As filed with the Securities and Exchange Commission on September 15, 1999
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE TIREX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 3282985
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3828 RUE SAINT PATRICK
MONTREAL, QUEBEC H4E 1A4
(Address of Principal Executive Offices) (Zip Code)
EMPLOYMENT AND/OR CONSULTING AGREEMENTS
BETWEEN REGISTRANT AND:
TERENCE C. BYRNE, VIJAY KACHRU AND JOHN B. FROHLING
(Full title of the Plan)
FROHLING, HUDAK & PELLEGRINO, LLC
425 EAGLE ROCK AVENUE
ROSELAND, NEW JERSEY 07068
(Name and address, including zip code of agent for service)
(973) 226-4600
(Telephone number, including area code, of agent for service)
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CALCULATION OF REGISTRATION FEE
==============================================================================================
PROPOSED
PROPOSED MAXIMUM
TITLE OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(2) FEE
==============================================================================================
<S> <C> <C> <C> <C>
Common Stock, Par Value,
$.001 Per Share, Issued
Pursuant to Employment or
Consulting Agreement With
TERENCE C. BYRNE 941,262 $.045 $ 42,356.79 $11.78
VIJAY KACHRU 713,469 $.045 $ 32,106.11 $ 8.92
JOHN B. FROHLING 1,000,000 $.045 $ 45,000.00 $12.51
--------- ----------- ------
TOTAL 2,654,731 $119,462.90 $33.21
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* Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) on the basis of the average of the low
bid and ask prices of the Common Stock of the Registrant as traded in the
over-the-counter market and reported in the Electronic Bulletin Board of the
National Association of Securities Dealers on September 13, 1999.
<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN REOFFER PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-3 INCLUDED HEREIN
UNDER COVER OF FORM S-8, PURSUANT TO RULE 404(A)
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Form S-3 Item No. and Heading Heading in Prospectus
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<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus......................................... AVAILABLE INFORMATION;
REPORTS TO SHAREHOLDERS;
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE;
TABLE OF CONTENTS
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.......................... Outside Front Cover Page;
THE COMPANY; RISK FACTORS
4. Use of Proceeds............................................. Not Applicable
5. Determination of Offering Price............................. Outside Front Cover Page;
PLAN OF DISTRIBUTION
6. Dilution.................................................... Not Applicable
7. Selling Security Holders.................................... SELLING SHAREHOLDERS
8. Plan of Distribution........................................ Outside Front Cover Page;
PLAN OF DISTRIBUTION
9. Description of Securities to be Registered.................. DESCRIPTION OF SECURITIES
10. Interests of Named Experts and Counsel...................... EXPERTS; LEGAL OPINIONS
11. Material Changes............................................ Not Applicable
12. Incorporation of Certain Information
by Reference............................................ INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
13. Disclosure of Commission Position
on Indemnification For Securities
Act Liabilities......................................... INDEMNIFICATION
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R E O F F E R
P R O S P E C T U S
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2,654,731
SHARES
------
THE TIREX CORPORATION
------
COMMON STOCK
$.001 PAR VALUE
---------------
The shares of common stock offered hereby (the "Shares") are being sold
by Terence C. Byrne, Vijay Kachru and John B. Frohling, shareholders and
consultants or employees of The Tirex Corporation (the "Company"). Messrs. Byrne
and Frohling and Ms. Kachru are hereinafter referred to both singly and
collectively as the "Selling Shareholders." The Company will not receive any of
the proceeds from the sale of the common stock. The common stock is traded in
the over-the-counter market, as reported in the Over-The-Counter Electronic
Bulletin Board of the National Association of Securities Dealers ("Bulletin
Board"). On September 13, 1999, the high ask and low bid prices of the Company's
common stock, as quoted on the Bulletin Board, were $.05 and $.045 per share,
respectively. The Selling Shareholders propose to offer their Shares for sale in
the over-the-counter market through customary brokerage channels at the
then-current market price. See "Plan of Distribution."
---------------
THIS OFFERING INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" SECTION BEGINNING ON
PAGE 7
------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is September 15, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.........................................................1
REPORTS TO SHAREHOLDERS.......................................................1
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE................................................................1
THE COMPANY...................................................................2
RISK FACTORS
1. DEVELOPMENT STAGE COMPANY - NO ASSURANCE
AS TO FUTURE PROFITABLE OPERATIONS..................................8
2. NEED FOR SUBSTANTIAL ADDITIONAL
CAPITAL.............................................................8
3. HISTORY OF LOSSES AND ACCUMULATED DEFICIT............................10
4. GOING CONCERN ASSUMPTION.............................................10
5. NO GUARANTEE OF PRODUCT
ACCEPTANCE IN MARKET...............................................10
6. DILUTIVE AND OTHER ADVERSE EFFECTS
OF PRESENTLY OUTSTANDING DEBENTURES, WARRANTS AND
OPTIONS............................................................11
7. ADDITIONAL DILUTION FROM ISSUANCE OF SHARES FOR SERVICES.............13
8. POSSIBLE DEPRESSIVE EFFECT ON PRICE OF SECURITIES
OF FUTURE SALES OF COMMON STOCK....................................13
9. POSSIBLE VOTING CONTROL BY MANAGEMENT AND CORPORATE COUNSEL;
POSSIBLE DEPRESSIVE EFFECT ON MARKET PRICES........................14
10. PROPOSED REVERSE SPLIT;
POSSIBLE NEGATIVE EFFECT ON VALUES OF SECURITIES...................14
11. DEPENDENCE ON MAJOR CUSTOMERS........................................15
ii
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12. UNCERTAINTY OF PRODUCT AND
TECHNOLOGY DEVELOPMENT:
TECHNOLOGICAL FACTORS..............................................16
13. INTERNATIONAL SALES AND OPERATIONS...................................16
14. PROTECTION OF TIREX PROPRIETARY
TECHNOLOGY AND POTENTIAL INFRINGEMENT..............................17
15. LIMITED PUBLIC MARKET................................................17
16. APPLICABILITY OF "PENNY STOCK RULES"
TO BROKER-DEALER SALES OF
COMPANY COMMON STOCK...............................................18
17. MANAGEMENT'S LACK OF INDUSTRY EXPERIENCE.............................19
18. DEPENDENCE ON KEY PERSONNEL..........................................19
19. REGULATORY AND ENVIRONMENTAL CONSIDERATIONS..........................20
20. TECHNOLOGICAL CHANGES................................................21
21. COMPETITION..........................................................21
22. NO DIVIDENDS AND NONE ANTICIPATED....................................22
23. POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION AND
ISSUANCE OF PREFERRED STOCK........................................22
24. PRIOR NOTICE REQUIRED FOR SHAREHOLDER ACTIONS........................22
25. ADVERSE EFFECTS OF PROPOSALS TO BE PRESENTED AT
ANNUAL SHAREHOLDERS MEETINGS; ANTI-TAKEOVER PROVISIONS,
LIMITATIONS ON SHAREHOLDERS VOTING RIGHTS AND STOCK
BONUSES TO MANAGEMENT..............................................23
SELLING SHAREHOLDERS.........................................................24
PLAN OF DISTRIBUTION.........................................................26
DESCRIPTION OF SECURITIES....................................................26
EXPERTS......................................................................27
LEGAL OPINIONS...............................................................27
INDEMNIFICATION..............................................................28
iii
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AVAILABLE INFORMATION
The Company is subject to the information requirements of Section 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 1100 L Street, N.W. Room 6101, Washington, D.C.
20005; 26 Federal Plaza, Room 1100, New York, New York 10007; 10960 Wilshire
Boulevard, Suite 1710, Los Angeles, California 90024; and 219 South Dearborn
Street, Room 1228, Chicago, Illinois 60604; and copies of such material can be
obtained from the Public Reference Section of the Commission at 500 North
Capital Street, N.W., Washington, D.C. 20549 at prescribed rates.
REPORTS TO SHAREHOLDERS
The Company will furnish to its shareholders, upon request, annual
reports containing audited financial statements together with an opinion with
respect thereto by its independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's annual report on Form 10-KSB for its fiscal year ended June 30, 1998,
filed pursuant to Section 15(d) of the Exchange Act, the Company's quarterly
reports on Forms 10-QSB for the fiscal quarters ended September 30, 1998,
December 31, 1998 and March 31, 1999 filed pursuant to Section 15(d) of the Form
S-8 Exchange Act, the Company's Current Reports on Form 8-K dated May 27, 1998,
September 14, 1998, March 17, 1999, May 4, 1999 and September 3, 1999 filed on
August 3, 1998, September 18, 1998, March 23, 1999, May 18, 1999 and September
3, 1999 respectively, and all other reports, if any, filed by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the
fiscal year ended June 30, 1998.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Shares shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modified or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without
charge, upon request, a copy of any of the documents incorporated by reference
herein, except for the exhibits to such documents. Requests should be directed
to Terence C. Byrne, The Tirex Corporation, 3828 rue Saint Patrick, Montreal,
Quebec H4E 1A4, Canada.
1
<PAGE>
THE COMPANY
The Tirex Corporation (hereinafter, the "Company" or "Tirex") was
incorporated in Delaware on August 19, 1987 under the name "Concord Enterprises,
Inc." Its name was changed to "Stopwatch Inc." on June 20, 1989 and to "Tirex
America Inc." on March 10, 1993. On July 11, 1997, in order to encompass the
current and projected international scope of its operations, the Company's name
was changed to "The Tirex Corporation". The Company, directly and through its
Canadian subsidiaries, The Tirex Corporation Canada Inc. and Tirex Canada R&D,
Inc. (which, until June 3, 1998, was known and did business as "Tirex Canada
Inc."), is engaged in the early stages of two business segments, consisting of:
(i) manufacturing, selling, and leasing its patented cryogenic tire
disintegration plant (the "TCS-1 Plant"), which it has designed and developed;
and (ii) operating a TCS-1 Plant and manufacturing molded rubber products out of
the recycled rubber crumb produced thereby. The Company's long range business
plan in this segment encompasses owning and operating, directly or indirectly,
on exclusive or joint venture bases, several product manufacturing plants which
utilize TCS-1 Plants in their operations. The Company's initial product
manufacturing operations in this latter segment are being conducted pursuant to
an agreement (the "IM2/Tirex Agreement") with IM2 Merchandising and
Manufacturing, Inc. ("IM2"), in Quebec. Pursuant to the IM2/Tirex Agreement, the
Company acts as IM2's exclusive supplier of rubber welcome mats and related
products molded out of rubber crumb.
On June 1, 1998, the Company formed a wholly-owned subsidiary, The
Tirex Corporation Canada Inc. ("TCCI") and on June 3, 1998, the corporate name
of 3143619 Canada Inc. (a.k.a. Tirex Canada Inc.) was changed to Tirex Canada R
& D Inc. (hereinafter referred to as "Tirex R&D"). These changes were effected
in connection with the transfer all business activities, except those which
constitute research and development activities exclusively, from Tirex R&D to
TCCI. On April 22, 1998, the Company also formed another wholly owned Canadian
subsidiary, Tirex Advanced Products Quebec, Inc. This subsidiary is presently
dormant, however, the Company may, in the future, transact finished product
manufacturing activities through this corporation. In addition, in connection
with the merger with RPM Incorporated, discussed below, the Company formed a
wholly owned subsidiary under the laws of the State of Delaware, named Tirex
Acquisition Corp. This corporation is currently dormant and, as at the date
hereof, the Company has no plans to activate it. The Company's principal
executive offices are located at 3828 rue Saint Patrick, Montreal, Quebec H4E
1A4, Canada, its telephone number is (514) 933-2518 and its Internet address is
[email protected]
MATERIAL FINANCING ACTIVITIES
THE TYPE A PRIVATE PLACEMENT
Between November 5, 1997 and May 11, 1998, the Company offered to sell
(the "Type A Private Placement") through H.J. Meyers & Co., Inc., as placement
agent (the "Placement Agent"), 28 Units, (the "Type A Units") at a price of
$25,000 per Unit, each Type A Unit consisting of one 10% Convertible
Subordinated Debenture in the principal amount of $25,000 (the "Type A
Debentures") and 100,000 warrants (the "Type A Warrants") to purchase a like
2
<PAGE>
number of shares of the Common Stock of the Company (the "Type A Warrant
Shares"). The Type A Private Placement was terminated by the Company and the
Placement Agent on May 11, 1998 following the sale on April 9, 1998 of twenty
Type A Units to two purchasers, yielding gross proceeds of $500,000 and net
proceeds of $433,500 after payment of the Placement Agent's $10% commission, 3%
nonaccountable expense allowance, and an escrow agent's fee of $1,500. The Type
A Private Placement was effected in reliance upon the availability of an
exemption from the registration provisions of the Securities Act by virtue of
compliance with the provisions of Section 4(2) of the Securities Act and Rule
506 of Regulation D thereof ("Rule 506"). The Type A Units were offered and sold
to a limited number of sophisticated investors who understood and are
economically capable of accepting the risks associated with a speculative
investment, including the complete loss of such investment, and who are
"Accredited Investors" within the meaning prescribed by Regulation D and Rule
501 of the Securities Act.
