GARB OIL & POWER CORP - FORM 10-Q

Attached files

file	filename
EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF CHIEF EXECUTIVE OFFICER - GARB OIL & POWER CORP	ex311q033111.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - GARB OIL & POWER CORP	ex312q033111.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - GARB OIL & POWER CORP	ex321q033111.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2011

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

For the transition period from _________ to ________

Commission File Number: 000-14859

GARB OIL & POWER CORPORATION

(Exact name of registrant as specified in its charter)

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

5248 South Pinemont Dr. Suite C-110

Murray, UT 84123

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: 801- 738-1355

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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

Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]		Accelerated filer	[ ]
Non-accelerated filer	[ ]	(Do not check if a smaller reporting company)	Smaller reporting company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of March 9, 2012 was 2,347,911,502.

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

GARB OIL & POWER CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	March 31, 2011		December 31, 2010
ASSETS		(unaudited)
Current assets:
Cash	$	-	$	2
Prepaid expenses		1,082		133,506
Total current assets		1,082		133,508

Property and equipment, net		3,571		3,606
Total assets	$	4,653	$	137,114

Refer to Notes to Condensed Consolidated Financial Statements

GARB OIL & POWER CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Continued)

	March 31, 2011		December 31, 2010
		(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Bank overdraft	$	95,162	$	91,585
Accounts payable and accrued expenses		743,597		660,674
Related party payable		354,626		366,203
Notes payable		1,410,334		1,444,064
Accrued interest		1,016,720		961,715
Wages payable and other accrued liabilities		914,215		781,473
Income taxes payable		132,412		126,257
Total current liabilities		4,667,066		4,431,971

Deferred tax liabilities		17,398		16,424
Total long-term liabilities		17,398		16,424

Total liabilities		4,684,464		4,448,395

Stockholders’ equity(deficit):
Class A preferred; ($.0001 par value) 1,000,000 shares authorized 2 shares issued and oustanding as of March 31, 2011 and December 31, 2010		-		-
Class B preferred; ($.0001 par value) 30,000,000 shares authorized 193,679 and 205,394 shares issued and oustanding as of March 31, 2011 and December 31, 2010, respectively		19		21
Class C preferred; ($.0001 par value) 19,000,000 shares authorized no shares issued and oustanding as of March 31,2011 and December 31, 2010, respectively		-		-
Common stock; ($.001 par value) 50,000,000,000 shares authorized, 224,919,480 and 126,446,842 shares issued and oustanding at March 31, 2011 and December 31, 2010, respectively		224,919		126,447
Additional paid in capital		(251,001)		(409,268)
Accumulated other comprehensive income		67,931		112,177
Accumulated deficit		(4,689,508)		(4,109,532)
Total Garb Oil & Power stockholders' equity (deficit)		(4,647,640)		(4,280,155)
Non-controlling interest		(32,171)		(31,126)
Total stockholders' equity (deficit)		(4,679,811)		(4,311,281)
Total liabilities and stockholders' equity (deficit)	$	4,653	$	137,114

Refer to Notes to Condensed Consolidated Financial Statements

GARB OIL & POWER CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	For the three month periods ended
	March 31, 2011		March 31, 2010
		(unaudited)		(unaudited)
SALES
Sales	$	-	$	-
Sales-related party		-		-
TOTAL SALES		-		-
COST OF SALES		-		-
GROSS PROFIT		-		-

OPERATING EXPENSES
Selling, general and administrative		376,228		250,800
Total Operating Expenses		376,228		250,800
INCOME (LOSS) FROM OPERATIONS		(376,228)		(250,800)

OTHER INCOME(EXPENSE)
Loss on extinguishment of debt		(81,588)		-
Other income		-		12,947
Interest expense		(123,205)		(88,497)
Total Other Income(Expense)		(204,793)		(75,550)
LOSS BEFORE INCOME TAXES		(581,021)		(326,350)
PROVISION(BENEFIT) FOR INCOME TAXES		-		366

