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 December 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
THE TIREX CORPORATION
(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.)
740 St. Maurice, Suite 201 Montreal, Quebec H3C 1L5
(Address of Principal executive offices)
(514) 878-0727
(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 February 10, 1998: 47,530,358 shares Transitional Small Business
Disclosure Format (check one):
Yes ___ No _X_
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development State Company)
----------------
TABLE OF CONTENTS
PART I
Item 1 - Financial Information (unaudited) Page
-----
The Tirex Corporation and Subsidiary
Consolidated Balance Sheets as at
December 31, 1997 and 1996 ............................... 3
Consolidated Statements of Operations
for the six-month periods
ended December 31, 1997 and 1996 ......................... 4
Consolidated Statements of Cash Flows
for the six-month periods
ended December 31, 1997 and 1996 ........................ 5
Notes to Financial Statements (unaudited)..................... 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 12
PART II
Item 2 - Changes in Securities.........................................
Item 6 - Exhibits and Reports on Form 8-K.............................. 16
----------
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 December 31, 1997 and the results of its operations
and changes in its financial position for the six-month periods ended December
31, 1996 and 1997 and for the period from inception (July 15, 1987).
2
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheet
(Unaudited)
December 31
1997 1996
ASSETS
Current Assets
Cash $ -- $ 9,309
Notes receivable 39,729 1,158
Prepaid expenses 18,972 --
Employee advances 157,096 --
Sales tax receivable 29,092 --
Income taxes receivable 494,918 --
----------- -----------
Total current assets 739,807 10,467
----------- -----------
Equipment, at cost, net of accumulated
depreciation of $ 9,792 16,853 16,561
----------- -----------
Other assets
Equipment development costs 1,032,920 184,482
Deferred start-up costs 74,683 --
Organization costs, net of accumulated
amortization of $ 795 747 1,059
----------- -----------
1,108,350 185,541
----------- -----------
Total Assets $ 1,865,010 $ 212,569
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current Liabilities
Bank indebtedness $ 64,210 $ --
Note payable 24,000 24,000
Accrued expenses 948,616 212,576
Due to shareholders -- 5,000
Loans payable 437,626 80,796
Deposits payable 963,500 65,000
----------- -----------
Total current liabilities 2,437,952 387,372
----------- -----------
Commitments and contingencies
Stockholders' equity(deficit)
Common stock, $.001 par value, authorized
50,000,000 shares, issued and outstanding
39,599,182 shares 39,599 23,664
Additional paid-in capital 3,984,997 2,563,049
Deficit accumulated during the development
stage (4,597,538) (2,761,516)
----------- -----------
(572,942) (174,803)
----------- -----------
Total Liabilities and Stockholders'
Equity (Deficit) $ 1,865,010 $ 212,569
=========== ===========
3
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
December 31
1997 1996
Revenues $ -- $ --
Cost of sales -- --
------------ ------------
Gross profit -- --
------------ ------------
General and administrative expenses
Officers' salaries 397,221 263,524
Consulting services 70,186 30,973
Professional services 120,004 24,627
Rent 16,174 4,114
Travel and entertainment 189,545 24,310
Telephone 8,763 2,476
Depreciation and amortization 4,786 1,390
Office expenses 33,861 2,867
Miscellaneous -- 1,056
Franchise and other tax 2,852 --
Interest and bank charges 3,698 1,656
Investor relations 2,829 --
Transfer agent 1,695 3,226
Foreign exchange (15,353) --
------------ ------------
Total general and administrative expenses 836,261 360,219
------------ ------------
Net loss $ (836,261) $ (360,219)
============ ============
Net loss per common share $ (0.02) $ (0.02)
============ ============
Weighted average shares of common
stock outstanding 38,607,926 22,533,003
============ ============
4
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THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated statement of cash flows
(Unaudited)
December 31
1997 1996
Cash flows from operating activities:
Net loss $(836,261) $(360,219)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 4,786 1,390
Stocks issued in exchange for services 403,049 286,898
Change in assets and liabilities
Decrease in employee advances 28,846 --
Decrease in sales tax receivable 21,192 --
Increase in prepaid expenses (18,972) --
Increase in notes receivable (30,000) --
Decrease in loan-director 10,881 --
Increase in accrued expenses 56,362 (25,853)
---------
Increase in income taxes receivable (225,000)
--------- ---------
Net cash used in operating activities (585,117) (97,784)
--------- ---------
Cash flows from investing activities:
Equipment (6,691) --
Equipment assembly costs (249,469) (7,258)
--------- ---------
Net cash used in investing activities (256,160) (7,258)
--------- ---------
Cash flows from financing activities:
Repayment of notes payable (98,551) --
Proceeds from loans payable 237,081 45,796
Proceeds from deposits payable 483,500 --
Proceeds from issuance of common stocks -- 68,315
--------- ---------
Net cash provided by financing activities 622,030 114,111
--------- ---------
Net increase (decrease) in cash (219,247) 9,069
Cash and cash equivalents-beginning of period 155,037 240
--------- ---------
Cash and cash equivalents-end of period $ (64,210) $ 9,309
========= =========
5
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
TirexAmerica, Inc. (the "Company") was incorporated under the laws of the
State of Delaware on August 19, 1987. 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 acknowledged that they acceded to their respective positions
and had received compensation in consideration of their representations
that they would, and their best 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, 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.
