SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

         [X]      Annual  report  under  Section  13 or 15(d) of the  Securities
                  Exchange Act of 1934
 
                  For the fiscal year ended June 30, 1998

         [ ]      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
                 (Name of Small Business Issuer in Its Charter)

               Delaware                                 22-3282985
      (State or Other Jurisdiction of                 (I.R.S. Employer
       Incorporation or Organization)                Identification No.)

             740 St. Maurice
             Montreal, Quebec                             H3C 1L5
(Address of Principal Executive Offices)                 (Zip Code)

                                 (514) 878-0727
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                     Name of Each Exchange
         Title of Each Class                          on Which Registered
         -------------------                         ---------------------
                NONE                                          NONE

         Securities registered under Section 12(g) of the Exchange Act:

                                      NONE

      Check  whether the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the Company was required to file such reports), and (2)
has been subject to such filing  requirements  for the past 90 days.  Yes [ ] No
[X]

      Check if there is no disclosure  of delinquent  filers in response to Item
405 of  Regulation  S-B  contained in this form,  and if no  disclosure  will be
contained,  to the  best of the  Company's  knowledge,  in  definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]


<PAGE>

                                    $880,000

               (Issuer's revenues for its most recent fiscal year)

                      $10,353,194 (as of February 4, 1999)
                (Aggregate market value of the voting stock held
                        by non-affiliates of the Issuer)

                       78,095,141 (as of February 4, 1999)
 (Number of shares outstanding of each of the Issuer's classes of common stock,

         Transitional Small Business Disclosure Format (check one)
         Yes [ ]  No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE
                                   into Part I

                 Registration statement on Form S-18, as amended
                              File No. 33-17598-NY

                 Registration statement on Form SB-2, as amended
                               File No. 333-53255

                  Annual Report on Form 10-K of the Company for
                        the year ended December 31, 1988

                  Transition Report on Form 10-K of the Company
                            for the transition period
                      January 1, 1989 through June 30, 1989

                 Annual Reports on Forms 10-K of the Company for
                            the years ended June 30,
                       1989, 1990, 1991, 1992, 1993, 1994

                  Annual Report of Forms 10-KSB of the Company
                for the years ended June 30, 1995, 1996 and 1997

                Quarterly Reports of Forms 10-QSB of the Company
          for the quarters ended September 30, 1997, December 31, 1997,
                               and March 31, 1998

                   Current Reports on Forms 8-K of the Company
            Dated July 11, 1997, February 3, 1998, May 27, 1998, and
                               September 14, 1998


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ITEM 1.  DESCRIPTION OF BUSINESS

Business Development

      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 (see  "Existing and Proposed
Businesses - Equipment Manufacturing"). 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 (see "Existing and Proposed  Businesses - Proposed
TCS-1  Plant  Operations:  Sales of  Rubber  Crumb and  Manufacture  and Sale of
Finished Products").

      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 to Tirex Canada R & D Inc.  (hereinafter  referred to as "Tirex
R&D").  The purpose of these  changes was to transfer all  business  

---------
(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.


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<PAGE>

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
tirexcorp@aol.com.

      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 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.

      Absent any reference to "Canadian",  "Cdn", or any other variant  thereof,
all dollar amounts shown  throughout  this Report are in United States  dollars.
Whenever any dollar amount has been translated from 

---------
(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.


                                       4
<PAGE>

Canadian  dollars into United States  dollars or  vice-versa,  the exchange rate
used was one Canadian  dollar (Cdn $1.00) for every United States  seventy cents
(US$0.70).  This was the approximate  average exchange rate in effect during the
course of the fiscal year ended June 30, 1998. As of the close of the applicable
international currency market on February 19, 1999, the quoted exchange rate was
one Canadian dollar  (Cdn$1.00) for every United States sixty-six and thirty-six
one hundredths cents (US$0.6636)

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  March 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 67.5% of the  closing  bid  price of the  Company's  common
stock,  as traded in the  over-the-counter  ("OTC") market and quoted in the OTC
Electronic Bulletin Board of the NASD, on the trading date immediately preceding
the 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  


                                       5
<PAGE>

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 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.


                                       6
<PAGE>

      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  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  


                                       7
<PAGE>

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
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 


                                       8
<PAGE>

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.

Existing and Proposed Businesses

Canadian Operations

      The  governments of Canada and Quebec,  have officially  acknowledged  the
pivotal  role  played by business  investment  in research  and  development  in
insuring  sustained  economic  growth  and  long-term  prosperity.  In  order to
encourage such  activities,  the Government of Canada,  on a national basis, and
the Government of Quebec,  on a provincial  basis,  support private research and
development  initiatives  through  the  provision  of  scientific  research  tax
incentives to businesses and individuals. As a result of the combined efforts of
both levels of  government,  Quebec offers the most generous tax  incentives for
research and development programs of which the Company is aware.

      In May of 1995, in order to take advantage of such financial incentives in
connection with the research and development  work on the first production model
of the TCS-1 Plant,  the Company formed a Canadian  corporation,  3143619 Canada
Inc.  (formerly  referred to as "Tirex  Canada  Inc.").  On June 3, 1998,  Tirex
Canada  Inc.'s  name was  changed to Tirex  Canada R&D Inc.  and is  hereinafter
referred to as "Tirex  R&D".  On April 22,  1998,  the  Company  formed a second
Canadian  corporation,  3477584  Canada  Inc.,  the name of which was changed to
Tirex  Advanced  Products  Quebec  Inc  on  June  3,  1998  ("TAP").  TAP  is  a
wholly-owned  subsidiary of The Tirex Corporation and is presently  dormant.  On
June 1,  1998,  the  Company  formed a third  Canadian  corporation,  "The Tirex
Corporation Canada Inc.",  referred to herein as "TCCI".  TCCI is a wholly-owned
subsidiary  of  The  Tirex  Corporation.  The  purpose  of the  above  described
corporate  formations  and name  changes was to position the Company to dedicate
Tirex R&D's activities solely and exclusively to research and development and to
establish TCCI as the Company's manufacturing arm.


