U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended March 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from ___________ to ___________
Commission File Number 33-17598-NY
TIREX AMERICA INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 22-2824362
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) identification No.)
3767 Thimens, Ville St. Laurent, Quebec H4R lW4
(Address of Principal executive offices)
(514) 335-0111
(issuer's telephone number, including area code)
__________________________________________________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
-------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity: As of May 12, 1997, there were 28,794,063 shares of the
Issuer's common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
-------- ---------
<PAGE>
Tirex America Inc.
(A Development State Company)
TABLE OF CONTENTS
PART I
Item I - Financial Information (unaudited) Page
Tirex America Inc. and Subsidiary
Consolidated Balance Sheets as of
March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
for the three and nine month periods
ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the nine-month periods
ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . . . . . . . . . . . . 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . 16
PART II
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . 18
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 27
The financial statements are unaudited. However, the management of
registrant believes that all necessary adjustments (which include only normal
recurring adjustments) have been reflected to present fairly the financial
position of registrant at March 31, 1997 and the results of its operations and
changes in its financial position for the three and nine month periods ended
March 31, 1997 and for the period from inception (July 15, 1987).
<PAGE>2
TIREX AMERICA INC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
As At March 31
<S> <C> <C>
1997 1996
Assets
Current Assets:
Cash 10,697 ---
Note Receivable 1,158 1,158
Total Current assets 11,855 1,158
Equipment - At Cost - Net of Accumulated 17,681 6,290
Depreciation of $8,895 (Note 1)
Other Assets
Equipment Development costs 549,116 61,201
Other Assets (Note 1) - 1,600
Organization Costs, Net of Accumulated 984 1,292
Amortization of $558
Total Other Assets 550,100 64,098
Total Asset 579,636 71,541
Liabilities and Owners' equity (Deficit):
Current Liabilities
Bank Indebtedness - 1,344
Accrued expenses 234,603 62,600
Due to Shareholders (Note 3) - 5,000
Total Current Liabilities 234,603 68,944
Deposit payable 190,000 65,000
Stock Options (Note 6) 20,000 20,000
Loans payable 45,796 31,985
255,796 116,985
490,399 185,929
Commitments and Contingencies
Owners' Equity (Deficit)
Common Stock, $.001 par value; Authorized
50,000,000 Shares, Issued and Outstanding,
28,029,268 (Note 1, 3, 4, 5) 28,029 21,287
<PAGE>3
Tirex America Inc.
Consolidated
Balance Sheet cont.
Additional Paid-in Capital 3,082,938 2,053,463
(Deficit) accumulated during the
development stage (3,021,730) (2,189,138)
Total Owners' Equity (Deficit) 89,237 (114,388)
Total Liabilities and Owners' Equity $ 579,636 $ 71,541
(Deficit)
See Notes to Financial Statements
</TABLE>
<PAGE>4
<TABLE>
TIREX AMERICA INC
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Operations
(Unaudited)
<CAPTION>
Six Months Ended
March 31
1997 1996
<S> <C> <C>
Revenues - $ 36,860
Cost of Sales - 4,000
Gross Profit - 32,860
General and Administrative
Expenses
Officers Salary (Note 3, 5) 382,592 412,500
Consulting Services 70,771 128,833
Professional Services 58,761 13,525
Rent 5,056 1,500
Travel and Entertainment 65,672 32,794
Telephone 6,031 1,195
Depreciation and Amortization 2,085 1,035
Office Expenses 13,599 15,044
Miscellaneous 2,793 350
Franchise and other Tax - 443
Bank Charges 6,270 318
Investor Relations 1,794 576
Transfer Agent 5,009 2,216
Total General and Administrative 620,433 610,329
Expenses
Net (Loss) (620,433) (577,469)
Net (Loss) Per Common Share ( .02) ( .03)
Weighted Average Shares of 23,907,069 19,041,095
Common Stock Outstanding
</TABLE>
See Notes to Financial Statements.
<PAGE>5
TIREX AMERICA INC
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
<S> <C> <C>
1997 1996
Operating Activities
Net (Loss) $(620,433) $(577,469)
Adjustments to Reconcile Net (Loss) to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 2,085 1,035
Stocks Issued In Exchange For Services 531,958 2,942
Change in Assets and Liabilities:
Increase(Decrease) in Accrued Expenses (7,826) 2,942
Decrease in due to shareholders (5,000) -
521,217 416,477
Net Cash-Operating Activities (99,216) (160,922)
Investing Activities
Equipment (1,740) -
Equipment Development Costs (371,892) -
Net Cash-Investing Activities (373,632) -
Financing Activities
Issuance Of Common Stocks And Additional 347,509 54,193
Paid In Capital
Loans Payable 10,796 31,985
Deposit Payable 125,000 15,000
Net Cash - Financing Activities 483,305 101,178
Net Increase(Decrease) in Cash 10,457 (59,814)
Cash - Beginning of Period 240 58,470
Cash - End of Period $ 10,697 $ (1,344)
</TABLE>
See Notes to Financial Statements.