6
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
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 par
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. 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. In May of 1995, in order to take advantage of
various research and development incentives, the Company and officers of
the Company formed a Canadian corporation named 3143619 Canada, Inc. (Tirex
Canada). All of the research and development work on the first production
model of the TCS-1 System is being completed by Tirex Canada and after the
completion of the model, they will manufacture the product. On July 11,
1997 the Company's name was changed to The Tirex Corporation.
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.
7
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
Equipment Development Costs
Deferred development costs are stated at cost net of any investment tax
credits when there is reasonable assurance that the credits will be
realized. Amortization will begin once commercial production of the product
has commenced and will be computed based upon the estimated useful life of
related products as determined from management's future sales estimates and
will not exceed five years from the date of the product's market launching.
Deferred Start-Up Costs
Deferred start-up costs represent pre-operating expenses and will be
amortized on a straight-line basis over a three year period once commercial
operations have commenced.
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 or retired are
eliminated from the accounts and any gain or losses are reflected in
earnings.
Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Organization 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 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 $4 million
as of June 30, 1997, 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.
8
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies (continued)
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 temporary
differences and operating loss carryforwards. Because of the uncertainties
discussed in Note 2, however, any deferred tax asset established for
utilization of the Company's tax 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.
The Company has research and development investment tax credits receivable
from Canada and Quebec amounting to $494,918 as of December 31, 1997.
Foreign Exchange
Assets and liabilities of the Company which are denominated in foreign
currencies are translated at exchange rates prevailing at the balance sheet
date. Revenues and expenses are translated at average rates throughout the
year.
Note 2 - Going Concern
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 June 30, 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.
The Company is currently in the process of trying to obtain funding needed
through a private placement of its securities in an amount of not less than
$700,000, which will provide working capital while the Company constructs
its cryogenic disintegration machine. The ability of the Company to
continue as 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 is unable to continue as a going concern.
Note 3 - Notes Payable
The Company also had a note payable in the amount of $24,000 outstanding as
of June 30, 1997. The repayment terms were being negotiated as of that
time.
9
<PAGE>
The Tirex Corporation and Subsidiary
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 4 - Loan Payable
1997 1996
----- ----
FORD-Q ................... $ 321,429 $ 80,796
IDEA-SME ................. 116,197 --
--------- --------
$ 437,626 $ 80,796
========= ========
On April 11, 1996 the Company entered into a loan agreement with the
Federal Office of Regional Development - Quebec (FORD-Q) which will be
repayable annually over a period of forty-eight months following the
completion of the project. The loan is being contributed under the
Industrial Recovery Program for South-West Montreal and will be calculated
as the lesser of $362,319 or 20% of the eligible costs incurred for the
construction of a commercial scale prototype of the cryogenic scrap tire
disintegration system. The loan is non-interesting bearing and unsecured.
The Company received $178,806 under this program in fiscal 1997.
On April 30, 1997 the Company received a refundable contribution awarded
under the terms of the Program for the Development of Quebec's SME'S
(IDEA-SME). The contribution is repayable in amounts equal to 1% of the
annual gross sales in Spain and Portugal occurring after June 1, 1997.
