the year
ended June 30, 1998.

                                        9
<PAGE>

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
         MATTERS

         The Company's  common stock is traded in the  over-the-counter  market.
The  representative  bid  and  asked  quotations  are  posted  on  the  National
Association of Securities  Dealers OTC Bulletin Board under the symbol 3GARB. On
October 5, 1998,  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.  During the years ended June 30,  1998,  1997 and 1996,  the
stock was only sporadically  traded. The following table sets forth the range of
high and low representative bid quotations for the periods indicated as reported
by Wilson-Davis, Inc., a market-maker in the Company's stock.

            Period
         (Fiscal Year)                        High             Low

         1996

         1st Quarter                          .6563            .4375
         2nd Quarter                          .625             .3125
         3rd Quarter                          .375             .2188
         4th Quarter                          .50              .1563

         1997

         1st Quarter                          .25              .1875
         2nd Quarter                          .25              .1875
         3rd Quarter                          .31              .25
         4th Quarter                          .4375            .1875

         1998

         1st Quarter                          .2188            .1875
         2nd Quarter                          .2188            .0938
         3rd Quarter                          .14              .10
         4th Quarter                          .52              .11

         The foregoing  over-the-counter  quotations are inter-dealer quotations
without retail mark-ups,  mark-downs or commissions and may not represent actual
transactions.

                                       10
<PAGE>

Dividends

         No cash  dividends  have  been  paid by the  Company  in the  past  and
dividends are not  contemplated  in the  foreseeable  future.  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.

Recent Sales of Unregistered Securities

         During the fourth  quarter of the year ended June 30, 1998, the Company
did not issue any securities  without  registration  under the Securities Act of
1933.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The  Company  is  considered  to  still  be in the  development  stage.
Therefore management cannot say with certainty when significant revenues will be
received from the Company's primary business.

         The auditor's report  accompanying the Company's  financial  statements
for the year ended June 30, 1998 contains the following statement: "As discussed
in Note 1 to the  financial  statements,  the Company's  operating  losses since
inception  and the  deficit  accumulated  during  the  development  stage  raise
substantial  doubt about their  ability to  continue as a going  concern...  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty."

         Management is pursuing  various  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.  GMC is pursuing  sales of
its shredders which, if successful,  would allow GMC to repay amounts it owes to
the  Company.  The  Company is also  attempting  to interest  purchasers  of GMC
shredders in  establishing  used tire joint ventures.  The Company  continues to
pursue the licensing or leasing of the  Disintegrator.  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.  If any of such possible
transactions  occur,  management believes that the Company would have sufficient
resources to operate for the next twelve  months.  The Company is also  pursuing
debt or equity  financing,  but  management  does not believe  that  substantial
financing can be obtained  prior to obtaining  firm  commitments  on any revenue
generating transactions.  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

                                       11
<PAGE>

proceed, no assurances can be expressed as to the Company's continuing viability
in  the  absence  of  revenues.  Substantially  all of  the  Company's  existing
liabilities,  other than trade payables and deferred  revenue,  are owed to John
Brewer or other shareholders of the Company.

         The start-up  costs for UTTI were financed with a loan in the principal
amount of $165,000 from the minority shareholder of UTTI, who is also an officer
and director of UTTI.  Operating expenses for the Company have been paid in part
from short term unsecured notes from shareholders. As a result, at June 30, 1998
the Company had a deficit in working capital  (current  liabilities in excess of
current  assets) of $652,937.  The working  capital deficit at June 30, 1997 had
been  $447,098.  The  decrease in working  capital  was caused by the  continued
accrual of salary and accounts payable for expenses which the Company was unable
to pay in cash.  Working capital at June 30, 1998 includes  accounts  receivable
from GMC in the amount of $195,474 (increased from $186,044 at June 30, 1997).

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

         During the year ended June 30, 1998, the Company  recorded  $4,625 from
the sale of tires from  inventory  by UTTI  compared  to tire sales of $9,685 in
fiscal  1997 and  $24,030 in fiscal  1996.  In fiscal  1997,  the  Company  also
recorded $30,519 of revenue representing  forfeiture of a non-refundable earnest
money upon termination of the ART agreement. The funds that the Company received
from Giant  towards  its option  during the fiscal  year was treated as deferred
revenue.  Since sale of tires or forfeiture of earnest moneys are not considered
to be the Company's principal business, the Company is still considered to be in
the development stage.

         The  Company  incurred  a loss  from  operations  before  other  income
(expense)  and  extraordinary  items  during  the year  ended  June 30,  1998 of
$163,251 compared to losses of $140,810 and $98,517 for the years ended June 30,
1997 and 1996,  respectively.  Total expenses for 1998 were $172,876 compared to
$181,104 in 1997 and $122,547 in 1996.  Salaries and wages were $77,934 for 1998
compared to $93,815 for 1997 and $48,000 for 1996.  Rental expenses were $27,636
in 1998,  $22,308  in 1997 and  $16,368  in 1996,  due to  UTTI's  facility  and
increased use of the offices  shared with GMC.  UTTI incurred  $13,460 of direct
costs of  sales in 1998,  $7,496  in 1997  and  $15,661  in 1996.  If any of the
Company's plans for revenue producing activities come to fruition, expenses will
rise accordingly.

         Net loss for the year  ended June 30,  1998 was  $217,439  compared  to
$177,298  in 1997 and  $124,871  in 1996.  The 1998 net loss  includes a $30,233
charge for the write down of shredder  blades and gears held in inventory.  On a
per  share  basis,  the net loss for the year  ended  June 30,  1998 was  ($.01)
compared to ($.01) in 1997 and 1996.  Operating  losses are expected to continue
until such time,  if ever, as the Company  receives  revenues from the sale of a

                                       12
<PAGE>

crumb  rubber  plant,  the  lease  or  license  of the  Disintegrator,  or other
operations. There is no assurance that the Company will ever be profitable.

         UTTI is 55% owned by the Company and operates at a loss.  UTTI's losses
have  exceeded  the equity  capital  contributed  by the  minority  shareholder.
Therefore, in preparing its consolidated  statements of operations,  the Company
does not adjust its consolidated net loss by the minority shareholder's interest
in the UTTI loss.

         During the year ended June 30, 1998,  the Company had a net decrease in
cash of $2,119.  The  non-refundable  option  payment  from Giant,  increases in
accounts  payable and accrued  salaries and reduction in tire inventory were the
primary sources of cash for operations for the year. Such financing  sources may
not be available  on an ongoing  basis if the Company does not begin to generate
revenue.

ITEM 7.  FINANCIAL STATEMENTS

            [The remainder of this page was intentionally left blank]


                                       13

<PAGE>

ITEM 8.  CHANGES IN ACCOUNTANTS AND DISAGREEMENTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

         Not applicable except as previously reported.