NET LOSS BEFORE NON-CONTROLLING INTEREST		(581,021)		(326,716)
Net Income (loss) attributable to non-controlling interest		(1,045)		(1,496)
NET LOSS ATTRIBUTABLE TO GARB OIL & POWER		(579,976)		(325,220)

OTHER COMPREHENSIVE INCOME(LOSS):
Foreign currency translation adjustment		(44,246)		(51,867)
TOTAL COMPREHENSIVE INCOME (LOSS)		(624,222)		(377,087)
Comprehensive income(loss) attributable to non-controlling interest		(8,849)		(10,373)
COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO GARB OIL & POWER	$	(615,373)	$	(366,714)

BASIC AND DILUTED LOSS PER COMMON SHARE ATTRIBUTABLE TO GARB OIL & POWER SHAREHOLDERS	$	(0.00)	$	(0.00)

WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING		165,508,047		79,250,000

Refer to Notes to Condensed Consolidated Financial Statements

GARB OIL & POWER CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	For the three months ended
	March 31, 2011		March 31, 2010
		(unaudited)		(unaudited)
Cash Flows from Operating Activities:
Net loss	$	(579,976)	$	(325,220)
Adjustments to reconcile net loss to net cash from
operating activities:
Net loss attributable to non-controlling interest		(1,045)		(1,496)
Depreciation		1,516		1,700
Shares issued for services		-		51,505
Debt for services		75,000		-
Loss on extinguishment of debt		81,588		-
Loan fees		46,763		39,207
Contributed services		6,883		-
Changes in assets and liabilities:
Accounts receivable		-		1,612
Prepaid expenses		132,424		(2,939)
Accounts payable and accrued expenses		82,923		13,239
Accrued interest		67,780		36,091
Accrued interest-related party		-		9,371
Income taxes payable		7,129		(8,226)
Wages payable and other accrued liabilities		132,742		56,194
Net cash flows from operating activities		53,727		(128,962)
Cash flows from investing activities:
Net cash flows from investing activities		-		-
Cash flows from financing activities:
Net Proceeds from convertible notes payable		-		47,000
Bank overdraft		3,577		7,607
Payments on notes payable-related party		(11,579)		-
Proceeds from issuance of common stock		-		5,000
Net cash flows from financing activities		(8,002)		59,607
Net Increase(Decrease) in cash and cash equivalents		45,725		(69,355)
Effect of exchange rates on cash		(45,727)		49,719
Beginning Cash and Cash equivalents		2		19,657
Ending Cash and Cash equivalents	$	-	$	21

Supplemental Disclosures of Cash flow information:
Cash paid for interest	$	-	$	-
Cash paid for income taxes	$	-	$	-

Supplemental Disclosures of Non-cash Investing and Financing Activities
Series A Preferred shares issued to relieve debt	$	-	$	134,790
Common stock issued for debt	$	168,267	$	-
Series B Preferred shares converted to common stock	$	29,287	$	-
Stock options granted as partial consideration for acquisition of RPS GmbH Resource Protection Systems	$	-	$	3,150,000
Decrease in Due from related party due to acquisition of Newview	$	-	$	515,084
Increase in Notes payalbe related party due to acquisition of Newview	$	-	$	355,636

Refer to Notes to Condensed Consolidated Financial Statements

Garb Oil & Power Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.	Nature of Operations and Going Concern

Garb Oil & Power, Corporation (the “Company” or “Garb”) was incorporated in the State of Utah in 1972 under the name Autumn Day, Inc. The Company changed its name to Energy Corporation International in 1978, to Garb-Oil Corporation of America in 1981 and finally to Garb Oil & Power Corporation in 1985. The Company is a provider of high-quality equipment to waste processing and recycling industries. Garb supplies enabling technologies that allow its clients to push their waste processing and recycling goals forward. Whether the need is for single machines or an entire plant, Garb provides innovative, profitable ideas and comprehensive value-added solutions providing for a high rate of return on investment. On October 27, 2009, the company entered a reverse-acquisition transaction with German-based Green-technologies company RPS GmbH Resource Protection Systems (“RPS”). The reverse-acquisition brought to Garb a large portfolio of technologies in the areas of waste-to-energy, electronic waste (e-scrap/e-waste) refinement and recycling, and waste-rubber refinement and recycling. Garb is currently engaged in the building and commissioning of turnkey waste-to-energy plants and refinement/recycling plants in e-scrap/e-waste and waste-rubber. On January 15, 2010, RPS purchased 80% of the issued and outstanding stock of Newview S.L., a company organized under the laws of Spain (“Newview”).

The accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern; accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and retire its liabilities in other than the normal course of business and at amounts different from those in the accompanying financial statements. As shown in the accompanying condensed consolidated financial statements, the Company incurred a net loss of $579,976 for the three months ended March 31, 2011, and has an accumulated deficit of $4,689,508. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain successful operations. Management is continuing its efforts to obtain the necessary financing as may be required to generate sufficient cash flows for future operations. Management is pursuing avenues of generating cash or revenues during the next twelve months. The Company is pursuing sales of its waste-to-energy, waste-rubber and e-scrap plants on which the Company would earn a commission. The Company is also attempting to interest purchasers, or potential purchasers, of Garb shredders and plants in establishing joint ventures. The Company also continues to pursue financing to build, commission and operate its own waste refinement and recycling plants. Management also believes that with the new line-up of next-regeneration machines, industry expertise, website and marketing strategies that are now implemented, the potential for machinery and plant sales has increased.

2.	Basis of Presentation

These interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for any interim period or an entire year. The Company applies the same accounting policies and methods in its interim financial statements as those in the most recent audited annual financial statements. The financial statements and notes included herein should be read in conjunction with the annual financial statements and notes for the year ended December 31, 2010 included in the Company’s filing of Form 10-K.

3.	Related party transactions

From time to time, our CEO, John Rossi incurred expenses in behalf of the Company. At March 31, 2011 the balance owed to Mr. Rossi was $54,049. The balance has been accrued in related party payable. Additionally, as of March 31, 2011 the Company owes Igor Plahuta, a director of the Company, $300,577, related to the purchase of Newview, S.L. in January 2010.

4.	Capital Stock

In February 2011, the Company agreed to issue 29,287,500 shares of common stock upon conversion of 11,715 shares of Class B Preferred Stock owned by a related party of the Company.

During the three months ended March 31, 2011, the Company agreed to issue 41,720,000 common shares upon conversion of $60,157 of notes payable. Because the Company approved the issuance of the shares at a discount to the market price on the date of issuance it recognized an $81,588 loss on forgiveness of debt.

During the three months ended March 31, 2011, the Company agreed to issue 27,465,138 common shares upon conversion of $108,110 of convertible promissory notes.

5.	Debt Issuance

In May 2010 the Company borrowed $40,000 from Asher Enterprises Inc. (“Asher”) pursuant to a convertible promissory note. During the quarter ended March 31, 2011, the Company recognized default penalties on the note and recorded interest expense in the amount of $23,289.

In June 2010 the Company borrowed $45,000 from Asher pursuant to a convertible promissory note. During the quarter ended March 31, 2011, the Company recognized default penalties on the note and recorded interest expense in the amount of $24,830.

On March 31, 2011 the Company issued a promissory note to Outsourced Associates for $75,000 related to consulting services. The Note bears interest at 10% per annum and has a maturity date of October 1, 2011. The Note agreement contains a 10% penalty clause if the Company fails to make payment at the maturity date. In October 2011, the Company recognized default penalties on the note and recorded interest expense in the amount of $7,500.

6.	Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. Management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption, therefore they have not been discussed here.

7.	Subsequent Events

In June 2011 the Company signed a $20 million Equity Line of credit with Evolution Capital, LLC. The funding will be used to close on potential acquisitions currently under review and due diligence. The Company has yet to draw down any amounts on the line of credit. In addition GARB engaged DDR & Associates, a strategic consulting firm with years of expertise in helping small enterprises achieve their growth potential.