On March 26, 1997, the Company received a refundable contribution for the
preparation of market development studies for India under the Quebec SME
development assistance program (IDEA-SME). The maximum contribution is
$14,493 based on 50% of the approved eligible costs. The contribution is
repayable in amounts equal to 1% of the annual gross sales in India
occurring after June 1, 1997.
On June 6, 1997, the Company entered into an agreement under the Quebec SME
development assistance program (IDEA-SME) to receive a refundable
contribution for market development activities for the Iberian Peninsula.
The maximum contribution is $68,841 , based on 50% of approved eligible
costs. The contribution is repayable in amounts equal to 1.5% of the annual
gross sales in Spain and in Portugal occurring after June 1, 1998 less
amounts repaid through the amounts noted in the April 30, 1997 agreement.
Note 5 - Related Party Transactions
In 1994, a stockholder loaned the Company $5,000. This loan was converted
to common stock and additional paid-in capital during the year ended June
30, 1997. 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.
The Company has entered into employment agreements with all of its
executive officers and with its in-house corporate counsel. 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.
10
<PAGE>
The Tirex Corporation and Subsidiary
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 5 - Related Party Transactions (continued)
Included in accrued expenses at December 31, 1997 is $34,733 of salary to
officers which the company subsequently issued common stock. The Company
advanced funds to its officers and directors during the year ended June 30,
1997 in the amount of $185,942. These will be repaid during the year ending
June 30, 1998.
On June 30, 1997 and 1996, the Company had notes receivable from various
officers in the amount of $9,729 and $1,158, respectively. All of these
notes and loans are non-interest bearing and will be repaid during the year
ending June 30, 1998.
Deposits payable include an amount of $738,500 which are payable to
companies which are owned by a director of the Company.
Note 6 - Stock Option
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 per share, exercisable during the two year period
beginning May 19, 1995, and ending May 18, 1999. The director paid $20,000
for the option. The terms 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 September 30,
1997, the option has not been exercised.
Note 7 - Government Assistance
The Company has entered into an agreement with Recyc-Quebec for financial
assistance covering 50% of certain defined costs incurred in developing the
cryogenic scrap tire disintegration system to a maximum of $54,348. $36,500
has been received during the year and this amount has reduced the equipment
development costs on the balance sheet.
11
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARY
(A Developmental Stage Company)
Notes to Consolidated Financial Statements
Note 8 - Commitments
The Company has entered into a property lease agreement, with a term from
July 1, 1997 to June 30, 2000. The Company has an option to renew this
lease for an additional three years. Minimum rentals in each of the next
three years is as follows:
1998 .................. $ 18,967
1999 .................. 18,967
2000 .................. 18,967
--------
$ 56,901
========
Note 9 - Contingency
The Company is a defendant in an action which commenced on June 18, 1997
entitled Great American Commercial Funding Corp. vs. Tirex America, Inc.
The Company agreed to pay the plaintiff a placement fee of $250,000 and to
grant them an option to acquire 400,000 shares of the company's common
stock at a price of $.01 per share in the event that the plaintiff
succeeded in obtaining financing acceptable to the Company. The amount and
terms of the financing are not mentioned in the documents. The plaintiff
recommended an equipment lease financing company who in turned introduced
the Company to one of their customers. The customer ultimately entered into
a lease financing arrangement with Tirex America, Inc. Because the advances
made to the Company pursuant to that lease financing arrangement did not
constitute the type of financing originally contemplated, the Company
believes it has no financial obligation to the plaintiff. The Company and
its litigation counsel believe that the plaintiffs complaint is without
merit and that the Company will prevail in this litigation.
12
<PAGE>
THE TIREX CORPORATION 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 December 31, 1997.
Liquidity and Capital Resources
Registrant is presently engaged in the very early stages of 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. 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
--------- ----------
1997 $345,391
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 an additional $225,000, during the six-month
period ended December 31, 1997.