<PAGE>6
TIREX AMERICA INC. AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
Nature of Business
Tirex America, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on August 19, 1997. The Company originally planned to
provide comprehensive health care services to persons with Acquired Immune
Deficiency Syndrome, however due to its inability to raise sufficient capital
it was unable to implement its business plan. The Company had been inactive
since it ceased operations in November 1990.
In the Fall of 1992, a group of shareholders lead by Edward Mihal and
including 16 other shareholders acting in concert with Mr. Mihal along with
Patrick McLaren and George Fattell, individuals without any prior affiliation
with the Company, became interested in the Company as an entity potentially
suitable for merger or similar transaction with an operating private company
seeking to become public in this manner. This group approached the Company's
incumbent management with a proposal whereby they agreed to assume management
control, make all delinquent filings with the Securities and Exchange
Commission, restore service by transfer agent and pay all other expenses
required to enable the Company to begin trading its stock and completing a
merger or similar transaction.
In furtherance of the foregoing, on November 5, 1992, J. Richard
Goldstein, MD, Peter R. Stratton and Robert Kopsack resigned from their
positions as officers and directors of the Company. From June 1989 until the
date of such resignations, Dr. Goldstein was the Company's President and Chief
Executive Officer, Mr. Stratton was Vice-President, Chief Operating Officer,
Secretary and Treasurer, and Mr. Kopsack was the Company's Vice President, In
resigning their positions, Dr. Goldstein and Messrs. Stratton and Kopsack acknow
ledged that they acceded to their respective positions and had received
compensation in consideration of their representations that they would, and
their beat efforts to, implement a business plan for the Company which would
encompass, among other things, the establishment and operating of skilled
nursing care facilities for patients with Acquired Immune Deficiency
Syndrome. Compensation received by Dr. Goldstein and Messrs. Stratton and
Kopsack consisted of cash payments, stock issuances, and the grants of stock
options and/or stock purchase warrants. As part of their resignations, Dr.
Goldstein and Messrs. Stratton and Kopsack each executed releases whereby the
Company was released and forever discharged from all debts, obligations,
covenants, agreements, contracts, claims or demands in law or in equity,
including but not limited to any stock options or stock purchase warrants
granted or promised to them,
<PAGE>7
which against the Company, each ever had, or thereafter may have for or by
reason of any matter, cause or thing up to and through November 5, 1992. Each
of Dr. Goldstein and Messrs. Stratton and Kopsack also acknowledged the
termination and rescission of their respective employment agreements with the
Company to such persons as the Company should direct for the purpose of
satisfying certain of the Company's obligations to third parties. In
consideration of the resignations and releases executed by Dr. Goldstein and
Messrs. Stratton and Kopsack, Edward Mihal and each of the sixteen
shareholders of the Company acting in concert with Mr. Mihal executed and
delivered reciprocal personal releases to and on behalf of Dr. Goldstein and
Messrs. Stratton and Kopsack. In connection with the foregoing resignations,
Dr. Goldstein and Messrs. Stratton and Kopsack appointed, as an interim board
of directors, Patrick McLaren, George Fattell, And Edward Mihal (the "Interim
Management"). It was the goal of the Interim Management to find suitable
acquisition and/or development by the Company. On December 29, 1992, Edward
Mihal resigned his position as an officer and a director of the Company and
Louis V. Muro was appointed as an officer and director of the Company to fill
the vacancy created thereby.
<PAGE>8
TIREX AMERICA INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Reorganization
On March 26, 1993, the Company entered into an acquisition agreement (the
"Acquisition Agreement") with Louis V. Muro, Patrick McLaren and George
Fattell, officers and directors of the Company (collectively the "Sellers'') ,
for the purchase of certain technology owned and developed by the Sellers (the
"Technology") and extensive and detailed plans (the "Business Plan") for a
business which will engage in the exploitation of the Technology. The
Technology will be used to design, develop and construct a prototype machine
and thereafter a production quality machine for the cryogenic disintegration
of used tires. Pursuant to the Acquisition Agreement, Sellers agreed to
assign, transfer and sell to the Company all of their right, title and
interest in the Technology and Business Plan in exchange for fifteen million
nine hundred thousand (15,900,000) shares of the Company's common stock, $.001
par value per share (the "Sellers' Stock") of which eleven million nine
hundred thousand (11,900,000) shares were put into escrow. The Business Plan
and Technology were developed by the Sellers prior to their affiliation or
association with the Company. The Sellers were engaged as the Company's
officers and directors for the purpose of implementing the Business Plan with
the Technology or such other technology which they believed could reasonably
satisfy the requirements of the Business Plan.
Effective with the March 26, 1993, closing date of the Acquisition
Agreement (the "Closing Date"), the Company authorized an increase in the
number of directors of the Company from three to six. Pursuant thereto, the
Company appointed Messrs. Kenneth Forbes, Nicholas Campagna, and Alfred J.
