As filed with the Securities and Exchange Commission on March 24, 1999
Registration No. 333-62197
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
POST EFFECTIVE AMENDMENT NO.1
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.)
740 St. Maurice, Suite 201
Montreal, Quebec H3C 1L5
(Address of Principal Executive Offices) (Zip Code)
EMPLOYMENT AGREEMENT
BETWEEN REGISTRANT AND:
SCOTT RAPFOGEL
(Full title of the Plan)
Frances Katz Levine
621 Clove Road
Staten Island, NY 10310
(Name and address, including zip code of agent for service)
(718) 981-8485
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered per Share* Price* Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value,
$.001 Per Share, of The
Tirex Corporation Issued
Pursuant to Employment
Agreement with
Scott Rapfogel 181,353 $.1525 $27,656 $8.38
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TOTAL 181,353 $.1525 $27,656 $100
===============================================================================================
</TABLE>
* 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 closing 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 March 19, 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)
Form S-3 Item No. and Heading Heading in Prospectus
----------------------------- ---------------------
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 SHAREHOLDER
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
2
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INCORPORATION OF EFFECTIVE REGISTRATION STATEMENT ON FORM S-8
A registration statement on Form S-8 respecting the registration of shares
of the common stock of the Registrant, issued under the employee benefit plan
named on the front cover page of this registration statement (the "Prior
Registration Statement"), was filed with the Securities and Exchange Commission
on August 25, 1998, and is currently effective. The contents of the said Prior
Registration Statement (SEC File No. 333-62197) are incorporated herein by
reference.
3
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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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181,353 Shares
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THE TIREX CORPORATION
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Common Stock
$.001 Par Value
The shares of common stock offered hereby (the "Shares") are being sold by
Scott Rapfogel, a shareholder of The Tirex Corporation (the "Company"); Mr.
Rapfogel is hereinafter referred to as the "Selling Shareholder". 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 March 19, 1999, the high ask and low
bid prices of the Company's common stock, as quoted on the Bulletin Board, were
$ .18 and $ .125 per share, respectively. The Selling Shareholder proposes to
offer his 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"
----------
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 March 24, 1999
1
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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 intends to furnish to its shareholders 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 and
December 31, 1998 filed pursuant to Section 15(d) of the Exchange Act, the
Company's Current Reports on Form 8-K, dated May 27, 1998 and September 14, 1998
filed on August 3, 1998 and September 18, 1998 respectively, and all other
reports, if any, filed by the Company pursuant to Section 13(a) for 15(d) of the
Exchange Act since the end of the fiscal year ended June 30, 1998. In addition,
a registration statement on Form S-8 (the "Prior Registration Statement"),
respecting the registration of shares of the common stock of the Company issued
under the employee benefit plan named on the front cover page of the
registration statement of which this Prospectus is a part, was filed with the
Securities and Exchange Commission ("SEC") )on August 25, 1998 and is currently
effective. The contents of the said Prior Registration Statement (SEC File No.
333-62197) are incorporated herein by reference.
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.
2
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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, 740 St. Maurice, Suite 201, Montreal,
Quebec Canada, H3C 1L5.
3
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TABLE OF CONTENTS
Page
----
Available Information..........................................................2
Reports to Shareholders........................................................2
Incorporation of Certain Documents
by Reference................................................................2
The Company....................................................................6
Risk Factors
1. Development Stage Company - No Assurance
as to Future Profitable Operations...................................13
2. Need for Substantial Additional
Capital..............................................................13
3. History of Losses and Accumulated Deficit..............................16
4. Going Concern Assumption...............................................16
5. No Guarantee of Product
Acceptance in Market.................................................17
6. Dilutive and Other Adverse Effects
of Presently Outstanding Debentures,
Warrants and Options.................................................17
7. Additional Dilution from Issuance of
Shares for Services..................................................19
8. Possible Depressive Effect on Price of Securities
of Future Sales of Common Stock......................................20
9. Possible Voting Control by Management and
Corporate Counsel; Possible Depressive Effect
on Market Prices.....................................................20
10. Reverse Split; Possible Negative Effect on
Values of Securities.................................................21
11. Dependence on Major Customer...........................................22
12. Uncertainty of Product and
Technology Development:
Technological Factors................................................23
4
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13. International Sales and Operations.....................................23
14. Protection of Tirex Proprietary
Technology and Potential Infringement................................23
15. Limited Public Market..................................................24
16. Applicability of "Penny Stock Rules"
to Broker-Dealer Sales of
Company Common Stock.................................................25
17. Management's Lack of Industry Experience...............................26
18. Dependence on Key Personnel............................................26
19. Regulatory and Environmental Considerations............................26
20. Production and Supply..................................................28
21. Technological Changes..................................................28
22. Competition............................................................29
23. Lack of Liability Insurance............................................29
24. No Dividends and None Anticipated......................................29
25. Possible Adverse Effects of Authorization and
Issuance of Preferred Stock..........................................29
26. Prior Notice Required for Shareholder Actions..........................30
27. Adverse Effects of Proposals to be Presented at
Annual Shareholders Meetings; Anti-Takeover Provisions,
Limitations on Shareholders Voting Rights and Stock
Bonuses to Management................................................30
Selling Shareholder...........................................................33
Plan of Distribution..........................................................35
Description of Securities.....................................................35
Experts.......................................................................36
Legal Opinions................................................................36
Indemnification...............................................................37
5
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THE COMPANY
The Tirex Corporation (hereinafter, the "Company" or "Tirex") is engaged
in the early stages of the business of manufacturing, selling, and leasing a
patented "turn key" cryogenic tire recycling system (the "TCS-1 Plant") designed
and developed by Tirex, which breaks down used tires into cleanly separated and
re-saleable rubber crumb, steel wire, and fiber. The Company 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(1) 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, does business directly, and indirectly
through its Canadian subsidiaries, The Tirex Corporation Canada Inc. and Tirex
Canada R&D, Inc. (formerly, 3143619 Canada Inc., and formerly known as "Tirex
Canada Inc.").