The 2,000,000 outstanding Type A Warrants are exercisable at a price of
$.001 per share. At any time until they are repaid, the principal amount of the
Type A Debentures and all interest due thereon is convertible into common stock
at a conversion ratio equal to 63% of the closing bid price of the Company's
common stock, as traded in the over-the-counter ("OTC") market and quoted in the
OTC Electronic Bulletin Board of the NASD, on the trading date immediately
preceding the Company's receipt of a notice of conversion from a holder of the
Type A Debentures. Since the Company's Registration Statement was not declared
effective, commencing June 1999 the conversion rate decreases on a monthly basis
at a rate of 1.5% per month, until such date, when it will stabilize at 61.5% of
the Market Price. There is no minimum conversion price. The Type A Debentures,
as amended, are due and payable on December 31, 1999 (the "Maturity Date") and
are redeemable upon the request of a holder at any time after the Maturity Date
at 125% of the principal amount plus all accrued, unpaid interest on the
principal amount. As of September 13, 1999, an aggregate of $40,000 of the
principal amount of the Type A Debentures had been converted into an aggregate
of 594,012 shares of common stock.
As of September 13, 1999, the resale of the 2,000,000 shares issuable
pursuant to the exercise of the Type A Warrants and the resale of the shares
issuable pursuant to the conversion of an aggregate principal amount of $460,000
of the Type A Debentures are intended to be registered for re-sale to the public
by the holders thereof by way of an appropriate Registration Statement.
Following the effective date of the appropriate Registration or upon the
availability of an exemption from the registration provisions of the Securities
Act of 1933, as amended, the shares underlying the Type A Warrants and Type A
Debentures, to the extent that they are acquired from the Company, may be
offered and resold by the holders thereof, from time to time, as market
conditions permit in transactions in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
relating to prevailing market prices or at negotiated prices.
MERGER WITH RPM INCORPORATED AND THE TYPE B PRIVATE PLACEMENT
On January 7, 1998, The Company issued a total of 3,305,000 shares of
its common stock to thirty-six persons, none of whom had any affiliation with
the Company. These issuances were made pursuant to the terms of a merger
3
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agreement by and among the Company, the Company's wholly-owned subsidiary Tirex
Acquisition Corp. ("TAC"), and RPM Incorporated ("RPM") respecting the merger of
RPM with and into TAC (the "RPM Merger"). The RPM Merger Agreement was effective
on January 7, 1998, concurrent with the closing of a private placement of RPM's
securities (the "RPM Private Placement"), in which RPM had offered to sell, on a
best efforts 30 Units-or-none basis, up to 85 units of its securities (the "RPM
Units"), each such RPM Unit consisting of one 10% Convertible Subordinated
Debenture in the principal amount of $10,000 (the "RPM Debentures") and 10,000
shares of the Common Stock of RPM. The closing took place upon the sale of 30.5
RPM Units. All of the net proceeds from the RPM Private Placement ($276,085)
remained in RPM when it was merged into TAC, which was the surviving entity.
Such proceeds thereby inured to the benefit of the Company. In effectuation of
the RPM Merger, the Company:
(i) exchanged one share of its common stock ("Merger Shares") for
every issued and outstanding share of RPM common stock (which
included 305,000 shares sold in the RPM Private Placement and
3,000,000 shares which had been issued and outstanding prior
to the commencement of the RPM Merger); and
(ii) assumed RPM's liabilities and obligations under 30.5 RPM
Debentures in the aggregate principal amount of $305,000 which
RPM had theretofore sold in the RPM Private Placement;
After the Merger, the Company commenced the "Type B Private
Placement", in which it offered and sold the same type of securities, as were
sold in the RPM Private Placements, i.e., the securities offered in the Type B
Private Placement consisted of "Type B Units" each consisting of 10,000 shares
of the Company's common stock and one convertible Subordinated Debenture of the
Company in the principal amount of $10,000 (the "Type B Debenture"). The number
of Type B Units offered (54.5) was equal to the number of RPM Units remaining
unsold as at the time of the Merger.
Prior to the Merger, RPM and Tirex were completely separate entities.
However, the RPM Private Placement, the merger, the exchange of RPM common stock
for Tirex Common Stock, and the subsequent Type B Private Placement by Tirex
were at all times contemplated as interdependent transactions and described in
the RPM Private Placement Memorandum as such. Thus the contemplated post-merger
Type B Private Placement was viewed as being a "continuance" of the RPM Private
Placement. The Type B Private Placement differed from the RPM Private Placement
only insofar as: (i) in the RPM Private Placement, RPM offered and sold shares
of RPM common stock, which were to be exchanged for Tirex Common Stock in the
Merger, while in the post-merger Type B Private Placement, the Company offered
and sold shares of Tirex Common Stock; and (ii) in the RPM Private Placement,
RPM offered and sold RPM debentures, which were to be assumed by Tirex in the
Merger, while in the Type B Private Placement, the Company offered and sold
Tirex Type B Debentures. Except for the above, the terms of the securities
included in the Type B Units were identical to those included in the RPM Units
Between January 23, 1998 and May 11, 1998, the Company sold 23 Type B
Units, consisting in the aggregate of 230,000 shares of its common stock and
twenty-three 10% convertible Debentures, each in the principal amount of
$10,000, to 21 private investors, who had no affiliation with the Company.
4
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All of the Type B Debentures and the RPM Debentures, which had been
assumed by the Company (referred to collectively, hereinafter as the "Type B
Debentures"), provide for: (i) the registration of the shares (the "Type B
Conversion Shares") issuable upon the conversion of the Type B Debentures; and
(ii) restrictions on the transfer of the Type B Conversion Shares until the
first to occur of: (a) six months from the effective date of the Registration
Statement, or (b) one year from the date of the issuance of the Type B
Debenture. The Type B Debentures are convertible at a ratio of one share for
every $0.20 of the principal amount of the Debenture plus interest earned
thereon from the date of issuance.1 The Type B Debentures are redeemable by the
Company, at the option of the holder thereof, at face value plus all earned
interest from the date of issuance on the first to occur of: (i) two years from
the issue date or (ii) the completion and closing of a public offering of its
securities by the Company.
The resales of shares of the Company's common stock issuable pursuant
to the conversion of the Type B Debentures, other than the Previously Converted
Shares, or may be sold pursuant to an exemption from registration if available.
PRE-PLACEMENT RPM SHARES
3,000,000 shares (the "Pre-Placement RPM Shares") of the 3,305,000
shares of RPM Common Stock for which the Company issued Merger Shares,
constituted all of the shares of RPM Common Stock which were issued and
outstanding prior to the commencement of the RPM Private Placement. These shares
were exchanged for 3,000,000 Merger Shares in consideration of RPM's waiver of
certain consulting fees in the amount of $4,000 per month, accrued prior and
subsequent to the Merger pursuant to the terms of a certain five-year consulting
agreement, dated June 9, 1997, among RPM, the Company, and Dr. Eugene Stricker
and Mr. Mark Schindler who were, prior to the Merger, RPM's principal
shareholders, officers, and directors (the "RPM Consulting Agreement"). Pursuant
to the RPM Consulting Agreement, Dr. Stricker and Mr. Schindler rendered, and
continue to render, consulting services to the Company concerning matters in
connection with the operation of the business, equipment financing, corporate
acquisitions, mergers and other business combinations, as well as management,
corporate planning, marketing, organization and related matters. None of the RPM
Shareholders had any affiliation of any kind with the Company prior to or after
the Merger (except insofar as they have become shareholders of the Company as a
result of the said Merger). Based upon information provided by the recipients
(the RPM Shareholders") of the above described 3,305,000 shares of Common Stock
and advice from the principals of RPM and the opinion of RPM's counsel, all
3,000,000 of the Pre-Placement RPM Shares were acquired by the RPM Shareholders
prior to March 31, 1997; all of the RPM Shareholders are "accredited investors"
as that term is defined in Rule 501(a) of the Securities Act; all 3,305,000 of
the shares of RPM common stock (including the Pre-Placement RPM Shares as well
- ----------------
1 As of September 13, 1999, (i) the holder of two Type B Debentures, in
the aggregate principal amount of $100,000 converted all of the
principal plus the $12,247 in interest due on such Type B Debentures
through the date of conversion into 561,235 shares of common stock; and
(ii) the holder of one Type B Debenture in the principal amount of
$5,000 converted all of the principal, but none of the interest, due on
such Type B Debenture into 25,000 shares of common stock (collectively
the "Previously Converted Shares").
5
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as the RPM Shares sold in the RPM Private Placement) which were exchanged for
Merger Shares were acquired in transactions which were exempt from the
registration requirements of Section 5 of the Securities Act available under
Rule 506 of Regulation D thereof, which would not be integrated, as such term is
defined in Section 502(a) of Regulation D under the Securities Act, with the
distribution of the Merger Shares to the RPM Shareholders, so as to render
unavailable, for such distribution, the exemption from the registration
provisions of the Securities Act under Rule 506 of Regulation D.
Sales made in the RPM Private Placement and the Type B Private
Placement and the exchange of shares in the Merger were effected in compliance
with Rule 506 to a limited number of sophisticated investors who understood and
were economically capable of accepting the risks associated with a speculative
investment, including the complete loss of such investment, and who were
"Accredited Investors" within the meaning prescribed by Regulation D and Rule
501 of the Securities Act.
THE TYPE C PRIVATE PLACEMENT
On May 11, 1998, the Company completed a private placement (the "Type C
Private Placement") made directly by the Company, with all offers and sales made
by officers of the Company, of a total of 11,760,000 shares of the Company's
Common Stock (the "Type C Shares") at a price of $.10 per share, yielding
proceeds of $1,176,000, without deducting nominal incidental expenses incurred
in connection with the offering. As was the case with the Type A and Type B
Private Placements, the Type C Private Placement was effected in compliance with
Rule 506 and the Type C Shares were offered and sold only to a limited number of
sophisticated investors who understood and were economically capable of
accepting the risks associated with a speculative investment, including the
complete loss of such investment, and who were "Accredited Investors" within the
meaning prescribed by Regulation D and Rule 501 of the Securities Act.
The 11,760,000 Type C Shares which were sold are intended to be
registered for re-sale to the public by the holders thereof by way of an
appropriate Registration Statement or may be sold pursuant to an exemption from
registration, if available.
REGISTRATION STATEMENT
On May 21, 1998, the Company filed a Registration Statement on Form
SB-2 (Registration No. 333-53255) with the Securities and Exchange Commission,
for the registration of the resale of certain presently outstanding shares of
the Company's common stock and an undetermined number of shares issuable upon
the conversion or exercise of certain presently outstanding debentures, options,
and warrants. The aforementioned Registration Statement on Form SB-2 has not
6
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been deemed effective by the SEC. None of the shares included in the
Registration Statement are being offered for sale by the Company and the Company
will receive no proceeds from the sales of any of the shares included therein.
As of September 3, 1999, the shares of common stock which the Company
intends to register pursuant an appropriate Registration Statement or: (i)
11,952,857 presently outstanding shares of the Company's common stock which are
being offered by 58 selling shareholders including 11,760,000 shares issued to
57 persons in the Type C Private Placement described under "Material Financing
Activities" and 192,857 shares issued in November 1998 to one individual; (ii)
shares underlying an option issued to CG Tire Inc. ("CGT") on April 24, 1997,
for the purchase, prior to April 23, 2000, of the number of shares which would
constitute upon their issuance, on a fully diluted basis, up to ten percent
(10%) of the issued and outstanding common stock of the Company at an exercise
price equal to fifty percent (50%) of the average of the final bid and ask
prices for the Company's common stock during the ten business days preceding the
date of exercise; (iii) 2,000,000 shares issuable upon the exercise of the Type
A Warrants issued in the Type A Private Placement described under "Material
Financing Activities"; (iv) 2,000,000 shares issuable upon the exercise of
currently outstanding common stock purchase warrants (the "SCT Warrants") to
purchase 666,666 shares of the Company's common stock at an exercise price of
$.25 per share, 666,666 shares of the Company's common stock at an exercise
price of $.40 per share, and 666,666 shares at an exercise price of $.50 per
share; (iv) shares issuable upon the conversion of the Type A Debentures, issued
in the Type A Private Placement described under "Material Financing Activities",
in the aggregate principal amount of $460,000 at a conversion rate equal to a
maximum of 64.5% and a minimum of 61.5% of the closing bid price of the
Company's common stock on the trading date immediately prior to the date upon
which the Company receives a notice of conversion (see the discussion, above, in
this section, under the subcaption "The Type A Private Placement"; and (v)
2,150,000 shares issuable upon the conversion of the Type B Debentures, issued
under the Type B Private Placement described under "Material Financing
Activities" in the aggregate principal amount of $430,000. (At the option of the
holders of the Type A and Type B Debentures, all unpaid interest accrued on the
Debentures, through the date of conversion, may also be converted into shares of
the Company's common stock).
