U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________ to _________
COMMISSION FILE NUMBER 33-17598-NY
THE TIREX CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 22-2824362
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3828 ST. PATRICK, MONTREAL, QUEBEC H4E 1A4
(Address of Principal executive offices)
(514) 933-2518
(Issuer's telephone number, including area code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of November 7, 2000: 163,893,594 shares
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
THE TIREX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PART I
ITEM 1 - FINANCIAL INFORMATION (unaudited) PAGE
The Tirex Corporation and Subsidiaries
Consolidated Balance Sheets as of
September 30, 2000 and 1999...................................
Consolidated Statements of Operations
for the three month period
ended September 30, 2000 and 1999.............................
Consolidated Statements of Cash Flows
for the three month period
ended September 30, 2000 and 1999.............................
Notes to Financial Statements (unaudited).........................
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....................
PART II
Item 1 - Legal Proceedings................................................
Item 2 - Changes in Securities and Use of Proceeds........................
Item 3 - Defaults Upon Senior Securities..................................
Item 4 - Submission of Matters to a Vote of Security Holders..............
Item 6 - Exhibits and Reports on Form 8-K.................................
The financial statements are unaudited. However, pursuant to new SEC
requirements, the financial statements have been reviewed by the Company's
independent auditor. Readers are cautioned that a review engagement does not
constitute an audit. Management of registrant believes that all necessary
adjustments, including normal recurring adjustments, have been reflected to
present fairly the financial position of registrant at September 30, 2000 and
the results of its operations and changes in its financial position for the
three month period ended September 30, 2000 and 1999 and for the period from
inception (July 15, 1987).
2
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<TABLE>
<CAPTION>
THE TIREX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENTAL STAGE COMPANY)
Consolidated Balance Sheet
As at September 30, 2000
ASSETS (Unaudited) (Audited)
2000 June 30, 2000
------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 13,163 $ 2,793
Accounts receivable & notes receivable 11,446 129,431
Sales tax receivable 26,609 19,288
Inventory 107,976 109,961
R& D tax credit receivable 559,706 475,221
Prepaid expenses and deposits 103,074 106,384
------------ ------------
821,974 843,078
------------ ------------
Property and equipment, at cost, net of accumulated
depreciation of $144,481 2,203,838 2,223,798
------------ ------------
Other assets
Prepaid expenses and deposits 209,000 220,508
------------ ------------
$ 3,234,812 $ 3,287,384
============ ============
LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued liabilities $ 1,030,939 $ 1,187,711
Current portion of long-term debt 202,761 227,516
------------ ------------
1,233,700 1,415,227
Other liabilities
Long-term deposits 143,500 143,500
Long term debt (net of current portion) 383,089 393,542
Convertible subordinated debentures 55,000 75,000
Loan from officers 1,244,957 2,093,954
------------ ------------
1,826,546 2,705,996
------------ ------------
Stockholders' equity
Common stock, $.001 par value, authorized
165,000,000 shares, issued and outstanding,
163,443,541 shares 163,444 151,133
Class A stock;.001 par value, authorized 5,000,000
shares issued and outstanding, 0 shares
Additional paid-in capital 21,178,003 19,364,787
Deficit accumulated during the development stage (21,336,304) (20,510,191)
Unrealized gain on foreign exchange 169,423 160,432
------------ ------------
174,566 (833,839)
------------ ------------
$ 3,234,812 $ 3,287,384
============ ============
See Notes to Consolidated Financial Statements
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TIREX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENTAL STAGE COMPANY)
Consolidated Statements of Operations
Cumulative From
Three months ending Three months ending March 26, 1999 to
September 30, 2000 September 30, 1999 September 30, 2000
------------------- ------------------- -------------------
<S> <C> <C> <C>
Revenues $ 0 $ -- $ 1,325,573
Cost of sales 0 -- 1,018,094
------------------- ------------------- -------------------
Gross profit 0 0 307,479
Operations
General and administrative 430,957 335,654 7,886,698
Depreciation and amortization 17,247 143,098 157,038
Research and development 243,056 178,022 12,085,174
------------------- ------------------- -------------------
Total Expense 691,260 656,774 20,128,910
------------------- ------------------- -------------------
Loss before other income and expenses (691,260) (656,744) (19,821,431)
------------------- ------------------- -------------------
Other income (expenses)
Interest expense (35,739) (24,835) (309,065)
Interest income -- -- 45,443
Income from stock options -- -- 10,855
Loss on disposal of equipment -- -- (2,240)
Gain (loss) on foreign exchange (99,114) 103,777 (202,510)
------------------- ------------------- -------------------
(134,853) 78,942 (457,517)
------------------- ------------------- -------------------
Net loss $ (826,113) $ (577,832) $ (20,278,948)
=================== =================== ===================
Net loss per common share $ (0.01) $ (0.01) $ (0.69)
=================== =================== ===================
Weighted average shares of common stock 114,137,838 86,698,326 29,197,534
Outstanding =================== =================== ===================
</TABLE>
See notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
THE TIREX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENTAL STAGE COMPANY)
Consolidated Statements of Stockholders' Equity (Deficit)
As at September 30, 2000
Deficit
Accumulated
Additional During Unrealized
Common Stock Paid-in Developmental Foreign
Shares Amount Capital Stage Exchange Total
----------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 2000 $151,133,177 $ 151,133 $ 19,364,787 $ (20,510,191) $ 160,432 $ (833,839)
Stock issued for services 495,500 496 253,894 -- -- 254,390
Stock issued for options -- -- -- -- -- 0
Shares issued in exchange
for debt 11,693,864 11,694 1,440,466 -- -- 1,452,160
Conversion of debentures 121,000 121 24,079 -- -- 24,200