Since the beginning of 1993, the Company has devoted the bulk of its
efforts to completing the design and development, and commencing the
manufacture, of the TCS-1 Plant and raising the financing required for such
project. All major components of the TCS-1 Plant were successfully tested and
were operational on a non-continuous running basis by May 1998, with
approximately 85% of the TCS-1 Plant components meeting all of Tirex's
specifications. In December 1998, the Company began successfully operating the
first fully integrated TCS-1 Plant on a continuous-running basis for scheduled
periods of up to four hours, at 50% of capacity with one of its two freezing
towers and fracturing mills. This allows the TCS-1 Plant to process only the
tread portion of the tires. The addition of the second freezing tower and
fracturing mill, which is expected to be completed in April of 1999, will allow
for the processing also of the sidewall portion of the tire.
The Company is also in the process of establishing and initiating
operations in a second business segment which will involve owning and operating,
directly or indirectly, on exclusive or joint venture bases, product
manufacturing plants (the "Tirex Advanced Products Plants") which will utilize
TCS-1 Plants to produce recycled rubber crumb and which will manufacture
finished products out of such recycled material. The Company's initial
operations in this segment will be 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 will act as IM2's
exclusive supplier of rubber welcome mats and related products molded out of
rubber crumb ("IM2 Products"). The Company intends to use rubber crumb produced
by the TCS-1 Plant which has been installed, and which will be operated, at the
Company's Montreal facility
The Company's wholly-owned subsidiary, The Tirex Corporation Canada Inc.
("TCCI") was formed on June 1, 1998, and on June 3, 1998, 3143619 Canada Inc.'s
name was changed
- ----------
(1) For a discussion of the merger with Stopwatch, the healthcare business
which was intended, but was never commenced, by Stopwatch, and the reasons for
the termination of the Stopwatch business plan, reference is made to Item 1 of
Registrant's annual report on Form 10-K for the fiscal year ended December 31,
1988, its transition report on Form 10-K for the transition period ended June
30, 1989, and its annual report on Form 10-KSB for the fiscal year ended June
30, 1995.
6
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to Tirex Canada R & D Inc. (hereinafter referred to as "Tirex R&D"). The purpose
of these changes was to 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 formed another wholly owned Canadian
subsidiary now known as Tirex Advanced Products Quebec, Inc. ("TAP"). This
subsidiary is presently dormant. However, the Company may, in the future,
transact finished product manufacturing activities through TAP. The Company also
has another dormant, wholly owned subsidiary, formed under the laws of the State
of Delaware, Tirex Acquisition Corp. ("TAC"), for which the Company has no
present plans.(2) The Company's principal executive offices are located at 740
St. Maurice, Suite 201, Montreal, Quebec H3C 1L5, Canada, its telephone number
is (514) 878-0727 and its Internet address is [email protected].
Although the Company has generated some limited revenues from operations,
it is still in the development stage. The Company began taking orders for TCS-1
Plants in October of 1995 and, to date, has taken orders on a total of fifteen
Plants from five customers, two of which have given refundable deposits of
$25,000 on one Plant each and one of which has given refundable deposits of
$25,000 on each of five Plants. Parts of one of the foregoing Plants (the "First
Production Model") have been delivered and the Company has received a total of
$880,000 in respect thereof. In December 1998, the Company entered into sale and
lease-back arrangements for other portions of the First Production Model,
pursuant to which it received a total of $300,000 (see, below, "Sale and
Lease-Back Transactions"). All undelivered orders are subject to change by
reason of several factors, including possible cancellation of orders, changes in
terms of the contracts, and other factors beyond the Company's control and
should not be relied upon as being necessarily indicative of the Company's
future revenues or profits. The ultimate consummation of each sale contemplated
by such orders will be entirely dependent upon the TCS-1 Plant's meeting
performance expectations, each customer's obtaining lease, or other financing
for the purchased portions of the TCS-1 Plant (as well as all required permits
and licenses to operate a system) and the Company's obtaining sufficient
production financing and capacity to meet delivery requirements. The Company
intends to retain ownership rights to the portions of the First Production
Model, not included in the portions sold for the $880,000 noted above, and to
use the entire First Production Model in the first Tirex Advanced Product Plant,
to be located in the Company's Montreal facility (see "Existing and Proposed
Business Proposed TCS-1 Plant Operations: Sales of Rubber Crumb and Manufacture
and Sale of Finished Products", "Sales and Marketing - Agreements with Oceans
Tire Recycling and Processing Co., Inc.", and "Backlog"). With respect to the
commercial manufacture of TCS-1 Plants, the Company has located and entered into
written and oral agreements with various engineering and manufacturing
subcontractors and component suppliers, which Management believes will give the
Company sufficient production capacity to meet all current and projected orders
for TCS-1 Plants, as required, commencing in or about March 1999. At present,
the Company has no scheduled delivery date obligations in connection with any
orders it has received to date. With respect to projected rubber mat production
operations, the Company has ordered the necessary equipment for flocking and
die-cutting. This equipment is expected to be installed in March of 1999. For
- ----------
(2) Unless context necessarily requires otherwise, references hereinafter
to the "Company" refer to The Tirex Corporation and its subsidiaries, TCCI,
Tirex R&D, TAP and TAC, collectively.
