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
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
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
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
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