Issuance of common stock -- -- -- -- -- 0
Unrealized foreign exchange -- -- -- -- 8,991 8,991
Grants issued -- -- 94,777 -- -- 94,777
Net loss period -- -- -- (826,113) -- (826,113)
----------- ------------- ------------- ------------- ------------- -------------
BALANCE AT SEPTEMBER 30, 2000 $163,443,541 $ 163,444 $ 21,178,003 $ (21,336,304) $ 169,423 $ 174,566
============ ============= ============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
<TABLE>
<CAPTION>
THE TIREX CORPORATION AND SUBSIDIARIES
(A DEVELOPMENTAL STAGE COMPANY)
Consolidated Statements of Cash Flows
Cumulative
Period from
March 26, 1993
Three months ended (Date of
September 30, Inception) to
2000 1999 September 30, 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (826,113) $ (685,426) $ (20,278,948)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 17,247 143,098 155,796
Loss on disposal and abandonment of assets -- -- 22,339
Stock issued in exchange for interest 4,200 26,258 169,142
Stock issued in exchange for services and expenses 456,556 537,491 9,782,738
Stock options issued in exchange for services 254,725 41,552 2,825,738
Unrealized gain on foreign exchange 8,991 3,864 169,423
Change in assets and liabilities:
(Increase) decrease in :
Accounts receivable
Inventory 1,985 -- (107,971)
Sales tax receivable 7,321 38,082 (11,967)
R&D investment tax credit receivable (84,485) (126,921) (559,706)
Other assets 1,172 24,236 (335,840)
(Decrease) increase in :
Accounts payable and accrued expenses 153,940 (807,420) 1,355,496
Accrued salaries 38,039 122,795 451,015
Due to stockholders -- -- 5,000
------------------ ------------------ ------------------
Net cash used in operating activities 33,578 (682,391) (6,357,750)
------------------ ------------------ ------------------
Cash flow from investing activities:
Increase in notes receivable (117,985) (18,778) (247,416)
Equipment 0 (93,918) (2,260,599)
Organization cost -- -- 6,700
Reduction of security deposit -- -- (1,542)
------------------ ------------------ ------------------
Net cash used in investing activities (98,025) (112,696) (2,502,857)
------------------ ------------------ ------------------
Cash flows from financing activities:
Loans from officers -- 427,563 2,422,107
Proceeds from deposits -- -- 143,500
Issuance of convertible debentures -- -- 1,035,000
Proceeds from loan & leases payable -- 100,263 551,860
Proceeds from issuance of stock options -- -- 20,000
Proceeds from grants 94,777 127,263 2,613,096
Proceeds from issuance of common stock -- -- 74,716
Proceeds from additional paid-in capital -- -- 2,013,234
------------------ ------------------ ------------------
Sub total $ 94,777 $ 655,089 $ 8,873,513
------------------ ------------------ ------------------
</TABLE>
See Notes to Consolidated Financial Statements
-5-
<PAGE>
<TABLE>
<CAPTION>
THE TIREX CORPORATION AND SUBSIDIARIES
A DEVELOPMENTAL STAGE COMPANY
Consolidated Statements of Cash Flows (continued)
Cumulative
Period from
Three months ended March 26, 1993
September 30, (date of Inception) to
2000 1999 September 30,2000
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Net cash provided by financing activities $ 94,777 $ 655,089 $ 8,873,513
---------------------- ---------------------- ----------------------
Net (decrease) increase in cash and cash
equivalents 10,370 (139,998) 12,906
Cash and cash equivalents - beginning
of year 2,793 177,256 257
---------------------- ---------------------- ----------------------
Cash and cash equivalents - end of year $ 13,163 $ 37,258 $ 13,163
====================== ====================== ======================
Supplemental Disclosure of Non-Cash Activities:
In 2000 and 1999, the Company recorded an increase in common stock and in
additional paid-in capital of $726,033 and $6,000, respectively, which was in
recognition of the payment of debt. In 2000 and 1999 stock was issued in
exchange for services performed and expenses in the amount of $463,780 and
$1,338,040 respectively.
Convertible debentures were exchanged into stock totaling $20,000 during the
three months ended September 30, 2000. Accrued interest of $136,206 was also
converted into stock.
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 7,456 $ 6,391 $ 71,392
====================== ====================== ======================
Income taxes paid $ -- $ -- $ --
====================== ====================== ======================
</TABLE>
See Notes to Consolidated Financial Statements
-6-
<PAGE>
THE TIREX CORPORATION AND SUBSIDIARIES INC.
(A DEVELOPMENTAL STAGE COMPANY)
Notes to Consolidated Financial Statements
Note 1 - SUMMARY OF ACCOUNTING POLICIES
CHANGE OF NAME
In June1998 the Company changed its name from Tirex America, Inc. to
The Tirex Corporation.
NATURE OF BUSINESS
The Tirex Corporation and Subsidiaries (the "Company") was incorporated
under the laws of the State of Delaware on August 19, 1987. The Company
was originally organized to provide comprehensive health care services,
but due to its inability to raise sufficient capital it was unable to
implement its business plan. The Company became inactive in November
1990.
REORGANIZATION
On March 26, 1993, the Company entered into an acquisition agreement
(the "Acquisition Agreement") with Louis V. Muro, currently a director
of the Company and former officers and directors (collectively the
"Seller"), for the purchase of certain technology owned and developed
by the Seller (the "Technology") to be used to design, develop and
construct a prototype machine and thereafter a production quality
machine for the cryogenic disintegration of used tires. The Technology
was developed by the Seller prior to their affiliation or association
with the Company.
DEVELOPMENTAL STAGE
At September 30, 2000 the Company is still in the development stage.
The operations consist mainly of raising capital, obtaining financing,
developing equipment, obtaining customers and supplies, installing and
testing equipment and administrative activities.
BASIS OF CONSOLIDATION
The consolidated financial statements include the consolidated accounts
of The Tirex Corporation and its subsidiaries and Tirex Canada R&D,
Inc. Tirex Canada R&D, Inc. is held 49% by the Company and 51% by the
certain shareholders of the Company. The shares owned by the
shareholders are held in escrow by the Company's attorney and are
restricted from transfer. All inter-company transactions and accounts
have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less, were
deemed to be cash equivalents.