7
<PAGE>
the primary molding of the rubber mats, the Company is currently in the process
of evaluating several alternative modes of production, including in-house
production as well as outsourcing to one or more of numerous available
sub-contractors. Decisions respecting such operations are expected to be made by
management during the first half of March 1999.
Sale and Lease-back Transactions
On December 16, 1998, the Company entered into two sale and lease-back
transactions by and among the Company, Northshore Leasing & Funding Inc.
("NLFI"), and Ocean Utility Contracting, Inc. ("OUCI"). Such transactions
consisted of the Company's sales to NLFI of the single fracturing mill and the
single freezing tower, which are components of the TCS-1 Plant installed at the
Company's Montreal facility and the lease back of such components to OUCI. The
Company received an aggregate of $300,000 by way of the purchase prices for the
two components. The Company and OUCI have agreed that all of OUCI's rights under
the leases will be assigned to the Company and the Company will assume all of
OUCI's liabilities thereunder. Both leases are for a sixty-month period
commencing on December 15, 1998, with monthly lease payments of $3,499.20
required under each of the two leases. Both leases also provide that at the end
of the lease term, the lessee will have the right to purchase the leased
equipment for $1.00. Such right to purchase will be included in OUCI's
assignment to the Company of its rights under the leases.
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
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. Through April 10, 1999, the principal amount of the Type A
Debentures and all interest due thereon is convertible into common stock at a
conversion ratio of 66% of the closing bid price of the Company's common stock,
as traded in the over-the-counter ("OTC") market and quoted
8
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in the OTC Electronic Bulletin Board of the NASD, 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 "Market Price"). Unless
the registration statement discussed below is declared effective prior to June
11, 1999, the conversion rate will decrease, 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.
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 the Type A Debentures are being registered by way of inclusion in
the Company's registration statement on Form SB-2 filed with the Securities and
Exchange Commission on May 21, 1998 (Registration No. 333-53255), which has yet
to be declared effective (the "Registration Statement"). Following the effective
date of the Registration Statement, to the extent that they are acquired from
the Company, the shares underlying the Type A Warrants and Type A Debentures 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 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
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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 the Company were completely separate
entities. However, the RPM Private Placement, the merger, the exchange of RPM
common stock for Company 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 Company common stock in the merger, while in the post-merger Type
B Private Placement, the Company offered and sold shares of Company common
stock; and (ii) in the RPM Private Placement, RPM offered and sold RPM
debentures, which were to be assumed by the Company in the Merger, while in the
Type B Private Placement, the Company offered and sold Company 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.
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
Debentures. 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. The principal amounts of the Type B
Debentures are due and payable 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 Type B Debentures bear interest at the annual
rate of 10% from the date of issuance (the "Issuance Date"), payable
semi-annually, commencing six months from the Issuance Date. The company is
presently in default on interest payments due on the Type B Debentures. As of
February 16, 1999, the Company had not received any demands for interest
payments from any of the holders of the Type B Debentures. The Company intends
to pay all interest due and payable as soon as the funds required to do so are
available.
The resale of shares of the Company's common stock issuable pursuant to
the conversion
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of the Type B Debentures, are being registered by way of inclusion in the
Registration Statement.
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
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
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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 being registered for
resale to the public by the holders thereof by way of their inclusion in the
Company's Registration Statement.
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. 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 resales of any of the shares included therein.
The shares of common stock being registered pursuant to the Registration
Statement include: (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 $500,000 at a
conversion rate equal to a maximum of 67.6% 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) 2,675,000 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 $535,000. (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).
The Company is presently preparing to file an amendment to such Registration
Statement and expects to do so as promptly as practicable following the filing
of this Report.
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RISK FACTORS
The Company's liquidity, capital resources, and results of operations
indicate that an investment in the Company remains speculative, involves a high
degree of risk, and should not be made by persons who cannot afford the loss of
their entire investment. Prospective investors in the Company should carefully
consider all of the information contained in this Report before deciding whether
to purchase securities of the Company, 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.
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 existing business (the
design and manufacture of tire recycling equipment) and its proposed business
(the operation of tire recycling equipment and the production of products using
the recycled rubber produced therefrom), are both 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 in either business segment 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. 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"). Upon completion of
the last of such financing activities in May of 1998, management believed that
the proceeds realized therefrom (together with Canadian and Quebec government
and governmental agency grants and loans, in various forms) would provide the
Company with adequate funding to accomplish the following: (i) complete and
cover all of the Company's costs related to the first production model of the
TCS-1 Plant (the "Production Model"); (ii) renovate the Company's new
manufacturing and assembly facility to bring it into full compliance with all
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applicable provincial and municipal regulations; and (iii) cover the Company's
overhead costs and expenses through the end of October 1998. The Company has,
however, had to revise its estimates regarding the adequacy of such funding for
several reasons, including but not limited to the necessity for certain
unanticipated modifications to the TCS-1 Plant design and the Company's entry
into a second business segment involving the operation of a TCS-1 Plant and the
production of molded rubber floor mats.