Viscido to fill the vacancies created in the size of the board. As an
inducement to Messrs. Forbes, Campagna and Viscido to join the board of
directors, the Company issued 250,000 shares of its common stock, $.001 per
value to each of them. The Acquisition Agreement also provided for stock
issuances in the form of finders fees. Pursuant thereto, the Company issued
300,000 and 1,700,000 shares of its common stock, $.001 par value, to Joseph
Territo and Edward Mihal, respectively.
Effective March 24, 1994, George Fattell resigned as an officer and
director of the Company. Per the terms of his resignation any future shares
of the Company's common stock issued to Mr. Fattell are to be equally
distributed to Louis V. Muro and Patrick McLaren.
<PAGE>9
Effective January 18, 1995, Louis V. Muro and Patrick McLaren resign
their positions as officers and directors of the Company. In addition to
their resignations they acknowledged that none of the requisite performance
levels for the release of any of the 11,900,000 escrow shares had been met and
renounced all rights to such shares.
Basis of Consolidation
The consolidated financial statements include the accounts of Tirex
America, Inc. and its subsidiary Tirex Canada. All intercompany transactions
and accounts have been eliminated in consolidation.
<PAGE>10
TIREX AMERICA INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Equipment
Equipment is recorded at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the assets by
using the straight-line method of depreciation.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The cost and related accumulated
depreciation of assets sold ore retired are eliminated from the accounts and
any gain or losses are reflected in earnings.
Organizations Costs
Organization costs are being amortized on a straight-line basis over a
sixty month period.
Per Share Data
The primary income (loss) per share was computed on the weighted number
of shares of the common stock outstanding during the period. Common share
equivalents were not included as their inclusion would have been
anti-dilutive.
Income Taxes
The Company has net operating loss carryovers of approximately $2.4
million as of June 30, 1996, expiring in the years 2004 through 2011.
However, based upon present Internal Revenue regulations governing the
utilization of net operating loss carryovers where the corporation has issued
substantial additional stock, most of this loss carryover may not be available
to the Company.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes, effective July 1993. SFAS No. 109
requires the establishment of a deferred tax asset for all deductible
temporarily differences and operating carryforwards. Because of the
uncertainties discussed in Note 2, however, and deferred tax asset established
for utilization of the Company's tax amount is loss carryforwards would
correspondingly require a valuation allowance of the same amount pursuant to
SFAS No. 109. Accordingly, no deferred tax asset is reflected in these
financial statements.
<PAGE>11
Note 2 - Going Concern
As shown in accompanying financial statements, the Company incurred a net
loss of $(620,433) during the nine months ended March 31, 1997 and as of that
date, the Company's current liabilities exceeded it current assets by $222,748
and its total assets exceeded its total liabilities by $89,237.
In March 1993, the Company, which was still in the development stage,
developed a new Business Plan. The Company is in the process of constructing
a production quality machine for the cryogenic disintegration of used tires.
The Company also plans to recycle used tires using ambient temperature
disintegration equipment. At March 31, 1997, the company is still in the
development stage. Fees generated from tipping and culling were insufficient
to fund the current operations of the Company. All of these factors create an
uncertainty about the Company's ability to continue as a going concern.
<PAGE>12
TIREX AMERICA INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Note 2 - Going Concern (continued)
The Company is currently in the process of formulating a plan to obtain
capital through a merger or acquisition, which will provide working capital
while the Company constructs its cryogenic disintegration machine. The
ability of the Company to continue as a going concern is dependent on the
success of the plan. The financial statements do not include any adjustments
that might be necessary if the Company in unable to continue as a going
concern.
Note 3 - Related Party Transactions
On July 22, 1994, 3,000,000 shares of Tirex America, Inc. were released
from escrow and issued to Louis V. Muro and Patrick McLaren (1,500,000 shares
each) in accordance with the terms and provisions of the Acquisition Agreement
dated March 26, 1993.
In January 1995, the Company entered into employment agreements with the
President and General Counsel whereby the Company will pay $250,000 a year
plus benefits and $150,000 a year plus benefits respectively. In January
1996, the Company signed an employment agreement with the Vice President in
charge of Engineering for $150,000 a year plus benefits, All of the employment
agreements call for three year terms. In addition to the employment services,
the officers agree not to compete with the Company for the two year period
following the termination of employment. If an officer is terminated other
than for cause or for "good reason", the terminated officer will be paid twice
the amount of their base salary for twelve months.
Included in accrued expenses at March 31, 1997 is $126,026 of salary to
officers for which the company subsequently issued common stock.
Note 4 - Forgiveness of Debt
In 1996 and 1995, the Company recorded increases in common stock and
paid-in capital of $29,400 and $24,500, respectively, which was in recognition
of the forgiveness of debt by certain related parties of the Company.
Note 5 - Common Stock
During the year ended June 30, 1995, the Company's Board of Directors has
authorized the issuance of 2,000 shares of its common stock, $.001 par value
per share. These shares were purchased during the year ended June 30, 1990.
Inadvertently, the Company failed to issue the shares at the time of purchase.