INVENTORY
The Company values inventory at the lower cost (first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of five years.
Repairs and maintenance costs are expensed as incurred while additions
and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or retired are eliminated from the accounts
and any gain or losses are reflected in earnings.
ESTIMATES
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and
6
<PAGE>
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 123
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 encourages, but does not require companies to record at
fair value compensation cost for stock-based compensation plans. The
Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee
must pay to acquire the stock. The difference between the fair value
method of SFAS-123 and APB 25 is immaterial.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 128
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (SFAS 128). SFAS 128 changes the standards for computing and
presenting earnings per share (EPS) and supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share." SFAS 128
replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. This Statement requires restatement of all
prior-period EPS data presented.
As it relates to the Company, the principal differences between the
provisions of SFAS 128 and previous authoritative pronouncements are
the exclusion of common stock equivalents in the determination of Basic
Earnings Per Share and the market price at which common stock
equivalents are calculated in the determination of Diluted Earnings Per
Share.
A basic earnings per common share is computed using the weighted
average number of shares of common stock outstanding for the period.
Diluted earnings per common share is computed using the weighted
average number of shares of common stock and dilutive common equivalent
shares related to stock options and warrants outstanding during the
period.
The adoption of SFAS 128 had no effect on previously reported loss per
share amounts for the year ended June 30, 1997. For the years ended
June 30, 2000 and 1999, primary loss per share was the same as basic
loss per share and fully diluted loss per share was the same as diluted
loss per share. A net loss was reported in 2000 and 1999, and
accordingly, in those years the denominator was equal to the weighted
average of outstanding shares with no consideration for outstanding
options and warrants to purchase shares of the Company's common stock,
because to do so would have been anti-dilutive. Stock options for the
purchase of 13,212,673 shares at June 30, 1999 and warrants for the
purchase of 1,000,000 shares at June 30, 1999 were not included in loss
per share calculations and neither were options to purchase 1,694,447
shares, issued under the Company's Stock Option Plan during the
three-month period ended September 30, 2000, because to do so would
have been anti-dilutive. Further, 4,553,102 shares of common stock
issued subsequent to year end, to an employee of Ocean Tire Recycling &
Processing Co., Inc were not included in loss per share calculations
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, which
principally include cash, note receivable, accounts payable and accrued
expenses, approximates fair value due to the relatively short maturity
of such instruments.
7
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The fair values of the Company's debt instruments are based on the
amount of future cash flows associated with each instrument discounted
using the Company's borrowing rate. At June 30, 2000 and September 30,
2000, respectively, the carrying value of all financial instruments was
not materially different from fair value.
INCOME TAXES
The Company has net operating loss carryovers of approximately $21.3
million as of September 30, 2000, expiring in the years 2004 through
2015. However, based upon present Internal Revenue regulations
governing the utilization of net operating loss carryovers where the
corporation has issued substantial additional stock, most of this loss
carryover may not be available to the Company.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes, effective July 1993. SFAS No.109
requires the establishment of a deferred tax asset for all deductible
temporary differences and operating loss carryforwards. Because of the
uncertainties discussed in Note 2, however, any deferred tax asset
established for utilization of the Company's tax loss carryforwards
would correspondingly require a valuation allowance of the same amount
pursuant to SFAS No. 109. Accordingly, no deferred tax asset is
reflected in these financial statements.
The Company has research and development investment tax credits
receivable from Canada and the Province of Quebec amounting to $559,706
at September 30, 2000 compared to $475,221 as of June 30, 2000.
FOREIGN EXCHANGE
Assets and liabilities of the Company, which are denominated in foreign
currencies, are translated at exchange rates prevailing at the balance
sheet date. Revenues and expenses are translated at average rates
throughout the year.
REVENUE RECOGNITION
Revenue is recognized when the product is shipped to the company.
Note 2 - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred
a net loss of $5,548,829 during the year ended June 30, 2000 and an
additional net loss for the three-month period ended September 30, 2000
in the amount of $826,113.
In March 1993, the Company was still in the development stage and had
developed a new Business Plan. As at June 30, 2000 the Company had
constructed a production quality machine for the cryogenic
disintegration of used tires, but continues to engage in research and
development activities on this machine in an effort to enhance its
performance. As of September 30, 2000, Management considers the Company
to be still in the development stage.
The ability of the Company to continue as a going concern is dependent
on the success of its marketing its TSC Plants, and /or raising funds
through equity sales, bank loans, governmental grants or a combination
of these. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
Note 3 - FINANCING COSTS
During the year ended June 30, 1999 the Company incurred $158,255 in
connection with debt financing. These costs have been capitalized in
other assets and are being amortized over the terms of the financing.
Amortization of financing costs for the year ended June 30, 2000 and
1999 was $125,291 and $32,964, respectively, reducing this account
balance to zero. Thus there were no deferred financing costs to
amortize during the three-month period ended September 30, 2000.
8
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Note 4 - PROPERTY AND EQUIPMENT
As of September 30, 2000 plant and equipment consisted of the
following:
Furniture, fixtures and equipment $ 196,339
Leasehold improvements 171,940
Construction in progress - equipment 2,000,000
----------
2,368,279
Less accumulated depreciation and amortization 144,481
----------
$2,223,798
==========
Depreciation and amortization expense charged to operations was $67,717
and $42,770 for the years ended June 30, 2000 and 1999, respectively.
For the three-month period ended September 30, 2000, depreciation and
amortization amounted to $17,247.
NOTE 5 - LONG-TERM DEBT SEPTEMBER 30, 2000 Federal Office of Regional
Development (Ford-Q) Loan payable under the Industrial
Recovery Program amounting to 20% of certain eligible
costs incurred (maximum loan $340,252) repayable in
annual installments over a forty- eight month period
following completion of the project, unsecured and
non-interest bearing. (If the Company defaults the loans
become interest bearing) $ 340,252
Loans payable under the Program for the Development of
Quebec SME's based on 50% of approved eligible costs for
the preparation of market development studies in certain
regions. Loans are unsecured and non-interest bearing.