                                       9
<PAGE>

      To qualify for Canadian  Government  grants and tax  benefits,  the record
owners  of 51% of the  issued  and  outstanding  capital  stock of Tirex R&D are
Terence C. Byrne, chairman of the board of directors and chief executive officer
of The Tirex  Corporation and Louis V. Muro, vice president of engineering and a
member of the board of  directors  of The  Tirex  Corporation,  both of whom are
Canadian residents. Terence C. Byrne also serves as the chairman of the board of
directors and the chief executive  officer of Tirex R&D while Louis V. Muro also
serves as a vice president and a director of Tirex R&D. The Tirex Corporation is
the record  holder of the balance of 49% of the issued and  outstanding  capital
stock of Tirex R&D. Messrs. Byrne and Muro hold their Tirex R&D shares under the
terms of the shareholders agreement,  dated July 3, 1995, as amended February 2,
1996 and August 27,  1997 (The  "Tirex R&D  Shareholder  Agreement")  which will
require them to transfer all such shares to the Company for no  compensation  in
2001 or earlier under certain circumstances.

The Tirex R&D License

      Tirex R&D holds an  exclusive,  ten year license  from the Company,  which
expires on July 2, 2005, to design,  develop, and manufacture the TCS-1 Plant in
North America (the "Primary License").  The terms of the Primary License provide
that Tirex R&D may  manufacture  TCS-1 Plants only upon and pursuant to specific
purchase orders issued by The Tirex Corporation and requires that Tirex R&D sell
all TCS-1 Plants which it  manufactures  exclusively  to, or as directed by, The
Tirex Corporation. To the extent necessary to insure that Tirex R&D's operations
are  limited  to pure  research  and  development  activities,  Tirex  R&D  will
sublicense  the Primary  License to TCCI.  Unless context  necessarily  requires
otherwise, the terms of the sublicense will be identical to those of the Primary
License.  To the extent  necessary  to achieve the  aforesaid  goals,  all other
contracts to which Tirex R&D is a party,  will be transferred  and assigned,  in
whole or in part,  from Tirex R&D to TCCI, The Tirex  Corporation,  or any other
existing  or  future  subsidiary  or  affiliate  of The  Tirex  Corporation,  as
management shall determine.

Canadian Government and Government Sponsored Financial Assistance

      The  Company's  May 1995  transfer of its  research  and  development  and
manufacturing  activities to Tirex R&D (then referred to as "Tirex Canada") made
the Company eligible for various Canadian and Quebec  government  programs which
provide loans, grants, and tax incentives,  as well as government guarantees for
loans from private lending institutions,  for eligible investment,  research and
development, and employee-training activities.

      The financial  assistance  which the Company received under these programs
is discussed briefly below, under the subcaptions "Tax Incentives" and "Canadian
Government  and  Government  Sponsored  Loans and Grants".  A discussion in more
detail  of the  terms  and  provisions  of  these  various  types  of  financial
assistance,  which the Company  received,  is included in Item 6 of this Report,
"Management's Discussion and Analysis".

Tax Incentives

      Canadian and Quebec tax  incentives  take the form of  deductions  and tax
credits with respect to eligible research and development  expenditures of Tirex
R&D. Certain tax credits are called "refundable"  because to the extent that the
amount  of the tax  credit  exceeds  the  taxes  payable,  they are paid over or
"refunded" to the taxpayer.  Thus such credits function  effectively as monetary
grants.  To qualify for such tax credits,  research and  development  activities
must comprise  investigation or systematic  technological or scientific research
conducted  through pure or applied  research,  undertaken to advance science and


                                       10
<PAGE>

develop  new  processes,  materials,  products  or devices or to  enhance,  even
slightly, existing processes, materials, products, or devices.

Canadian Government, and Government Sponsored Loans and Grants

      The Company has also  received  financial  assistance  by way of loans and
grants from Quebec  governmental  agencies for the design and development of the
TCS-1 Plant and for export market  development.  The terms and conditions of the
government and government sponsored loans and grants obtained by the Company are
discussed  in Item 6 of this  Report  "Management's  Discussion  and  Analysis".
Briefly, they have included the following:

      $500,000  (Canadian)  Regional  Development  Loan  From  Canadian  Federal
Government.  In March of  1996,  the  Company  qualified  for an  interest-free,
unsecured  loan (the "FORDQ Loan") in the amount of CA $500,000,  (approximately
US $350,000)  from the  Canadian  federal  government  agency,  Canada  Economic
Development for Quebec Regions  ("CEDQR"),  formerly known as The Federal Office
for Regional Development-Quebec  (sometimes referred to herein as "FORDQ") under
its Industrial Recovery Program for Southwest Montreal, which is administered by
CEDQR. The purpose of the government program, under which this loan was made, is
to encourage industrial  development in Southwest Montreal,  where the Company's
corporate headquarters and its manufacturing facility are located.

      $75,000   (Canadian)  Grant  From  La  Societe  Recyclage   Quebecoise  de
Recuperation  et de Recyclage  ("Recyc  Quebec").  In April of 1997, the Company
qualified for a grant from Societe  Quebecoise de  Recuperation  et de Recyclage
("Recyc-Quebec"),  a  self-financed  State  owned  corporation  which  promotes,
develops,  and  supports  the  reduction,  reuse,  recovery,  and  recycling  of
containers,  packaging materials or products,  as well as their  transformation,
from a resource conservation perspective.  Under its mandate,  Recyc-Quebec will
provide financial aid for tire recycling projects.  The purpose of this grant to
the  Company was to support the design,  development,  and  construction  of the
first TCS-1 Plant.