<PAGE>13
During the years ended June 30, 1996 and 1993, the Company issued common
stock to individuals for services performed and forgiveness of debt totaling
$542,572 and $177,950, respectively. Included in these amounts are payments
to officers of the Company in exchange for salary in the amount of $502,756
and $150,000, respectively. The dollar amounts assigned to such transactions
have been recorded at the fair value of the services received, because the
fair value of the services received was more evident than the fair value of
the stock surrendered.
<PAGE>14
TIREX AMERICA INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
Notes to Consolidated Financial Statements
Note 6 - Stock Options
On May 19, 1995, the Company sold to a director of the Company an option
to purchase 20,000 shares Of Cumulative Convertible Preferred Stock at an
exercise price of $10 par share, exercisable during the two year period
beginning May 19, 1995, and ending May 18, 1997. The director paid $20,000
for the option. The term of the Preferred Stock purchasable under the option
call for cumulative cash dividends at a rate of $1.20 per share and conversion
into shares of common stock. The conversion to Common stock ratio varies
depending on when the conversion is made. At March 31, 1997, the option has
not been exercised.
<PAGE>15
TIREX AMERICA INC. AND SUBSIDIARY
(A Development Stage Company)
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of significant
factors which have affected Registrant's financial position and operations
during the fiscal quarter ended March 31, 1997 (all amounts are shown in
United States dollars).
Liquidity and Capital Resources
The activities of Registrant since its inception in 1987 have been
financed by sources other than operations. Such financing was principally
provided by the sale of securities in private transactions. as follows:
Proceeds From
Year Ended Sales of
June 30th Securities
1996 $ 80,872
1995 22,316
1994 237,430
1993 76,055
1990 80,812
1989 77,000
In addition, Canadian Government tax credits, grants and/or loans
provided Registrant with an aggregate of $26,861 during the year ended June
30, 1996 and an additional $45,796 during the nine-month period ended March
31, 1997.
As at March 31, 1997, Registrant had total assets of $ 579,636 reflecting
an increase of $367,067 from the end of the quarter ended December 31, 1996
when total assets were $212,569 and an increase of $508,095 from the end of
the analogous quarter ended March 31, 1996, when total assets were $71,541.
Such increase reflects, in the main part, accrued development costs related to
the TCS-1 System. As at March 31, 1997, total liabilities were $490,399. This
reflects an increase of $103,027 from the end of the quarter ended December
31, 1996 when total liabilities were $387,372 and an increase of $304,470,
from the end of the analogous quarter ended March 31, 1996, when total
liabilities were $185,929. Management attributes such increases to accrued
operating expenses and increase in deposit and loans payable. Reflecting the
foregoing, as at March 31, 1997,
<PAGE>16
Registrant had a working capital deficit (current assets minus current
liabilities) of $222,748. This reflects an increase of $11,639 in the size of
the deficit from December 31, 1996, when Registrant had a working capital
deficit of ($211,109) and a further increase in the size of the deficit from
the analogous quarter ended March 31, 1996 when Registrant had a working
capital deficit of ($67,786).
Registrant currently has no material assets and a negative net worth.
The success of its proposed cryogenic tire disintegration business and its
ability to continue as a going concern will be dependent upon Registrant's
ability to obtain adequate financing to complete the design and development of
the TCS-1 System and to commence manufacturing and sales activities related
thereto. While Registrant believes that it will be able to do so by the
autumn of 1997, it cannot, at the present time, give any assurances that this
will in fact be the case.
Results of Operations
Registrant has never engaged in any significant business activities and
had no revenues from operations during the three or nine months ended March
31, 1997 or in the analogous periods ended March 31, 1996. Management has
continued to devote all of Registrant's limited resources to activities
connected with completing the design and development of the first TCS-1
System. commencing the manufacture thereof, and endeavoring to raise financing
to cover the costs of such activities.
From inception (July 15, 1987) through March 31, 1997, Registrant has
incurred a cumulative net loss of ($ 3,021,730), more than half of which was
incurred, prior to the inception of Registrant's present business plan, in
connection with Registrant's discontinued proposed health care business and
was due primarily to the expensing of costs associated with obtaining certain
certificates of need ($309,000), officers salaries ($168,750), professional
services ($171,703), rent ($92,335) and other start-up costs ($164,226).
Registrant never commenced its proposed health care operations and therefore,
generated no revenues from operations. Pursuant to Registrant's present
business plan. it intends to engage in the business of manufacturing cryogenic
tire disintegration equipment. At the present time, Registrant is engaged in
completing the design and development, and commencing the construction of a
production quality cryogenic tire disintegration machine based on its
proprietary TCS-1 System technology, Unless and until Registrant successfully
develops and commences manufacturing and sales operations respecting such a
machine, Registrant will continue to generate no revenues from operations.
<PAGE>17
PART II
OTHER INFORMATION
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
During the fiscal quarter ended March 31, 1997, Registrant made the
following sales of its common stock, $.001 par value, per share ("Common
Stock") without registration under the Securities Act of 1933, as amended (the
"Securities Act"). The following sets forth information respecting the dates,
purchasers, and consideration involved in such sales and the bases for
Registrant's claim that all such sales were exempt from the registration
provisions of Section 5 of the Securities Act.