During the "Stage 2" test phase of the First Production Model, the Company
encountered certain unanticipated design flaws in the TCS-1 which required
modification and it also identified several opportunities for improvements in
the original design of the TCS-1 Plant, which the Company believes will increase
economy and efficiency of its operation. The required modifications were
completed in December 1998 with respect to a single fracturing mill and a single
freezing tower in the First Production Model. Completion of the second
fracturing mill and freezing tower to be installed therein is scheduled to occur
in April of 1999. The costs of the foregoing modifications, including
engineering fees, aggregated to a previously unbudgeted amount of approximately
$500,000, approximately $250,000 of which had been paid by the Company as of
December 31, 1998.
The Company is also currently involved in establishing rubber mat molding
operations under the IM2 Agreement. In connection therewith, the Company will
incur additional costs and expenses in an estimated aggregate amount of
approximately $925,000. This includes: (i) approximately $325,000 for
modifications to the Company's Montreal facility, necessary to accommodate these
operations, and for materials handling equipment; and (ii) approximately
$600,000 to cover the costs of purchasing and installing a complete rubber mat
molding and flocking plant.
The Company has also had to, and may, in the near future be forced to
continue to, cover its overhead costs from sources other than cash flow from
operations because of the unanticipated and lengthy delays in the commencement
of commercial operations.
The Company believes that it will be possible to meet its immediate goals
of: (a) commencing full scale commercial production of TCS-1 Plants; (b)
commencing rubber mat molding operations under the IM2 Agreement; and (c)
covering its overhead expenses until sufficient cash flow is generated by
operations, out of a combination of some or all of the following sources: (i)
funds on hand; (ii) expected cash flow from sales of four TCS-1 Plants to
ENERCON America Distribution Limited ("Enercon") of Westerville, Ohio. (see
"Existing and Proposed Businesses - Sales and Marketing - The Enercon
Agreements"); (iii) Canadian and Quebec government and governmental agency
grants, loans, and refundable tax credits; (iv) sale and lease back financing on
inventory and equipment owned by the Company; (v) conventional asset based debt
financing against receivables and inventory; (vi) refund 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; (vii) subcontractor financing; (viii) a
research and development tax credit facility from the Bank of Montreal for the
1999 calendar year; and/or (ix) vendor financing by way of installment purchases
of equipment. However, the sufficiency of such funds, if the Company does
receive them, will be completely dependent upon the TCS-1 Plant's as yet
unproven ability to operate without significant problems, on a long-term,
continuous, commercial basis.
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Assuming the Company is able to cover the costs necessary to: (i) complete
the second fracturing mill and freezing tower; and (ii) install a complete
rubber mat molding and flocking facility, from the sources described above, full
scale commercial manufacture of TCS-1 Plants and rubber mat molding operations
are presently expected to occur during March 1999. However, any failure or delay
in the Company's receipt of the required financing would be directly reflected
in a commensurate delay or failure in the commencement of commercial operations.
The Company's more long term future capital requirements will depend upon
numerous factors, including the amount of revenues generated from operations (if
any), 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 meeting performance expectations, ENERCON's ability
to meet its payment obligations under its agreements with the Company, Enercon
obtaining all required permits and licenses to operate a Plant, the Company's
obtaining sufficient production, financing and capacity to meet delivery
requirements, and the rubber crumb produced by the TCS-1 meeting customer
requirements. The Company believes that if all of the foregoing contingencies
are met, it will have sufficient cash flow to fund its operations for at least
the next twelve months. If revenues from operations within the next twelve
months should fail to meet current projections, the Company may attempt to make
an underwritten public offering of its securities in order to insure that it
will have sufficient working capital. The Company notes that on August 13, 1997,
it received a Letter of Intent from H.J. Meyers, Inc. ("Meyers"), a
broker-dealer registered with the National Association of Securities Dealers,
Inc., for the underwriting of such a proposed public offering (the "Proposed
Public Offering") in an amount of not less than $8,000,000. On or about
September 16, 1998, however, Meyers abruptly ceased doing business. If the
Company should determine that it is necessary or desirable to effect a public
offering, it will have to locate another broker-dealer, ready, willing, and able
to underwrite a public offering of the Company's securities. There can be no
assurance that the Company will succeed in finding an underwriter or that a
public offering will in fact be completed or that the Company will receive
adequate financing from any such public offering. In the event that the
projected revenues are not generated and a public offering does not occur within
twelve months, the Company intends to endeavor to obtain sale and lease-back
financing on equipment owned by the Company, conventional asset based debt
financing against receivables and inventory, and/or to seek other avenues of
financing through private offerings of its debt or equity securities. The
Company believes that at least one, or a combination of more than one, of the
foregoing avenues of financing will enable it to commence full scale production
of the TCS-1 Plant and its proposed product manufacturing and rubber crumb sales
operations on a level sufficient to sustain the Company for at least the next
twelve months. However, given the early stage of development of the Company, it
should be noted that it is impossible at this time to estimate with any
certainty what the Company's income from operations will be during the next
twelve months and that there can be no assurance that the Company will be able
to obtain outside financing on a debt or equity basis on terms favorable to it,
if at all. 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.