                                       14
<PAGE>



                  GARB OIL & POWER CORPORATION AND SUBSIDIARIES



                                TABLE OF CONTENTS

                                                                          Page

Report of Independent Certified Public Accountants                         16

Financial Statements:

         Consolidated Balance Sheets June 30, 1998
           and 1997                                                        17

         Consolidated Statements of Operations for the Years Ended June
           30, 1998,  1997 and 1996 and for the Period From January 14,
           1981 (Date of Inception of the Development Stage) to
           June 30, 1998                                                   19

         Consolidated Statements of Stockholders' Deficit
           for the Period From Inception of the Development
           Stage (January 14, 1981) Through June 30, 1998                  20

         Consolidated Statements of Cash Flows for the Years Ended June
           30, 1998,  1997 and 1996 and for the Period From January 14,
           1981 (Date of Inception of the Development Stage) to
           June 30, 1998                                                   21

         Notes to Consolidated Financial Statements                        22



                                       15

<PAGE>



     HANSEN, BARNETT & MAXWELL
     A Professional Corporation
     CERTIFIED PUBLIC ACCOUNTANTS

                                                                  (801) 532-2200
   Member of AICPA Division of Firms                          Fax (801) 532-7944
           Member of SECPS                          345 East Broadway, Suite 200
Member of Summit International Associates        Salt Lake City, Utah 84111-2693




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Stockholders
Garb Oil and Power Corporation

We have audited the accompanying consolidated balance sheets of Garb Oil & Power
Corporation and  Subsidiaries (a development  stage company) as of June 30, 1998
and 1997, and the related consolidated  statements of operations,  stockholders'
deficit, and cash flows for each of the three years in the period ended June 30,
1998,  and for the  period  from  January  14,  1981 (date of  inception  of the
development  stage) through June 30, 1998.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  financial  statements  based on our audits.  The  consolidated
financial  statements of Garb Oil & Power  Corporation and  Subsidiaries for the
year  ended June 30,  1993 and for the four  years in the period  ended June 30,
1993 were audited by other auditors  whose report dated  September 28, 1993, did
not  express  an  opinion  on the  financial  statements  for June 30,  1993 and
included an explanatory  paragraph that described the uncertainty  regarding the
basis  of  presentation  discussed  in  Note  1 to  the  consolidated  financial
statements.  Our opinion,  insofar as it relates to the amounts for those years,
is based solely on the report of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the financial  position of Garb Oil & Power Corporation and
Subsidiaries  as of June 30, 1998 and 1997 and the  results of their  operations
and their cash flows for each of the three  years in the period  ending June 30,
1998 and  cumulative for the period from January 14, 1981 through June 30, 1998,
in conformity with generally accepted accounting principles.

                                       16
<PAGE>

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  The Company is a development
stage  enterprise  engaged in  developing  technology  related to  production of
electricity by burning used rubber,  pyrolysis  (extraction of oil, carbon,  and
steel from used tires).  As discussed  in Note 1 to the  consolidated  financial
statements,  the  Company's  operating  losses since  inception  and the deficit
accumulated  during the development  stage raise  substantial  doubt about their
ability to continue as a going  concern.  Management's  plans  concerning  these
matters are also described in Note 1. The consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.



                                                     HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
September 8, 1998



                                       17
<PAGE>
<TABLE>
<CAPTION>


                                   GARB OIL & POWER CORPORATION AND SUBSIDIARIES
                                           (A Development Stage Company)
                                           CONSOLIDATED BALANCE SHEETS
                                              JUNE 30, 1998 AND 1997


                                                                                                    1998              1997
                                                                                         ---------------   ---------------
                                                          ASSETS
Current Assets
<S>                                                                                      <C>               <C>            
      Cash                                                                               $         5,954   $         8,073
      Accounts receivable - related party                                                        195,474           186,044
      Inventory                                                                                   30,232            73,925
                                                                                         ---------------   ---------------
           Total Current Assets                                                                  231,660           268,042

Property and Equipment
      Trucks                                                                                          -             16,052
      Office equipment                                                                             8,115             8,115
      Tools and equipment                                                                         30,099            30,099
      Building improvements                                                                        4,747             4,747
                                                                                         ---------------   ---------------
           Total Property and Equipment                                                           42,961            59,013
      Less:  Accumulated depreciation                                                            (25,837)          (31,221)
                                                                                         ---------------   ---------------
           Net Property and Equipment                                                             17,124            27,792

Other Assets
      Deposits                                                                                     1,000             1,000
      Patents - net of accumulated amortization at June 30,
        1998 and 1997 of $12,728 and $11,796, respectively                                         3,090             4,022
                                                                                         ---------------   ---------------
           Total Other Assets                                                                      4,090             5,022
                                                                                         ---------------   ---------------

Total Assets                                                                             $       252,874   $       300,856
                                                                                         ===============   ===============

                                           LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
      Accounts payable                                                                   $        92,919   $        72,583
      Deferred revenue                                                                           150,000            53,000
      Accrued payroll                                                                            312,000           264,000
      Accrued interest                                                                            81,450            61,650
      Accrued expenses                                                                             1,321                -
      Notes payable - related parties                                                            246,907           263,907
                                                                                         ---------------   ---------------
           Total Current Liabilities                                                             884,597           715,140

Stockholders' Deficit
      Common stock -  20,000,000  shares  authorized;  no par value;  17,028,299
        shares issued at June 30,
        1998 and 1997                                                                          2,744,068         2,744,068
      Accumulated deficit - prior to development stage                                           (27,178)          (27,178)
      Deficit accumulated during the development stage                                        (3,348,613)       (3,131,174)
                                                                                         ---------------   ---------------
           Total Stockholders' Deficit                                                          (631,723)         (414,284)
                                                                                         ---------------   ---------------

Total Liabilities and Stockholders' Deficit                                              $       252,874   $       300,856
                                                                                         ===============   ===============
</TABLE>



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

                                       18
<PAGE>
<TABLE>
<CAPTION>


                                       GARB OIL & POWER CORPORATION AND SUBSIDIARIES
                                               (A Development Stage Company)
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996 AND FOR THE
                             PERIOD FROM JANUARY 14, 1981 (INCEPTION OF THE DEVELOPMENT STAGE)
                                                     TO JUNE 30, 1998
                                                                                                                For the
                                                                                                              Period From
                                                                                                           January 14, 1981
                                                                                                           (Inception of the
                                                                                                              Development
                                                                                                               Stage) To
                                                                1998              1997              1996     June 30, 1998
                                                     ---------------   ---------------   ---------------   ---------------

Revenues
<S>                                                  <C>               <C>               <C>               <C>            
    Tire sales                                       $         4,625   $         9,685   $        24,030   $       117,932
    Equipment sales                                               -                 -                 -            595,723
    Other revenues                                             5,000            30,519                -            402,333
                                                     ---------------   ---------------   ---------------   ---------------
          Total Revenues                                       9,625            40,204            24,030         1,115,988