RISK FACTORS
The Shares offered hereby are speculative and involve a high degree of
risk. The Shares should not be purchased by investors who cannot afford the loss
of their entire investment. Prospective investors should carefully consider all
of the information contained in this Prospectus before deciding whether to
purchase Shares and, in particular, the factors set forth below.
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes", "expects", "may", "should" or "anticipates" or the negative
thereof or other variations thereon or comparable terminology or by discussions
of strategy. No assurance can be given that the future results covered by the
forward-looking statements will be achieved. The following Risk Factors include,
among other things, cautionary statements with respect to certain
forward-looking statements, including statements of certain risks and
uncertainties that could cause actual results to vary materially from the future
results referred to in such forward-looking statements.
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1. DEVELOPMENT STAGE COMPANY: NO ASSURANCE AS TO FUTURE PROFITABLE
OPERATIONS. Because it is in the development stage and has had no significant
operations to date, the Company cannot predict with any certainty the future
success or failure of its operations. The Company's business, is subject to all
of the risks inherent in the establishment of new businesses and there is no
assurance that the Company will generate net income or successfully expand its
operations in the future. Moreover, as a new enterprise, it is likely to remain
subject to risks and occurrences which management is unable to predict with any
degree of certainty, and for which it is unable to fully prepare. The likelihood
of the success of the Company must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with the formation of a new business and the competitive environment
in which the Company will operate. Because of the Company's very limited
business history, there is little evidence for investors to analyze in order to
make an informed judgment as to the merits of an investment in the Company. Any
such investment should therefore be considered a high risk investment in an
unseasoned start-up company with the possibility of the loss of the entire
investment.
2. NEED FOR SUBSTANTIAL ADDITIONAL CAPITAL. The Company has recently
completed the development of the TCS-1 Plant but requires additional funds to
design and install needed modifications. It has sold certain parts of the first
of such Plants (while retaining ownership of other parts and operating rights
over the entire Plant). The Company has also entered into sublease arrangements
for the parts of the Plant which it sold. The Company has taken orders and, in
some cases, received refundable deposits on such orders, for a total of another
fourteen Plants. The Company has not yet begun commercial manufacture of TCS-1
Plants for sale because none of the persons who have placed orders for such
Plants, have yet obtained the required financing to effect their purchases.
Operations in our second business segment, which involves operating the first
complete TCS-1 Plant and manufacturing molded rubber welcome mats out of the
recycled rubber crumb derived therefrom, commenced in March of 1999 and as at
the end of April had yielded only limited revenues but the Company has since
sold its mat operation eliminating any future potential profits from that line
of business. Therefore the Company remains in need of substantial financing from
sources other than operations in order to cover its overhead, complete the
establishment of its rubber molding plant and maintain and expand its
operations. To date, we have been able to meet our outside financing
requirements, as described below.
During the period between January 7, and May 11, 1998, the Company
completed and closed certain financing activities which yielded aggregate net
proceeds to the Company in the amount of $2,063,795 (see Risk Factor No. 6
"Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants, and Options"). From July 1, 1998 through March 31, 1999, the Company
has also received approximately $1,506,000 from various other sources (other
than operations) including: (i) sale and lease back financing on inventory and
equipment owned by the Company; (ii) Canadian research and development tax
credit refunds; (iii) loans from officers and directors; (iv) refunds of all of
the 15% sales tax paid by the Company on all goods, and services purchased in
connection with the Company's manufacturing activities. The foregoing have
provided adequate funding to accomplish the following: (i) cover all of the
Company's costs related to the first production model of the TCS-1 Plant (the
"Production Model"), including previously unanticipated modifications identified
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during testing; (ii) proceed with renovations of the Company's new manufacturing
and assembly facility which have brought it into full compliance with all
applicable provincial and municipal regulations except for the purchase and
installation of a sprinkler system which will cost approximately $100,000 and
for which the Company expects to be able to obtain sale and lease back
financing; (iii) cover the Company's overhead costs and expenses; and (iv) cover
the initial costs of establishing and commencing operations in the Company's
second business segment involving the operation of a TCS-1 Plant and the
production of molded rubber products, including capital investments in molding
and flocking equipment.
The Company expects that these same funding sources, together with
anticipated vendor financing, and conventional asset based debt financing
against receivables and inventory will continue to provide sufficient capital to
cover overhead and maintain and expand molding operations. The Company is also
ready to begin full scale, commercial manufacture of TCS-1 Plants. Its present
plans do not require that the Company obtain any outside financing to do so, but
instead require only partial prepayments from the purchasers of such Plants. The
Company will not manufacture any TCS-1 Plants for purchasers unless and until it
receives the prepayments necessary to fund such manufacture. Therefore, any
failure or delay, on the part of the persons who have placed orders with the
Company for TCS-1 Plants, to obtain the required financing to effect such
purchases, will be directly reflected in a commensurate delay or failure, on the
Company's part, to begin TCS-1 Plant manufacturing operations.
Absent adequate revenues from operations during the phase-in period of
commercial operations, the Company will remain dependent on the outside sources
described above to meet its requirements and to continue operating. While the
Company believes it will be successful in continuing to obtain sufficient
financing from such sources, there can be no assurance with any certainty that
this will, in fact, be the case and the failure to do so would have a material
adverse effect on the Company's ability to continue to operate. The Company's
more long term future capital requirements will depend upon numerous factors,
including the amount of revenues generated from operations, the cost of the
Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. Receipt of any projected revenues is entirely dependent upon the
TCS-1's continuing to meet performance standards under long-term, commercial
operating conditions, the Company's ability to successfully market finished
products made from recycled rubber crumb (excluding any revenues from the
welcome mats operations which the Company was sold), and the ability of
prospective purchasers of TCS-1 Plants to obtain financing to effect their
projected purchases.
While management does not believe that it will be the case, prospective
investors in the Company should note that if all of the above described internal
and external sources for financing should fail to be sufficient, the Company
could be required to reduce its operations, seek an acquisition partner or sell
securities on terms that may be highly dilutive or otherwise disadvantageous to
the Company.
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3. HISTORY OF LOSSES AND ACCUMULATED DEFICIT. The Company has
experienced operating losses in each fiscal period since its formation in 1987,
including the period since the 1993 inception of its tire recycling business
plan. As at June 30, 1998, the Company had a deficit accumulated since formation
in the aggregate approximate amount of $10,051,483, approximately $8,994,127 of
which was accumulated since the 1993 inception of the Company's present business
plan. The Company expects to incur additional operating losses through at least
the end of the fiscal year ending June 30, 1999 and possibly thereafter (see,
above, Risk Factor No. 1 "Development Stage Company: No Assurance as to Future
Profitable Operations"). Since its inception, the Company has generated
extremely limited revenues from operations.
4. GOING CONCERN ASSUMPTION. The Company's independent auditors'
report on the Company's financial statements for the years ended June 30, 1997
and 1998, contains an explanatory paragraph indicating that: (i) the Company is
still in the development stage; (ii) it cannot be determined at this time that
the Company's tire disintegration technology will be developed to a productive
stage; and (iii) the Company's uncertainty as to its productivity and its
ability to raise sufficient capital raise substantial doubt about its ability to
continue as a going concern. In addition, the Company had an accumulated deficit
of $10,051,483 as at June 30, 1998. The Company will require substantial
additional funds in the future, and there can be no assurance that any
independent auditors' report on the Company's future financial statements will
not include a similar explanatory paragraph if the Company is unable to raise
sufficient funds or generate sufficient cash from operations to cover the cost
of its operations. The existence of the explanatory paragraph may materially
adversely affect the Company's relationship with prospective customers and
suppliers, and therefore could have a material adverse effect on the Company's
business, financial condition and results of operations.
5. NO GUARANTEE OF PRODUCT ACCEPTANCE IN MARKET. The first production
model of the TCS-1 Plant was completed in May of 1998 and, since March 1999, the
Company has been operating it on a commercial basis. Because of its extremely
limited operating history, there can be no assurance that the TCS-1 Plant will
be accepted in the market for tire disintegration equipment. Moreover, the
Company's market research has focused on the potential demand for the TCS-1
Plant, and the rubber crumb it is designed to produce, to the exclusion of other
types of tire disintegration equipment. While the Company has received orders on
approximately fourteen TCS-1 Plants, to date, none of its potential customers
have obtained financing to effect purchases pursuant to such orders. While the
Company believes that all orders included in its backlog may eventually result
in purchases, it is not able to estimate with any assurance the potential demand
for the TCS-1 Plant. There can be no assurance that sufficient market
penetration can be achieved so that projected production levels of the TCS-1
Plant will be absorbed by the market.
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6. DILUTIVE AND OTHER ADVERSE EFFECTS OF PRESENTLY OUTSTANDING
DEBENTURES, WARRANTS, AND OPTIONS. As of September 13, 1999, there were
outstanding options and warrants pursuant to which the Company is obligated to
sell common stock, as follows:
(a) 2,000,000 common stock purchase warrants (the "Type A
Warrants") to purchase a like number of shares of the
Company's common stock at an exercise price of $.001 per
share, the resale of all of which shares are intended to be
registered for re-sale to the public by the holders thereof by
way of an appropriate Registration Statement
(b) 10% convertible Type A Debentures in the aggregate principal
amount of $460,000, with principal and interest convertible,
in whole or in part, into shares of the Company's common stock
at a conversion ratio equal to a percentage ranging between
64.5% and 61.5% of the closing bid price of the Company's
common stock on the trading date immediately preceding the
date of the Company's receipt of a notice of conversion from a
holder of the Type A Debentures. The resale of all of these
shares are intended to be registered for re-sale to the public
by the holders thereof by way of an appropriate Registration.
To the extent that the interest portion of the Debenture is
not converted, all accrued interest will be payable in cash.
(c) 10% convertible Type B Debentures in the aggregate principal
amount of $430,000, with principal and interest convertible,
in whole or in part, into shares of the Company's common stock
at a conversion ratio of one share for every $.20 of principal
amount and interest earned thereon from the date of issuance.
If the principal amount of all of the Type B Debentures, but
not the interest, were converted, the aggregate number of
shares issuable would be 2,150,000. The resale of all of which
shares are intended to be registered for resale to the public
by the holders thereof by way of an appropriate Registration
Statement or may be sold pursuant to an exemption from
registration if available. To the extent that the interest
portion of the Type B Debenture is not converted, all accrued
interest will be payable in cash.
(d) an option to purchase 235,294 shares, held by Lenford Robins,
an unaffiliated consultant, exercisable at a price of $.17 per
share. Mr. Robins is an expert in all types of equipment
financing through sale and leaseback arrangements, and
otherwise, and has provided, and continues to provide,
consulting services to the Company with respect to locating,
structuring, and arranging such financing for purchasers and
potential purchasers of TCS-1 Plants. From the Summer of 1996
through the Spring of 1997, Mr. Robins provided substantial
consulting services in connection with sale and leaseback
financing for Ocean's Tire Recycling & Processing Co., Inc.
("Oceans Tire").
(e) an option, held by a director of the Company, to purchase
20,000 shares of convertible preferred stock at a price of $10
per share (the "Preferred Option"). If purchased, such
preferred stock will be convertible into shares of the
Company's common stock at a conversion ratio equal to the
number of shares of common stock purchasable for the purchase
price of each preferred share ($10) at 30% of the average
market price of the Company's common stock during the five
trading days immediately prior to the date of conversion
provided, however, that should the total number of shares of
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the Preferred Stock which can be purchased pursuant to the
Option, be convertible into fewer than two million (2,000,000)
shares of the Company's Common Stock, the number of shares of
Preferred Stock purchasable under the Option, at the exercise
price of ten dollars per preferred share, will be increased to
such number as is convertible to 2,000,000.