Sales to Executive Officers in Respect of Services Rendered
On January 17, 1997, Registrant authorized the following stock issuances
to its executive officers and employees in consideration of unpaid salaries
due and owing to them under their respective employment agreements with
Registrant:
1. In consideration of unpaid executive services rendered during the
three-month period which commenced on October 1, 1996 and ended on December
31, 1996, Registrant authorized the issuance of an aggregate of 770,391 shares
to four of its executive officers at a per share price, of $.1433 based upon
an average of the bid-and ask price for the Common Stock of approximately
$.2866 per share during the three-month period in which such services were
rendered.
2. In consideration of unpaid executive services rendered during the
approximately three year period which commenced on December 29, 1992 and ended
in March 1997, Registrant authorized the issuance of one million, one hundred
thirteen thousand, six hundred thirty-six (1,113,636) Shares to one of its
executive officers at a per share price of $.275. The purchase price for these
shares was calculated as follows:
(a) The officer in question had served as Secretary of Registrant from
December 29, 1992 until March 1994 and as its president from March 1994 until
January 18, 1995, receiving no compensation for such services, but serving to
enhance the value of his shareholdings in Registrant and on the basis of an
understanding that, in addition to such value enhancement, he would be fairly
and equitably, compensated for services rendered;
(b) Registrant and such officer agreed that compensation at the same
annual rate as received for his services since January 18, 1995 would
constitute fair equitable compensation for services rendered prior to such
date;
<PAGE>18
(c) Compensation at the above described rate would entitle such officer
to receive, for his pre-1995 services, payment of an aggregate of three hundred
and six thousand, two hundred fifty dollars ($306,250);
(d) Registrant and such officer agreed that such funds were clearly
unavailable to Registrant and that the issuance of shares at 50% of even 100%
of the market prices for Registrant's common stock during the period when such
services were rendered could be undesirably dilutive to Registrant's
shareholders. Based upon the foregoing, the said officer agreed to: (i)
cancel all unreimbursed disbursements made by him for or on behalf of this
corporation prior to January 18, 1995 and (ii) accept as compensation in full
for all services rendered prior to 1995 shares of Registrant's common stock
valued at approximately one hundred and fifty percent (150%) of the average of
the high and low bid prices of such stock, as traded in the over-the-counter
market and quoted in the Electronic Bulletin Board of the NASD, during the
calendar years of 1993 and 1994. Because Registrant's stock was traded only
sporadically during such time, calculations were based upon the fifteen months
during 1993 and 1994 when actual trading took place and for which it was
possible to obtain information;
(e) During the fifteen months in 1993 and 1994 when Registrant's common
stock was traded in the over-the-counter market, and for which it was possible
to obtain information, the average of the high and low closing prices of the
common stock of this corporation, as traded in the over-the-counter market and
quoted in the NASDAQ Electronic Bulletin Board, was approximately $.18333 per
share. Accordingly, 1,113,636 shares were issued, at a per share price of
$.275 in respect of the $306,250 in unpaid compensation.
These sales are claimed to have been exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, as more fully described
below.
Sales to Non-Affiliate Consultant in Respect of Services Rendered
1. On January 17. 1997, in consideration of business and financial
consulting services rendered by a non-affiliated consultant (the "Consultant")
between November 5, 1996 and January 17, 1997 and in further consideration for
such Consultant's agreement to continue to render such services until November
4, 1998 without further compensation, Registrant sold 300,000 authorized the
issuance of 3 on Stock to the said non-affiliated Consultant at a per share
price of $.001.
<PAGE>19
Sales to Non-Affiliated Private Investors
1. On January 17, 1997, Registrant sold an aggregate of 43,478 shares
of Common Stock to a non-affiliated private investor, who holds such shares
with his spouse as joint tenants, at a negotiated per share price of
twenty-three cents ($.23), which price was equal to approximately seventy
percent (70%) of the average of the high and low bid prices of the Common
Stock on or about the date of such purchase.
2. On March 7, 1997, Registrant sold an aggregate of fifty-two
thousand, seven hundred eighty-seven (52,787) shares of Common Stock to a
non-affiliated private investor, for his own account and for the account of a
corporation under his control, at a negotiated per share price of twenty-three
cents ($0.23), which price was equal to more than sixty-seven percent (67.6%)
of the average of the high and low bid prices of the Common Stock on such
date.
3. On March 11, 1997, Registrant sold an aggregate of three hundred
twenty-nine thousand (329,000) shares of Common Stock to three non-affiliated
private investors, two of whom hold their shares as joint tenants with their
respective spouses, as follows:
(a) an aggregate of three hundred ten thousand (310,000) shares of Common
Stock to two non-affiliated private investors at a negotiated per share price
of seventeen cents ($0.17), which price was equal to approximately forty-two
and one half percent (42.5%) of the average of the high and low bid prices of
the Common Stock on such date;
(b) nine thousand (9,000) shares of Common Stock to a non-affiliated
private investor, who holds such shares with his spouse as joint tenants, at a
negotiated per share price of twenty-four cents ($0.24), which price was equal
to approximately sixty percent (60%) of the average of the high and low bid
prices of the Common Stock on such date.