Subsequent to March 31, 2011 the Company has issued 1,154,286,302 common shares upon conversion of $1,297,017 of debt, and issued 968,705,720 shares of common stock for services valued at $1,763,423.

The Company has also received proceeds of $329,190 from the issuance of Notes payable.

In August 2011 the Company announced it will form a JV partnership in Rome, Italy to build and operate an E-Waste plant in the Viterbo province. The plant will have 25,000 metric tons input and produce output in Copper, Aluminum, Alloys and Plastic. Once operational the plant will provide estimated revenues in excess of euro 11,000,000 ($15,400,000) and EBITA in excess of euro 6,000,000 ($8,400,000) per year of operation. All raw materials will be sold to local entities for further processing. The plant will be locally funded and initial funds are available to start the project. The JV will be 51% owned by Garb and 49% by a local group already present in the waste recycling business locally. The Company will then build, own and operate a 25,000 metric ton E-Waste plant.

In August 2011, the Company formed a Joint Venture partnership that will act as the coordinating company for the managing and coordinating the growth and development of 7 E-waste plants throughout the United States. It is planned that the company will manage and co-ordinate the building of 7 E-Waste recycling facilities within the next 3 years. The JV will be funded through USCIS designated regional centers under the EB-5 Pilot Program for each E-Waste recycling facility in accordance with our planned schedule. It is estimated that each E-Waste recycling facility will cost as much as $15,000,000 to build depending on configuration and size of each recycling facility. The Joint Venture is owned 51% by the Company and 49% by ACG Consulting LLC. Three E-Waste recycling facilities are planned for operation during the 2013 calendar year with four additional recycling facilities to come on line during the 2014 calendar year.

In October 2011 the Company formed a Joint Venture partnership in Italy to build and operate an E-Waste plant. The plant will have 25,000 metric tons input and produce output in Copper, Aluminum, Alloys and Plastic. The Joint Venture will be 51% owned by the Company and 49% by a local Italian group already present in the waste recycling business locally. The Company will then build, own and operate a 25,000 metric ton E-Waste plant. The estimated cost of the project including land, building and plant is expected to be approximately $25 million and is scheduled to be completed by September 2012.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risks and Uncertainties” and the risks set out below, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:

the uncertainty that we will not be able to successfully identify and evaluate a suitable business opportunity;

risks related to the large number of established and well-financed entities that are actively seeking suitable business opportunities;

risks related to the failure to successfully manage or achieve growth of a new business opportunity; and

other risks and uncertainties related to our business strategy.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

As used in this quarterly report, the terms “we”, “us”, “our”, “our company” and “Garb” mean Garb Oil & Power Corporation, unless otherwise stated.

Our Current Business

Garb Oil & Power Corporation (“Garb”) is in the fast growing industry of waste recycling and specifically related to the E-Waste, waste to energy, tire recycling and car recycling. Garb’s strategy is to build its own plants and sell the high value products that Garb’s processing technology allow it to produce. These include products such as copper, aluminum, alloys and plastics from its e-scrap plants, once in production, and products such as NanoRubber from its rubber plants, once in production. Garb technology is a proven technology already well utilized in Europe, where Garb, through its wholly owned subsidiary RPS GmbH Resource Protections Systems and its officers and principal shareholders, has already sold in the last 10 years over 135 machines and produced, built, collaborated, designed, planned, delivered and/or commissioned over 15 plants in the E-waste and Rubber recycling and general waste processing.

Garb is a corporation incorporated in the State of Utah in 1972 under the name Autumn Day, Inc. The Company changed its name in 1978 to Energy Corporation International and again in 1981 to Garb-Oil Corporation of America, which marked the start of company’s development stage in the energy and recycling industries. The Company’s development stage activities consisted of raising capital, purchasing property and developing technology related to waste-to-energy electricity production, pyrolysis (extraction of oil, carbon, and steel from used tires), and recovery of used rubber from large off-the-road tires and repair and sale of used truck tires. In 1985 the Company changed its name to Garb Oil & Power Corporation.