      Loans From the Canadian Federal Office of Regional Development - Quebec
("FORDQ"). FORDQ's Program for the Development of Quebec's IDEA Program provides
loans in amounts of up to 50% of approved  expenditures made by the borrower for
the purpose of identifying and developing export markets for Canadian  products.
Under  this  program,  the  Company  has had its  application  approved,  and or
obtained, a total of five loans under this program, as follows:

      (a)   On January 16, 1997, the Company  qualified for a loan, in an amount
            equal to 50% of approved  expenditures,  up to a maximum loan amount
            of $20,000 Canadian  (approximately $14,000 U.S.) for a Market Study
            respecting the  feasibility of marketing TCS-1 Plants in the Iberian
            Peninsula.  Such study  (the  "Iberian  Report")  was done by Gapco,
            Inc., a corporation  controlled  by Alan  Crossley,  who  thereafter
            became the Company's Director of European Marketing. As compensation
            therefor Mr.  Crossley  received an  aggregate  of $40,000  Canadian
            consisting of a combination of cash and stock.  The stock portion of
            such  compensation  was paid on May 29,  1997 with the  issuance  of
            84,658 shares of the Company's  common stock. Mr. Crossley was until
            February  11, 1999,  a director of the  Company.  In July 1997,  Mr.
            Crossley  was  appointed  as  the  Company's  Managing  Director  of
            European   Market    Development   (see   "Existing   and   


                                       11
<PAGE>

            Proposed Businesses").  The Iberian Report is discussed below in the
            subtopic  "Marketing and Distribution - Combined Segments" under the
            caption, "Marketing Activities".

      (b)   On April 1, 1997,  the Company  qualified  for a loan,  in an amount
            equal to 50% of approved  expenditures,  up to a maximum loan amount
            of $20,000 Canadian  (approximately $14,000 U.S.) for a Market Study
            respecting the feasibility of marketing TCS-1 Plants in India.  Such
            study (the "Indian  Report") was done by Gapco,  Inc., a corporation
            controlled by Alan Crossley. As compensation  therefor, the Company,
            paid Mr. Crossley $40,000 Canadian.

      (c)   On July 7, 1997,  the  Company  qualified  for a loan,  in an amount
            equal to 50% of approved  expenditures,  up to a maximum loan amount
            of  $95,000  Canadian   (approximately   $66,500  U.S.)  for  market
            development  activities  in the  United  States  markets  for rubber
            crumb.  The  proceeds  of this loan  were  used to pay for  research
            activities  respecting the potential market in the United States for
            TCS-1  Plants  and for the  rubber  crumb  that  is  expected  to be
            produced  thereby ("Tirex Rubber Crumb").  The nature and results of
            these activities are discussed below in the subtopic  "Marketing and
            Distribution - Combined  Segments" under the subcaption,  "Marketing
            Activities".

      (d)   On June 10, 1997,  the Company  qualified  for a loan,  in an amount
            equal to 50% of approved  expenditures,  up to a maximum loan amount
            of $95,000 Canadian  (approximately $66,500 U.S.) for Iberian market
            development  activities related to positioning the company to market
            TCS-1  Plants,  rubber  crumb,  and related  products in the Iberian
            Peninsula.  The  activities  conducted in this regard are  discussed
            below  in  the  subtopic  "Marketing  and  Distribution  -  Combined
            Segments" under the subcaption, "Marketing Activities".

      (e)   On March 11, 1998,  the Company  qualified  for a loan, in an amount
            equal to 50% of approved  expenditures,  up to a maximum loan amount
            of $98,000 Canadian  (approximately  $68,600 U.S.) for international
            market development activities, which the Company used to explore the
            feasibility  of  using  rubber  crumb  in  thermoplastic   elastomer
            compounds in the United States and Canada. The activities  conducted
            in this regard are discussed  below in the subtopic  "Marketing  and
            Distribution - Combined  Segments" under the subcaption,  "Marketing
            Activities".

Tirex Advanced Products Manufacturing Activities

      The Company  intends to  establish  and operate its first  proposed  Tirex
Advanced  Products  manufacturing   activities  at  its  Montreal  research  and
development and assembly facility. It is the intention of the Company that these
operations  will be conducted,  exclusively,  or on a joint venture basis with a
third party, through the Company's  wholly-owned Canadian subsidiary,  TCCI (see
"Existing and Proposed  Businesses - Proposed TCS-1 Plant  Operations:  Sales of
Rubber Crumb and Manufacture and Sale of Finished Products").


                                       12
<PAGE>

Equipment Manufacturing

Product:  The TCS-1 Plant

      The TCS-1  Plant  comprises a complete,  turn-key,  environmentally  safe,
cryogenic tire recycling plant system designed to: (i) disintegrate scrap tires,
using  substantially  less energy than is required by existing  ambient  methods
(which  shred and/or chop tires at  "ambient"  or normal room  temperatures)  or
other currently available cryogenic methods (which reduce the temperature of the
materials  for at least a  portion  of the  process,  but  which  still  rely on
chopping and/or shredding the tire), and (ii) produce commercially  exploitable,
high  quality,  clean rubber  crumb and  unshredded  steel and fiber.  All major
components of the first  full-scale TCS-1 Plant (the "First  Production  Model")
were successfully tested and were operational on a non-continuous  running basis
by May 1998.  In  mid-June  1998,  the  Company  initiated  the second  stage of
testing,  which  consisted of testing all major  components and all functions of
the First Production Model, individually, on a continuous running basis. Results
of second stage tests, as at September, 1998 indicated that approximately 85% of
the TCS-1 Plant  components  met all of the  Company's  specifications  and that
modifications  were  required in certain  components  in order for the  complete
Plant  to  operate  fully  in  accordance  with  the  Company's  specifications.
Continuous  testing  of the Plant  components  also  enabled  Tirex to  identify
opportunities  to increase the TCS-1 Plant's cost and operating  efficiency.  In
September 1998, the Company retained the Montreal  engineering firm of Beaudoin,
Hurens and Associates,  Inc.  ("BHA") to: (i) prepare and/or finalize all design
and  engineering   drawings,   operation  and  technical   manuals,   and  other
documentation   respecting  the  TCS-1  Plant;  and  (ii)  make  an  independent
engineering  assessment  of Tirex's  findings  from its first and  second  stage
testing of the TCS-1 Plant to verify and  authenticate the  modifications  which
were required to bring the Plant into full compliance with projected performance
specifications.  BHA  assisted  the  Company in  implementing  all  required  or
recommended  changes and will serve as  engineering  project  manager during the
final stage of preparation for full scale commercial operations. The Company has
also retained Plasti-Systemes Inc. of Montreal to do all mechanical fabrications
required during this final stage of the project. The required modifications were
completed subsequent to the period covered by this Report in December of 1998 on
a single  fracturing  mill and a single  freezing tower in the First  Production
Model.  Completion of the second fracturing mill and freezing tower,  which will
be included therein, is scheduled to occur in April of 1999. Present estimations
for  commencement of full scale  commercial  manufacture of TCS-1 Plants are now
projected  for  March of 1999.  For a  discussion  of the  associated  costs and
financing  of  the  above,   reference  is  made  to  Item  6  of  this  Report,
"Management's Discussion and Analysis

      The functions and mechanisms of the TCS-1 Plant have been designed for the
exclusive purpose of disintegrating  automobile and truck tires, which basically
consist of the following elements:

      *     Two types of  rubber.  The  sidewalls  of tires are  constructed  of
            material  containing a higher  percentage of natural,  as opposed to
            synthetic,  rubber which is used in the treads.  The TCS-1 Plant has
            been designed to take  advantage of these  differences  to produce a
            separate rubber powder reclaimed exclusively from the sidewalls.