(c) ten thousand (10,000) shares of Common Stock to a non-affiliated
private investor at a negotiated per share price of twenty-five cents ($0.25),
which price was equal to approximately sixty-two and one-half percent (62.5%)
of the average of the high and low bid prices of the Common Stock on such
date.
Issuance of Stock Certificates for Post Purchases by Non-Affiliate Investors
On January 17, 1997, Registrant authorized the issuance of an aggregate
of 128,925 shares of its common stock to two non-affiliated stockholders for
shares which such persons had purchased and paid for and which Registrant had
agreed to sell on or about October 31, 1994 and on May 9, 1995, respectively),
as follows:
<PAGE>20
(a) 86,625 shares were issued to a non-affiliated stockholder of the
Registrant at a negotiated price of $0. 10 per share under the following
circumstances (based upon affidavits from such stockholder and one member of
the former management, both of whom were present at all events described
below;
(i) During the 18-month period which ended in August 1994, a
non-affiliate individual rendered valuable consulting services to Registrant,
during which period and for which services (together with certain unreimbursed
expenses incurred in connection therewith), he billed Registrant for a
aggregate of eight thousand, six hundred and sixty-two United States dollars
and fifty cents (US $8,662.50);
(ii) On or about October 31, 1994, such person agreed to accept,
and, at a meeting of the board of directors of Registrant which took place on
or about October 31, 1994, the said board of directors resolved to issue to
such person, in full satisfaction of the debt which Registrant owed to him as
a result of his above described services and unreimbursed disbursements, a
total of eighty six thousand, six hundred twenty-five (86,625) unregistered
shares of Registrant's common stock valued at ten United States cents
(US $0.10) per share.
(iii) After the January 1995 change in Registrant's management, the
new management persistently endeavored but was unable to obtain from the
former management the corporate records of Registrant which contained the
minutes of all board of directors meetings held prior to January 18, 1995, and
consequently the shares were not issued until these matters were brought to
the attention of management by the said stockholder.
(b) 42,300 shares were issued to a non-affiliated stockholder of the
Registrant at a negotiated price of approximately $0.2222 per share under the
following circumstances:
(1) In the spring of 1995, Registrant was in critical need of funds
and at such time, such non-affiliated stockholder, a member of the immediate
family of an officer and director of Registrant, volunteered to help Reg
purchasing a total of 42,300 unregistered shares of common stock arms length
negotiated aggregate price of $9,400, $1,000 of which was received by
Registrant on April 19, 1995 and $8,400 of which was received on May 9, 1995,
which payments are reflected in the financial books and records of
Registrant. The per share price for these shares was approximately $.2222,
which represented more than fifty percent of the average of the bid and ask
prices of Registrant's common stock, as traded in the over-the-counter market
and quoted in the
<PAGE>21
NASDAQ Electronic Bulletin Board, during the months of April and May 1995
(through an until May 9, 1995).
(ii) On April 19, 1995, by the unanimous written consent of the
executive committee of Registrant's board of directors, such stock sale was
authorized, but because of the early stage of organization of Registrant and a
severe lack of resources in terms of personnel, office equipment, and record
keeping facilities which existed during the spring of 1995, Registrant
inadvertently failed to issue such shares. Pursuant to a review of the
financial and corporate books and records, this oversight was recognized and
the certificates were issued shortly thereafter.
These sales are claimed to have been exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, as more fully described
below.
Investment Purchases by Affiliates
During the quarter ended March 31, 1997, Registrant sold an aggregate of
180,232 shares of its common stock to two affiliates, one of whom is an
officer, director, and significant shareholder of Registrant and one of whom
is a director of Registrant. Registrant believes that all of such sales were
made at prices as good or better than could have been obtained in arm's length
transactions. The dates, amounts, and prices involved in such sales were as
follows:
1. On January 17, 1997, Registrant authorized the sale of an
aggregate of 150,232 shares of its common stock to an affiliate (an officer,
director, and significant shareholder) which such person had offered to
purchase and for which such person had made cash payment in full, on several
occasions during the period which extended from July 7, 1995 through May 31,
1996, Because of the press of other priorities and Registrant's limited
resources, the board of directors failed to formally effectuate such stock
sales notwithstanding its earlier receipt of cash payments therefor, as
follows:
(a) On July 7, and July 11, 1995, such affiliate offered to purchase an
aggregate 28,579, shares at a per share purchase price of $.3125 and made
payments to Registrant in the aggregate amount of $8,931 for such shares,
which payments are reflected in the financial books and records of
Registrant. The price paid represented fifty percent (50%) of the average of
the high and low bid prices of such stock, as traded in the over-the-counter
market and quoted in the NASDAQ Electronic Bulletin Board, on July 7, 1995.
(b) On April 15, and April 18, 1996, such affiliate offered to purchase
an aggregate of 94,616 shares of its Common Stock at a per share price of $.18
and made payments to Registrant which aggregated to approximately $17,031 for
such shares, which
<PAGE>22
payments are reflected in the financial books and records of Registrant.