Recent Developments

Results of Operations

The following summary of our results of operations should be read in conjunction with our unaudited financial statements for the three month periods ended March 31, 2011 and 2010 which is included herein.

Our operating results for the three month periods ended March 31, 2011 and 2010 are summarized as follows:

	Three Months Ended March 31,
	2011			2010
Operating expenses	$	376,228		$	250,800
Other income (expense)	$	(204,793	)	$	(75,550	)
Net Loss	$	(579,976	)	$	(325,220	)

Revenues

We did not earn any revenues for the three months ended March 31, 2011, or for the comparable period of 2010. The Company does not expect to have revenues for the foreseeable future until our e-waste plants are opened.

Expenses

General and Administrative

Our general and administrative expenses increased $125,428, or 50.01% to $376,228 for the three-months ended March 31, 2011 when compared to the three months ended March 31, 2010 amount of $250,800. This increase is primarily attributable to an increase in consulting fees of approximately $105,000, professional fees of approximately $45,000, and salaries and wages of $105,000, offset in part by a decrease in other promotional expense of approximately $91,000 and travel expenses of approximately $24,000 when compared to the three months period ended March 31, 2010.

Other income (expense)

Other income (expense) increased by $129,243, or 171%, from $(75,550) to $(204,793) for the three months ended March 31, 2011 when compared to the three months ended March 31, 2010. The increase is a result of an increase in interest expense of approximately $35,000 related to the Company’s increase in notes payable, an increase in loss on extinguishment of debt of $81,588 and a decrease in other income of $12,947.

Net loss

The Company’s net loss for the period ended March 31, 2011 increased $(254,756) or 78.3% to $(579,976) from $(325,220) when compared to the three month period ended March 31, 2010 for the reasons discussed above.

Liquidity and Capital Resources

Working Capital

							Percentage
	March 31,			December 31,			Increase
	2011			2010			(Decrease)
Current Assets	$	1,082		$	133,508		(99.2)%
Current Liabilities	$	4,667,066		$	4,431,971		5.3%
Working Capital (Deficiency)	$	(4,665,984	)	$	(4,298,463	)	(8.6)%

Cash Flows

	Three Months Ended March 31,						Percentage Increase
	2011			2010			(Decrease)
Cash Used in Operating Activities	$	53,727		$	(128,962	)	(141.7)%
Cash Used in Investing Activities	$	-		$	-		N/A
Cash Provided by Financing Activities	$	(8,002	)	$	59,607		(113.4)%
Net Increase (Decrease) in Cash	$	45,725		$	(69,355	)	(165.9)%

We anticipate that we will incur approximately $500,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Securities Exchange Act of 1934 and our legal representation during the next twelve months. We do not have sufficient working capital to provide for the anticipated expenses over the next twelve months. Accordingly, we will need to obtain additional financing in order to complete our business plan.

Cash From Operating Activities

We had net cash flows from operating activities in the amount of 53,727 during the three month period ended March 31, 2011 compared to $(128,962) during the three month period ended March 31, 2010. The net cash flows from operating activities for the three months ended March 31, 2011 are primarily attributable to changes in prepaid expenses of $132,424, accounts payable of $82,923, accrued interest of $67,780, other accrued expenses of $132,742, debt for services of $75,000, loss on extinguishment of debt of $81,588 and loan fees of $46,763, offset in part by the net loss for the period of $(579,976).

Cash From Investing Activities

There were no cash flows from investing activities in either of the three month periods ended March 31, 2011 or 2010.

Cash From Financing Activities

Cash flows from financing activities during the three months ended March 31, 2011 consisted of payments on notes payable related party of $11,579 and a change in the bank overdraft of $3,577.

The Company raised $47,000 net funds from the sale of convertible debenture to an unaffiliated, accredited investor and $5,000 from the private placement of Common Stock during the three months ended March 31, 2010.

Disclosure of Outstanding Share Data

As of the balance sheet date of this quarterly report, we had 224,919,480 shares of Common Stock; 2 shares of Class A Preferred Stock; and 193,289 shares of Class B Preferred Stock issued and outstanding.