Expenses
    Cost of sales                                             13,460             7,496            15,661            60,020
    Cost of equipment                                             -                 -                 -            473,837
    Bad debt                                                      -                 -                 -            266,750
    Salary and wages                                          77,934            93,815            48,000         1,324,459
    Sales commission                                           2,750             3,000             5,140            27,785
    Office                                                     7,955             7,160             5,920           140,942
    Rent                                                      27,636            22,308            16,368           201,919
    Telephone                                                  3,957             5,161             2,421           100,470
    Professional fees                                         17,313            16,933            10,645           382,967
    Finders' fee                                                  -                 -                 -            145,000
    Insurance                                                  5,052             5,293             3,878            80,804
    Taxes and licenses                                         3,305             5,651               244            98,113
    Travel                                                     3,416             1,750             1,218           211,589
    Promotion and entertainment                                   -                 -                 -             14,053
    Testing                                                       -                 -                 -             27,073
    Advertising                                                  200                -                864           139,414
    Amortization                                                 932               932               932            51,170
    Depreciation                                               7,377             9,157             9,216            49,552
    Consulting fee                                                -                 -                 -             19,737
    Stockholders' meetings                                        -                 -                 -                670
    Parking                                                      990               660                -             10,774
    Subcontractors                                                -                 -                 -             40,138
    Auto expense                                                  -                 -                679             4,417
    Repairs and maintenance                                      116                -                 -              3,982
    Other                                                        483             1,698             1,361            15,065
                                                     ---------------   ---------------   ---------------   ---------------
          Total Expenses                                     172,876           181,014           122,547         3,890,700

Loss From Operations Before Other Income
  (Expense) and Extraordinary Item                          (163,251)         (140,810)          (98,517)       (2,774,712)
                                                     ---------------   ---------------   ---------------   ---------------

Other Income (Expense)
    Write off and abandonment of assets                      (30,233)               -                 -           (431,690)
    Gain on sale of assets                                     4,709                -                655             5,364
    Interest income                                               -                 -                 -            147,810
    Interest expense                                         (28,664)          (36,488)          (27,009)         (184,556)
    Minority interest in losses of subsidiary                     -                 -                 -              5,383
                                                     ---------------   ---------------   ---------------   ---------------
          Total Other Expenses                               (54,188)          (36,488)          (26,354)         (457,689)

Loss From Operations Before Extraordinary
  Item                                                      (217,439)         (177,298)         (124,871)       (3,232,401)

Extraordinary Item - Loss on Extinguishment
  of Debt                                                         -                 -                 -           (116,212)
                                                     ---------------   ---------------   ---------------   ---------------

Net Loss                                             $      (217,439)  $      (177,298)  $      (124,871)  $    (3,348,613)
                                                     ===============   ===============   ===============   ===============

Basic and Diluted Loss Per Share
    Operations                                       $         (0.01)  $         (0.01)  $         (0.01)  $         (0.22)
    Extraordinary item                                            -                 -                 -              (0.01)
                                                     ---------------   ---------------   ---------------   ---------------

Basic and Diluted Net Loss Per Share                 $         (0.01)  $         (0.01)  $         (0.01)  $         (0.23)
                                                     ===============   ===============   ===============   ===============

Weighted Average Number of Shares
  Outstanding                                             17,028,299        16,793,146        16,445,900        14,615,904
                                                     ===============   ===============   ===============   ===============
</TABLE>


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

                                       19

<PAGE>
<TABLE>
<CAPTION>



                                       GARB OIL & POWER CORPORATION AND SUBSIDIARIES
                                               (A Development Stage Company)
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                  FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
                                         (JANUARY 14, 1981) THROUGH JUNE 30, 1998

                                                                                                     Deficit
                                                                                                   Accumulated     Treasury Stock
                                                                Common Stock                        During the   Number
                                                         Number                    Accumulated      Development   of
                                                       of Shares          Amount      Deficit          Stage     Shares      Amount
                                                      ----------     -----------   ----------   -------------  --------  ----------
<S>              <C> <C>                              <C>            <C>           <C>          <C>             <C>     <C>   
Balance, January 14, 1981                             12,833,333     $    61,894   $  (27,178)  $        -        -      $    -
    Stock issued to satisfy current liabilities:
      June 30, 1983-$2.94 per share                       82,000         240,889         -               -        -           -
    Stock issued to satisfy related party liabilities:
       November 30, 1993 - $.20 per share                 64,310          12,882         -               -        -           -
       December 1, 1993 - $.14 per share                  87,000          12,200         -               -        -           -
       November 9, 1994 - $.21 per share                  25,000           5,342         -               -        -           -
    Stock issued for services:                       
       May 11, 1981-$1.60 per share                        5,000           8,000         -               -        -           -
       May 26, 1983-$1.50 per share                       50,000          75,000         -               -        -           -
       August 13, 1992 - $.15 per share                   10,000           1,500         -               -        -           -
       August 16, 1992 - $.15 per share                   15,000           2,250         -               -        -           -
       December 23, 1992 - $.15 per share                  4,000             600         -               -        -           -
       November 9,1994 - $.21 per share                    4,000             855         -               -        -           -
       January 9,1995 - $.21 per share                    76,167          16,276         -               -        -           -
       February 8,1995 - $.21 per share                   10,000           2,137         -               -        -           -
    Stock issued for cash:                           
       March 17, 1981-$.70 per share                      10,000           7,000         -               -        -           -
       April 22, 1981-$.41 per share                     192,834          80,000         -               -        -           -
       June 25, 1981-$1.31 per share                      27,518          35,945         -               -        -           -
       March 24, 1983-$.75 per share                      14,000          10,500         -               -        -           -
       April 26, 1983-$1.00 per share                     50,000          50,000         -               -        -           -
       June 30, 1983-$3.04 per share                      30,000          91,272         -               -        -           -
       September 10, 1984-$1.00 per share                200,000         200,000         -               -        -           -
       November 4, 1984-$.95 per share                   105,470         100,000         -               -        -           -
       April 25, 1986-$1.27 per share                    770,000         980,000         -               -        -           -
       May 1992 - $0.24 per share                        208,334          50,000         -               -        -           -
       December 23, 1992 - $.15 per share                 50,000           7,500         -               -        -           -
       February 17, 1993 - $.15 per share                100,000          15,000         -               -        -           -
       March 26, 1993 - $.15 per share                   100,000          15,000         -               -        -           -
       May 17, 1993 - $.15 per share                     100,000          15,000         -               -        -           -
       June 14, 1993 - $.25 per share                    100,000          25,000         -               -        -           -
       August 15, 1993 - $.20 per share                  100,000          20,000         -               -        -           -
       October 4, 1993 - $.15 per share                  100,000          15,000         -               -        -           -
       October 14, 1993 - $.07 per share                 150,000          10,000         -               -        -           -
       November 1, 1993 - $.25 per share                  20,000           5,000         -               -        -           -
       December 16, 1993 - $.17 per share                 30,000           5,000         -               -        -           -
       December 28, 1993 - $.15 per share                 50,000           7,500         -               -        -           -
       December 29, 1993 - $.20 per share                100,000          20,000         -               -        -           -
       January 11, 1994 - $.25 per share                  20,000           5,000         -               -        -           -
       February 15, 1995 - $.20 per share                 50,000          10,000         -               -        -           -
       March 22,1995 - $.22 per share                    163,000          36,500         -               -        -           -
       March 30, 1995 - $.20 per share                   100,000          20,000         -               -        -           -
       May 19, 1995 - $.25 per share                      20,000           5,000         -               -        -           -
       June 30, 1995 - $.20 per share                     25,000           5,000         -               -        -           -
    Contributed capital                                     -            356,402         -               -        -           -
    Purchase of treasury stock                              -               -            -               -      10,000     (10,009)
    Retirement of treasury stock                         (10,000)        (10,009)        -               -     (10,000)     10,009
    Net loss from January 14, 1981 through           
       June 30, 1995                                        -               -            -         (2,829,005)    -           -
                                                      ----------     -----------   ----------   -------------  --------  ----------
                                                     