(If the Company defaults the loans become interest
bearing).
Loan payable over five years commencing June 2000 due
June 2004 64,648
Loan payable over five years, commencing June 2001, due
2005 60,020
Loan payable in amounts equal to 1% of annual sales in
Spain through June 30, 2007 13,610
Loan payable in amounts equal to 11/2% of annual sales
in Spain and Portugal through June 30, 2004 46,079
----------
524,609
Less: current portion 204,754
$ 319,855
==========
Minimum principal repayments of each of the next five years as follows:
2000 $ 204,754
2001 157,033
2002 29,243
2003 37,555
2004 96,024
----------
$ 524,609
==========
9
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Note 6 - CAPITALIZED LEASE OBLIGATIONS
The Company leases certain equipment under agreements classified as
capital leases. The cost and the accumulated amortization for such
equipment as of June 30, 2000 and 1999 was $90,233 and $122,609,
respectively.
The following is a schedule by years of future minimum lease payments
under capital leases of equipment together with the obligations under
capital leases (present value of future minimum rentals) as of June 30,
2000.
Years Ended
June 30,
2001 $ 21,056
2002 28,075
2003 28,075
2004 20,955
-----------
Total minimum lease payments 98,161
Less amount representing interest 8,731
-----------
Total obligations under capital lease 89,460
Less current installments of obligations
under capital leases 22,762
-----------
Long-term obligation under capital leases,
with interest rate of 9.3% $ 66,668
===========
Note 7 - CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures consist of the following:
TYPE B
Balance at September 30, 2000 $ 55,000
Interest rate 10%
Maturity Earlier of (i)-two years from
the issue date or (ii)-the
completion of a public
offering of its securities by
the Maker. These debentures
are subordinated to all
current and future bank debt.
Redemption rights If not converted the holder
may require the Company to
redeem at any time after
maturity for the principal
amount plus interest
Conversion ratio $.20 per share. During the
year ended June 30, 2000,
$305,000 of convertible
debentures were converted to
common stock.
During the three months ended September 30, 2000, $20,000 of
convertible debentures were converted.
10
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Note 8 - RELATED PARTY TRANSACTIONS
The Company entered into various employment agreements with former
executive officers and general Counsel whereby the Company was
obligated to pay a total of $565,000 a year plus benefits. All of the
employment agreements called for terms ranging from 3 - 8 years. In
addition to the employment services, the officers agree not to compete
with the Company for the two year period following the termination of
employment. If an officer is terminated other than for cause or for
"good reason", the terminated officer will be paid twice the amount of
their base salary for twelve months. During the year ended June 30,
1999, two employees were terminated and received severance pay
totaling $500,000 which was paid in shares of the company's common
stock. The employees also received options to buy 4,000,000 shares of
stock for par value or $4,000. The options were exercised July 31,
1999. The value of the options were recorded as paid in capital at
June 30, 1999 for 50% of the average price of the stock or $381,600.
Various loans are due to the officers totaling $1,244,957. In the
past, such loans have been repaid through the issuance of stock.
Various Notes Receivable from officers separately reported on the
audited Balance Sheet as of June 30, 2000, plus accrued interest
thereon, were offset against amounts due to these officers as of
September 30, 2000.
Deposits payable included an amount of $118,500 which are payable to
companies which are owned by a director of the Company.
Note 9 - EXCHANGE OF DEBT FOR COMMON STOCK
During the three-month period ended September 30, 2000, the Company
recorded an increase in common stock and additional paid-in capital of
$1,825,527 representing issuances of stock in lieu of cash payments
for debts owed. During the year ended June 30, 2000, the Company
recorded increases in common stock and paid-in capital of $389,898,
which was in recognition for the exchange of common stock for debts
owed.
Note 10 - COMMON STOCK
During the three-month period ended September 30, 2000, the Company
issued common stock to individuals in exchange for services performed
totaling $470,063. During the years ended June 30, 2000 and 1999, the
Company issued common stock to individuals in exchange for services
performed totaling $2,246,631 and $2,759,744, respectively. Included
in these amounts are payments to officers of the Company and for
present and former legal counsel in exchange for salary and consulting
in the amount of $1,115,784 and $2,210,502, respectively. Also
included in the amounts paid in stock during the year ended June 30,
1999 was an amount paid to an officer totaling $406,250 in respect of
an officer's release of rights to serve as a distributor of TCS-1
Plants in North America or to receive commissions in connection with
sales of TCS-1 Plants made by the Company in North America. The dollar
amounts assigned to such transactions have been recorded at the fair
value of the services received, because the fair value of the services
received was more evident than the fair value of the stock
surrendered.
Note 11 - STOCK OPTION
On May 19, 1995, the Company sold to a director of the Company an
option to purchase 20,000 shares of Cumulative Convertible Preferred
Stock at an exercise price of $10 per share, exercisable during the
two-year period beginning May 19, 1995, and ending May 18, 1997. The
director paid $20,000 for the option. The terms of the Preferred Stock
purchasable under the option call for cumulative cash dividends at a
rate of $1.20 per share and conversion into 2,000,000 or more shares
of common stock. The conversion to common stock ratio varies depending
on when the conversion is made. At May 29, 1997, the exercise period
was extended until May 18, 1999. During the year ended June 30, 1999,
the director exercised the option to buy 1,234,567 shares of common
stock for $40,000. The balance of these options have expired.