(f) the CGT Option to purchase a number of shares equal, on a
fully diluted basis, to 10% of the total issued and
outstanding common stock of the Company, at an exercise price
equal to $.1195 per share with respect to 969,365 shares and
at an exercise price with respect to the balance of the shares
equal to fifty percent (50%) of the average of the final bid
and ask prices of the common stock of the Company, as quoted
in the OTC Bulletin Board during the ten business days
preceding the exercise date. If all of the other presently
outstanding debentures, options, and warrants were exercised,
as described above, the total number of shares of common stock
of the Company issued and outstanding would be 106,296,410,
prior to the exercise of the CGT Option, in which case, the
number of shares subject to the CGT Option would be
11,810,712, The resale of all of which shares are intended to
be included in an appropriate Registration Statement or may be
sold pursuant to an exemption from registration, if available.
(g) 2,000,000 common stock purchase warrants (the "SCT Warrants")
to purchase a like number of shares of the Company's common
stock at an exercise price of $.25 per share for the first
666,666 shares, $.40 per share for the second 666,666 shares,
and at $.50 per share for the remaining 666,666 shares. The
resale of all of these shares are intended to be registered
for resale in an appropriate Registration Statement or may be
sold pursuant to an exemption from registration if available.
The holders of the convertible debentures, the warrants, and the
outstanding options have an opportunity to profit from a rise in the market
price of the common stock, if such rise should occur, with a resulting dilution
in the interests of the other shareholders. Moreover, if the above described
debentures, warrants, and options (the "Convertible Securities") are converted
or exercised, most of the shares of common stock issued upon such exercise or
conversion (the "Underlying Shares") will be available for immediate sale into
the public market, commencing on the effective date of the Company's filing of
the appropriate Registration Statement or upon the Company's eligibility for an
exemption from registration. The sale or availability for sale of substantial
amounts of common stock in the public market could adversely affect the
prevailing market price of the Company's common stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities. In addition, even if the Convertible Securities are not converted or
exercised, the terms on which the Company may obtain additional financing may be
adversely affected by the existence of such securities. For example, the holders
of the Convertible Securities could convert or exercise them at a time when the
Company is attempting to obtain additional capital through a new offering of
securities which have terms more favorable (to the Company) than those provided
by the then outstanding Convertible Securities.
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7. ADDITIONAL DILUTION FROM ISSUANCE OF SHARES FOR SERVICES. To date,
the Company has had very limited revenues from operations. Accordingly, the bulk
of its cash assets have been, and may continue to be, utilized to cover the
expenses associated with the development of its business and products. Given the
foregoing, the Company regularly pays certain of its financial obligations by
issuing restricted shares of its common stock, at a discount, in lieu of cash.
The discounts at which such shares were issued was generally, but not always,
set at 50% of the average market price of the stock, as traded in the
over-the-counter market and quoted in the OTC Bulletin Board. Such discounts
were either negotiated at arms length with third parties or determined
arbitrarily by the Company, in which cases they bore no relationship to the
Company's assets, earnings, book value or other such criteria of value. Such
issuances have, and may continue to, result in substantial dilution to the
Company's existing shareholders.
From January of 1995 through August of 1999, the Company has issued a
total of 39,129,410 shares, constituting approximately 44.8% of the issued and
outstanding shares of the Company in lieu of cash compensation and expense
reimbursement due under employment and consulting agreements with its executive
officers, employees, and corporate counsel and in additional compensation by way
of directors shares and stock bonuses. In addition, during that period, the
Company issued 13,410,946 shares, constituting approximately 15.38% of the
issued and outstanding common stock of the Company to affiliated and
non-affiliated consultants and subcontractors for consulting services of various
types. For as long as the Company has insufficient cash resources to meet its
obligations to its officers, counsel, and outside vendors, the Company will, to
the extent possible, continue to issue shares of its common stock at negotiated
or arbitrary discounts. In addition, the Company intends to submit to its
shareholders, proposals to adopt three stock option plans for the benefit of its
employees (See Risk Factor No. 9 "Possible Voting Control by Management and
Corporate Counsel" and Risk Factor No. 27 "Adverse Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions, Limitations
on Shareholders Voting Rights, and Stock Bonuses to Management").
8. POSSIBLE DEPRESSIVE EFFECT ON PRICE OF SECURITIES OF FUTURE SALES
OF COMMON STOCK. The resale of 11,952,857 of the 87,196,000 common shares of the
Company, issued and outstanding as of April 22, 1999, has been included in the
Company's Registration Statement on Form SB-2 (See "The Company - Registration
Statement"). All 11,952,857 shares will be freely tradeable commencing on the
effective date of such Registration Statement. The resale of an estimated
25,092,495 shares issuable upon the exercise or conversion of certain presently
outstanding options, warrants, and debentures have also been included in such
Registration Statement and will be freely tradeable upon the later of: (i) the
effective date of the Registration Statement; or (ii) their issuance. The sale
or other disposition of much of the other currently outstanding shares of common
stock is restricted by the Securities Act. Unless such sales are registered,
these shares may only be sold in compliance with Rule 144 promulgated under the
Securities Act or some other exemption from registration thereunder. Rule 144
provides, among other matters, that if certain information concerning the
operating and financial affairs of the Company is publicly available, persons
who have held restricted securities for a period of one year may thereafter sell
in each subsequent three month period up to that number of such shares equal to
one percent of the Company's total issued and outstanding common stock. The sale
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or availability for sale of substantial amounts of common stock in the public
market after the offering being made by such Registration Statement could
adversely affect the prevailing market price for the Company's common stock and
could impair the Company's ability to raise additional capital through the sale
of its equity securities.
9. POSSIBLE VOTING CONTROL BY MANAGEMENT AND CORPORATE COUNSEL:
POSSIBLE DEPRESSIVE EFFECT ON MARKET PRICES. As of September 13, 1999, the
Company's officers and directors were the beneficial owners of an aggregate of
31,590,872 shares, constituting approximately 36.23% of the Company's
outstanding common stock. The Company intends to hold an annual meeting of its
shareholders prior to the end of the current calendar year. (See Risk Factor No.
27 "Adverse Effects of Proposals to Be Presented at Annual Shareholders Meeting:
Anti-Takeover Provisions, Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management"). In addition to the proposals discussed in Risk Factor
No. 27, the Board of Directors has proposed that the shareholders approve the
adoption of three stock option plans. If adopted, two of these plans will be for
the benefit of all of the Company's employees, but management and key employees
are expected to be the principal beneficiaries thereof. The third of these
proposed plans, is intended to be specifically for the purpose of awarding
options for the purchase of shares of common stock at a nominal exercise price
of $.001 per share, to key employees and members of management in respect of
certain specified performance achievements attained or to be attained by the
Company due to their efforts.
The other two stock option plans to be presented to the Shareholders,
consist of a statutory and a non-statutory plan. Key management and other
employees will also be eligible to receive option grants under each of such
plans. The exercise price of options granted under the statutory plan must be
not less than 100% of the market price on the day the option is granted unless
the grantee owns 10% or more of the total issued and outstanding common stock of
the Company, in which case the exercise price must be not less than 110% of the
market price on the day the option is granted. The non-statutory plan to be
proposed to the shareholders calls for an exercise price of not less than 50% of
the market price on the date the option is granted.
The concentration of ownership by the Company's officers and directors
may, along with other "anti-takeover" measures which the Board of Directors
plans to submit to the shareholders, discourage potential acquirers from seeking
control of the Company through the purchase of Common Stock, and this
possibility could have a depressive effect on the price of the Company's
Securities. (See "Risk Factor No. 25 "Adverse Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions, Limitations
on Shareholders Voting Rights, and Stock Bonuses to Management")
10. PROPOSED REVERSE SPLIT: POSSIBLE NEGATIVE EFFECT ON VALUE OF
SECURITIES. As of September 13, 1999 there were 105,854,976 shares of the
Company's common stock issued and outstanding. While the Company considers that
it would be highly unlikely if all of the currently outstanding options and
warrants were to be exercised and all of the currently outstanding debentures
were to be converted with respect to the principal amount of such debentures,
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there could be up to 136,766,098 shares of common stock issued and outstanding.
On August 13, 1997, the Company received a Letter of Intent from H.J. Meyers,
Inc. (the "Meyers Letter of Intent"), a broker-dealer registered with the
National Association of Securities Dealers, Inc., for the underwriting of a
proposed public offering. On or about September 16, 1998, however, H. J. Meyers
abruptly ceased doing business. The Company intends to endeavor to effect a
public offering of its securities and is presently in negotiations with another
potential underwriter. The Meyers Letter of Intent had required that the Company
have not more than ten million (10,000,000) shares of common stock issued and
outstanding prior to the proposed public offering. The Company believes that any
potential underwriter for a public offering of the Company's securities will
require that the Company effect a reverse split to reduce the number of shares
of its common stock issued and outstanding because the total number of shares of
common stock currently outstanding is disproportionately large in relation to
the Company's level of sales, net income and net worth. Additionally, the
Company's common stock has had a low market value per share in recent months,
which may, the Company believes, tend to reduce stockbroker and investor
interest in the Company. Further, the Company believes that the current per
share price of the Company's common stock may limit the effective marketability
of the Company's common stock because of the reluctance of many brokerage firms
and institutional investors to recommend lower-priced stocks to their clients or
to hold them in their own portfolios. In light of the above, the Company intends
to call a meeting of its shareholders and to submit to them a proposal to
reverse split the number of shares of common stock issued and outstanding at a
ratio of one post-split share for every seven pre-split shares, or at some
other, possibly higher, ratio, as the board of directors shall agree is in the
best interests of the Company and its shareholders. Based upon the number of
shares issued and outstanding as of September 13, 1999, and assuming that the
Reverse Split is approved by the shareholders and effected at a one-for-seven
ratio, there will be a decrease in the number of outstanding shares of common
stock of the Company to approximately 15,122,139 shares. Because of standard
anti-dilution clauses or market price sensitive exercise or conversion prices
contained in all presently outstanding convertible debentures, warrants, and
options, such reverse split would also affect the number of shares of common
stock issuable upon conversion or exercise of such debentures, warrants, or
options. Negotiations with potential underwriters may result in a different
reverse-split ratio or even a second reverse split.
The Company believes that a decrease in the number of shares of common
stock outstanding may increase the trading price and marketability of such
shares. However, the market price of the Company's common stock should also be
expected to reflect Company performance and other factors, some of which may be
unrelated to the number of shares outstanding. Accordingly, there can be no
assurance that the market price of the Common Stock after the Reverse Split will
actually increase in an amount proportionate to the decrease in the number of
outstanding shares. The Reverse Split may leave stockholders with one or more
"odd lots" of the Company's stock, i.e. stock holdings in amounts of less than
100 shares. These shares may be more difficult to sell, or require a greater
commission per share to sell, than shares in lots of 100.
11. DEPENDENCE ON MAJOR CUSTOMERS. To date the Company has received
orders for fifteen TCS-1 Plants, eight of which were ordered by Ocean/Ventures
III, Inc.("O/V III") of Toms River, New Jersey ("O/V III") and parts of one of
which have been purchased by Oceans Tire Recycling & Processing Co., Inc.
("Oceans Tire"), a company under common control with O/V III. The eight Plants
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ordered by O/V III constitute approximately fifty-six percent (56%) of the
Company's present backlog. The Company has also received orders for four TCS-1
Plants from ENERCON America Distribution Limited ("Enercon") of Westerville,
Ohio. The Enercon orders constitute approximately twenty-eight percent (28%) of
the Company's present backlog. The loss of either of these two customers would
have a major adverse effect on the Company. Both O/V III and Oceans Tire are
controlled by Louis V. Sanzaro, the former President and a director of the
Company.
Completion and consummation of all currently outstanding orders for
TCS-1 Plants, are entirely dependent on each customer's obtaining lease or other
financing for the purchased portions of the Plant as well as all required
permits and licenses to operate a Plant. In this regard, the Company notes that
Enercon initially placed orders for two plants in August 1998. Enercon has
assured the Company on numerous occasions that it expects to receive financing
to effect these purchases, but to date no such financing has been obtained by
Enercon. The Company is unable to state when, if ever, Enercon will receive its
funding and be in a position to effect its projected purchases of a total of
four TCS-1 Plants.