The price paid represented which price was equal to fifty percent (50%) of the
average of the daily bid and ask prices of Registrant's Common Stock as traded
in the over-the-counter market and quoted in the NASDAQ Electronic Bulletin
Board during the month of April through the 15th thereof,
(c) On May 31, 1996, such affiliate offered to purchase an aggregate
of 27,037 share at a per share price of $.135 and made payment to Registrant
of $3,650 for such shares, which payment is reflected in the financial books
and records of Registrant. The price paid represented fifty percent (50%) of
the average of the daily bid and ask prices of Registrant's Common Stock as
traded in the over-the-counter market and quoted in the NASDAQ Electronic
Bulletin Board during the month of May through the 31st thereof.
2. On March 11, 1997, Registrant sold thirty thousand (30,000) shares
of Common Stock to one of its directors, for the account of a corporation
controlled by him, but otherwise having no connection with the Registrant, a
per share price of $0.25, which price was equal to sixty-two and one-half
percent (62.5%) of the average of the high ask and low bid prices of such
stock, traded in the over-the-counter market and quoted in the NASDAQ
Electronic Bulletin Board, as at such date.
Sales to Non-Affiliated Subcontracts
1. On January 17, 1997, Registrant sold an aggregate of three hundred
forty thousand, one hundred sixty (340,160) shares of Common Stock to an
unaffiliated subcontractor at a negotiated price of $0.20 per share. The said
contractor is providing the design and construction of the prototype
disintegration system for the Registrant's TCS-1 System. Consideration for
this purchase was paid by way of services pursuant to the terms of
Registrant's contract with such subcontractor, dated as of July 23, 1996 (the
"Disintegration System Contract"). The Disintegration System Contract
provides for Registrant to pay a total purchase price for the said
disintegration system of two hundred thirty thousand Canadian dollars
(approximately US $167,900 at current exchange rates) in cash and Common
Stock, as follows. (i) one hundred fifty thousand Canadian Dollars
(approximately US $109,500 at current exchange rates) in cash and (ii) eighty
thousand Canadian Dollars (approximately US $ 58,400 at current exchange
rates) in Common Stock at a value of twenty United States cents (US $0.20) per
share. These shares were issued on the basis of the exchange rate on January
17, 1997. Prior to January 17, 1997, that part of the design work on the
disintegration system, which was allocated to the stock portion of the
purchase price for such system, had been completed.
2. On January 17, 1997, Registrant sold an aggregate of two hundred
fifty-five thousand and ten (255,010) shares of Common Stock to an
unaffiliated subcontractor at a negotiated price of $0.20 per share. The said
contractor is providing the design, construction, and installation of the
first
<PAGE>23
"front-end system" Registrant' s TCS-1 System, Consideration for this purchase
was paid by way of mechanical work and equipment furnished to Registrant
pursuant to the terms of Registrant's contract with such subcontractor, dated
as of October 16, 1996, (the "Front-End System Contract"). The Front-End
System Contract provides for Registrant to pay a total purchase price for all
mechanical work and equipment of two hundred thirty thousand Canadian dollars
(approximately US $ 167,900 at current exchange rates) in cash and Common
Stock, as follows: (i) one hundred seventy thousand Canadian dollars
(approximately US $124,100 at current exchange rates) in cash and (ii) sixty
thousand Canadian Dollars (approximately US $43,800 at current exchange rates)
in Common Stock at a value of twenty United States cents (US $0.20) per
share. These shares were issued on the basis of the exchange rate on January
17, 1997. Prior to January 17, 1997, that part of the design and engineering
work on the front-end system, which was allocated to the stock portion of the
purchase price for such system, had been completed.
Issuance of Shares to Non-Affiliates in Settlement of Debt
On January 17, 1997, Registrant authorized the issuance of forty-one
thousand, six hundred sixty-seven (41,667) shares of Common Stock to a
non-affiliate creditor of Registrant, for a negotiated price of five thousand
dollars ($5,000). Consideration for these shares was paid by way of the
settlement of a debt incurred pursuant to a loan in the amount of $5,000 made
to Registrant in May of 1994. As part of such settlement the said creditor
agreed to forego all interest which had accrued on the principal amount.