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In the past, the Company has experienced operational difficulties and
delays of more than five years, three of which years occurred during the tenure
of the current management. All such difficulties and delays were the result of
working capital constraints and the Company may continue to experience such
problems in the future. Should such problems continue or reoccur in the future,
they could have a material adverse effect on the Company's business, financial
condition and results of operations. The working capital constraints which the
Company experienced were the result of its being undercapitalized from the
outset and therefore without sufficient resources to hire required personnel or
pay vendors of products and services, including but not limited to
subcontractors needed to design and build the First Production Model of the
TCS-1 Plant. The Company estimates that it required financing in excess of
$2,000,000 to complete the design, development, and construction of the said
First Production Model of its TCS-1 Plant plus funds to maintain finance-raising
activities. The Company actively sought financing under its former management
from 1992 through 1994 and continued to do so under its current management
beginning in January 1995. It did not raise sufficient financing to design and
construct the First Production Model to the point where initial testing could be
commenced until May 1998. Lack of sufficient working capital also required
management, who worked for the Company for no, or very limited, cash
compensation, to devote a substantial amount of their time and effort to raising
the required financing. The Company estimates, that if it had sufficient
financing in January of 1995 when members of current management commenced its
search for funding, it might have been able to complete the design, development,
and construction of the First Production Model by October 1996. Instead, it
required an additional three years for the Company to raise sufficient funds to
meet its initial goals and objectives. The absence of operations and the
resultant lack of significant cash flow from 1995 until the present, compounded
the Company's problems because even the overhead required to sustain fund
raising activities had to be financed from outside sources. This further delayed
the Company's ability to devote sufficient resources to completing the design,
development, and construction of the First Production Model of the TCS-1. By way
of example, the First Production Model was scheduled for delivery by February of
1997. Instead, the last of the three major components of such model was
completed in June of 1998 and, as discussed above, the First Production Model
underwent extended testing and "debugging" procedures until December 1998.
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
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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 is expected to be
ready for commercial production, on a complete "turn-key" basis, in March 1999.
Consequently, there is not yet any history of commercial operations of the TCS-1
Plant. 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. Therefore, the Company is not able to estimate with
any assurance the potential demand for the TCS-1 Plant, if any. 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.
6. Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants, and Options. As of February 12, 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 included in the Registration Statement on Form SB-2.
(b) 10% convertible Type A Debentures in the aggregate principal amount
of $500,000, 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 67.5% 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. Accordingly,
if, on February 16, 1999, all of the principal amount, but none of
the interest, due on the Type A Debentures had been converted into
common stock (based on the market price of the common stock as at
February 12, 1999), a total of 4,357,298 shares of common stock
would have been issued in respect of such conversion. The resale of
all of which shares would be included in the Registration Statement
on Form SB-2. To the extent that the interest portion of the
Debenture is not converted, all accrued interest will be payable in
cash.
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(c) 10% convertible Type B Debentures in the aggregate principal amount
of $535,000, 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 2,675,000, the
resale of all which shares are included in the Registration
Statement on Form SB-2. 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. ("OTRP").
(e) (i) options to purchase, on or before March 31, 1999, an aggregate
of 250,000 shares, at an exercise price of $.1875 per share; and
(ii) options to purchase, on or before June 30, 1999, an aggregate
of 250,000 shares, at an exercise price of $.28 per share. Each of
the above described options are held among three individuals,
including Sharon Sanzaro (the spouse of Louis Sanzaro, an officer
and director of the Company), who hold such options as designees or
assignees of Ocean/Venture III, Inc., a company controlled by Mr.
Sanzaro. These options were granted in consideration of the
agreements of Ocean/Venture III, Inc. given on March 31, 1996, and
June 30, 1996 to extend the maturity date of certain indebtedness
which the Company owed to Ocean/Venture III, Inc. for periods which
ranged from 90 to 120 days from each of such dates.
(f) an option, held by a former outside 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 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. If the shares of convertible preferred
stock had been converted into shares of the Company's common stock
as at February 16, 1999, a total of 3,836,930 shares would have been
issued in respect of such conversion.
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(g) 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 91,699,663, prior to the
exercise of the CGT Option, in which case, the number of shares
subject to the CGT Option would be 10,188,851, the resale of all of
which shares would be included in the Registration Statement on Form
SB-2.
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 Registration
Statement. 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.
7. Additional Dilution from Issuance of Shares for Services. To date, the
Company has had no significant operating revenues. Accordingly, the bulk of its
cash assets have been, and may continue to be, utilized to cover the expenses
associated with the development of the TCS-1 Plant. 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.
Since January of 1995, the Company has issued a total of 32,756,186
shares, constituting 41.94% of the issued and outstanding shares of the Company
in lieu of cash compensation 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 12,888,243 shares, constituting approximately
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16.5% 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 78,095,141 common shares of the
Company, issued and outstanding as of February 4, 1999, has been included in the
Registration Statement on Form SB- 2. 11,760,000 of such shares will be freely
tradeable commencing on the effective date of the Registration Statement on Form
SB-2 or, if the holders thereof shall choose to withdraw the registration of
such shares, they will be tradeable under Rule 144 commencing May 11, 1999. The
resale of an estimated 21,220,449 shares issuable upon the exercise or
conversion of presently outstanding options, warrants, and debentures have also
been included in the Registration Statement on Form SB-2 and will be freely
tradeable upon the later of: (i) the effective date of the Registration
Statement; or (ii) their issuance. Alternatively, if the holders of the
convertible debentures and some of such warrants (but not the options) shall
choose to withdraw them from the Registration Statement, they will become
tradeable under Rule 144 on commencement dates ranging from January 7, 1999 to
May 11, 1999. The sale or other disposition of much of the 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 or availability for sale of substantial amounts of common
stock in the public market after the offering being made by the Registration
Statement on Form SB-2 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 February 4, 1999, the Company's
officers and directors were the beneficial owners of an aggregate of 29,391,199
shares, constituting approximately 37.16% of the Company's outstanding common
stock. The Company intends to hold the 1999 annual meeting of its shareholders
prior to the end of the current fiscal 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
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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 acquirors 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. 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").