      *     Steel beads,  which consist of steel wires tightly wound together to
            a diameter of approximately 3/8 of an inch. These beads are imbedded
            around  the  rims  of  the  tire  treads;  

      *     Steel belting,  which  incorporates a thin layer of steel wires laid
            out in a  "herring  bone"  pattern  and which  underlies  the entire
            surface  of  the  tread  area,   and  

      *     Fiber threads which are incorporated into the rubber used throughout
            the tire.


                                       13
<PAGE>

Economy, Functions, Operations, and Capabilities

      The TCS-1 Plant has been  designed to operate  continuously  (with minimum
amounts of downtime for maintenance), to consume approximately 6.50 kilowatts of
power, and is designed to require substantially less energy than is used, to the
best of the Company's  knowledge,  by other  presently  existing tire  recycling
equipment. The TCS-1 Plant is expected to be able to process both automobile and
truck  tires  at a  rate  equivalent  to  180  passenger  tires  per  hour  on a
continuous,  commercial  operations basis. To date, the Company has succeeded in
operating the TCS-1 Plant 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.  Results  of  operations  to date  indicate  that the  TCS-1  Plant is
presently  capable  of  processing  passenger  car  tires at a rate of three per
minute.

      The following discussion of the functions, operations, and capabilities of
the TCS-1 Plant are based upon engineering  design plans and  specifications and
first and second  stage test  operations  of the first  production  model of the
TCS-1  Plant.  This  discussion  assumes  that the TCS-1 Plant will  function in
accordance with projected performance specifications on a continuous, long term,
commercial  operating  basis.  There can however be no assurance,  at this time,
that the  foregoing  assumptions  will  prove to be  correct  when the  Plant is
operated over extended periods of time on a commercial basis.

Step-by-Step Operations

      The projected  step-by step  operations of the TCS-1 Plant will  encompass
the following:

      (a)   The two  sidewalls  will be cut off and the  tread  will be cut into
            lengths of about one foot. (The sidewalls will be kept separate from
            the tread sections throughout the process).

      (b)   The two steel  beads  which are  contained  within each tire will be
            pulled out;

      (c)   Sidewall  and tread  sections  will  automatically  be  placed  onto
            separate  conveying systems which will then feed them into the TCS-1
            Plant's freezing chambers through separate air locks.

      (d)   The  frozen   sections   will  then  pass   through   two   patented
            disintegrators  ("Fracturing  Mills")  where the  sidewall and tread
            rubber  will  be  reduced  to  two  separate  coarse  powders.  This
            operation   will   not   involve   any   chopping,   shredding,   or
            hammer-milling.  Therefore,  the  steel  wires  will  not  be cut or
            broken.  The fiber  threads  will  retain  their  basic  shapes  and
            characteristics. No steel powder or fiber fluff will be produced.

      (e)   The  steel  wires  will be  magnetically  removed  from  the  rubber
            powders.

      (f)   The fiber  and  rubber  powder  will be passed  through  screens  to
            separate the powder from the fiber  threads.  The fiber threads will
            then be conveyed out of the machine to a fiber baler.

      (g)   The rubber powders will then be conveyed out of the TCS-1 Plant.

      (h)   70% of the  rubber  powders  yielded  by the TCS-1  Plant  will pass
            through a ten mesh screen.  Supplementary  grinders will be supplied
            for customers  desiring finer powders which can pass through 40 mesh
            or 80 mesh screens.


                                       14
<PAGE>

Comparison  of the Projected TCS-1 Plant
  With Other, Existing Tire Recycling Equipment

      There are two types of tire  disintegration  processes  in use today which
produce rubber powder,  normally  referred to as "crumb";  cryogenic systems and
"ambient" systems.  Management  believes that the TCS-1 Plant will have distinct
advantages over existing  systems,  as set forth in the comparisons  below.  All
references  to  "existing  conventional  cryogenic  and ambient  systems" are to
technologies which are widely available and known throughout the industry.  Such
technologies include all mechanical,  commercially  feasible tire disintegration
systems of which the Company has  knowledge.  There can be no assurance  however
that one or more new  technologies,  or improvements  to existing  technologies,
presently  unknown to  management,  has not,  or in the near  future,  will not,
become available.  While it is conceivable that new technological  breakthroughs
could  provide  benefits  and  advantages  equal  to or  exceeding  those of the
projected  TCS-1 Plant,  at this time, the Company is not aware of any such tire
disintegration system or technology.

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

Methods

Except for a small  number of recyclers  who remove the steel beads first,  most
conventional  cryogenic and ambient  systems used today to produce  rubber crumb
feed whole tires into chopping, shredding,  grinding, or pulverizing mechanisms,
or a combination of any two or more of such mechanisms.  Because the entire tire
is subject to these  operations,  the steel  which makes up the beads as well as
the steel wires embedded in the belting and the fiber components of the tire are
also chopped,  shredded,  and ground. In both conventional cryogenic and ambient
systems, this initial chopping and shredding is effected at ambient temperatures
(normal  climatic  conditions).  Tires,  however,  are  designed to be tough and
durable at these temperatures. The difficulty in chopping or shredding the tires
at these  temperatures  is  compounded  by the fact that all of the steel in the
tire is also being chopped and shredded.