                                                     
Balance, June 30, 1995                                16,241,966       2,632,435      (27,178)     (2,829,005)    -           -
    Stock issued for services:                       
       September 26, 1995 - $.13 per share                20,000           2,684         -               -        -           -
    Stock issued for cash:                           
       July 7, 1995 - $.25 per share                      40,000          10,000         -               -        -           -
       December 11, 1995 - $.10 per share                250,000          25,000         -               -        -           -
       May 3, 1996 - $.12 per share                       50,000           6,000         -               -        -           -
       May 28, 1996 - $.25 per share                      40,000          10,000         -               -        -           -
    Net Loss                                                -               -            -           (124,871)    -           -
                                                      ----------     -----------   ----------   -------------  --------  ----------
                                                     
Balance, June 30, 1996                                16,641,966       2,686,119      (27,178)     (2,953,876)    -           -
    Stock issued for services:                       
       May 23, 1997 - $.15 per share                      86,333          12,949         -               -        -           -
    Stock issued for cash:                           
       January 8, 1997 - $.15 per share                  300,000          45,000         -               -        -           -
    Net Loss                                                -               -            -           (177,298)    -           -
                                                      ----------     -----------   ----------   -------------  --------  ----------

Balance, June 30, 1997                                17,028,299       2,744,068      (27,178)     (3,131,174)    -           -
    Net loss                                                -               -            -           (217,439)    -           -
                                                      ----------     -----------   ----------   -------------  --------  ----------

Balance, June 30, 1998                                17,028,299     $ 2,744,068   $  (27,178)  $  (3,348,613) $  -      $    -
                                                      ==========     ===========   ==========   =============  ========  ==========
</TABLE>
                                                      

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

                                       20
<PAGE>
<TABLE>
<CAPTION>


                                       GARB OIL & POWER CORPORATION AND SUBSIDIARIES
                                               (A Development Stage Company)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                               FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996 AND FOR THE
                         PERIOD FROM JANUARY 14, 1981 (DATE OF INCEPTION OF THE DEVELOPMENT STAGE)
                                                     TO JUNE 30, 1998
                                                                                                                For the
                                                                                                              Period From
                                                                                                            January 14, 1981
                                                                                                            (Inception of the
                                                                                                              Development
                                                                                                               Stage) To
                                                                   1998            1997             1996     June 30, 1998
                                                          -------------    ------------    -------------    --------------
Cash Flows From Operating Activities
<S>                                                       <C>              <C>             <C>              <C>            
    Net loss                                              $    (217,439)   $   (177,298)   $    (124,871)   $   (3,348,613)
    Adjustments to reconcile net cash provided
     by (used in) operating activities:
       Depreciation and amortization                              8,309          10,089           10,148           100,722
       Bad debt expense                                               -               -                -           266,750
       Gain on sale of asset                                     (4,709)              -             (655)            5,364
       Write off and abandonment of assets                       30,233               -                -           431,690
       Loss on extinguishment of debt                                -                -                -           116,212
       Stock issued for services and interest                        -           12,949            2,684           122,251
       Changes in assets and liabilities:
          Accrued interest receivable                                -                -                -           (24,250)
          Accounts receivable - related party and
           other receivables                                         -            1,257            3,337          (150,344)
          Contract receivable                                        -                -                -          (242,500)
          Income tax refund receivable                               -                -                -               537
          Inventory                                              13,460           6,880           15,100            62,494
          Prepaid expenses                                           -                -            4,000                -
          Accounts payable                                       20,336          10,157           (3,334)           92,817
          Deferred revenue                                       75,000          22,481           30,519           128,000
          Advances payable - related party                           -                -                -          (120,106)
          Accrued payroll taxes                                   1,321               -           (3,114)            1,321
          Accrued payroll                                        48,000          48,000           36,140           312,001
          Accrued interest payable                               24,800          19,800           19,800           296,209
          Other current liabilities                                  -               65                -           240,954
                                                          -------------    ------------    -------------    --------------

       Net Cash  Used In  Operating Activities                     (689)        (45,620)         (10,246)       (1,719,219)

Cash Flows From Investing Activities
    Construction in progress                                         -                -                -        (2,937,790)
    Net (advances) collections (to)/from related party           (9,430)        (25,607)         (57,224)          (57,130)
    Purchase of treasury stock                                       -                -                -           (10,009)
    Increase (Decrease) of other assets                              -                -            3,694        (1,957,733)
    Purchase of property and equipment                               -           (1,836)               -           (60,412)
    Proceeds from sale of asset                                   8,000               -            1,500             9,500
                                                          -------------    ------------    -------------    --------------

       Net Cash Provided By (Used In) Investing Activities        1,430         (27,443)         (52,030)       (5,013,574)

Cash Flows From Financing Activities
    Net proceeds from (payments on) notes
      payable - related party                                        -           20,000           25,000           298,407
    Proceeds from bank loans                                         -                -                -         4,636,647
    Sale of common stock                                             -           45,000           51,000         1,947,217
    Contributions to capital by parent company                       -                -                -           356,402
    Principal payments on bank loans                                 -                -                -          (500,000)
                                                          -------------    ------------    -------------    --------------

       Net Cash Provided By Financing Activities                     -           65,000           76,000         6,738,693

Net Increase (Decrease) In Cash And Cash Equivalents             (2,119)         (8,063)          13,724             5,880