11
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<TABLE>
<CAPTION>
During the three-month period ended September 30, 2000, the Company
issued stock options in compensation for services rendered valued at
COMPENSATORY COMMON STOCK OPTIONS Compensation
Cost For the
Three Months
Ended
Number of Shares September 30, 2000
-------------------- ------------------
<S> <C> <C>
Balance at July 1, 2000 -- --
Stock options expiring during the
three months ended September 30, 2000 1,694,447 365,306
-------------------- ------------------
Balance at June 30, 2000 1,694,447 365,306
-------------------- ------------------
</TABLE>
An Employee Stock Option, Awards and Grants Plan was adopted in June
of 2000. In the three-month period ended September 30, 2000, the
Company issued stock options to purchase an aggregate amount of
1,694,447 shares for an aggregate of $365,306. In addition, the
Company issued 7,000,000 shares of Common Stock in the form of grants
for an aggregate of $712,343. No awards have been given to date.
Note 12 - ACQUISITION BY MERGER OF RPM INCORPORATED
During November 1997, the Company entered into a merger agreement with
RPM Incorporated ("RPM"). The Company acquired all of the assets and
liabilities of RPM by acquiring all of the outstanding common stock of
RPM in exchange for common stock in the Company on a unit for unit
basis. RPM ceased to exist following the exchange.
The assets and liabilities acquired by the Company from RPM consisted
of the proceeds from the sale of debentures as well as the debentures
of $535,000. The financing fees on the issuance of the debentures
totaling $61,755 were included in the statement of operations for the
year ended June 30, 1998. A total of 535,000 shares were issued as a
result of the merger valued at $16,050. A total of $16,050 was
received for this stock.
The Company entered into an additional agreement with the former
shareholders of RPM for a consulting agreement for a period of 5 years
expiring in June, 2002. In exchange for this consulting agreement,
3,000,000 shares of common stock were issued valued at $240,000. Other
than the consulting agreement and the issuance of the debentures, RPM
was inactive.
For accounting purposes the Company recorded the merger as a purchase
and not as a pooling of interests.
Note 13 - GOVERNMENT ASSISTANCE
The Company received financial assistance from Revenue Canada and
Revenue Quebec in the form of scientific research tax credit. During
the year ended June 30, 2000 the Company received approximately
$395,683, which has been recorded as paid in capital. During the
three-month period ended September 30, 2000, the Company recorded
additional tax credits receivable in the amount of $84,485, bringing
the reported balance of tax credits receivable from $475,221 as of
June 30, 2000 to $559,706 as of September 30, 2000.
12
<PAGE>
Note 14 - COMMITMENTS
The Company leases office and warehouse space at an annual minimum
rent of $82,000 for the first year, $169,000 for the second year and
$211,000 per year for the third through the fifth year. The lease
expires 2003. The Company is also responsible for its proportionate
share of any increase in real estate taxes and utilities. Under the
terms of the lease, the Company is required to obtain adequate public
liability and property damage insurance. The minimum future rental
payments under this lease are as follows:
June 30, Amount
-------- ----------
2001 $ 153,075
2002 204,100
2003 170,100
----------
$ 527,275
==========
Rental expense for the year ended June 30, 2000 and 1999 amounted to
$176,900 and $111,930, respectively. One of these leases contains a
second ranking moveable hypothec in the amount of $300,000 on the
universality of the corporation's moveable property.
For the three-month period ended September 30, 2000, the rent for the
factory, warehouse and office space, converted to US dollars amounted
to $58,294.
Note 15 - CONTINGENCY
The Company is involved with a lawsuit with a prior consultant. The
complaint alleged that the Company breached its consulting agreement
by failing to pay compensation due there under and sought damages in
the amount of $221,202 including interest and legal costs. The Company
filed a counter claim for fraud, breach of contact and unjust
enrichment on the part of the consultant. The Company sought relief
consisting of compensatory damages in the amount of $28,800 and
cancellation of the stock certificate issued to the plaintiff for
263,529 shares; a declaratory judgment that the consulting agreement
is of no force and effect; punitive damages; and interest and legal
costs. The Company's position is that it has viable defenses and
counterclaims respecting this lawsuit.
Note 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME
The deficit accumulated during the development stage included other
accumulated comprehensive income totaling $103,396.
Note 17 - SUBSEQUENT EVENT
Subsequent to June 30, 2000, the Company modified its agreement with
Ocean Tire Recycling & Processing Co., Inc ("OTRP") to clarify various
terms of the parties prior agreements and to obtain a commitment by
OTRP to pay future lease payments on the prototype system, if
necessary. The Company also exchanged its debt obligation to OTRP for
4,553,102 shares of its Common Stock, which was issued, pursuant to
OTRP's request, to its principal shareholder and President, as well as
other consideration, including a grant of shares to an employee of
OTRP who is also a director of the Company.
On November 2, 2000, the Chancery Court of the State of Delaware
dismissed the legal actions initiated against the Compnay by IM(2) and
David Sinclair, which suits had alleged breach of contract and fraud.
13
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of significant
factors which have affected the Company's financial position and operations
during the three month period ended September 30, 2000. This discussion also
includes events which occurred subsequent to the end of such quarter and
contains both historical and forward- looking statements. When used in this
discussion, the words "expect(s)", "feel(s)", "believe(s)", "will", "may",
"anticipate(s)" "intend(s)" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected.
The first three quarters of Fiscal 2000 were devoted primarily to the
completion of the Company's prototype TCS-1 System such that the Company would
have a demonstrable technology and thus the capability of concluding sales
agreements. While the Company would have preferred a more rapid progression to
the commercial stage, limitations on the availability of financial resources
imposed a more modest climb toward the Company's goal. It was not until the
beginning of March 2000 that the Company was in a position to state that its
tire recycling technology was ready for replication and thus commercialization.
Thus, while the Company now has a demonstrable technology to demonstrate to
potential customers, the Company nonetheless considers that it is still in the
very early stages of marketing and fabricating or arranging to have fabricated
the two versions of its patented cryogenic scrap tire recycling equipment (the
"TCS System").
The Company is still in the very early stages of the business of
organizing the manufacturing of its patented cryogenic scrap tire recycling
equipment (the "TCS System"). Management is currently negotiating potential
sales agreements and possible manufacturing agreements, the effect of which,
should negotiations be successful, would be that commencement of full-scale
commercial fabrication of TCS Systems would occur in the near future.