10. Proposed Reverse Split: Possible Negative Effect on Value of
Securities. As of February 4, 1999, there were 78,095,141 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,
there could be up to 103,887,814 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
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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 five
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
February 4, 1999, and assuming that the Reverse Split is approved by the
shareholders and effected at a one-for-five ratio, there will be a decrease in
the number of outstanding shares of common stock of the Company to approximately
15,619,028 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.
Upon the effectiveness of the Reverse Split, if it is approved by the
Shareholders, the presently issued certificates shall be deemed to represent the
number of shares equal to the number of pre-split shares originally represented
by such certificate divided by the ratio of the reverse split, and rounded up to
the next full number. EXAMPLE: if the reverse split is effected at a
one-for-five ratio, a certificate which originally represented an 10,523
pre-split shares would be deemed to represent 10,523 divided by five (2,104.6),
rounded up to the next full number, i.e., 2,105 shares. Thus no fractional
shares of common stock will result from the reverse split (see "Risk Factor No.
6, Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants and Options").
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. ("OTRP"), a
company under common control with O/V III. The eight Plants 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 OTRP are controlled by Louis V.
Sanzaro, an officer and director of the Company.
Completion and consummation of all currently outstanding orders for TCS-1
Plants, are entirely dependent upon the TCS-1's meeting performance
expectations, each customer's obtaining lease or other financing for the
purchased portions of the Plant (as well as all required
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permits and licenses to operate a Plant), and to the Company's obtaining
sufficient production, financing and capacity to meet delivery requirements.
12. Uncertainty of Product and Technology Development: Technological
Factors. The Company has completed initial development and construction, of the
first production model of the TCS-1 Plant. The Company's success will depend
upon the TCS-1 Plant's meeting targeted performance and cost objectives and its
timely introduction into the marketplace. Such an outcome will be subject to the
risks inherent in the development of a new product, technology, and, business,
including unanticipated delays, expenses, and difficulties, as well as the
possible insufficiency of funding to complete development (see Risk Factor No. 2
"Need for Substantial Additional Capital", above). 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 testing by the Company, problems will
not be encountered in the TCS-1 Plant after the commencement of commercial
manufacture and sales, resulting in loss or delay in market acceptance.
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 may enter into 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.
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 proposed TCS-1 Plant which will
utilize 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
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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(3) 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 February 4, 1999, had 78,095,141 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 Warrants and Presently Outstanding Option"). Moreover, even 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
- ----------
(3) "Public float" is defined as shares that are not held directly or
indirectly by any officer or director of the issuer and by any other
person who is the beneficial owner of more than 10 percent of the
total shares outstanding.
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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
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
Company's shares 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 of the Company's common stock 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
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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 no member of management has been directly involved in
administering a tire disintegration, recycling, or tire disintegration equipment
manufacturing, 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.
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 in the process of making arrangements to own the First Production
Model of the TCS Plant and to operate it as a "Tirex Advanced Products Plant"
for the purpose of selling rubber crumb produced by operation of the TCS-1 Plant
and manufacturing finished products, made wholly or partially from such rubber
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crumb. 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 from the operation of the Plant and to the best of the Company's
knowledge, will 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 will involve, 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 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.
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
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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. Production and Supply. The Company intends to begin manufacturing the
TCS-1 Plant on a commercial basis in March 1999. In connection therewith, the
Company will be dependent on arrangements with its subcontractors for the
manufacture and assembly of the principal components incorporated into the TCS-1
Plant. It will therefore be substantially dependent on the ability of such
subcontractors to satisfy performance and quality specifications and to dedicate
sufficient production capacity for all TCS-1 Plant scheduled delivery dates. The
Company believes that all of its subcontractors have the requisite manufacturing
capabilities and the willingness to dedicate sufficient amounts of their
manufacturing capacity to the Company to meet all TCS-1 Plant delivery dates,
currently scheduled or expected to be scheduled within the next two years.
However, no assurance can be given that this will in fact be the case and
failure on the part of the Company's subcontractors in these regards would
adversely affect the Company's ability to manufacture and deliver TCS-1 Plants
on a timely and competitive basis. In such event the Company would have to
replace or supplement its present subcontractors. There can be no assurance that
should it be necessary to do so, the Company would be able to find capable
replacements for its subcontractors on a timely basis and on terms beneficial to
the Company, if at all; The Company's inability to do so would have a material
adverse effect on its business.
Components of the TCS-1 Plants, which are not manufactured by the
Company's subcontractors specifically for the TCS-1 Plant, will be purchased,
either directly by the Company or indirectly through its subcontractors from
third-party manufacturers. The Company believes that numerous alternative
sources of supply for all such components are readily available.
21. 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
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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.
22. Competition. Although management believes that the Tirex Technology
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 Company. Management intends to meet such competition by
developing technological innovations which will make 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.
23. Lack of Liability Insurance. The proposed TCS-1 Plant may expose the
Company to possible product liability claims if, among other things, the
operation of the TCS-1 Plant results in personal injury, death or property
damage. There can be no assurance the Company will have sufficient resources to
satisfy any liability resulting from such claims or will be able to cause its
component suppliers or customers to indemnify or insure the Company against such
claims. The Company does not presently intend to obtain product liability
insurance prior to the commencement of commercial operation of the TCS-1 Plant.