Net Cash and Cash Equivalents At Beginning of Period              8,073          16,136            2,412                74
                                                          -------------    ------------    -------------    --------------

Net Cash and Cash Equivalents At End of Period            $       5,954    $      8,073    $      16,136    $        5,954
                                                          =============    ============    =============    ==============

Supplemental Disclosures of Cash Flow Information -
    Cash paid during the periods for interest             $       3,864    $     16,688    $       8,618    $       95,092
                                                          =============    ============    =============    ==============
</TABLE>

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

                                       21
<PAGE>


                  GARB OIL & POWER CORPORATION AND SUBSIDIARIES
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                   PRINCIPLES

         Organization--Garb  Oil & Power  Corporation  (Garb Oil) is a 56% owned
         subsidiary of Garbalizer  Corporation of America.  Garb Oil was dormant
         at  January  13,  1981.  From  January  14,  1981,  Garb  Oil has  been
         considered to be in the development stage. Development stage activities
         have consisted of raising capital,  purchasing  property and developing
         technology  related to production of electricity by the burning of used
         rubber,  pyrolysis  (extraction  of oil,  carbon,  and steel  from used
         tires),  the recovery of used rubber from large  off-the-road tires and
         repair and sale of used truck tires.

         The accompanying  financial  statements include Garb Oil and its wholly
         owned subsidiary, Rialto Power Corporation (which has been 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.

         Basis  of   Presentation--The   accompanying   consolidated   financial
         statements  have  been  prepared  on  a  going  concern  basis,   which
         contemplates   the  realization  of  assets  and  the  satisfaction  of
         liabilities  in  the  normal  course  of  business.  As  shown  in  the
         consolidated  financial  statements,  during  the years  ended June 30,
         1998,  1997,  and 1996,  the Company  incurred  net losses of $217,439,
         $177,298,  and  $124,871,  respectively,  and as of June 30, 1998,  the
         Company's  deficit  accumulated  during the  development  stage totaled
         $3,348,613.  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.  As
         described  in Note 7 the Company has  entered  into an option  purchase
         agreement.  Management  is hopeful that this  agreement  will  generate
         sufficient cash flows to continue operations of the Company. Management
         is continuing  its efforts to obtain the necessary  financing as may be
         required to generate sufficient cash flows for future operations.

         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

         Trade Accounts Receivable--The  allowance for doubtful accounts at June
         30, 1998 was immaterial.

                                       22
<PAGE>

         Inventory--Inventory  is carried  at the lower of cost or market,  cost
         being  determined  on the  first-in  first-out  basis,  and consists of
         tires, blades and miscellaneous parts and supplies.

         Patents--Patents  are  carried at cost and are being  amortized  over a
         17-year life.

         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.

         Effective  July 1, 1997,  the Company  adopted  Statement  of Financial
         Accounting   Standards  No.  121,  Accounting  for  the  Impairment  of
         Long-Lived  Assets to be Disposed Of (SFAS 121). SFAS 121 requires that
         impairment losses be recorded when indicators of impairment are present
         and  undiscounted  cash flows estimated to be generated by those assets
         are  less  than the  assets'  carrying  amount.  The  adoption  of this
         standard  did not have a  material  impact on the  Company's  operating
         results, cash flows or financial position.

         Advertising  Costs--The  Company  expenses  all  advertising  costs  as
         incurred.  The Company had  advertising  expense of $200, $ 0, and $864
         for the years ending June 30, 1998, 1997 and 1996, respectively.

         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
         deferred  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.

         Loss Per Share -- In the fourth  quarter of 1997,  the Company  adopted
         Statement of Financial  Accounting  Standards (SFAS) No. 128,  Earnings
         Per  Share.  Under  SFAS 128,  loss per  common  share is  computed  by
         dividing   net  loss   available   to   common   stockholders   by  the
         weighted-average number of common shares outstanding during the period.
         Diluted loss per share  reflects  the  potential  dilution  which could
         occur  if all  contracts  to  issue  common  stock  were  exercised  or
         converted  into  common  stock or  resulted  in the  issuance of common
         stock. In the Company's present position, diluted loss per share is the
         same as basic loss per share because there are no potentially  issuable
         common  shares.  The  effect  of the new  standard  on prior  years was
         immaterial; accordingly, prior periods have not been restated.

         Financial   Instruments--Cash   equivalents   include   highly   liquid
         short-term  investments  with  original  maturities  of three months or
         less,  readily  convertible  to  known  amounts  of cash.  The  amounts
         reported as cash and  equivalents,  receivables,  other  assets,  trade
         accounts payable, deferred revenue and notes payable to related parties
         are  considered to be reasonable  approximations  of their fair values.
         The  fair  value  estimates  presented  herein  were  based  on  market
         information  available to  management  as of June 30, 1998.  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.

                                       23
<PAGE>

         Reclassification--Certain   previously   reported   amounts  have  been
         reclassified to conform to the June 30, 1998 presentation.

         Use of Estimates--The preparation of financial statements in conformity
         with generally accepted  accounting  principles  requires management to
         make  estimates  and  assumptions  that affect the reported  amounts of
         assets and liabilities at the date of the financial  statements and the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.

NOTE 2--INVESTMENT IN RIALTO POWER CORPORATION

         The Company  entered  into a joint  venture  with DITT,  S.A., a French
         Corporation   (DITT),   on  December  2,  1985,   for  the  purpose  of
         constructing a 35-megawatt  electrical generating plant fueled by scrap
         tires (the  project).  The  Company  received  50 percent of the common
         stock of Rialto Power Corporation  (Rialto),  a corporation  formed for
         the purpose of the joint  venture,  in exchange for equipment and other
         assets.  The  remaining  50 percent  of the common  stock of Rialto was
         issued to DITT in  consideration  of an arrangement  whereby DITT would
         arrange and guarantee a $4,000,000 line of credit from a bank to Rialto
         and construct a power plant.

         Rialto had drawn the entire line of credit as of May 1988 at which time
         the joint venture agreement was terminated. Pursuant to the termination
         of the  agreement,  DITT  transferred  to Garb Oil all of its  stock in
         Rialto  making  Garb Oil the sole  shareholder  of Rialto.  The line of
         credit  was  called  by the bank  and,  under  the terms of the line of
         credit,  DITT, as guarantor,  paid the bank. As consideration  for this
         payment,  Rialto executed a note payable at 10% to DITT  collateralized
         by all of the assets of Rialto. The note was due on December 31, 1988.