With respect to the US market, the Company signed a License Agreement
in November 1999 with Ocean Equipment Manufacturing and Sales Co. (OEMS) of New
Jersey for the marketing and for the manufacturing, installation and service of
Tirex tire recycling systems. This agreement covers the entire US market. The
Company will receive a royalty for each system sold, subject to adjustments
respecting actual manufacturing costs. As of November 1, 2000, OEMS had not yet
concluded any sales of TCS Systems to independent parties.
The Company has signed Memoranda of Understanding or letters of Intent
with numerous Asian and European groups outlining the intentions of the parties
to enter into purchase and sale agreements respecting TCS Systems. While the
Company is confident that purchase contracts will result from one or more of
these Memoranda, no guarantees can be given that such purchase contracts will
actually be signed or that even if signed, the Company would realize a profit
from such contracts.
Because of the lengthy delay preceding the commencement of commercial
operations, the Company has had to, and will in the near future be forced to
continue to, cover its overhead costs from sources other than revenues from
operations. As of November 1, 2000, the Company estimates that overhead costs
from July 1, 2000 until the date that adequate revenues could be generated from
operations to cover its overhead costs, will be approximately $400,000.
LIQUIDITY AND CAPITAL RESOURCES
The activities of the Company since its formation in 1987 and the
inception of its current business in 1993 have been financed by sources other
than operations. Such financing was principally provided by the sale of
securities in private transactions and by additional capital investments by
directors, officers and employees. During the three-month period which ended
March 31, 2000, directors, officers, employees and consultants made direct cash
investments into the Company for an amount of $80,690.
14
<PAGE>
As reported in previous 10-KSB filings, the Company received financial
assistance by way of loans and grants from the governments of Canada and of
Quebec, directly or through agencies thereof, for the design and development of
the TCS-1 Plant and for export market development. Briefly, they have included
the following (note that conversions to the US Dollar were made at 70(cent)
which was the approximate prevailing rate at the time such loans and grants were
received:)
<TABLE>
<CAPTION>
Actual Cash Received
-------------------------
Type of US$
Source Assistance Purpose Cdn$ Amount Equivalent
------ -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Government of Canada
Industrial Recovery Interest-free Construct $ 500,000 $ 350,000
Program for Southwest loan prototype
Montreal TCS-1
Innovation, Development Interest-free Market Study $ 20,000 $ 14,000
& Entrepreneurship Assistance loan - Iberian
Program (IDEA) (#1) Peninsula
IDEA (#2) Interest-free Market Study $ 20,000 $ 14,000
loan for India
IDEA (#3) Interest-free US market for $ 95,000 $ 66,500
loan crumb rubber
IDEA (#4) Interest-free Market $ 95,000 $ 66,500
loan development
in Iberia
IDEA (#5) Interest-free Use of crumb $ 98,000 $ 68,600
loan rubber in
thermoplastic
compounding
Government of Quebec
Recyc-Quebec Grant Construct $ 75,000 $ 52,500
prototype
TCS-1
</TABLE>
Repayment of the loans received under the Industrial recovery Program
for Southwest Montreal (IRPSWM), and the Innovation, Development &
Entrepreneurship Assistance Program (IDEA), noted above, are as per the
following table. Note that the IDEA loans designated above as #1, #2 and #4
provide for repayment as a percentage of sales; there is no fixed repayment
schedule. In each case, the percentage is used to compute an amount payable to
the Government of Canada under these loans as a function of gross sales in a
specified territory, these being the Iberian Peninsula for IDEA #2 and #4 and
India for IDEA #2. If sales do not result in the specified territories, no
repayment of the loan is required. In all three cases, the amount which results
from the multiplication of the percentages by the gross sales is capped at the
actual amount of money lent to the Company. Only IDEA #3 and IDEA #5 have fixed
repayment schedules.
The following amounts are in Canadian Dollars. US Dollar equivalents
follow using a 66(cent) equivalent which is the approximate current exchange
rate versus the Canadian dollar:
<TABLE>
<CAPTION>
Loan Now Due FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
IRPSWM $100,000 $150,000 $200,000
IDEA #3 $6,333 $12,666 $18,999 $25,333 $31,666
IDEA #5 $6,533 $13,067 $19,600 $26,133 $32,667
TOTAL (Cdn$) $106,333 $169,199 $232,066 $44,933 $57,799 $32,667
US$ equivalent $70,180 $111,671 $153,164 $29,656 $38,147 $21,560
</TABLE>
15
<PAGE>
The Company is presently negotiating with various financial and
operating companies concerning the possible investment by such companies in
Tirex. As of this date, none of those negotiations have been completed or have
resulted in a definitive agreement. Also, the Company is in discussions with a
major tire manufacturer concerning a possible working relationship, or strategic
investment by that Company into Tirex. There is no assurance that any such
relationship will be established.
Whether or not the funds, which the Company obtains from any of the
above proposed sources will be sufficient to enable the Company to reach a
profitable operating stage will be entirely dependent upon the amount of such
financing which the Company is actually able to raise and the as yet unproven
ability of the TCS System to operate continuously on a long-term commercial
basis in accordance with its anticipated performance specifications.
Any failure or delay in the Company's receipt of the proposed financing
would be directly reflected in a commensurate delay or failure in the
commencement of full-scale manufacturing and / or sales of TCS Systems. It
should be noted also that the period of time during which any funds raised will
be available to cover normal overhead costs could be significantly reduced if
the Company is required to make substantial, presently unanticipated,
expenditures to correct any further flaws or defects in the design or
construction of the TCS System, which could manifest themselves over the next
several months. Given the early stage of the transition of the Company from that
of a developmental stage company to a fully commercial stage operation, it is
impossible at this time to estimate with any certainty the amount of incoming
cash flow from operations, if any, during the next twelve months.