                                    Projected
                                      TCS-1
                                     System

Methods

The projected TCS-1 Plant will be designed to remove and salvage the steel beads
of the tire before any other operation is commenced.  Disintegration of the tire
will be  accomplished  solely by the  exertion  of  pressure,  in a  proprietary
manner, on frozen rubber. This disintegration process will take place only after
the tire sections  have been cooled to a temperature  between 90 and 100 degrees
below zero,  fahrenheit,  at which point the material  will take on a glass-like
brittleness.  At no point in the process will the steel or fiber  components  be
subjected to any chopping, shredding,  grinding, or pulverizing procedures which
would destroy the basic  integrity of their  respective  wire-like and cord-like
configurations.


                                       15
<PAGE>

Equipment, Energy and
  Maintenance Requirements

Because of the  toughness  of rubber at ambient  temperatures  and the fact that
steel,  as well as the rubber and fiber,  are being  chopped or  shredded,  very
large and powerful  equipment  and the  application  of  substantial  amounts of
energy are required to tear tires apart using conventional  cryogenic or ambient
systems.  Moreover,  since  tires  are so tough  and  durable,  they  have to be
shredded in stages.  The stages  typically  include:  (i) initial  shredding  to
reduce  the tire to  strips of about 2 x 6 inches;  (ii) a second  shredding  to
reduce such strips to pieces  approximately 1 x 2 inches in size;  (iii) a third
stage which further reduces the material to pieces of  approximately  1/8 to 1/2
inches in size; and a fourth  shredding  operation which yields a coarse powder.
The foregoing  shredding  operations will consume a total of  approximately  one
thousand  horsepower  or  more.  Because  of  the  foregoing  requirements,  the
machinery which is used to construct  conventional  cryogenic or ambient systems
has more bulk than the TCS-1  Plant.  Moreover,  there is great wear and tear on
the cutting  edges of the chopping  and  shredding  mechanisms  which causes the
cutting edge to require constant maintenance, repair, and blade replacement.

Equipment, Energy and
 Maintenance Requirements

The  projected  TCS-1 Plant is designed to remove the steel beads from the tires
before any disintegration process commences. Additionally, the rubber will be in
an  extremely  brittle  and easy to break  condiiton  during the  disintegration
process.  Therefore,  the  equipment  required  to break  down the tires will be
considerably   smaller  and  lighter,   and  the  energy  requirements  will  be
drastically  lower than those  required  by  conventional  cryogenic  or ambient
systems in use today.  The TCS-1  Plan will be  comparatively  light in terms of
bulk and weight.  Moreover,  the TCS-1 Plan will have no  shredding  or chopping
surfaces that would  require  continuous  sharpening  and  repairing.  This will
result in an additional significant reduction in maintenance expenses.

Cooling Techniques

As discussed below,  conventional  cryogenic systems use liquid nitrogen to cool
the rubber  before  subjecting  it to knife or  hammer-mill  operations.  Liquid
nitrogen is an expensive coolant, costing approximately $.04 per pound of tire.

Cooling Techniques

The TCS-1  Plant will be designed to use  mechanical  regrigeration  to coll the
tires to the required  temperatures.  Mechanical  refrigeration is normally less
expensive  to use than liquid  nitrogen  and the Company  expects its cost be be
approximately $.01 per pound of tire.

Costs and Expenses

As a result of the  foregoing,  initial  capital  outlays for the  equipment and
continuing energy and maintenance costs are high.

Costs and Expenses

The foregoing is expected to result in  significantly  smaller  initial  capital
requirements and drastically lower continuing energy and maintenance costs.


                                       16
<PAGE>

Problems Associated With Tire Disintegration 
Methods In Current Use.

The initial operations  described above will chop or shred a complete tire until
it is reduced to chips  ranging in size from about 2 x 2 inches to 2 x 6 inches.
These chips can be used as "TDF" (tire  derived  fuel") and  possibly as fill to
assist drainage.  Unless destined for these limited uses, the chips are normally
then fed into a second  shredder  which reduces them to 1 x 1 inch or 1 x 2 inch
pieces.  They are then fed into a knife or hammer mill where they are reduced to
rubber "crumb" consisting of particles of rubber,  approximately 1/8 to 1/2 inch
in size. Finally, these pieces are pulverized into a coarse powder or crumb in a
hammer mill.  At this point,  some of the steel will have been broken into small
pieces of wire,  free of rubber,  but much of the steel will remain  embedded in
the rubber  pieces.  In addition,  since the fiber will have been subject to the
chopping,  shredding,  and/or pulverizing operations,  much of it will have been
broken,  and its  thread  or  cord-like  configuration  destroyed.  The  broken,
pulverized fibers will have formed a "fluff" which entraps and holds both rubber
and steel particles.

In order for this crumb to be useable,  the steel will have to be separated  and
removed.  The use of strong  magnets  removes  the free steel  pieces,  but such
magnets  also remove all of the rubber  particles in which the rest of the steel
is embedded, resulting in a loss of up to 15% of the rubber.

To avoid  losing the  substantial  amounts of  steel-bearing  rubber  which were
magnetically removed, and to obtain a finer crumb (the coarse crumb has very few
uses), the crumb must be subjected to a second re-grinding, which may or may not
be cryogenic.  This is normally  done in a knife mill capable of  disintegrating
the crumb into smaller particles or in a hammer-mill.

In using a hammer or  knife-mill  for this  operation,  however,  the  following
problems  arise:  (i) running at an efficient  speed,  the fiber fluff (which is
contained in the rubber  crumb) may clog the  mechanism;  and (ii) the action of
the hammer or knife-mill  will heat the rubber to the  

Avoidance of Problems Associated With Tire
Disintegration Methods in Current Use.

The  proposed  TCS-1  Plant has been  designed to avoid the  problems  described
opposite which arise out of current tire disintegration methods by insuring that
the steel and fiber  components of the tire are not  subjected,  at any time, to
chopping,  shredding,  or hammer or  knife-milling  operations which destroy the
integrity of the wire or cord-like  configurations  of the steel and fiber. This
is  expected  to  prevent  the   creation  of  steel  powder  and  fiber  fluff.
Disintegration will be accomplished solely through the exertion of pressure. The
TCS-1 Plant  disintegration  process is not expected to break the steel wires or
to affect their integrity in any way. Based upon  continuous  tests to date, the
TCS-1 Plant's proprietary disintegration mechanism does not create steel powder;
this  results  in easy and  efficient  separation  and  removal  of the steel by
magnetic means,  without the substantial loss of rubber powder which occurs with
the methods described opposite.