We have options outstanding for the purchase of 100,000,000 shares of the Company’s common stock at an exercise price equal to one-tenth of the closing ask price for the ten trading days prior to the exercise of the option. The options were issued in connection with the acquisition of RPS and became effective only upon the increase in authorized shares of common stock which took place in March 2010. The options expire in November 2014.

Going Concern

The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated sufficient revenues in the last two years to cover all operating and overhead costs, and has never paid any dividends and is unlikely to pay dividends in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at March 31, 2011, our company has accumulated losses of $4,689,508. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the financial statements for the year ended December 31, 2010, our independent auditors have included an explanatory paragraph regarding concerns about our ability to continue as a going concern. The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Future Financings

We anticipate continuing to rely on equity sales of shares of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to shareholders.

Risks and Uncertainties

History of net losses/Going Concern.

We have a history of incurring losses, minimal revenue and an accumulated deficit. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. 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.

Current economic downturn.

The current economic downturn and uncertainty in the financial markets in the United States and internationally may adversely affect our business and our financial results. If economies in the United States and internationally remain unstable or weaken, or if businesses or consumers perceive that these economic conditions may continue or weaken, we may experience declines in the sales. As a result, we cannot predict what impact the current economic downturn and uncertainty of the financial markets will have on our business, but expect that such events may have an adverse effect on our business and our financial results in the current quarter and future periods.

Reliance on our key employees.

Our success and future growth depends to a significant degree on the skills and continued services of our management team. Our future success also depends on our ability to attract and retain and motivate highly skilled technical, managerial, marketing and customer service personnel, including members of our management team. Our employees work for us on an at-will basis, however, the laws of some of the international jurisdictions where we may have employees in the future may require us to make statutory severance payments in the event of termination of employment. We plan to hire additional personnel in all areas of our business, both domestically and internationally. We may be unable to successfully attract or retain qualified personnel. Our inability to retain and attract the necessary personnel could adversely affect our business.

Changes in financial accounting standards.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and are likely to occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Conflicts of interest between our management and the Company.

Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of the Company. A conflict of interest may arise between the Company’s management’s personal pecuniary interest and their fiduciary duty to our stockholders.

Limited internal controls.

We currently have three directors all whom are officers of the company, so we rely on computer and manual systems without independent officers and employees to implement full, formal, internal control systems. Accordingly, we do not have separate personnel that provide dual signatures on checks, separate accounts receivable and cash receipts, accounts payable and check writing, or other functions that frequently are divided among several individuals as a method of reducing the likelihood of improper activity. This reliance on a few individuals and the lack of comprehensive internal control systems may impair our ability to detect and prevent internal waste and fraud.

Inadequate disclosure controls and procedures.

The Company does not have adequate personnel to review of day-to-day financial transactions, review of financial statement disclosures, or record, process, summarize and report within the time periods specified in SEC rules and forms for the period covered by this Report on Form 10-Q. To remediate the control deficiencies, one of several specific additional steps is that the Company plan to undertake to employ a fulltime CFO to implement adequate systems of accounting and financial statement disclosure controls to comply with the requirements of the SEC and implement internal processes and controls for all day-to-day financial transactions. Our efforts to comply with disclosure controls and procedures are likely to continue to result in increased expenses and the commitment of significant financial and personnel resources. We can give no assurance that in the future such efforts will be successful.

Need for additional capital.

We will need additional funds to cover expenditures in the completion, publications and marketing of our products. We will fund any additional amounts required for such expenditures through additional debt or equity financing, which may dilute the economic interest of existing stockholders, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Our Board can approve the sale of additional equity securities from our authorized share capital without stockholder consent.

Inability to obtain additional financing.

There can be no assurance that any proceeds we receive from additional debt or equity financing will satisfy our capital needs. There is no assurance that additional financing will be available when needed on terms favorable to us or at all. The unavailability of adequate financing on acceptable terms could have a material adverse effect on our financial condition and on our continued operation.

Control of Company by officers and directors.