Sale of Shares to Non-affiliates Pursuant to Partial Exercise of Options
On January 13, 1997, Registrant sold an aggregate of two hundred nine
thousand, seven hundred fifteen (209,715) shares to two non-affiliate
consultants (the "Technical Consultants") at a per share price of $0.187
pursuant to the terms of their respective consulting agreements with Registrant
(the "Consulting Agreements"). The said Consulting Agreements were both dated
October 5, 1995 and provided for the consultants to provide Registrant with
technical, engineering, and materials handling equipment and procedures advice
and assistance. Compensation under the Consulting Agreements consisted of the
options to purchase, respectively, 560,000 and 100,000 shares of Registrant's
Common Stock for a per share exercise price equal to the average of the
closing bid and ask prices of the Common Stock, as traded in the
over-the-counter market and quoted in the NASDAQ Electronic Bulletin Board,
which was, as at October 5, 1995 ($0.187). On January 13, 1997, the
individual option holders notified the Registrant that they were exercising
their options for the purchase of 183,501 shares and 26,214 shares,
respectively. The Exercise Price for the foregoing purchases was paid by way
of full satisfaction of a debt in the amount of $39,216.71 which was owed by
Registrant to Ocean/Venture III ("O/V III") a company with which both of the
Technical Consultants are affiliated or associated. The amount of the said
debt consisted of the principal amounts and all accrued and unpaid interest
under the following two promissory notes of Registrant: (i) a promissory note,
dated October 5, 1995, in the principal amount of $10,000, bearing
<PAGE>24
interest from the issuance date of the note at an annual rate of ten percent
(10%) and (ii) a promissory note, dated December 8, 1995, in the principal
amount of $25,000, bearing interest from the issuance date of the note at an
annual rate of ten percent (10%).
Basis for Exemption Claimed
With respect to all sales and other issuances of securities as hereinabove
described:
(i) Registrant did not engage in general advertising or general solicitation
and paid no commission or similar remuneration, directly or indirectly, with
respect to such transactions.
(ii) The persons who acquired these securities were current or former
executive officers and directors, consultants, or sophisticated private
investors. Such persons had continuing access to all relevant information
concerning the Registrant and/or have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of such investment and are able to bear the economic risk thereof.
(iii) The persons who acquired these securities advised Registrant that the
Shares were purchased for investment and without a view to their resale or
distribution unless subsequently registered and acknowledged that they were
aware of the restrictions on resale of the Shares absent subsequent
registration and that an appropriate legend would be placed on the
certificates evidencing the Shares reciting the absence of their registration
under the Securities Act and referring to the restrictions on their
transferability and resale.
(iv) Such sales did not constitute a single financing plan of the Issuer for
the following reasons:
(a) Four of the Purchasers are executive officers or employees of the
Issuer who have agreed to take stock in lieu of all or part of the cash
compensation due to them for services rendered. One of the aforesaid officers
and an additional director of Registrant also purchased shares, for cash, at
prices which Registrant believes were as good or better than could have been
obtained in an arm's length transaction if persons willing to make such
investment could be found.
(b) Five of the Purchasers (two of whom hold their shares as joint
tenants with their respective spouses and one of whom purchased stock for his
own account and for the account of a corporation under his control) are current
purchasers of the stock.
<PAGE>25
(c) Two of the Purchasers are subcontractors to the Issuer who have
agreed to take the shares being issued to them as partial payment for goods
and/or services heretofore rendered to the Issuer.
(d) One of the Purchasers is a consultant to the Issuer who has agreed
to take the shares being issued to it as payment for consulting services
heretofore rendered to the Issuer.
(e) One of the Purchasers is a former consultant to the Issuer who, in
October of 1994, agreed to take the shares being issued to him as payment for
consulting services rendered to the Issuer during the 18-month period which
ended in August 1994, which agreement was adopted by resolution of the board
of directors of the Issuer on or about October 31, 1994. Inadvertently, the
certificates representing these shares were never issued. The certificates
are being issued at this time because the foregoing events were recently
brought to the attention of management at this time and substantiated by
affidavits from persons involved at the time of occurrence.
(f) One of the Purchasers subscribed and completed making cash payment
for her shares on May 9, 1995. Her subscription and payment were accepted at
that time by the Issuer's board of directors, but inadvertently, the
certificate therefor was never issued. Pursuant to a recent review of the
financial and corporate books and records, this oversight was recognized and
the certificates are being issued at this time.
(g) Two of the Purchasers are former consultants of the Issuer who
purchased their shares pursuant to the partial exercise of options granted to
them in October of 1995 as compensation under their individually negotiated
compensation agreements with the Issuer.
Accordingly, Registrant claims the transactions hereinabove described, to
have been exempt from the registration requirements of Section 5 of the
Securities Act by reason of Section 4(2) thereof in that such transactions did
not form part of a single financing plan and did not involve a public offering
of securities.
<PAGE>26
Item. 6 - Exhibits and Reports on Form S-K
(a) Exhibits filed herewith:
None
(b) Current Reports on Forms 8-K filed during quarter
ended March 31, 1997
Current Report on Form 8-K, dated January 10, 1997, filed with the Commission
on January 24, 1997 (on paper pursuant to a continuing hardship exemption,
with a confirming copy filed electronically on February 7, 1997), reporting:
Item 9. "Sales of Equity Securities Pursuant to Regulation S".
Current Report on Form 8-K, dated March 7, 1997, filed with the Commission on
March 20, 1997, reporting: Item 9. "Sales of Equity Securities Pursuant to
Regulation S".
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
TIREX AMERICA INC,
By /s/ Terence C. Byrne
Terence C. Byrne, President
and Treasurer
Date: May 12, 1997 /s/ Terence C. Byrne
Terence C. Byrne, Chief Executive
and Chief Financial Officer
<PAGE>27
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
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