12. UNCERTAINTY OF PRODUCT AND TECHNOLOGY DEVELOPMENT: TECHNOLOGICAL
FACTORS. The Company has completed and is presently operating the first
production model of the TCS-1 Plant. The Company's success will depend upon the
TCS-1 Plant's continuing to meet targeted performance and cost objectives on a
long term, commercial basis. Such an outcome will be subject to the risks
inherent in the development of a new product, technology, and business. There
can be no assurance that under commercial usage conditions, the TCS-1 Plant will
satisfactorily perform the functions for which it has been designed and
constructed, that it will meet applicable price or performance objectives, or
that unanticipated technical or other problems will not occur which would result
in increased costs or material delays in establishing the Company's business at
a profitable level. There can be no assurance that, despite the successful
operation of the TCS-1 Plant during the current, initial operational period, we
will not encounter problems which could result in loss or delay in market
acceptance of the TCS-1 Plant.
13. INTERNATIONAL SALES AND OPERATIONS. The Company plans to market the
TCS-1 Plant in Europe and India during the 1999 calendar year, and in other
areas throughout the world as opportunities arise. There can however, be no
assurances that the TCS-1 Plant will be successfully marketed or that any
anticipated international sales of TCS-1 Plants will take place. In addition,
the Company will seek joint ventures with purchasers of TCS-1 Plants for the
purpose of engaging in the business of operating tire recycling businesses
equipped with TCS-1 Plants. To the extent that the Company engages in
international sales and/or operations, it will be subject to various risks
associated therewith, including but not limited to changes in tariff rates, lack
of reliability and availability of qualified labor, and instability of political
climate or economic environment. In addition, the value of any capital equipment
owned by such joint ventures and any operating lease or equipment purchase
financing payments received by the Company, may, under certain conditions, be
valued or paid in non-U.S. currencies, all of which will be subject to
independent fluctuating exchange rates with the U.S. dollar which may have an
adverse affect on the Company's revenues or asset values in terms of the U.S.
dollar.
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14. PROTECTION OF TIREX PROPRIETARY TECHNOLOGY AND POTENTIAL
INFRINGEMENT. The success of the Company's proposed business depends in part
upon its ability to protect its proprietary technology and the TCS-1 Plant which
utilizes such technology. On April 7, 1998, the Company was issued a United
States patent on its Cryogenic Tire Disintegration Process and Apparatus (Patent
No. 5,735,471). This patent will expire on December 18, 2016. In November 1998,
the Company filed this patent with the Canadian Patent Office. The Company is
presently unable to state how long the Canadian review will take. While the
Company expects a Canadian patent to be granted, it is unable to give any
assurance that this will in fact be the case. Prior to obtaining its patent, the
Company relied on trade secrets, proprietary know-how and technological
innovation to develop its technology and the designs and specifications for the
TCS-1 Plant. Except where the terms of their employment agreements would make it
redundant or, in the sole discretion of management, it is determined that
because of the non-technical nature of their duties, such agreements are not
necessary or appropriate, the Company has, and will continue to, enter into
confidentiality and invention assignment agreements with all employees and
consultants which limit access to, and disclosure or use of, the Company's
proprietary technology. There can be no assurance, however, that the steps taken
by the Company to deter misappropriation or third party development of its
technology and/or processes will be adequate, that others will not independently
develop similar technology and/or processes or that secrecy will not be
breached. In addition, although the Company believes that its technology has
been independently developed and does not infringe on the proprietary rights of
others, there can be no assurance that the Company's technology does not and
will not so infringe or that third parties will not assert infringement claims
against the Company in the future. Moreover, there can be no assurance that the
Company will have the resources to defend its Patent by bringing patent
infringement or other proprietary rights actions.
15. LIMITED PUBLIC MARKET: COMPANY NOT ELIGIBLE FOR INCLUSION ON
NASDAQ. To date there has been only a limited and sporadic public market for the
Company's common stock. There can be no assurance that an active and reliable
public market will develop or, if developed, that such market will be sustained.
Purchasers of shares of common stock of the Company may, therefore, have
difficulty in reselling such shares. As a result, investors may find it
impossible to liquidate their investment in the Company should they desire to do
so. The Company's common stock is currently traded in the over-the-counter
market and quoted on the OTC Bulletin Board. The Company intends to apply to
have its common stock approved for quotation on the Nasdaq SmallCap Market at
such time, in the future, that it meets the requirements for inclusion. As at
the date hereof, however, the Company is not eligible for inclusion in NASDAQ or
for listing on any national stock exchange. All companies applying and
authorized for NASDAQ are required to have not less than $4,000,000 in net
tangible assets, a public float with a market value of not less than five
million dollars, and a minimum bid of price of $4.00 per share. At the present
time, the Company is unable to state when, if ever, it will meet the Nasdaq
application standards. Unless the Company is able to increase its net worth and
market valuation substantially, either through the accumulation of surplus out
of earned income or successful capital raising financing activities, it will
never be able to meet the eligibility requirements of NASDAQ. In addition, it is
likely that the Company, which, as of September 13, 1999, had 105,854,976 shares
of common stock issued and outstanding, will have to effect a reverse split of
its issued and outstanding stock, in order to meet the minimum bid price
requirement (see, also, Risk Factor No. 6 "Dilutive and Other Adverse Effects of
Debentures and Warrants15.ab and Presently Outstanding Option"). Moreover, even
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if the Company meets the minimum requirements to apply for inclusion in The
Nasdaq SmallCap Market, there can be no assurance, that approval will be
received or, if received, that the Company will meet the requirements for
continued listing on the Nasdaq SmallCap Market. Further, Nasdaq reserves the
right to withdraw or terminate a listing on the Nasdaq SmallCap Market at any
time and for any reason in its discretion. If the Company is unable to obtain or
to maintain a listing on the Nasdaq SmallCap Market, quotations, if any, for
"bid" and "asked" prices of the common stock would be available only on the OTC
Bulletin Board where the common stock is currently quoted or in the "pink
sheets" published by the National Quotation Bureau, Inc. This can result in an
investor's finding it more difficult to dispose of or to obtain accurate
quotations of prices for the common stock than would be the case if the common
stock were quoted on the Nasdaq SmallCap Market. Irrespective of whether or not
the common stock is included in the Nasdaq SmallCap system, there is no
assurance that the public market for the common stock will become more active or
liquid in the future. In that regard, prospective purchasers should consider
that this offering is being made without the underwriting arrangements typically
found in a public offering of securities. Such arrangements generally provide
for the issuer of the securities to sell the securities to an underwriter which,
in turn, sells the securities to its customers and other members of the public
at a fixed offering price, with the result that the underwriter has a continuing
interest in the market for such securities following the offering. In order to
qualify for listing on a national stock exchange, similar minimum criteria
respecting, among other things, the Company's net worth and/or income from
operation must be met.
Accordingly, market transactions in the Company's common stock are
subject to the "Penny Stock Rules" of the Securities and Exchange Act of 1934,
which are discussed in more detail, below, under "Risk Factor No. 16.
Applicability of Penny Stock Rules to Broker-Dealer Sales of Company Common
Stock". These rules could make it difficult to trade the common stock of the
Company because compliance with them can delay and/or preclude certain trading
transactions. This could have an adverse effect on the ability of an investor to
sell any shares of the Company's common stock.
16. APPLICABILITY OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF
COMPANY COMMON STOCK. As discussed above, at the present time, the Company's
common stock is not listed on The Nasdaq SmallCap Stock Market or on any stock
exchange. Although dealer prices for the Company's common stock are listed on
the OTC Bulletin Board, trading has been sporadic and limited since such
quotations first appeared on April 4, 1994.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
special disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a "penny stock". Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share and is not listed on The Nasdaq SmallCap Stock Market or a
major stock exchange. These regulations subject all broker-dealer transactions
involving such securities to the special "Penny Stock Rules" set forth in Rule
15g-9 of the Securities Exchange Act of 1934 (the "34 Act"). It may be necessary
for the Selling Shareholders and the Underlying Share Selling Shareholders to
utilize the services of broker-dealers who are members of the NASD. The current
market price of the Company's Common Stock is substantially less than $5 per
share and such stock can, for at least for the foreseeable future, be expected
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to continue to trade in the over-the-counter market at a per share market price
of substantially less than $5. Accordingly, any broker-dealer sales of the
shares being registered hereunder, as well as any subsequent market transactions
in the Company's common stock, will be subject to the Penny Stock Rules. These
Rules affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this offering to sell their shares
in the secondary market, if such a market should ever develop.
The Penny Stock Rules also impose special sales practice requirements
on broker-dealers who sell such securities to persons other than their
established customers or "Accredited Investors." Among other things, the Penny
Stock Rules require that a broker-dealer make a special suitability
determination respecting the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. In addition, the Penny Stock
Rules require that a broker-dealer deliver, prior to any transaction, a
disclosure schedule prepared in accordance with the requirements of the
Commission relating to the penny stock market. Disclosure also has to be made
about commissions payable to both the broker-dealer and the registered
representative and the current quotations for the securities. Finally, monthly
statements have to be sent to any holder of such penny stocks disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. Accordingly, for so long as the Penny Stock
Rules are applicable to the Company's common stock, it may be difficult to trade
such stock because compliance with such Rules can delay and/or preclude certain
trading transactions. This could have an adverse effect on the liquidity and/or
price of the Company's common stock.
17. MANAGEMENT'S LACK OF INDUSTRY EXPERIENCE. Although Management has
significant general business and engineering experience, potential investors
should be aware that, prior to their association with the Company, no member of
management has been directly involved in administering a tire disintegration,
recycling, tire disintegration equipment manufacturing, or molded rubber
products business, except for Mr. Sanzaro, who has more than twenty years of
experience in the recycling business (excluding tires).
18. DEPENDENCE ON KEY PERSONNEL. The Company believes that its success
depends to a significant extent on the efforts and abilities of certain of its
senior management, in particular those of Terence C. Byrne, Chairman of the
Board of Directors and Chief Executive Officer; Louis Sanzaro, President and
Chief Operating Officer, and Louis V. Muro, Vice President in charge of
engineering. The loss of any of these persons could have a material adverse
affect on the Company's business, prospects, operating results, and financial
condition. The Company has entered into employment agreements with Messrs.
Byrne, Sanzaro, and Muro. The Company does not presently have key man life
insurance policies and does not intend to obtain any unless required to do so
under future financing arrangements. There can be no assurance that such
policies will be available to the Company on commercially reasonable terms, if
at all. Additionally, the ability of the Company to realize its business plan
could be jeopardized if any of its senior management becomes incapable of
fulfilling his obligations to the Company and a capable successor is not found
on a timely basis. There can however be no assurance that, in such event, the
Company will be able to locate and retain a capable successor to any member of
its senior management.
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19. REGULATORY AND ENVIRONMENTAL CONSIDERATIONS. The Company does not
expect that its equipment manufacturing operations will be subject to any
unusual or burdensome governmental regulations. However, the Company is
presently operating the First Production Model of the TCS Plant, which is
installed at its Montreal facility. The TCS-1 Plant is a "closed loop" system
which does not use any chemicals, solvents, gases or other substances which
could result in emissions of any kind and, to the best of the Company's
knowledge, does not result in the emission of air pollution, the disposal of
combustion residues, the storage of hazardous substances (as is the case with
other tire recycling processes such as pyrolysis), or the production of any
significant amounts of solid waste which would have to be landfilled. However,
the operation of a TCS-1 Plant involves, to varying degrees and for varying
periods of time, the storage of scrap tires which, with their size, volume and
composition, can pose serious environmental problems. While the Company does not
believe that such storage will normally involve quantities of tires so large or
storage periods so extensive as to constitute the "stockpiling" of scrap tires,
it should be noted that stockpiling, should it occur, could constitute a
particularly serious environmental problem. Among the numerous problems relating
to scrap tires is that, when stockpiled above ground, tires create serious fire,
public health, and environmental hazards ranging from fires, which generate
large and dense clouds of black smoke and are extremely difficult to extinguish,
to the creation of vast breeding grounds for mosquitoes and vermin.
As a result, many states have either passed or have pending legislation
regarding discarded tires including legislation limiting the storage of used
tires to specifically designated areas. The Company, and, if any TCS-1 Plants
are sold by the Company, other operators of TCS-1 Plants, will therefore be
subject to various local, state, and federal laws and regulations including,
without limitation, regulations promulgated by federal and state environmental,
health, and labor agencies. Establishing and operating a TCS-1 Plant for tire
recycling will require numerous permits and compliance with environmental and
other government regulations, on the part of the Company's customers, both in
the United States and Canada and in most other foreign countries. The process of
obtaining required regulatory approvals may be lengthy and expensive for both
the Company and for its TCS-1 Plant customers. Moreover, regulatory approvals,
if granted, may include significant limitations on either the Company's or its
customer's operations. The EPA and comparable state and local regulatory
agencies actively enforce environmental regulations and conduct periodic
inspections to determine compliance with government regulations. Failure to
comply with applicable regulatory requirements can result in, among other
things, fines, suspensions of approvals, seizure or recall of products,
operating restrictions, and criminal prosecutions.