The fiber, which does not lose its thread or cord-like configuration,  is broken
in the disintegration  process into lengths of from 1/2 to 4 inches. Rubber that
is attached to the fiber constitutes a saleable product with unique  properties.
Furthermore, test operations to date, indicate that, in this form, the fiber can
be easily  separated  from the rubber  crumb by  passing  it  through  wire mesh
screens.  The salvaged  steel wire pieces and fiber  threads will be useable and
saleable.

Based on the foregoing and on test results,  management  believes  that: (i) the
rubber  powder  yielded by the TCS-1 Plant will  contain  only an  insignificant
amount of fiber and steel;  (ii) wastage of  salvageable  rubber  powder will be
reduced  from the  approximately  30%  associated  with the use of  conventional
cryogenic or ambient systems to an estimated 3%. (iii) instead of unusable steel
powder  and  fiber  fluff,  which  recyclers  must pay to have  hauled  away and
deposited in landfills,  the TCS-1 Plant will yield clean useable,  and saleable
reclaimed steel and fiber as well as two types of rubber powder  


                                       17
<PAGE>

point  where it will  become so soft that  instead  of being  pulverized  into a
powder,  it will simply be softened and mashed and thereby will further clog the
mechanism.

To avoid these problems, the hammer or knife-milling operations can be conducted
at low feed rates, which will reduce the foregoing  problems,  but which may not
be economically feasible.  Conventional cryogenic systems deal with this problem
by using liquid  nitrogen to cool the previously  chopped and shredded  material
before  feeding it into the hammer or  knife-mill.  Some ambient  systems do not
freeze the rubber,  but instead inject liquid nitrogen directly into the mill to
keep the rubber from softening.

Knife-milling or hammer-milling  operations will create further problems because
all of the fiber and steel,  which is mixed in with the rubber crumb,  will have
been ground up and pulverized along with the rubber, with the following results:
(i) The steel components of the tires will have been ground or pulverized into a
fine powder,  which cannot be allowed to remain as a  contaminant  in the rubber
powder if the rubber is to have any economic value.  The steel must therefore be
removed magnetically. However, the fine steel powder will be thoroughly mixed in
with the  rubber  powder.  The  magnetic  action  which is meant to pull out the
minute particles of steel, will necessarily also draw out substantial amounts of
the surrounding  rubber  particles.  Losses of rubber powder  resulting from the
magnetic  removal of the steel powder are  estimated to amount to  approximately
15% percent of the total rubber powder produced. Such wastage adds substantially
to the cost of useable product yielded by these systems. The steel powder is not
useable for any purpose and has no economic  value.  It must be transported  and
deposited  in  landfills  which  again adds to the cost of any  useable  product
produced. (ii) The thread or cord-like configuration of the fiber will have been
disintegrated  into the cotton-like  "fluff"  described  above.  This fluff will
attract  and  hold  significant  amounts  of  the  powdered  rubber  and  steel.
Separation  of the steel and  rubber  particles  from the fiber  fluff is nearly
impossible  because the fine particles are trapped in the entangling strands and
adhere to them.  It is  

containing only insignificant amounts of fiber and steel.


                                       18
<PAGE>

estimated that up to 15% of the rubber powder will be trapped in the fiber fluff
and drawn out with it.  The fluff has no  current  economic  value and  actually
constitutes a liability  because it must be transported and disposed of, usually
as landfill.

The wastage of up to 15% of the rubber  powder,  which  results  from losing the
rubber which is trapped in the fiber fluff,  together  with the  additional  15%
percent of the rubber powder which clings to the pulverized steel particles when
they  are  removed  magnetically,  brings  total  losses  of  rubber  powder  to
approximately 30% percent,  which is reflected in a concomitant  increase in the
cost of the product produced.

Recovery Ratio

Current shredding  operations recover on average twelve pounds,  representing 75
percent,  of the rubber  contained in every twenty pound tire.  All of the fiber
and steel,  and the balance of the rubber  components  of each tire are, in most
cases, not reclaimed,  for the reasons  described above. The result is a loss of
approximately eight pounds of unrecovered,  unrecycled rubber, steel, and fiber,
representing  40% of the  constituent  materials  of the  tire,  which  must  be
transported  and  disposed  of  in  landfills  or  other  solid  waste  disposal
facilities.

Recovery  Ratio

For the reasons  described  above,  and based on performance  tests of the scale
model  prototype  of the TCS-1  Plant's  proprietary  disintegration  mechanism,
management expects that almost all of the rubber, steel, and fiber components of
the tire will be recovered in useable and saleable condition.

Production and Supply

      The  Company's   activities  to  date  have  focused  on  the  design  and
development of the TCS-1 Plant. In connection with these activities, the Company
has been dependent on arrangements with its  subcontractors  for the manufacture
and assembly of the principal components  incorporated into the TCS-1 Plant (see
"Subcontractors", below).

      The Company  has  effected,  and intends to continue to effect,  all TCS-1
Plant manufacturing operations through its subcontractors.  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  for not less than the next two  years.  However,  no
assurance  can be given  that 


                                       19
<PAGE>

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.

Subcontractors

      The  Company  has  retained   the   following   machinery   manufacturing,
engineering and designing firms located in Quebec:

      Beaudoin,  Hurens and Associates,  Inc. On September 21, 1998, the Company
accepted the proposal of Beaudoin,  Hurens and Associates,  Inc. to: (i) prepare
and/or  finalize all design and  engineering  drawings,  operation and technical
manuals,  and other  documentation  respecting the TCS-1 Plant; and (ii) make an
independent engineering assessment of Tirex's findings from its first and second
stage testing of the TCS-1 Plant to verify and authenticate the requirements for
the  modifications  which the Company  believes  are required to bring the Plant
into full  compliance  with  specifications.  BHA  assisted  the Company and its
subcontractors in effecting the required modifications and is continuing to work
with the Company on fine tuning and enhancing the operation of the Plant. BHA is
also currently serving as engineering project manager during what Tirex believes
is the final stage of preparation for full scale commercial  operations.  BHA is
presently in the process of reducing its agreement with the Company to a formal,
written  agreement  which will reflect their  standard  charges for  engineering
services at an hourly  rate of CA $60.00  (approximately  US  $42.00).  Based on
present  estimates,   the  Company  believes  that  BHA's  total  fees  will  be
approximately US $200,000.