         In November 1989, Rialto agreed to convey the collateralized  assets to
         DITT in satisfaction  of the note and related  interest  payable.  Such
         assets represented substantially all costs of the project. The carrying
         value  of  the  related  assets  and  liabilities  at the  date  of the
         conveyance were as follows:

                  Land                                       $       1,384,126
                  Construction in progress                           2,937,790
                  Other assets                                         140,633
                                                             -----------------

                  Total assets conveyed                              4,462,549
                  Less note and related interest payable             4,346,337

                  Loss recognized on extinguishment of debt  $         116,212
                                                             =================

         Due to the ongoing legal actions  regarding certain permits issued with
         respect to the Rialto project and the adverse effect of related delays,
         the  Company  could  not  proceed  with  any  further  construction  or
         development  of the  project.  As  discussed  in Note 1,  the  State of
         California  dissolved Rialto Power Company.  The Company may pursue the
         construction  of other  waste-to-energy  projects in areas  believed to
         have more favorable regulatory environments.  The Company does not have
         any firm agreements for the construction of such additional plants.

                                       24
<PAGE>

NOTE 3--UTAH TRUCK TIRE, INC.

         Utah Truck Tire,  Inc. was formed May 20, 1994, and on May 24, 1994 the
         Company was issued 55 percent (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 percent (45 shares) was issued to a director of Utah Truck
         Tire, Inc. for a commitment to loan Utah Truck Tire, Inc. $150,000 (see
         Note 5). Utah Truck Tire,  Inc. is primarily in the business of selling
         retread diesel truck tires.

NOTE 4--CONTRACT RECEIVABLE

         In August 1988,  the Company sold to an unrelated  corporation  a plant
         and technology related to the extraction of oil by-products, steel, and
         resulting gases from scrap tires in exchange for a contract  receivable
         in the amount of  $242,500.  The contract  bore  interest at 8% and, as
         extended on September 1, 1991,  was due in full on March 1, 1992. As no
         payments  were  received by the Company  since the contract was entered
         into in August  1988,  the  contract  receivable  and  related  accrued
         interest receivable of $24,250 were written off as uncollectible during
         the year ended June 30, 1992. The Company is attempting to locate other
         parties  who may be  interested  in  purchasing  the plant and  related
         technology.  No value was assigned to such plant and related technology
         as of June 30, 1998 and 1997 due to the  uncertainty of the realization
         of any significant value.

NOTE 5--RELATED PARTY TRANSACTIONS

         During the years ended June 30, 1998,  1997 and 1996,  the Company made
         non-interest bearing advances to Garbalizer Machinery Corporation (GMC)
         in the amounts of $27,521, $34,771 and $99,247, respectively.  Payments
         on these  advances  totaled  $14,091,  $9,164 and $42,024 for the years
         ended June 30, 1998,  1997 and 1996.  These  advances are due on demand
         and deemed  collectable.  GMC is a related  sister  corporation  of the
         Company and has common shareholders.

         Prior to July 1, 1992,  the Company  borrowed  $31,907  from an officer
         under a note  payable for various  purchases  on behalf of the Company.
         The Company pays all interest charges  (currently at approximately 9%),
         relating to these  purchases  but, as of June 30,  1998,  no  principal
         payments have been made.

         During the year ended June 30, 1997, the Company  borrowed $20,000 from
         shareholders under short-term,  non-interest  bearing notes payable due
         on demand. As of June 30, 1998, $10,000 has been converted to a payment
         on an option agreement. (See Note 7.)

         During the year ended June 30, 1996, the Company  borrowed $35,000 from
         shareholders under short-term,  non-interest  bearing notes payable due
         on demand. As of June 30, 1998, no payments have been made.

         During the year ended June 30, 1995, the Company  borrowed $22,000 from
         shareholders under short term non-interest bearing notes payable due on
         demand.  $10,000  of these  notes  were paid in cash and the  remaining
         $12,000 was converted in 1998 to a payment on an option agreement. (See
         Note 8.)

                                       25
<PAGE>

         During the year  ended June 30,  1995 and 1994,  the  Company  borrowed
         $15,000 and $150,000,  respectively,  from an officer under a 12% note,
         due on demand, unsecured. No amounts had been paid as of June 30, 1997.
         Also, during the year ended June 30, 1994, the Company borrowed $12,000
         from an officer on a 90-day note which was subsequently  paid by GMC as
         partial payment on their advances.

NOTE 6--INCOME TAXES

         The  Company did not have a current or  deferred  provision  for income
         taxes for the years ended June 30, 1998,  1997 and 1996.  The following
         presents the components of the deferred tax asset for the Company:

                                                               June 30,
                                                           1998           1997
                                                  -------------  -------------
          Benefit of operating loss carryforwards $     943,652  $     709,962
          Accrued salaries                               74,880         43,200
          Accrued interest                               33,716         18,495
          Depreciation                                    2,023          1,958
                                                  -------------  -------------

          Total deferred tax assets                   1,054,271        773,615
          Less:  Valuation Allowance                 (1,054,271)      (773,615)
                                                  -------------  -------------

          Net Deferred Tax Asset                  $        -     $        -
                                                  =============  =============

         The  valuation  allowance  has  increased  $280,656 and $79,220 for the
         years ended June 30, 1998 and 1997,  respectively.  The Company and its
         subsidiaries  have net operating loss  carryforwards of $2,760,807 that
         expire, if unused, in years 1998 through 2012.

         The  following  is a  reconciliation  of the income tax at the  federal
         statutory  tax rate with the  provision  for income taxes for the years
         ended:
<TABLE>
<CAPTION>

                                                                       June 30,
                                                             1998        1997       1996
                                                       ----------   ---------  ---------
<S>                                                   <C>          <C>        <C>       
         Income tax benefit at statutory rate (34%)    $  (73,929)  $ (60,281) $ (42,456)
         Current operating loss not recognized                 -       37,094     44,283
         Change in deferred tax asset valuation           280,656      23,187     (1,827)
         State tax net of federal benefit                  (7,175)         -          -
         Non-deductible expense                               (34)         -          -
         Effect on change of tax rates                   (199,518)         -          -
                                                       ----------   ---------  --------

                  Provision for Income Taxes           $       -    $      -   $      -
                                                       ==========   =========  ========
</TABLE>

NOTE 7--COMMITMENTS

         On April 28,  1997,  the Company  granted  Giant Tire  Recyclers,  Inc.
         (Giant) a Nevada corporation, an option to acquire a license to use the
         Company's OTR disintegrator  system. The price of the option was set at
         $150,000 payable as follows:  1) an initial payment of $15,000,  and 2)
         the remaining $135,000 is due within ten months of the execution of the
         agreement. The Company has received $150,000 and $53,000 as of June 30,
         1998 and 1997, respectively. Giant may exercise the option at any time.

                                       26
<PAGE>

         The option will expire  February  1999.  The above contract gives Giant
         the  opportunity to purchase an exclusive  license to use the Company's
         OTR  Disintegrator  System in the  states of  Arizona,  New  Mexico and
         Nevada for a license fee of $950,000,  less option payments prior co to
         the time of exercise.