As at December 31, 1997, Registrant had total assets of $1,865,010
reflecting an increase decrease from the end of the previous fiscal quarter
ended September 30, 1997 when total assets were $706,340 and an increase of
$1,652,441 from the end of the analogous quarter in the previous fiscal year,
when total assets as at December 31, 1996 were $212,569. Such increases reflect,
in the main part, accrued development costs related to the TCS-1 System, income
tax
13
<PAGE>
credits receivable, and advances to employees. As at December 31, 1997, total
liabilities were $2,437,952. This reflects an increase of $2,070,580 from the
analogous date in the previous fiscal year, when total liabilities were $387,372
as at December 31, 1996, and an increase of $364,573 from the end of the last
fiscal quarter, when total liabilities were $2,073,379. Management attributes
such increases to accrued operating expenses and increase in deposit and loans
payable. Reflecting the foregoing, as at December 31, 1997, Registrant had a
working capital deficit (current assets minus current liabilities) of
($1,698,145). The amount of Registrant's working capital deficit has therefore
increased since December 31, 1996, when Registrant had a working capital deficit
of ($376,905), and since the end of the last fiscal quarter, when it was
($1,440,518).
Registrant currently has limited 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 during the
current fiscal year which will end June 30, 1998, it cannot, at the present
time, give any assurances that this will in fact be the case.
Results of Operations
Registrant has engaged in only limited business activities since inception
and had no revenues from operations during the six months ended December 31,
1997. No revenues were received during the analogous six-month period in the
previous fiscal year. 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 December 31, 1997, Registrant has
incurred a cumulative net loss of ($4,597,538), approximately 23% of which was
incurred, prior to the inception of Registrant's present business plan, in
connection with Registrant's discontinued proposed health care business.
14
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
During the fiscal quarter ended December 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 December 15, 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 and unreimbursed
disbursements made on behalf of Registrant, rendered or disbursed during the
five-month period which commenced on July 1, 1997 and ended on November 30,
1997, Registrant authorized the issuance of an aggregate of 765,733 shares of
its Common Stock to four of its executive officers and its in-house corporate
attorney at a per share price of $.275 reflecting in full the average of the bid
and ask prices for the Common Stock during the five-month period in which such
services and disbursements were rendered or disbursed. These issuances reflect a
computational error insofar as the Executive Committee of Registrant's Board of
Directors had actually authorized that they be made at 50% of the average of the
bid as ask prices for the Common Stock. Accordingly, the shares should have been
issued at a per share price of $.1375 instead of $.275. The aggregate amount of
unpaid services and unreimbursed disbursements for which these shares were
issued was $209,409.32. Therefore, at the per-share price authorized by the said
Executive Committee, Registrant would have issued a total of 1,522,976 shares in
lieu of cash payments. Registrant intends to correct this error by the issuance
of additional shares at its earliest convenience.
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.
15
<PAGE>
Sales to Non-Affiliate as Compensation Under Consulting Agreement
2. On November 20, 1997, in consideration of business and financial
consulting services rendered by a nonaffiliated consultant (the "Consultant")
under the terms of a Consulting Agreement, dated October 1, 1997 (the
"Consulting Agreement"), Registrant sold 58,824 shares of its Common Stock to
the said Consultant at a per share price of $.17. Under the terms of the
Consulting Agreement, the Consultant agreed to take, as compensation for
services rendered, the right to purchase shares of Registrants Common Stock at a
discount from the market price.
This sale is claimed to have been exempt from registration under the
Securities Act pursuant to Section 4(2) thereof, as more fully described below.
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 executive officers
and directors, employees, and a consultant, all of whom were 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) Five 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;
16
<PAGE>
(b) One of the Purchasers is a consultant to the Issuer who has agreed
to take, as compensation for services rendered under his consulting
agreement with Registrant, the right to purchase shares of
Registrants Common Stock at a discount from the market price.
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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed herewith:
None
(b) Current Reports on Forms 8-K filed during quarter ended December
31, 1997
No Current Reports on Form 8-K were filed with the Commission
during the quarter ended December 31, 1997.
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.
THE TIREX CORPORATION
By /s/ Terence C. Byrne
-----------------------------------
Terence C. Byrne, President
and Treasurer
Date: February 13, 1998 /s/ Terence C. Byrne
-----------------------------------
Terence C. Byrne, Chief Executive
and Chief Financial Officer
17
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
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<PP&E> 26,645
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0
0
<COMMON> 39,599
<OTHER-SE> (612,541)
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<OTHER-EXPENSES> (832,563)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,698
<INCOME-PRETAX> (836,261)
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