      Fedico,  Inc. In January of 1997,  the Company  retained  Fedico,  Inc. of
St-Hubert,  Quebec ("Fedico"),  a machinery design firm located in Quebec. Prior
thereto,  Fedico had been providing the Company with consulting and other design
engineering  services  and had acted as project  leader,  guiding  the  over-all
design and  engineering  of the TCS-1  Plant.  In  addition to  supervising  the
over-all  assembly and start-up  procedures of the first  full-scale  production
model of the TCS-1 Plant,  Fedico designed,  engineered,  and fabricated certain
components of the Plant,  including but not limited to the freezing towers.  The
Company's  agreement with Fedico  provided for retention of Fedico for a minimum
of  five  hundred  hours  per  year  during  the  course  of such  agreement  at
reasonable,   competitive   hourly  rates  for   technicians,   draftsmen,   and
intermediate engineers, with overtime,  on-site services, and travel expenses at
prevailing market rates.  During second stage testing,  certain  deficiencies in
the components designed and/or manufactured by Fedico were identified.  Fedico's
work  for  the  Company  is  presently   limited  to  the   correction  of  such
deficiencies. The Company is presently reevaluating future assignments to Fedico
based upon its past  performance and its current  remediation of defects arising
therefrom.  The  Company  has been  invoiced  by Fedico  for the work  which the
Company believes did not, in all instances,  meet  specifications.  In the event
that,  upon  completion of its evaluation of Fedico's  performance,  the Company
should  decide to  terminate  its  relationship  with  Fedico,  the Company will
invoice Fedico for the costs of correcting  deficiencies caused by Fedico. Based
upon the foregoing,  in the event that the Company  terminates its  relationship
with Fedico following such evaluation, the Company does not believe that it will
be liable for any further payments to Fedico.


                                       20
<PAGE>

      Agreement with Lefebvre  Freres  Limitee.  In January of 1997, the Company
retained Lefebvre Freres Limitee ("Lefebvre"), a subsidiary of Lefebvre Inc., of
Montreal,  Quebec.  Lefebvre,  specializes  in custom design and  fabrication of
industrial  machinery.  With its sister  companies,  Foresteel  (specializing in
pressure vessels and welding) and Atelier D'Usinage Trempe (specializing in high
precision  machining),  Lefebvre  has  extensive  experience  and  expertise  in
designing and  constructing  equipment  used in the pulp and paper,  metallurgy,
fiber,  power generation,  and many other industries.  Since the spring of 1996,
Lefebvre  has  provided  the Company  with design  consulting  and other  design
engineering services; Lefebvre designed and constructed the prototype fracturing
mill  for  the  TCS-1  Plant  at  competitive  rates  and  accepted  payment  of
approximately  one-third  of its  price in  340,160  unregistered  shares of the
common  stock of the  Company.  The stock  portion  of such  price was issued to
Lefebvre on January 17, 1997.  Prior to such date,  Lefebvre had  completed  the
initial  design  specifications  for  the  TCS-1  Plant's   Disintegration  Unit
Assembly.  Lefebvre  delivered the two completed  fracturing mills for the first
TCS-1  Plant  during  the  last  week in May  1998.  During  continuous  testing
operations,   which  began  on  June  15,  1998,  certain  deficiencies  in  the
components, which Lefebvre was responsible for designing and manufacturing, were
identified.  As a result,  certain modifications were required to be made in the
fracturing   mills  to  bring  them  into   conformance   with  their  operating
specifications.  Lefebvre  advised the Company that, if they were to effect such
modifications,  they would require  approximately  three additional  months plus
additional  costs in an  indeterminate  amount.  The Company  suspended  further
services  by Lefebvre  and  contracted  with  Plasti-Systemes  to  complete  the
modifications   on  the   fracturing   mills  (see,   below   "Agreements   With
Plasti-Systemes, Inc."). Lefebvre's work for the Company is presently limited to
the correction of deficiencies and the Company is presently  reevaluating future
assignments  to  Lefebvre  based  upon  its  past  performance  and its  current
remediation  of defects  arising  therefrom.  The Company  has been  invoiced by
Lefebvre for the work which the Company believes did not, in all instances, meet
specifications.  In  the  event  that,  upon  completion  of its  evaluation  of
Lefebvre's performance,  the Company should decide to terminate its relationship
with  Lefebvre,  the Company will invoice  Lefebvre for the costs of  correcting
deficiencies  caused by them.  Based upon the  foregoing,  in the event that the
Company terminates its relationship with Lefebvre following such evaluation, the
Company  does not  believe  that it will be liable for any  further  payments to
Lefebvre.

Agreements with Plasti-Systemes,  Inc. Plasti-Systemes,  Inc. "Plasti-Systemes")
of  Ville  D'Anjou  Quebec  designed,   constructed,  and  installed  the  first
fully-automated front-end sidewall cutter and debeader module "front-end" of the
TCS-1 Plant which consists of a series of mechanisms  which  automatically:  (i)
clean and debead the tires;  (ii) separate the sidewalls from the treads;  (iii)
cut both  sidewalls  and treads into  sections  ready for  processing;  and (iv)
transport  the beads and tire  sections  into  separate  areas for  disposal  or
processing has been  completed.  On January 17, 1997,  Plasti-Systemes  accepted
payment of 26% of its total price for the  foregoing  services by way of 255,010
unregistered shares of the common stock of the Company. The Company has retained
Plasti-Systemes   to  identify  and  effect,   under  supervision  of  BHA,  the
modifications required to bring the fracturing mills into conformance with their
operating  specifications.  Costs are to be limited to materials costs and labor
at prevailing  hourly rates. The Company does not expect such costs to exceed CA
$75,000 (or approximately US $52,500).