Compliance with applicable environmental and other laws and regulations
governing the business of the Company, and of all TCS-1 Plant Operators, may
impose financial burdens that could adversely affect the business, financial
condition, prospects, and results of operations, of the Company. Such adverse
affects could include, but may not be limited to, the burden of compliance with
laws and regulations governing the installation and/or operation of TCS-1 Plants
discouraging potential customers from purchasing a TCS-1 Plant. Actions by
federal, state, and local governments concerning environmental or other matters
could result in regulations that could increase the cost of producing the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such by-products less profitable or even impossible
to sell at an economically feasible price level.
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The Company believes that existing government regulations, while
extensive, will not result in the disability of either the Company or its TCS-1
Plant customers to operate profitably and in compliance with such regulations.
However, since all government regulations are subject to change and to
interpretation by local administrations, the effect of government regulation
could conceivably prevent, or delay for a considerable period of time, the
development of the Company's business as planned and/or impose costly new
procedures for compliance, or prevent the Company or its TCS-1 customers from
obtaining, or affect the timing of, regulatory approvals. Actions by federal,
state, and local governments concerning environmental or other matters could
result in regulations that could therefore increase the cost of producing the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such by-products less profitable or even impossible
to sell at an economically feasible price level, which could result in the
Company's or its TCS-1 customers' businesses being less profitable, or
unprofitable, to operate. Continually changing government compliance standards
and technology, could also affect the Company's future capital expenditure
requirements relating to environmental compliance. Likewise, the burden of
compliance with laws and regulations governing the installation and/or operation
of TCS-1 Plants could discourage potential customers from purchasing a TCS-1
Plant which would adversely affect the Company's business, prospects, results,
and financial condition. As a result, the business of the Company could be
directly and indirectly affected by government regulations.
20. TECHNOLOGICAL CHANGES. To date, the market for tire disintegration
equipment has not, to the best of management's knowledge, been characterized by
rapid changes in technology. However, there can be no assurance that new
products or technologies, presently unknown to the Company, will not, at any
time in the future and without warning, render the Company's tire disintegration
technology less competitive or even obsolete. Moreover, the technology upon
which the Company's tire disintegration system is based, could be susceptible to
being analyzed and reconstructed by an existing or potential competitor.
Although the Company has been issued a United States patent respecting its
proprietary disintegration system, the Company may not have the financial
resources to successfully defend such patent, were it is to become necessary, by
bringing patent infringement suits against parties that have substantially
greater resources than are available to the Company. The Company must continue
to create innovative new products reflecting technological changes in design,
engineering, and development, not only of new tire disintegration machinery, but
of products, and machinery capable of producing products, which incorporate and
recycle the rubber, steel, and/or fiber by-products which will be produced by
the operation of the TCS-1 Plant. Failure to do so, could prevent to Company
from gaining and maintaining a significant market for its products. This may
require a continuing high level of product development, innovation, and
expenditures. To the extent that the Company does not respond adequately to such
technological advances, its products may become obsolete and its growth and
profitability may be adversely affected.
21. COMPETITION. With respect to our equipment manufacturing segment,
although management believes that the TCS-1 Plant has distinct advantages over
other existing tire disintegration methods, the Company will face competition
from other equipment manufacturers, virtually all of whom will be larger than
the Company, and will have substantially more assets and resources than the
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Company. Management intends to meet such competition by developing technological
innovations which will keep the TCS-1 Plant more economical and efficient than
other tire disintegration methods although no assurance can be given that this
will prove to be the case.
With respect to our molded rubber products segment, the market for such
products is highly competitive. However, competition with respect to molded
products made from recycled rubber is comparatively moderate. The Company will
attempt to compete in certain markets for products presently made from both new
and recycled rubber. It intends to do so on the basis of quality and price. We
believe that, especially within the markets for products made from recycled
rubber, our ability to vertically integrate production, by using recycled rubber
crumb produced by our TCS-1 Plant, will give us a competitive advantage. With
respect to competition against manufacturers of new rubber, all of whom are
larger than the Company and have substantially more assets and resources than
the Company, competitive efforts will focus on research and development of new
methods for utilizing at least a portion of more economical and ecologically
beneficial recycled rubber, where new rubber is now used.
22. NO DIVIDENDS AND NONE ANTICIPATED. The Company has not paid any
cash dividends, nor does it contemplate or anticipate paying any dividends upon
its Common Stock in the foreseeable future.
23. Possible Adverse Effects of Authorization and Issuance of Preferred
Stock. The Company's amended Certificate of Incorporation authorizes the
issuance of 5,000,000 shares of "Class A Stock". Twenty thousand of such shares
are reserved for issuance as preferred stock under an outstanding option
therefor. The Board of Directors has the power to issue the balance of the Class
A Stock in such series and classes and with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
The issuance of any series of preferred stock having rights superior to those of
the common stock may result in a decrease in the value or market price of the
common stock and could be used by the Board of Directors as a means to prevent a
change in control of the Company. Such preferred stock issuances could make the
possible takeover of the Company, or the removal of management of the Company,
more difficult. The issuance of such preferred stock could discourage hostile
bids for control of the Company in which shareholders could receive premiums for
their Common stock or warrants, could adversely affect the voting and other
rights of the holders of the common stock, or could depress the market price of
the common stock. Also, the voting power and percentage of stock ownership of
the shareholders of the Company's outstanding capital stock can be substantially
diluted by such preferred stock issuance. See also, Risk Factor No. 27 "Adverse
Effects of Proposals to Be Presented at Annual Shareholders Meeting:
Anti-Takeover Provisions, Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management".
24. PRIOR NOTICE NOT REQUIRED FOR SHAREHOLDER ACTIONS. None of the
Company's securities are registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "34 Act"). As a result, the Company is not subject
to the Proxy Rules of Section 14 of the 34 Act. The Company is thus able to take
shareholder actions in conformance with Section 228 of the Delaware General
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Corporation Act, which permits it to take any action which is required to, or
may, be taken at an annual or special meeting of the shareholders, without prior
notice and without a vote of the shareholders. Instead of such vote, the written
consent or consents in writing, setting forth the action so taken, can be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted on such action.
The only notice which shareholders other than those who consented to such
action, are entitled to, is required to be given promptly after the action has
been taken.
25. ADVERSE EFFECTS OF PROPOSALS TO BE PRESENTED AT ANNUAL SHAREHOLDERS
MEETING: ANTI-TAKEOVER PROVISIONS, LIMITATIONS ON SHAREHOLDERS VOTING RIGHTS,
AND STOCK BONUSES TO MANAGEMENT. The Company intends to hold an annual meeting
of its shareholders prior to the end of the current calendar year. This will be
the first meeting of the Shareholders ever called by the Company. The Board of
Directors has proposed that the Company's Certificate of Incorporation should be
amended and restated to contain provisions that may make it more difficult to
acquire control of the Company by means of tender offer, over-the-counter
purchases, a proxy fight, or otherwise. If adopted by the required vote of the
Company's shareholders, the amendments will include: (i) the addition of a "fair
price" provision to the Certificate of Incorporation that regulates business
combinations with any person or group beneficially owning fifteen percent (15%)
or more of the Company's common stock, including a voting requirement of
seventy-five percent (75%) of the voting power of all outstanding voting shares
of the Company (excluding shares held by such fifteen percent (15%) stockholder
or group of stockholders) for a business combination, unless the business
combination is approved by a majority of the current members of the Board of
Directors (the "Continuing Directors") or satisfies certain minimum price and
procedural requirements; (ii) the addition to the Certificate of Incorporation
of a provision granting authority to the Board of Directors to adopt one or more
shareholder rights plans, rights agreements, or other forms of "poison pills" in
the future without further shareholder approval, (iii) the addition to the
Certificate of Incorporation of a provision classifying the Board of Directors
into three classes; (iv) the addition to the Certificate of Incorporation of a
seventy-five percent (75%) voting requirement for any stockholder action to be
taken by 25.abwritten consent; (v) an amendment to the Certificate of
Incorporation requiring the affirmative vote of the holders of seventy-five
percent (75%) of the outstanding voting stock to amend, alter and repeal the
By-laws and to allow the Board of Directors to amend, alter or repeal the
By-laws without stockholder consent; (vi) the addition to the Certificate of
Incorporation of a provision electing to be governed by the provisions of
Section 203 of the Delaware General Corporation Law which, under certain
circumstances, imposes restrictions on proposed business combinations between a
company and an interested stockholder of such company; (vii) the addition of a
seventy-five percent (75%) voting requirement in order to amend, alter or repeal
the foregoing proposed amendments to the Certificate of Incorporation; (viii) an
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amendment to the By-laws eliminating the ability of stockholders to call a
special meeting; and (ix) the addition to the By-laws of a provision requiring
that stockholders submit director nominations and other business to be
considered at meetings of stockholders at least 90 days in advance of any such
meeting of stockholders. The proposed amendments are not being submitted to the
shareholders in response to any effort, of which the Company is aware, to
accumulate the Company's common stock or to obtain control of the Company.
The proposed amendments, individually and collectively, may have the
effect of making more difficult and discouraging a merger, tender offer or proxy
fight, even if such transaction or occurrence may be favorable to the interests
of some or all of the Company's stockholders. The proposed amendments also may
delay the assumption of control by a holder of a large block of the Company's
common stock and the removal of incumbent management, even if such removal might
be beneficial to some or all of the stockholders. Furthermore, the proposed
amendments may have the effects of deterring or frustrating certain types of
future takeover attempts that may not be approved by the incumbent Board of
Directors, but that the holders of a majority of the shares of Company's common
stock may deem to be in their best interests or in which some or all of the
stockholders may receive a substantial premium over prevailing market prices for
their stock.
SELLING SHAREHOLDERS
All of the shares of common stock (the "Shares") being offered
hereunder by the Selling Shareholders were acquired by them, pursuant to the
terms of their respective employment agreements, dated as of January 18, 1995 as
Amended May 30, 1996 (the "Byrne Employment Agreement), April 29, 19997 (the
"Kachru Employment Agreement") and September 13, 1999 ("Frohling Consulting
Agreement"). All of the Shares being offered by Messrs. Byrne and Frohling and
Ms. Kachru were acquired by them in partial satisfaction of salary payments and
unreimbursed cash expenditures owed to them under their respective Employment
Agreements. All of the shares being offered by Messrs. Byrne and Frohling and
Ms. Kachru under their respective employment agreements are each individually
negotiated written compensation agreements pursuant to which the Selling
Shareholders render bona fide services not in connection with the offer or sale
of securities in a capital raising transaction. Each of such agreements
constitutes an Employee Benefit Plan, as defined in Rule 405 of the Securities
Act of 1933. The Byrne Employment Agreement, the Kachru Employment Agreement and
the Frohling Consulting Agreement may sometimes be referred to hereinafter, both
singly and collectively, as the "Plan". For purposes of this Reoffer Prospectus,
all of the Shares being registered hereunder are "restricted shares" insofar as
they were issued to affiliates or employees of the Registrant under an employee
benefit plan pursuant to a Securities Act exemption prior to their inclusion in
a registration statement on Form S-8, of which this Reoffer Prospectus is a
part.
The table which follows identifies: (i) the Selling Shareholders; (ii)
the Plan pursuant to which the Shares being offered hereby have been acquired;
(iii) the nature of all positions, offices or other material relationships which
the Selling Shareholders have had with the Company within the past three years;
(iv) the number of shares of common stock owned by the Selling Shareholders
prior to the offering; (v) the number of shares of common stock to be offered
for the account of each of the Selling Shareholders; (vi) the number of shares
of common stock to be owned by the Selling Shareholders after the completion of
the offering, and (vii) the percentage of the Company's common stock to be owned
by the Selling Shareholders after completion of the offering.