As of December 31, 2010, John Rossi and Igor Plahuta, collectively owned 24.10% of all issued and outstanding common shares of the Company. They also own 100% of the Series A Preferred shares, which are convertible into 991,585,524 shares of common stock of the Company as of December 31, 2010. Additionally, Alan Fleming owns 15.4% of the Series B Preferred shares, which are convertible into 29,287,500 of common stock. Accordingly, by virtue of their ownership of shares, the stockholders referred to above acting together may effectively have the ability to influence significant corporate actions, even if other shareholders oppose them. Such actions include the election of our directors and the approval or disapproval of fundamental corporate transactions, including mergers, the sale of all or substantially all of our assets, liquidation, and the adoption or amendment of provisions in our articles of incorporation and bylaws. Such actions could delay or prevent a change in our control.

Importance of predicting market preferences and accurately target buyers.

The waste-to-energy, e-waste recycling and rubber-waste recycling industries have only, until recently, been minor industries in the United States. Over the past year there has been a steady increase in interest in these technologies and Federal and local governments have also given greater emphasis on these technologies. Because of this, there are several major companies currently positioning themselves to capture market share in these emerging industries. Although we believe Garb’s technologies are among the best in these industries, if we fail to predict market preferences, accurately target buyers, and properly market our technologies then sales will suffer. Furthermore, the successful development of new technologies and products will require us to anticipate the needs and preferences of the market and forecast market trends accurately. Consumer preferences tend to follow technological advances, which advances may also come from competitors. The development of products and application for these products requires high levels of innovation and a great understanding of industry and governmental standards and engineering practices. This process can be lengthy and costly. To remain competitive, we must continue to develop enhancements of our existing character base successfully. We cannot assure you that future products will be introduced or, if introduced, will be successful. The failure to enhance and extend our existing products or to develop and introduce products that achieve and sustain market acceptance and produce acceptable margins would harm our business and operating results.

Infringement of third party intellectual property rights.

In the course of our business, we may periodically receive claims of infringement or otherwise become aware of potentially relevant copyrights, trademarks or other intellectual property rights held by other parties. Upon receipt of this type of communication, we will evaluate the validity and applicability of allegations of infringement of intellectual property rights to determine whether we must negotiate licenses or cross-licenses to incorporate or use the proprietary copyrights or trademarks or other proprietary matters in or on our products. Any dispute or litigation regarding copyrights, trademarks or other intellectual property rights, regardless of its outcome, may be costly and time-consuming, and may divert our management and key personnel from our business operations. If we, our potential distributors or our manufacturers are adjudged to be infringing the intellectual property rights of any third party, we or they may be required to obtain a license to use those rights, which may not be obtainable on reasonable terms, if at all. And, we may incur costs in revising certain products so as to not infringe on others rights. We also may be subject to significant damages or injunctions against the development and sale of some or all of our products or against the use of a trademark in the sale of some or all of our products. We do not have insurance to cover any such claim of this type and may not have sufficient resources to defend an infringement action.

Affect of officer and director indemnification.

The officers and directors of the Company are entitled to certain indemnification protections under Utah law. If our directors or officers become exposed to liabilities triggering those indemnification obligations, we could be exposed to unreimbursable costs, including legal fees. Extended or protracted litigation subject to indemnification could have a material adverse effect on our cash flow.

Volatile stock price.

The market price of our common stock will likely fluctuate significantly in response to a number of factors, some of which are beyond our control. These factors include, but are not limited to, variations in our quarterly operating results; changes in financial estimates of our revenues and operating results by securities analysts; changes in market valuations; announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; additions or departures of key personnel; future sales of our common stock; stock market price and volume fluctuations attributable to inconsistent trading volume levels of our stock; commencement of or involvement in litigation.

Authorization of Preferred Stock.

Our Articles of Incorporation authorize the issuance of up to 50,000,000 shares of preferred stock with rights, preferences and privileges senior in many respects to the Company’s common stock. Our Board is empowered, without stockholder approval, to issue preferred stock with liquidation, conversion, voting, anti-dilution or other rights which could adversely affect the voting power, economic interests or other rights of the holders of the common stock. The preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.