         On May 23, 1996, the Company  entered into two agreements  with Alberta
         Recovery Technologies Ltd. (the customer) whereby the Company agrees to
         manufacture  and  install   equipment  that  will  1)  be  utilized  in
         processing  scrap  tires  into crumb  rubber  and 2)  prepare  reusable
         casings for recapping or reuse of off the road tires. In exchange,  the
         customer  agreed to pay the  Company a total of  $3,045,000  payable as
         follows:  1) An  initial  non-refundable  earnest  payment  of  $30,450
         ($30,519  was paid as of June 30,  1996 and was  included  as  deferred
         revenue at June 30, 1996), 2)Within ninety days of the execution of the
         agreement an additional  $960,900  payment is due;  which has yet to be
         received  by the  Company  and 3)  Within 30 to 60 days  following  the
         second payment an irrevocable letter of credit totaling $2,053,650 will
         be established  by the customer.  This agreement was terminated in 1997
         for failure to meet the provisions of the agreement between the Company
         and Alberta  Recovery  Technologies,  Ltd., the $30,519  non-refundable
         down  payment  classified  as  deferred  revenue  at June 30,  1996 was
         transferred to other revenue during the period ended June 30, 1997.

         The Company executed an employment  agreement with its President on May
         1, 1986. The agreement is of a continuing  nature and specifies no date
         of  termination.  Under the  terms of the  agreement,  the  President's
         salary is $48,000 per year and is  reviewed  by the Board of  Directors
         annually.

NOTE 8--SALE OF THE TIRE SHREDDERS

         In August 1990,  the Company sold to an unrelated  company a stationary
         tire shredder and related  motor for cash of $265,402.  The cost of the
         items sold was $160,000.

         In August 1991, the Company sold to an unrelated  company a mobile tire
         shredder,  related  motor,  and spare blades for cash of $330,321.  The
         cost of the items sold was $185,191.

NOTE 9--OPERATING LEASES

         The Company shares office space with Garbalizer  Machinery  Corporation
         under a lease  agreement  on a month to month  basis.  The Company also
         leases facilities on a month to month basis. Rental expense relating to
         these operating  leases was $27,636,  $22,308 and $16,368 for the years
         ended June 30, 1998, 1997, and 1996, respectively.

NOTE 10--SUPPLEMENTAL CASH FLOWS

         During the year  ended June 30,  1998,  the  holders of a $22,000  note
         payable  applied  the  balance as a payment on an option  agreement  it
         purchased from the Company in 1997. (See Note 7).

         During the year ended June 30, 1997 the Company issued 86,333 shares of
         common stock valued at $12,949 for services rendered.

                                       27
<PAGE>

         During the year ended June 30, 1996 the Company issued 20,000 shares of
         common stock valued at $2,684 to satisfy related party interest.

         During the year ended June 30, 1995,  the Company  issued 25,000 shares
         of common stock valued at $5,342 to satisfy related party  liabilities.
         Also,  during the year ended June 30, 1995,  the Company  issued 90,167
         shares of common stock valued at $19,268 for services rendered.

NOTE 11-CONTINGENCIES

         During  fiscal  1998,  the  Company  was   threatened   with  potential
         litigation by Giant Tire in regards to the option agreement it received
         from the Company.  Giant has asserted that it is entitled to additional
         time to  exercise  the  option  and  that  the  option  covers a larger
         territory  than stated in the option  agreement.  The Company  disputes
         Giant's assertions.  As of September 8, 1998 no formal legal action had
         been taken by Giant.

                                       28
<PAGE>


                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The term of  office  of each  director  is one (1)  year or  until  his
successor is elected at the Company's annual meeting and qualified.  The term of
office  for each  officer  of the  Company  is at the  pleasure  of the Board of
Directors.  The Board of Directors has no nominating,  auditing or  compensation
committee.

         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                   76            President, Chairman of
                                                        the Board of Directors
                                                        and Director

         Bill Vee Anderson                47            Vice-President, Director

         Charles Laver                    75            Secretary and Director


         John C.  Brewer has been the  President  and a director  of the Company
since  January,  1981,  and from 1972 until  January,  1981, was President and a
director of the  Company's  predecessor  Garb-Oil  Corporation.  Mr. Brewer also
serves as  president,  chairman  of the board of  directors  and a  director  of
Garbalizer  Corporation of America,  the majority shareholder of the Company and
Garbalizer Machinery Corporation, a public non-reporting company, from which the
Company  intends to  purchase  equipment.  Mr.  Brewer  will  continue to devote
approximately 40 hours per week to the Company as well as additional time to his
other business interests.

         Bill Vee Anderson has been Vice President and a director of the Company
since  September 1993, but 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

                                       29
<PAGE>

with Bell Telephone  Laboratories.  Mr. Anderson declared personal bankruptcy in
July,  1992 and agreed to a payment plan whereby his creditors have been or will
be paid the full amount of his indebtedness.

         Charles  Laver has been the  Secretary  and a director  of the  Company
since  January,  1981,  and from 1972 until  January,  1981, was secretary and a
director of Garb-Oil Corporation.  Mr. Laver's principal occupation for the last
30 years has been a self-employed  certified public  accountant.  Mr. Laver will
devote  such  time as may be  necessary  from time to time as an  officer  and a
director of the Company including but not limited to regular  (semi-monthly) and
special meetings of the board of directors.

Compliance With Section 16(a)

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent of a registered class of the Company's equity  securities,  to file with
the Securities and Exchange  Commission initial reports of ownership and reports
of changes in  ownership  of Common  Stock and other  equity  securities  of the
Company.  Officers,  directors  and greater than  ten-percent  shareholders  are
required by 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, 1998 all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with.

ITEM 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,  1998.
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


                                                        Annual Compensation
Name and Principal Position       Fiscal Year                Salary ($)
---------------------------       -----------                ----------

John C. Brewer                       1998                     $48,000
President and CEO                    1997                      48,000
                                     1996                      48,000


         No person received any form of non-cash  compensation  from the Company
in the  fiscal  year  ended  June  30,  1998  or  currently  receives  any  such
compensation. The Company does provide medical insurance to Mr. Brewer.

                                       30
<PAGE>

         During  the  current  fiscal  year,  the  Company  is paying  and it is
anticipated  that the Company  will  continue  to pay a salary to Mr.  Brewer of
$48,000 per annum for 40 hours per week of Mr. Brewer's time. The Company has an
employment  agreement  with  Mr.  Brewer.  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.

         The  Company  issued  options  during  the fiscal  year,  and none were
outstanding.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

         The following table sets forth certain  information with respect to the
beneficial  ownership  of the  Company's  common stock as of October 5, 1998 (i)
each  person  known by the  Company  to own more than five  percent  (5%) of the
Company's  outstanding  stock,  (ii) each  director of the Company and (iii) all
officers and directors as a group.