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<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PERCENTAGE
POSITIONS SHARES OWNED NUMBER OF SHARES OWNED OF SHARES
COMPENSATION AGREEMENT WITH PRIOR TO SHARES AFTER THE OWNED AFTER
SELLING SHAREHOLDER (NAME OF PLAN) OFFERING OFFERING OFFERED OFFERING THE OFFERING (3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Terence C. Byrne Employment Agreement dated Chairman and CEO 14,424,236(1)(2) 941,262 16,434,226 14.5 %
January 18, 1995 (as amended May 30,
1996)
Vijay Kachru Employment Agreement dated Director of Market
April 29, 1997 Development 0 713,469 713,469 (4)
John B. Frohling Consulting Agreement dated Consultant 0 1,000,000 1,000,000 (4)
September 3, 1999
====================================================================================================================================
====================================================================================================================================
</TABLE>
(1) Includes: (i) 1,415,443 shares held of record by Mr. Byrne as of may
20, 1999; (ii) 69,883 shares held of record by Mr. Byrne's wife, Darla
Sapone Byrne, as of May 20, 1999, over which shares Mr. Byrne has
voting power pursuant to an irrevocable proxy granted to him on
September 27, 1996; and (iii) 12,938,910 shares held of record by
Bartholomew International Investments, Ltd., as of May 20, 1999, which
is owned by the Bartholomew Trust, which holds such shares for the
benefit of Mr. Byrne, his spouse and Mr. Byrne's two sons.
(2) Does not include 4,331,092 shares owned as of May 20, 1999 by the NAIS
Corporation over which shares Mr. Byrne has voting power pursuant to an
irrevocable proxy.
(3) Based upon 105,854,976 shares issued and outstanding on September 13,
1999.
(4) Less than 1%.
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PLAN OF DISTRIBUTION
Except for Mr. Byrne, none of the Selling Shareholders have offered or
sold any shares of the Company's Common Stock pursuant to a registration
statement on Form S-8 within the three-month period preceding the date hereof.
On March 24, 1999 the Company filed Registration Statements on Form S-8 on
behalf of Mr. Byrne (Registration No. 333-74941) providing for the sale of up to
782, 414 shares by Mr. Byrne (the "Prior Shares"). This Registration Statements
is still effective. As of September 13, 1999 Mr. Byrne had sold 757,000 of these
shares. For each Selling Shareholder, the number of shares offered hereunder by
them, together with, the Prior Shares where applicable, sold, or to be sold by
them represents less than one percent of the total number of shares of the
Company's common stock presently issued and outstanding. The Selling
Shareholders may sell all or part of the shares, from time to time, in the
over-the-counter market, or in such other public market for the Company's common
stock as may develop, at market prices then pertaining. In connection therewith
the Selling Shareholders may utilize the services of broker-dealers, none of
whom will act as underwriters with respect to sales of the Shares. The names of
any such brokers-dealers, who have not yet been identified, will be set forth in
a supplement to this Reoffer Prospectus, to the extent required.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of one hundred
twenty million shares (120,000,000), par value $.001 per share, of which one
hundred fifteen million (115,000,000) shares are designated Common Stock par
value $.001 per share, and five million (5,000,000) shares are designated Class
A Stock, par value $.001 per share. As of September 13, 1999 there were one
hundred five million, eight hundred fifty four thousand, ninety seventy six
(105,854,976) shares of Common Stock issued and outstanding. The Class A Stock
may be issued from time to time, in one or more classes, or one or more series
within any class thereof, in any manner permitted by law, as determined from
time to time by the Company's board of directors, and stated in the resolution
or resolutions providing for the issuance of such shares adopted by the
Company's board of directors pursuant to authority vested in it in the Company's
Certificate of Incorporation, each class or series to be appropriately
designated, prior to the issuance of any shares thereof, by some distinguishing
letter, number designation or title. All shares of stock in such classes or
series may be issued for such consideration and have such voting powers, full or
limited, or no voting powers, and shall have such designations, preferences and
relative, participating, optional, or other special rights, and qualifications,
limitations or restrictions thereof, permitted by law, as shall be stated and
expressed in the resolution or resolutions, providing for the issuance of such
shares adopted by the Company's board of directors pursuant to authority vested
in the Company's Certificate of Incorporation. The number of shares of stock of
any class or series within any class, so set forth in such resolution or
resolutions may be increased (but not above the total number of authorized
shares) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by the Company's board
of directors pursuant to authority vested in it in the Company's Certificate of
Incorporation.
26
<PAGE>
The Company's Board of Directors may determine the times when, the
terms under which and the consideration for which the Company shall issue,
dispose of or receive subscriptions for its shares, including treasury shares,
or acquire its own shares. The consideration for the issuance of the shares
shall be paid in full before their issuance and shall not be less than the par
value per share. Upon payment of such consideration, such shares shall be deemed
to be fully paid and nonassessable by the Company.
The holders of shares of Common Stock are entitled to dividends when
and as declared by the Board of Directors from funds legally available therefore
and, upon liquidation, are entitled to share pro rata in any distribution to
shareholders. Holders of the Common Stock have one non-cumulative vote for each
share hold. There are no pre-emptive, conversion or redemption privileges, nor
sinking fund provisions, with respect to the Common Stock.
Stockholders are entitled to one vote of each share of Common Stock
held of record on matters submitted to a vote of stockholders. The Common Stock
does not have cumulative voting rights. As a result, the holders of more than
50% of the shares of Common Stock voting for the election of directors can elect
all of the directors if they choose to do so, and, in such event, the holders of
the remaining shares of Common Stock will not be able to elect any person or
persons to the board of directors of the Company.
EXPERTS
The financial statements and schedules of the Company and its
subsidiaries included in the Company's Annual Report on Form 10-KSB, for the
fiscal year ended June 30, 1998, which is incorporated herein by reference, have
been examined by Pinkham & Pinkham, P.C., Certified Public Accountants, and such
financial statements and reports are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Shares offered hereby has been passed upon for the
Company by its U.S. securities counsel, Frohling, Hudak & Pellegrino, LLC. As of
September 13, 1999 John B. Frohling of the firm was the record and beneficial
owner of less than 1% of the Company's issued and outstanding common stock.
27
<PAGE>
INDEMNIFICATION
The Company's certificate of incorporation provides for indemnification
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law ("Section 145"). Pursuant thereto, the Company indemnifies its
officers, directors, employees and agents to the fullest extent permitted for
losses and expenses incurred by them in connection with actions in which they
are involved by reason of their having been directors, officers, employees, or
agents of the Company. Section 145 permits a corporation to indemnify any person
who is or has been a director, officer, employee, or agent of the corporation or
who is or has been serving as a director, officer, employee or agent of another
corporation, organization, or enterprise at the request of the corporation,
against all liability and expenses (including but not limited to attorneys' fees
and disbursements and amounts paid in settlement or in satisfaction of judgments
or as fines or penalties) incurred or paid in connection with any action, suit
or proceeding, whether civil, criminal, administrative, investigative, or
otherwise, in which he or she may be involved by reason of the fact that he or
she served or is serving in these capacities, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no cause o believe his or her conduct was unlawful. In the case
of a claim, action, suit or proceeding made or brought by or in the right of the
corporation to procure a recovery or judgment in its favor, the corporation
shall not indemnify such person in respect of any claim issue or matter as to
which such person has been adjudged to be liable to the corporation for
negligence or misconduct int he performance of his or her duty to the
corporation, except for such expenses as the Court may allow. Any such person
who has been wholly successful on the merits or otherwise with respect to any
such claim, action, suit or proceeding or with respect to any claim, issue or
matter therein, shall be indemnified as of right against all expenses in
connection therewith or resulting therefrom. The effect of this provision in the
certificate of incorporation is to eliminate the rights of the Registrant and
its stockholders (through stockholders' derivative suits on behalf of the
Registrant) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described above.
The Company's By-laws provide for indemnification of the Company's
officers and directors against all liabilities (including reasonable costs,
expenses, attorney's fees, obligations for payment in settlement and final
judgment) incurred by or imposed upon them in the preparation, conduct or
compromise of any actual or threatened action, suit, or proceeding, whether
civil, criminal, or administrative, including any appeals therefrom and any
collateral proceedings in which they shall be involved by reason of any action
or omission by them in their capacity as a director or officer of the Company,
or of any other corporation which they serve as a director or officer at the
request of the Company, whether or not such person is a director or officer at
the time such liabilities are incurred or any such action, suit, or proceeding
is commenced against them. The indemnification provided by the By-laws does not
extend, however, to certain situations involving misconduct, willful
misfeasance, bad faith, or gross negligence.
28
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Except to the extent hereinabove set forth, there is no charter
provision, by-law, contract, arrangement or statute pursuant to which any
director or officer of registrant is indemnified in any manner against any
liability which he may incur in his capacity as such.
29
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this
registration statement.
(a) Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998, filed pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(b) Registrant's quarterly reports on Forms 10-QSB for the fiscal quarters
ended September 30, 1998, December 31, 1998, and March 31, 1999, filed
pursuant to Section 15(d) of the Exchange Act, and Registrant's Current
Reports on Form 8-K, dated May 27, 1998 (filed with the Commission on
August 3, 1998), September 14, 1998 (filed with the Commission on
September 18, 1998), March 17, 1999 (filed with the Commission on March
23, 1999), May 4, 1999 (filed with the Commission on May 18, 1999) and
September 3, 1999 (filed with the Commission on September 3, 1999)
All documents filed by the Registrant pursuant to Section 13(a), 13(c),
14, and 15(d) of the Securities Act and Sections 13(a), 13(c), and 14 of the
Exchange Act after the date of this registration statement and prior to the
filing of a post-effective amendment to this registration statement which
indicates that all securities offered hereunder have been sold, or which
registers all securities then remaining unsold under this registration
statement, shall be deemed to be incorporated by reference in this registration
statement and to be a part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
The authorized capital stock of Registrant consists of one hundred
twenty million shares (120,000,000), par value $.001 per share, of which one
hundred fifteen million, (115,000,000) shares are designated Common Stock par
value $.001 per share, and five million (5,000,000) shares are designated Class
A Stock, par value $.001 per share. As of September 13, 1999 there were one
hundred five million, eight hundred fifty four thousand, nine hundred seventy
six (105,854,976 ) shares of Common Stock issued and outstanding. The Class A
Stock may be issued from time to time, in one or more classes, or one or more
series within any class thereof, in any manner permitted by law, as determined
from time to time by Registrant's board of directors, and stated in the
resolution or resolutions providing for the issuance of such shares adopted by
Registrant's board of directors pursuant to authority vested in it in
30
<PAGE>
Registrant's Certificate of Incorporation, each class or series to be
appropriately designated, prior to the issuance of any shares thereof, by some
distinguishing letter, number designation or title. All shares of stock in such
classes or series may be issued for such consideration and have such voting
powers, full or limited, or no voting powers, and shall have such designations,
preferences and relative, participating, optional, or other special rights, and
qualifications, limitations or restrictions thereof, permitted by law, as shall
be stated and expressed in the resolution or resolutions, providing for the
issuance of such shares adopted by Registrant's board of directors pursuant to
authority vested in Registrant's Certificate of Incorporation. The number of
shares of stock of any class or series within any class, so set forth in such
resolution or resolutions may be increased (but not above the total number of
authorized shares) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by Registrant's board
of directors pursuant to authority vested in it in Registrant's Certificate of
Incorporation.
Registrant's board of directors may determine the times when, the terms
under which and the consideration for which Registrant shall issue, dispose of
or receive subscriptions for its shares, including treasury shares, or acquire
its own shares. The consideration for the issuance of the shares shall be paid
in full before their issuance and shall not be less than the par value per
share. Upon payment of such consideration, such shares shall be deemed to be
fully paid and nonassessable by Registrant.
The holders of shares of Common Stock are entitled to dividends when
and as declared by the Board of Directors from funds legally available therefore
and, upon liquidation, are entitled to share pro rata in any distribution to
shareholders. Holders of the Common Stock have one non-cumulative vote for each
share hold. There are no pre-emptive, conversion or redemption privileges, nor
sinking fund provisions, with respect to the Common Stock.
Stockholders are entitled to one vote of each share of Common Stock
held of record on matters submitted to a vote of stockholders. The Common Stock
does not have cumulative voting rights. As a result, the holders of more than
50% of the shares of Common Stock voting for the election of directors can elect
all of the directors if they choose to do so, and, in such event, the holders of
the remaining shares of Common Stock will not be able to elect any person or
persons to the board of directors of Registrant.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
John B. Frohling of the law firm of Frohling, Hudak & Pellegrino, LLC,
is employed by Registrant as a consultant and further serves as the Registrant's
U.S. Securities counsel. As of September 13, 1999 Mr. Frohling is the record and
beneficial owner of less than 1% of the Registrant's issued and outstanding
common stock.