Should the Company determine that such insurance is necessary, there can be no
assurance that affordable insurance coverage will be available in terms and
scope adequate to protect the Company against material adverse effects in the
event of a successful claim.
24. 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.
25. 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
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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".
26. 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
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.
27. Adverse Effects of Proposals to Be Presented at Annual Shareholders
Meeting: AntiTakeover Provisions, Limitations on Shareholders Voting Rights, and
Stock Bonuses to Management. The Company intends to hold the 1999 annual meeting
of its shareholders prior to the end of the current fiscal 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 members of the Board of Directors
who have held office since prior to the date of the 1999 annual meeting (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 written 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
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<PAGE>
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 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.
By having the effect of discouraging takeover attempts, the proposed
amendments also could have the incidental effect of inhibiting certain changes
in management (some or all of the members of which might be replaced in the
course of a change of control) and also the temporary fluctuations in the market
price of the Company's common stock that could result from actual or rumored
takeover attempts. Moreover, tender offers or other non-open market acquisitions
of stock are usually made at prices above the prevailing market price of a
company's stock. In addition, acquisitions of stock in the open market by
persons attempting to acquire control may cause the market price of the stock to
reach levels that are higher than might otherwise be the case. Approval of the
some or all of the proposed amendments may deter such purchases, particularly
purchases for less than all of the Company's shares, and therefore may deprive
holders of the Company's common stock of an opportunity to sell their shares at
a temporarily higher market price.
Purchasers of the Company's shares should note that such amendments, if
adopted, will result in there being special requirements for supermajority
shareholder approval of any subsequent business combination and the possibility
that after an acquiror (for purposes of this discussion, an "Interested
Shareholder") purchases a certain percentage of the Company's common stock, it
will be forced to pay a higher price to other Company shareholders in such a
business combination. This would likely would make it more costly for a third
party to acquire control of the Company. Thus, the proposed amendments may
decrease the likelihood of a tender offer for less than all of the shares of the
common stock of the Company, which may adversely affect stockholders who desire
to participate in such a tender offer. In certain cases, the proposed fair price
amendment's minimum price provisions, while providing objective pricing
criteria, could
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<PAGE>
be arbitrary and not indicative of value. In addition, an Interested Stockholder
may be unable, as a practical matter, to comply with all of the procedural
requirements. In these circumstances, unless an Interested Stockholder were able
to obtain special stockholder approval of a proposed Business Combination, it
would be forced either to negotiate with the Board of Directors on terms
acceptable to the Board or to abandon the proposed business combination. The
proposed amendments also would give veto power to minority stockholders with
respect to a proposed Business Combination that is opposed by a majority of
Continuing Directors but that is desired by a majority of the Company's
stockholders unless the minimum pricing and procedural requirements were met. If
members of the Company's current management and principal shareholders were to
maintain their current stock ownership, they would have the ability to block the
requisite vote. In addition, the proposed amendments may tend to insulate
incumbent directors against the possibility of removal in the event of a
takeover attempt because only the Continuing Directors would have the authority
to reduce to a simple majority or eliminate the special stockholder vote
required for a particular Business Combination.
While some of the proposed amendments would directly affect the
possibility of the Company's being the subject of a tender offer or a hostile
takeover, others will directly limit the ability of minority shareholders to
participate in Company affairs. The classified Board of Directors provisions,
will divide the Board of Directors into three classes of directors serving
staggered two-year terms, with two directors to be elected at each annual
meeting of shareholders. This will extend the time required to change the
composition of the Board of Directors. The provision requiring shareholders to
give 90 days advance notice to the Company of any nomination for election to the
Board of Directors, or other business to be brought at any shareholders' meeting
will make it more difficult for shareholders to nominate candidates to the Board
of Directors who are not supported by management. This provision will make it
more difficult to implement shareholder proposals even if a majority of
shareholders are in support thereof. Each of these provisions may also have the
effect of deterring hostile take-overs or delaying changes in control or
management of the Company. In addition, the indemnification provisions of the
Company's Certificate of Incorporation and Bylaws may represent a conflict of
interest between management and the shareholders since officers and directors
may be indemnified prior to any judicial determinations as to their conduct.
Under Delaware law, each of the proposed amendments to the Certificate of
Incorporation and By-laws described above requires the affirmative vote of the
holders of a majority of the Company's outstanding shares of common stock. All
of the proposals are permitted by law. If stockholders approve any or all of the
proposed amendments, the Company will file a Restated Certificate of
Incorporation that reflects the proposed amendments with the Secretary of State
of the State of Delaware. Each of the proposed amendments adopted by the
Company's stockholders will become effective regardless of whether any of the
other proposed amendments to be acted upon at the Meeting is adopted.
In addition to the proposed amendments to the Certificate of Incorporation
and By-laws, the present Certificate of Incorporation authorizes the Board of
Directors to issue shares of Class A Stock having such rights, preferences and
privileges as designated by the Board of Directors without stockholder approval
(see "Risk Factor No. 25 "Possible Adverse Effects of Authorization and Issuance
of Preferred Stock").