Audit compliance costs.

An immediate and specific risk relates to the our ability to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act the failure of which could lead to loss of investor confidence in our reported financial information. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to furnish a report by our management on our internal control over financial reporting. If we cannot provide reliable financial reports or prevent fraud, then our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly. In order to achieve compliance with Section 404 of the Act, we will need to engage in a process to document and evaluate our internal control over financial reporting, which will be both costly and challenging. In this regard, management will need to dedicate internal resources, engage outside consultants and adopt a detailed work plan.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, and accordingly we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate disclosure controls and procedures as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our management, under the supervision and with the participation of our Chief Executive Officer, who is also our Principal Accounting Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based upon this assessment, we determined that as of the end of period covered by this quarterly report on Form 10-Q our disclosure controls and procedures were not effective because there exist material weaknesses affecting our internal control over financial reporting.

The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States Generally Accepted Accounting Principles and the Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

Management’s remediation initiative

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2012: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Management’s Discussion of Material Weakness

Management has identified the following groups of control deficiencies, each of which, in the aggregate, represents a material weakness in the Company’s internal control over financial reporting as of March 31, 2011:

·	The Company’s accounting records, policies and procedures were not adequately maintained or documented, and the accounting and finance department lacked resources and sufficient technical accounting knowledge.
·	The Company did not analyze financial and operating results in a timely manner, including expenditures by certain management and others. Additionally, the company did not proactively review legal contracts and sales orders entered into for financial implications.
·	Departments did not always work cohesively, particularly in regards to required disclosures, due diligence and acquisitions.
·	The Company has engaged in a number of related-party transactions. Additionally, certain of the Company’s executive, directors and shareholders have outside business interests that could conflict with the priorities of the Company.
·	The Company has not widely circulated a code of ethics beyond the Company’s directors and officers.
·	The Company did not design and implement controls to communicate and monitor corporate strategy and objectives or compliance with policies and procedures, including expenditure policies at its operation in Spain and Germany.
·	The Company has only one independent director on the Board of Directors.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting implemented during the period of this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company anticipates implementing additional internal controls and procedures to address material weaknesses as soon as it is financially and logistically able to do so.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchaser	Shares	Price per share	Consideration	Date	Class/Series
Asher Enterprises	2,857,143	$ 0.0036	Conversion of debt	1/24/2011	Common
Evolution Capital	6,000,000	$ 0.0051	Conversion of debt	2/1/2011	Common
J Fenway LLC	5,720,000	$ 0.0060	Conversion of debt	2/2/2011	Common
Alan Flemming	29,287,500	$ 0.0010	Conversion of Series B Preferred shares	2/3/2011	Common
Asher Enterprises	4,666,667	$ 0.0026	Conversion of debt	3/3/2011	Common
Asher Enterprises	1,333,333	$ 0.0026	Conversion of debt	3/9/2011	Common
Asher Enterprises	3,333,333	$ 0.0031	Conversion of debt	3/14/2011	Common
Asher Enterprises	2,631,579	$ 0.0033	Conversion of debt	3/15/2011	Common
Asher Enterprises	5,714,286	$ 0.0036	Conversion of debt	3/17/2011	Common
Evolution Capital	10,000,000	$ 0.0026	Conversion of debt	3/23/2011	Common
J Fenway LLC	20,000,000	$ 0.0025	Conversion of debt	3/25/2011	Common
Asher Enterprises	6,928,797	$ 0.0017	Conversion of debt	3/26/2011	Common

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

None.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed or furnished herewith or are incorporated herein by reference to exhibits previously filed with the SEC.

No.	Description	Location
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	Filed herewith
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GARB OIL & POWER, INC.

/s/ John Rossi
John Rossi
Chief Executive Officer, President, and Director
(Principal Executive Officer and Principal Financial Officer)
Date: March 12, 2012

GARB OIL & POWER CORP - FORM 10-Q - March 12, 2012

Attached files

GARB OIL & POWER CORP Reports