In order for the Company to continue to pay its general and
administrative expenses in the future, it must raise funds from the sale of
securities, receive loans from its officers and directors, or obtain financing
from other sources. In order to conduct further research on its existing or
future products, it will continue to depend principally on various governmental
financing assistance programs.
In the event that the Company does not succeed in the private sale of
securities, nor that an investment from a strategic alliance partner is
received, 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.
In the event that there is a failure in any of the finance-related contingencies
described above, the funds available to the Company may not be sufficient to
cover the costs of its operations, capital expenditures and anticipated growth
during the next twelve months. In such case, the Company may wish to raise funds
through a public offering, which would require it to locate a broker-dealer,
willing to underwrite a public offering of the Company's securities. At this
time, the Company is not able to give any assurances that, in such event, it
will be successful in locating an underwriter or that its efforts will
ultimately result in a public offering. If the proceeds from the above described
potential sources of funding should be insufficient for the Company's
requirements and it is not able to effect a public offering of its securities
within the next twelve months, or find other sources of alternate funding, the
Company's financial position and its prospects for developing a profitable
business operations would be materially adversely affected. The Company does not
presently have the funds necessary to manufacture any of its TCS-1 systems and
must therefore depend on potential customers or other financial sources for such
working capital. Also, at present the Company does not have the funds on hand
required to defray the administrative expenses expected to be incurred in fiscal
year 2001.
As at September 30, 2000, the Company had total assets of $3,234,812 as
compared to $4,435,305 at September 30, 1999 reflecting a decrease of
$1,200,493, and a decrease of $52,572 versus total assets as of the last fiscal
year-end, June 30, 2000, which total amounted to $3,287,384. Management
attributes the decrease from September 30, 1999 to September 30, 2000 primarily
to the following factors: (i) a decrease of $519,919 in Tax Credits Receivable
from the balance as of September 30, 1999 in the amount of $1,079,625 to the
September 30, 2000 balance of $559,706, and (ii) a reduction of prepaid expenses
and deposits from the balance as of September 30, 1999 in the amount of $555,313
to $103,074 as of September 30, 2000, a decrease of $452,239. The reduction in
total assets of $52,572 from June 30, 2000 to September 30, 2000 is primarily
attributable to the reduction in accounts and notes receivable from $129,431 as
of June 30, 2000 to $11,446 as of September 30, 2000, a difference of $117,985,
reflecting the offset of certain receivables against current payables to the
same persons. The reduction in accounts and notes receivable was offset by an
16
<PAGE>
increase in tax credits receivable in the amount of $84,485, the difference from
the June 30, 2000 balance of $475,221 versus the September 30, 2000 balance of
$559,706. This increase in tax credits receivable reflects the continuing
commitment of the Company to its research and development efforts.
As of September 30, 2000, the Company had total liabilities of
$3,060,246 as compared to $3,952,008 at September 30, 1999, reflecting a
decrease in liabilities of $891,762. Total liabilities as of the end of June 30,
2000 (Fiscal 2000) were $4,121,223 which is $1,060,977 greater than the
$3,060,246 balance as of September 30, 2000. The difference in total liabilities
between September 30 1999 and June 30, 2000 reflected a marginal increase of
$169,215. The decrease of $1,060,977 occurred during the three-month period
ended September 30, 2000 and was almost entirely reflected by the decrease in
amounts due to officers in the amount of $848,997, from the balance as of June
30, 2000 in the amount of $2,093,954 to the September 30, 2000 balance of
$1,244,957. This reduction was the result of conversions of debt obligations
into common stock.
Reflecting the foregoing, the financial statements indicate that as at
September 30, 2000, the Company had a working capital deficit (current assets
minus current liabilities) of $411,726 and that as at September 30, 1999, the
Company had a working capital deficit of $560,876. The difference in the working
capital deficit from September 30, 1999 to September 30, 2000 thus shows a
reduction of $149,150, most of which can be attributed to a reduction in notes
payable.
The Company currently has only limited material assets and very limited
liquidity. The success of the Company's tire recycling equipment manufacturing
business, and its ability to continue as a going concern will be dependent upon
the Company's ability to obtain adequate financing to commence profitable,
commercial manufacturing and sales activities and the TCS-1 Plant's ability to
meet anticipated performance specifications on a continuous, long term,
commercial basis.
RESULTS OF OPERATIONS
As noted above, the Company is presently in the very early stages of
the business of manufacturing and selling TCS-1 Plants. The Company intends to
begin manufacturing TCS Systems on commercial basis imminently, upon the
eventual receipt of a firm purchase order. The Company had $390,848 of gross
sales during Fiscal 1999, but, with the halting of operations in the rubber mat
molding, the Company has not generated any gross sales during Fiscal 2000.
Unless and until the Company successfully develops and commences TCS System
manufacturing and sales operations on a full-scale commercial level, it will
continue to generate no or only limited revenues from operations. Except for the
foregoing, the Company has never engaged in any significant business activities.
The financial statements which are included in this Report reflect
total general and administrative expenses of $430,957 for the three-month period
ended September 30, 2000 versus $335,654 for the same three-month period ended
September 30, 1999, reflecting an increase of $95,303. The primary reasons for
this increase relate to increased personnel expenses related to the Company's
efforts to properly establish and position itself for full commercial scale
manufacturing and to issuances of shares in lieu of cash to consultants for
assistance in establishing the marketing and manufacturing capability of TCS
Systems.
Management believes that the amounts accrued to date in respect of the
shares issued to compensate the executive officers and consultants reflect the
fair value of the services rendered, and that the recipients of such shares
accepted such shares at a discount from the then current market price.
Management believes that the discount is warranted due to the fact that there
are often restrictions on the transfer of said shares arising out of the absence
of registration, and the uncertainty respecting the Company's ability to
continue as a going concern.
From inception (July 15, 1987) through March 31, 2000, the Company has
incurred a cumulative net loss of $21,336,304. Approximately $1,057,356 of such
17
<PAGE>
cumulative net loss was incurred, prior to the inception of the Company's
present business plan, in connection with the Company's discontinued proposed
health care business and was due primarily to the expending of costs associated
with the unsuccessful attempt to establish such health care business. The
Company never commenced its proposed health care operations and therefore,
generated no revenues therefrom.