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<PAGE>
SELLING SHAREHOLDER
35,057 of the 181,353 shares of common stock (the "Shares") being offered
hereunder by the Selling Shareholder were acquired by him on or about August 11,
1998, pursuant to the terms of his employment agreement, dated as of June 22,
1998, (the "Rapfogel Employment Agreement") for services rendered to the Company
during the period June 22, 1998 through on or about July 31, 1998. 146,296 of
the 181,353 Shares being offered hereunder by the Selling Shareholder were
acquired by him on or about May 1, 1999 for services rendered to the Company
during the period August 1, 1998 through December 31, 1998 pursuant to the terms
of the Rapfogel Employment Agreement for the five month period which commenced
on August 1, 1998 and ended on December 31, 1998. The Rapfogel Employment
Agreement is an individually negotiated written compensation agreement pursuant
to which the Selling Shareholder renders bona fide services not in connection
with the offer or sale of securities in a capital raising transaction. Such
agreement constitutes an Employee Benefit Plan, as defined in Rule 405 of the
Securities Act of 1933. The Rapfogel Employment Agreement may sometimes be
referred to hereinafter as the "Plan". For purposes of this Reoffer Prospectus,
all of the Shares being registered hereunder are "restricted shares" insofar as
they were issued 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 Shareholder ; (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 Shareholder has had with the Company within the past three years; (iv)
the number of shares of common stock owned by the Selling Shareholder prior to
the offering; (v) the number of shares of common stock to be offered for the
account of the Selling Shareholder; (vi) the number of shares of common stock to
be owned by the Selling Shareholder after the completion of the offering, and
(vii) the percentage of the Company's common stock to be owned by the Selling
Shareholder after completion of the offering.
33
<PAGE>
<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) Company Offering Offered Offering the Offering
- ------------------- -------------- ------- -------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Scott Rapfogel Employment Agreement of Assistant Corporate 181,353 181,353 0 0
June 22, 1998. Counsel
</TABLE>
34
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholder has offered and sold no shares (the "Prior
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. The number of
shares offered hereunder by the Selling Shareholder together with the Prior
Shares represents less than one percent of the total number of shares of the
Company's common stock presently issued and outstanding. The Selling Shareholder
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
Shareholder may utilize the services of NASD registered 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 at March 18, 1999 there were seventy eight million,
two hundred forty one thousand, four hundred thirty seven (78,241,437) 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.
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.
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<PAGE>
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, PA, 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 Frances Katz Levine, Esq., 621 Clove Road, Staten Island, NY 10310.
Ms. Levine, serves as corporate and securities counsel to the Company. As at
March 18, 1999 Ms. Levine and her husband, Robert Levine were the record and
beneficial owners of approximately 6.37% of the Company's issued and outstanding
common stock.
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
36
<PAGE>
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.
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.
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<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 22nd day
of March, 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 March 22, 1999
- ------------------------------ of Directors and Chief
Terence C. Byrne Executive Officer
/s/ Michael D.A. Ash Secretary, Treasurer March 22, 1999
- ------------------------------ and Chief Financial and
Michael D.A. Ash Accounting Officer
Majority of the Board of Directors
/s/ Terence C. Byrne Director March 22, 1999
- ------------------------------
Terence C. Byrne
/s/ Louis Sanzaro Director March 22, 1999
- ------------------------------
Louis Sanzaro
/s/ Louis V. Muro Director March 22, 1999
- ------------------------------
Louis V. Muro
/s/ Henry Meier Director March 22, 1999
- ------------------------------
Henry Meier
38
<PAGE>
EXHIBIT INDEX
Exhibit No. Item Page
- ----------- ---- ----
5.1 Opinion of Frances Katz Levine, Esq.
regarding the legality of the securities
being registered under this Registration
Statement
24.1 Consent of Pinkham & Pinkham, P.C.,
Certified Public Accountants,
Independent Auditors for the Company
24.2 Consent of Frances Katz Levine, Esq.,
the counsel for the Registrant (set
forth in the opinion of counsel included
as Exhibit 5.1)
39
EXHIBIT 5.1
OPINION OF
FRANCES KATZ LEVINE, ESQ.
FRANCES KATZ LEVINE
Counselor at Law
621 CLOVE ROAD
STATEN ISLAND, NY 10310
Member, New York and Telephone (718) 981-8485
New Jersey Bars Telefax (718) 447-1153
March 22, 1999
The Tirex Corporation
740 St. Maurice
Montreal, Quebec
Canada H3C 1L5
Ladies and Gentlemen:
You have requested my opinion as counsel for The Tirex Corporation Inc., a
Delaware corporation (the "Company"), 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 shareholder (the
"Selling Shareholder") named in the Company's Registration Statement on Form
S-8, to be filed with the Securities and Exchange Commission on or about March
24, 1999 (the "Registration Statement"), of one hundred eighty one thousand
three hundred fifty three (181,353) shares of Common Stock of the Company, $.001
par value, per share, currently issued and outstanding in the names of the
Selling Shareholder (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
Company as certified by the Secretary of State of the State of Delaware, the
Bylaws and the minute books of the Company as a basis for the opinion hereafter
expressed.
Based on the foregoing examination, it is my opinion, and I so advise,
that the 181,353 Shares currently are, and upon sale in the manner described in
the Registrant Statement will be, legally issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Frances Katz Levine
---------------------------------
Frances Katz Levine
EXHIBIT 24.1
CONSENT OF PINKHAM & PINKHAM, P.C.
Certified Public Accountants
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.
Pinkham & Pinkham, P.C.
Certified Public Accountants
March 22, 1999
Cranford, New Jersey