Name and Address                             Amount           Percent of Class

Garbalizer Corporation                     9,500,000               55.8%
of America (Note 1)
Newhouse Office Building
Suite 507
Salt Lake City, Utah

A/S Parkveien 55                           1,200,000                7.0%
c/o Hoegh Invest A/S (Note 2)
P.O. Box 2416 Solli
0202 Oslo 2, Norway

John C. Brewer (Note 3)                    9,500,000               55.8%
Newhouse Office Building, Suite 507
Salt Lake City, Utah

Charles Laver (See Note 4)                 9,520,746               55.9%
Newhouse Office Building, Suite 507
Salt Lake City, Utah

                                       31

<PAGE>

Bill Anderson                                  6,000                  *
Newhouse Office Building, Suite 507
Salt Lake City, Utah

All directors and                          9,537,121               55.9%
officers as a group
(3 individuals)

* less than 1%

         (1) John C. Brewer  beneficially  owns 83.7% of the outstanding  common
stock of Garbalizer Corporation of America ("GCA").

         (2) In  September,  1988 A/S  Parkveien 55 filed a Schedule 13D stating
its beneficial ownership of 1,800,000 shares owned of record and beneficially by
it. The Schedule 13D also indicates  that an additional  478,000 shares (3.3% of
the class) were beneficially owned by two Norwegian  corporations  having common
control  or  ownership  with  A/S  Parkveien  55.  During a prior  fiscal  year,
1,500,000  shares held of record by A/S Parkveien 55 at the time of the Schedule
13D filing have been 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  9,500,000  shares held by GCA and its  subsidiary  in
which Mr. Brewer may be deemed to share beneficial ownership due to his position
as a director and principal shareholder of GCA.

         (4)  Consists of  9,500,000  shares held by GCA and its  subsidiary  in
which Mr. Laver may be deemed to share beneficial  ownership due to his position
as a director of GCA and 20,746 shares owned of record by Mr. Laver.

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


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The  Company  advanced  $27,521,  $34,771 and $99,247 to GMC during the
years  ended  June  30,  1998,  1997 and  1996,  respectively  and had  advanced
additional  amounts in prior years.  The advances were unsecured and do not bear
interest.  GMC repaid $14,091 during fiscal 1998,  $9,164 during fiscal 1997 and
$42,024 during fiscal 1996 leaving a balance at June 30, 1998 of $195,474.

                                       32
<PAGE>

         During  fiscal 1997,  the Company  borrowed  $20,000 from  shareholders
under  non-interest  bearing  demand  notes.  During  fiscal 1996 and 1995,  the
Company had borrowed $35,000 and $22,000 from shareholders on similar terms. One
of the shareholders,  who is not an affiliate of the Company, applied $22,000 of
the amounts owed to him to Giant's option payment and $10,000 has been repaid in
cash.

         During  fiscal  1994,   UTTI   borrowed   $150,000  from  its  minority
shareholder,  who is also an officer and director of UTTI and a  shareholder  of
the Company. During fiscal 1995, an additional $15,000 was borrowed. The note is
due on demand,  bears interest at 12% per annum and is secured by  substantially
all of UTTI's assets.

         During  the year ended June 30,  1993 the  Company  borrowed a total of
$29,500 from four shareholders,  including the Company's  president.  Such loans
were  non-interest  bearing and  unsecured.  During  fiscal  1994 and 1995,  the
Company  converted  $22,500 of such  notes  into stock and repaid  $7,000 of the
notes in cash.

         The Company's president is entitled to annual salary of $48,000. During
1993 through 1998  substantially all of such salary was accrued rather than paid
in cash.  Such accrued wages are unsecured and do not bear interest.  As of June
30, 1998, the balance of accrued  salary to the president was $312,000.  This is
in addition to the $31,907 owed to the  Company's  president for advances to the
Company.


ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
         FORM 8-K

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


                          Garb Oil & Power Corporation


         Consolidated Balance Sheets - June 30, 1998 and 1997.

         Consolidated  Statements  of  Operations - For the Years Ended June 30,
         1998,  1997,  1996 and for the Period  from  January  14, 1981 (Date of
         Inception of the Development Stage) to June 30, 1998

         Consolidated  Statements of Stockholders'  Equity - For the Period from
         Inception of the Development  Stage (January 14, 1981) through June 30,
         1998

         Consolidated  Statements  of Cash  Flows For the Years  Ended  June 30,
         1998,  1997,  1996 and for the Period  from  January  14, 1981 (Date of
         Inception of the Development Stage) to June 30, 1998

                                       33
<PAGE>


     b. During the fourth  quarter of the year reported upon the Company filed a
Form 8-K dated May 11, 1998 reporting, under Item 5, the Project Development and
Construction Agreement with Trenergy, Inc. No financial statements were required
to be filed with such form.

     c. 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.
<TABLE>
<CAPTION>


Section No.         Exhibit No.         Description                          Location
<S>                     <C>            <C>                                  <C>                
        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          Amended Construction                 Exhibit 10.2 of Form 10-KSB
                                        Project Agreement (ART)              for June 30, 1996

        10                10.3          Amended OTR Project                  Exhibit 10.2 of Form 10-KSB
                                        Agreement (ART)                      for June 30, 1996

        10                10.4          Agreement with Giant Tire            Exhibit 10.4 of Form 10-KSB
                                        Recyclers, Inc.                      for June 30, 1997

        10                10.5          Project Development and              Exhibit 10.1 of Form 8-K
                                        Construction Agreement               dated May 11, 1998
                                        with Trenergy, Inc.

        21                21.1          List of Subsidiaries                 Exhibit 21.1 of Form 10-KSB
                                                                             for June 30, 1995

        27                27            Financial Data Schedule              Filed herewithin

</TABLE>


                                       34
<PAGE>


                                   SIGNATURES


     In accordance with Section 13 or 15(d) of the Securities  Exchange Act, the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                                           GARB OIL & POWER CORPORATION


                                           By: /s/ John C. Brewer
                                              ---------------------------
                                              John C. Brewer, President

DATED this 12 day of October, 1998


         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 12, 1998       /s/ John C. Brewer 
                                                     --------------------------
                                                     John C. Brewer, President

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


                     Date:    October 12, 1998       /s/ Charles Laver 
                                                     --------------------------
                                                     Charles Laver, Treasurer

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


                     Date:    October 12, 1998       /s/ John Brewer 
                                                     --------------------------
                                                     John Brewer, Director


                     Date:    October 12, 1998       /s/ Charles Laver 
                                                     --------------------------
                                                     Charles Laver, Director


                     Date:    October 12, 1998       /s/ Bill Vee Anderson 
                                                     --------------------------
                                                     Bill Vee Anderson, Director

                                       35