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On November 2, 2000, the Chancery Court of the State of Delaware
dismissed the legal actions initiated against the Company by IM2 and David
Sinclair Insert IM2, which suits had alleged breach of contract and fraud.
The Company is involved with a lawsuit with a prior consultant. The
complaint alleged that the Company breached its consulting agreement by failing
to pay compensation due there under and sought damages in the amount of $221,202
including interest and legal costs. The Company filed a counter claim for fraud,
breach of contact and unjust enrichment on the part of the consultant. The
Company sought relief consisting of compensatory damages in the amount of
$28,800 and cancellation of the stock certificate issued to the plaintiff for
263,529 shares; a declaratory judgment that the consulting agreement is of no
force and effect; punitive damages; and interest and legal costs. The Company's
position is that it has viable defenses and counterclaims respecting this
lawsuit.
18
<PAGE>
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
"During the first quarter of fiscal 2001, a total of 12,310,364 shares
were issued. Of this number, 3,234,789 shares were issued in lieu of salaries
and consulting fees"; 121,000 shares were issued pursuant to debenture
conversion rights; 8,502,438 shares were issued in exchange for outstanding loan
obligations 400,000 shares were issued in consideration for the settlement of a
legal dispute and 52,137 shares were issued to a Director in lieu of cash
reimbursement for Company expenses paid by that Director. The total of all these
shares issued during the three months ended September 30th was 12,310,364. All
but 305,226 shares of the total number issued of 12,310,364 were issued either
under the Company Stock Option Plan or under an S-8. The 305,226 shares were
issued with a restrictive legend.
BASIS FOR SECTION 4(2) EXEMPTION CLAIMED
Except for 11,484,138 shares registered pursuant to Form S-8, all other
shares of common stocks issued by the Registrant were issued in reliance on an
exemption from the registration requirements of Section 5 of the Securities Act
of 1933 reason of Section 4(2) of that Act.
SHARE ISSUANCES DURING THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000
NUMBER OF
PERSONS REASON FOR ISSUANCE SHARES ISSUED
6 In lieu of salaries and consulting fees 2,456,029
5 In lieu of independent consultant fees 451,804
1 To Corporate Counsel for fees 379,093
0 For goods and services received nil
2 Debenture conversions including interest 121,000
4 In lieu of loan repayments 8,502,438
1 Settlements (BHA) 400,000
19 TOTAL 12,310,364
Subsequent to September 30 and through November 1, 2000 a total of
450,053 additional shares of common stock were issued to the Company's President
John Threshie in lieu of unpaid compensation and in for consideration for loans
made by Mr. Threshie to the Company, and to a technical consultant under the
terms of his consulting contract.
The total number of shares issued and outstanding as of November 8,
2000 is 163,893,594
BASIS FOR SECTION 4(2) EXEMPTION CLAIMED
With respect to all sales and other issuances of securities as
hereinabove described, which Registrant claims to have been exempt from the
registration requirements of Section 5 of the Securities Act by reason of
Section 4(2) thereof:
(i) Registrant did not engage in general advertising or general
solicitation and paid no commission or similar remuneration, directly
or indirectly, with respect to such transactions.
(ii) The persons who acquired these securities were executive officers and
directors, or employees of the Registrant, all of whom are
19
<PAGE>
sophisticated investors; Such persons had continuing access to all
relevant information concerning the Registrant and/or have such
knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of such investment and
are able to bear the economic risk thereof.
(iii) The persons who acquired these securities advised Registrant that the
Shares were purchased for investment and without a view to their resale
or distribution unless subsequently registered and acknowledged that
they were aware of the restrictions on resale of the Shares absent
subsequent registration and that an appropriate legend would be placed
on the certificates evidencing the Shares reciting the absence of their
registration under the Securities Act and referring to the restrictions
on their transferability and resale.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
During the period January 7, 1998 through May 11, 1998, the Company
issued an aggregate of $535,000 of convertible, subordinated debentures bearing
interest at the rate of 10% which are due two (2) years from their respective
dates of issuance. Interest thereon was due and payable semi-annually commencing
six months from the issuance date of such debentures. As of November 1, 2000,
the Company was in arrears on interest payments accrued on outstanding
debentures having a principal amount of US$55,000, since their issuance. On
debentures converted since December 1999, interest was capitalized and thence
converted into equity.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In accordance with the Delaware General Corporation Law, Section
228(a), on July 9, 1998, the holders of record of approximately 50.7% of the
issued and outstanding shares of common stock, $.001 par value, of the issuer,
in person or by proxy, by their consent in writing authorized, approved and
adopted a resolution respecting the amendment of the issuer's certificate of
incorporation. Pursuant thereto, effective July 10, 1998, the Certificate of
Incorporation of the Company was amended to increase the amount of capital stock
of the Company from 69,900,000 shares of Common Stock, par value $.001 per share
and 100,000 shares of Open Stock, par value $.001 per share; to 115,000,000
shares of Common Stock, par value $.001 per share and 5,000,000 shares of Class
A Stock, par value $.001 per share. The Board of Directors has the power to
designate the Class A Stock in one or more classes and/or series, with such
rights and preferences as the Board of Directors shall determine. In January of
the Year 2000, following approval in December 1999 by more than 50% of the
shareholders, and in accordance with the Delaware General Corporation Law, the
Company's charter was amended to increase the authorized number of shares to
165,000,000, par value $0.001.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
THE TIREX CORPORATION
Date: November 14, 2000 By /s/ JOHN L. THRESHIE, JR.
--------------------------------------
John L. Threshie, Jr. President
Date: November 14, 2000 By /s/ MICHAEL ASH
--------------------------------------
Michael Ash, Treasurer and
Chief Accounting and Financial Officer
20