31
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Registrant's certificate of incorporation provides for indemnification
to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law ("Section 145"). Pursuant thereto, the Registrant indemnifies
its officers, directors, employees and agents to the fullest extent permitted
for losses and expenses incurred by them in connection with actions in which
they are involved by reason of their having been directors, officers, employees,
or agents of the Registrant. Section 145 permits a corporation to indemnify any
person who is or has been a director, officer, employee, or agent of the
corporation or who is or has been serving as a director, officer, employee or
agent of another corporation, organization, or enterprise at the request of the
corporation, against all liability and expenses (including but not limited to
attorneys' fees and disbursements and amounts paid in settlement or in
satisfaction of judgments or as fines or penalties) incurred or paid in
connection with any action, suit or proceeding, whether civil, criminal,
administrative, investigative, or otherwise, in which he or she may be involved
by reason of the fact that he or she served or is serving in these capacities,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no cause o believe his or her
conduct was unlawful. In the case of a claim, action, suit or proceeding made or
brought by or in the right of the corporation to procure a recovery or judgment
in its favor, the corporation shall not indemnify such person in respect of any
claim issue or matter as to which such person has been adjudged to be liable to
the corporation for negligence or misconduct in the performance of his or her
duty to the corporation, except for such expenses as the Court may allow. Any
such person who has been wholly successful on the merits or otherwise with
respect to any such claim, action, suit or proceeding or with respect to any
claim, issue or matter therein, shall be indemnified as of right against all
expenses in connection therewith or resulting therefrom. The effect of this
provision in the certificate of incorporation is to eliminate the rights of the
Registrant and its stockholders (through stockholders' derivative suits on
behalf of the Registrant) to recover monetary damages against a director for
breach of fiduciary duty as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described
above.
The Registrant's By-laws provide for indemnification of the
Registrant's officers and directors against all liabilities (including
reasonable costs, expenses, attorney's fees, obligations for payment in
settlement and final judgment) incurred by or imposed upon them in the
preparation, conduct or compromise of any actual or threatened action, suit, or
proceeding, whether civil, criminal, or administrative, including any appeals
therefrom and any collateral proceedings in which they shall be involved by
reason of any action or omission by them in their capacity as a director or
officer of the Registrant, or of any other corporation which they serve as a
director or officer at the request of the Registrant, whether or not such person
is a director or officer at the time such liabilities are incurred or any such
action, suit, or proceeding is commenced against them. The indemnification
provided by the By-laws does not extend, however, to certain situations
involving misconduct, willful misfeasance, bad faith, or gross negligence.
32
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by registrant of expenses incurred in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Except to the extent hereinabove set forth, there is no charter
provision, by-law, contract, arrangement or statute pursuant to which any
director or officer of registrant is indemnified in any manner against any
liability which he may incur in his capacity as such.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
The exhibits filed as a part of this Report or incorporated herein by
reference are as follows:
Exhibit No. Item
----------- ----
5.1 Opinion of Frohling, Hudak & Pellegrino, LLC regarding the
legality of the securities being registered under this
Registration Statement.
10.1 Employment Agreement dated September 3, 1999 between
Registrant and John B. Frohling.
10.2 Employment Agreement dated January 18, 1995 between the
Registrant and Terence C. Byrne. (1)
10.3 Amendment No. 1 dated May 30, 1996 to Employment Agreement
dated January 18, 1995 between the Registrant and Terence C.
Byrne (2)
10.4 Employment Agreement dated April 29, 1997 between Registrant
and Vijay Kachru. (3)
33
<PAGE>
24.1 Consent of Pinkham & Pinkham, P.C., Certified Public
Accountants Independent Auditors for the Registrant.
24.2 Consent of Frohling, Hudak & Pellegrino, counsel for the
Registrant (set forth in the opinion of counsel included as
Exhibit 5.1).
- ------------------
(1) Filed with the Securities and Exchange Commission, as Exhibit 10(rr) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1995, which exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission, as Exhibit 4.7, to
the Registration Statement of the Registrant on Form S-8 (Registration
No. 333-5310), which exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission, as Exhibit 10 (cccc)
to the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997, which exhibit is incorporated herein by reference.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
34
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities /Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the act and will be governed by the final adjudication of
such issue.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Montreal, Province of Quebec, Canada, on the 15th day
of September, 1999.
THE TIREX CORPORATION
By: /s/ TERENCE C. BYRNE
--------------------------------------
Terence C. Byrne,
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ TERENCE C. BYRNE Chairman of the Board September 15, 1999
- -------------------- of Directors and Chief
Terence C. Byrne Executive Officer
/s/ MICHAEL D.A. ASH Secretary, Treasurer
- -------------------- and Chief Financial and
Michael D.A. Ash Accounting Officer September 15, 1999
MAJORITY OF THE BOARD OF DIRECTORS
/s/ TERENCE C. BYRNE Director September 15, 1999
- --------------------
Terence C. Byrne
/s/ JOHN HARTLEY Director September 15, 1999
- --------------------
John Hartley
/s/ LOUIS V. MURO Director September 15, 1999
- --------------------
Louis V. Muro
36
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
- ------ ------------------------
5.1 Opinion of Frohling, Hudak & Pellegrino, regarding the legality
of the securities being registered under this Registration
Statement.
10.1 Employment Agreement dated September 3, 1999 between Registrant
and John B. Frohling.
10.2 Employment Agreement dated January 18, 1995 between the
Registrant and Terence C. Byrne. (1)
10.3 Amendment No. 1 dated May 30, 1996 to Employment Agreement dated
January 18, 1995 between the Registrant and Terence C. Byrne (2)
10.4 Employment Agreement dated April 29, 1997 between Registrant and
Vijay Kachru. (3)
24.1 Consent of Pinkham & Pinkham, P.C., Certified Public Accountants
Independent Auditors for the Registrant.
24.2 Consent of Frohling, Hudak & Pellegrino, counsel for the
Registrant (set forth in the opinion of counsel included as
Exhibit 5.1).
- -------------------
(1) Filed with the Securities and Exchange Commission, as Exhibit 10(rr) to
the Registrant's Annual Report or Form 10-KSB for the fiscal year ended
June 30, 1995, which exhibit is incorporated herein by reference.
(2) Filed with the Securities and Exchange Commission, as Exhibit 4.7, to
the Registration Statement of the Registrant on Form S-8 (Registration
No. 333-5310), which exhibit is incorporated herein by reference.
(3) Filed with the Securities and Exchange Commission, as Exhibit 10 (cccc)
to the Registrant's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997, which exhibit is incorporated herein by reference.
EXHIBIT
5.1
OPINION OF
FROHLING, HUDAK & PELLEGRINO, LLC
<PAGE>
FROHLING, HUDAK & PELLEGRINO, LLC
COUNSELLORS AT LAW
425 EAGLE ROCK AVENUE P.O. BOX 926
SUITE 200 NEWARK, NJ 07101
ROSELAND, NJ 07068 (973) 622-2800
(973) 226-4600
FAX (973) 226-0969 Please Reply to:
[X] Roseland
[ ] Newark
September 14 1999
The Tirex Corporation
740 St. Maurice, Suite 201
Montreal, Quebec
Canada H3C 1L5
Ladies and Gentlemen:
You have requested this firm's opinion as counsel for The Tirex
Corporation, a Delaware corporation (the "Registrant"), in connection with the
registration under the Securities Act of 1933, as amended, and the Rules and
Regulations promulgated thereunder, and the public offering by the selling
shareholders (the "Selling Shareholders") named in the Registrant's Registration
Statement on Form S-8, to be filed with the Securities and Exchange Commission
on or about September 14, 1999 (the "Registration Statement"), of an aggregate
of two million, six hundred fifty four thousand, seven hundred thirty one shares
(2,654,731) shares of Common Stock of the Registrant, $.001 par value, per
share, currently issued and outstanding in the names of the Selling Shareholders
(the "Shares").
I have examined the Registration Statement in the form to be filed with
the Securities and Exchange Commission, the Certificate of Incorporation of the
Registrant as certified by the Secretary of State of the State of Delaware, the
Bylaws and the minute books of the Registrant as a basis for the opinion
hereafter expressed.
Based on the foregoing examination, it is our opinion, and we so
advise, that the 2,654,731 Shares currently are, and upon sale in the manner
described in the Registrant Statement will be, legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ FROHLING, HUDAK & PELLEGRINO, LLC
-------------------------------------
FROHLING, HUDAK & PELLEGRINO, LLC
EXHIBIT
10.1
CONSULTING AGREEMENT DATED AS OF SEPTEMBER 3, 1999
BETWEEN REGISTRANT AND JOHN B. FROHLING
<PAGE>
CONSULTING AGREEMENT
THIS AGREEMENT made as of the 3rd day of September, 1999 B E T W E E N:
THE TIREX CORPORATION, a corporation incorporated
under the laws of DELAWARE
(the "Company")
- and -
John B. Frohling, an individual residing at 73 Sussex
Street, Jersey City, NJ 07302
(the "Consultant")
RECITES THAT the Company has agreed to retain the financial consulting
services of the Consultant and the Consultant has agreed to provide financial
consulting services to the Company, all on the terms and conditions hereinafter
set forth.
NOW THEREFORE in consideration of the following mutual covenants and
agreements, the parties hereto agree with each other as follows:
1. The Company shall retain the Consultant to provide the following
financial consulting services during the term of this agreement:
(a) assisting and providing advice and financial consulting services
to the Company in its management relations with its joint venture
partner, present or potential;
(b) assisting and providing advice and financial consulting services
to the Company in the implementation of marketing goals and
relationships with the Company's business partners, merger
candidates, and, if appropriate, with stockholders;
(c) such other services and assistance to the Company and its officers
and directors within the scope of the consultant's expertise as
the President of the Company and the Consultant may mutually agree
from time to time.
2. The term of this agreement shall be Twelve(12) months, commencing
on the date hereof and ending on September 7, 2000. During the term of this
agreement, the Consultant shall be required to provide his services for no more
than five days per month upon reasonable notice from the Company from time to
time as to the specific days that his consulting services will be required.
Services may be provided by telephone or in the form of written reports. In the
event the Company requests the Consultant to travel, and the Consultant agrees
to do so, the Company shall pay for reasonable travel and lodging expenses. It
is agreed that the Consultant shall travel business class.
<PAGE>
3. In consideration of the Consultant providing the consulting
services hereunder, the Company shall pay the consultant fees as follows:
1,000,000 shares of common stock upon signing this agreement
4. Except as provided in Paragraph 2 hereof, the Consultant shall be
responsible for all of his own out-of-pocket expenses incurred in connection
with the consulting services to be provided hereunder, unless the Company agrees
in writing with the Consultant prior to an expense being incurred that the
Company will reimburse the Consultant for all or part of such extraordinary
expense.
5. This agreement shall be binding upon the parties hereto and their
respective heirs, executors, administrators, legal representatives, successors
and assigns. This agreement may not be assigned by either party hereto without
the prior written consent of the other party.
6. This agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, between the parties hereto.
7. No amendment or modification of this agreement shall be binding
unless in writing and signed by the parties hereto.
8. No waiver by a party of any breach of any of the provisions of
this agreement by any other party shall take effect or be binding upon such
party unless in writing and signed by such party. Unless otherwise provided
therein, such waiver shall not limit or affect the rights of such party with
respect to any other breach.
9. All notices or other communications authorized or required to be
given pursuant to this agreement shall be in writing and either delivered by
hand, mailed by registered, first-class mail, postage prepaid, or sent by
facsimile as follows:
(a) to the Company at:
THE TIREX CORPORATION
3828 rue Saint Patrick
Montreal, Quebec H4E 1A4
Attn: Terence C. Byrne, President
with a copy to:
Frohling, Hudak & Pellegrino, LLC
425 Eagle Rock Avenue
Roseland, New Jersey 07068
Attn: Linda Pellegrino, Esq.
(b) to the Consultant at:
73 Sussex Street
Jersey City, NJ
<PAGE>
10. This agreement shall be deemed to be made in and shall be
construed in accordance with the laws of the State of New Jersey.
THE TIREX CORPORATION
By: /s/ Michael Ash, Secretary,
--------------------------------
TREASURER & CFO FOR:
Terence C. Byrne, President
/s/ JOHN B. FROHLING
--------------------------------
John B. Frohling, Consultant
EXHIBIT
24.1
CONSENT OF PINKHAM & PINKHAM, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
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Pinkham & Pinkham, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Report of Independent Auditors
We consent to the incorporation by reference in this Registration Statement of
The Tirex Corporation on Form S-8 of our report dated February 9, 1999,
appearing in the incorporated by reference Annual Report on Form 10-KSB of The
Tirex Corporation for the year ended June 30, 1998.
/s/ PINKHAM & PINKHAM, P.C.
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Pinkham & Pinkham, P.C.
Certified Public Accountants
July 6, 1999
Cranford, New Jersey
514 Centennial Avenue, Cranford, NJ 07016 Tel: 908-653-1710 Fax: 908-653-1713