Formerly Proposed Services

      In the past,  the Company  had  intended to require all of its TCS-1 Plant
purchasers to agree to enter into a maintenance and technical and market support
agreement.  In connection with which the Company had intended to provide timely,
high  quality  technical  support to insure that the TCS-1 Plant will perform in
conformance with its specifications. However, as at the date hereof, the Company
has been unable to determine what the maintenance  requirements or costs will be
under commercial operating conditions.  Therefore,  the Company is not presently
offering any maintenance or technical and market 


                                       21
<PAGE>

support  agreements  and does not intend to do so until it is able to  establish
the level of maintenance fees which it would have to charge in order to make the
provision of such services economically viable.

Sales and Marketing

      The  Company's  present and projected  marketing  plans  respecting  TCS-1
Plants,  crumb rubber  produced  from TCS-1 Plant  Operations,  and the proposed
"Tirex  Advanced  Products"  are  discussed  below  under the  caption  "Company
Marketing and Distribution".

TCS-1 Plant Sales

Sales

      The  Company's  present and projected  marketing  plans  respecting  TCS-1
Plants  are   discussed   below  under  the  caption   "Company   Marketing  and
Distribution".  The Company has entered into  agreements for the following sales
of  TCS-1  Plants.  The  ultimate  consummation  of each of such  sales  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
System (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 O/V III Agreements

      On May 29, 1997, the Company  entered into an Equipment Lease and Purchase
Agreement (the "O/V III L&P Agreement") with Ocean/Ventures III, Inc.("O/V III")
of Toms River, New Jersey ("O/V III"). This agreement modified the terms of, and
replaced,  a prior agreement  between the parties dated June 6, 1995. O/V III is
under common  ownership and control with Oceans Tire Recycling & Processing Co.,
Inc.  ("OTRP") and with the solid waste recycling firm,  Ocean County  Recycling
Center,  Inc. (see,  below  "Agreements  with Oceans Tire Recycling & Processing
Co., Inc."). Under the terms of the O/V III Agreement, O/V III will purchase and
lease the  respective  components  which comprise the  constituent  parts of the
TCS-1 Plant.  The  Agreement  provides for lease and purchase  arrangements  for
eight Plants at an aggregate  lease and purchase price of three million  dollars
($3,000,000) each.

      Pursuant to the terms of the O/V III  Agreement,  all  components  of each
Plant, except the Company's patented  disintegration system or "Fracturing Mill"
(the "Purchasable  Equipment") will be purchased by O/V III for a total purchase
price  of  $2,250,000.  Such  Purchasable  Equipment  includes:  (i)  the  fully
automated  front-end sidewall cutter and debeader module; (ii) the air plant and
freezing  towers;  and  (iii)  all  bailing  systems  and  associated  ancillary
equipment, conveyance and exit belts, chutes and/or other components combined or
integrated therewith.

      The patented Fracturing Mills, which are sometimes referred to hereinafter
as the "Leased  Equipment"  are not sold by the Company,  but are leased under a
five year operating  lease.  Under the terms of the O/V III L&P  Agreement,  the
monthly operating lease payments are $12,500 each.

      The O/V III L&P  Agreement  called for the  delivery of the first Plant by
October 1998, with seven  additional  Plants  scheduled for delivery every three
months  thereafter,  through July 2000.  Construction  of the  components of the
first full scale  prototype  of the TCS-1  began in  February  of 1997,  and was
completed in May of 1998.  Because  completion of the first  production model of
the TCS-1 Plant was 


                                       22
<PAGE>

delayed,  OV III waived the originally  scheduled delivery dates and agreed with
the Company that they would reschedule delivery of the first of these Plants for
an as yet  undetermined  date. In May 1997, O/V III waived its right to purchase
the first complete, fully operational TCS-1 Plant (the "First Production Model")
in  favor  of its  affiliated  corporation,  Oceans  Tire  ("OTRP"),  which  had
contracted  separately  with the  Company  for the  lease  and  purchase  of one
additional Plant (see below, "Agreements with Oceans Tire Recycling & Processing
Co., Inc." and "Proposed Product Manufacturing).

      The O/V III L&P  Agreement  requires a  downpayment  of  $25,000  for each
Plant,  to be paid not  less  than  fourteen  months  prior  to the  anticipated
delivery  date.  In an effort to assist the  Company at this early  stage of its
development,  to date, O/V III has prepaid $25,000 down payments on five Plants.
Other  payment  terms for each of the eight  systems  subject to the O/V III L&P
Agreement,  call for a  $50,000  payment  six  months  prior to the  anticipated
delivery  date,  an  additional  $100,000 to be paid three  months  prior to the
anticipated  delivery date, and $2,075,000 on O/V III's acceptance of the Plant.
Pursuant to the terms of the L&P  Agreement,  O/V III also  entered into certain
ancillary agreements with the Company, consisting of the following:

      (a)   a royalty agreement (the "Royalty  Agreement") pursuant to which O/V
            III will pay the  Company a  royalty  of three  percent  (3%) of the
            gross  proceeds  from all sales of rubber crumb fiber and steel from
            scrap  tires  disintegrated  through  the  utilization  of the TCS-1
            Plant;

      (b)   a  rubber  crumb  purchase  option   agreement  (the  "Rubber  Crumb
            Agreement")  pursuant to which O/V III has granted to the Company an
            option to  purchase  up to 40% of the rubber  crumb,  yielded by the
            disintegration  of scrap  tires in the TCS-1  Plant,  at  negotiated
            prices.  The  Company is  currently  exploring  the  feasibility  of
            vertically  integrating  its  operations so as to include the rubber
            crumb brokerage business and/or the value-added rubber crumb product
            development  business.  It obtained the rubber crumb purchase option
            in connection with the foregoing.

      In accordance  with the former  intention of the Company to require all of
its TCS-1 Plant  purchasers to agree to enter into a  maintenance  and technical
and market  support  agreement,  O/V III agreed that it would enter into such an
agreement.  However,  for reasons  described  above,  under  "Formerly  Proposed
Services",  as at the date  hereof,  the parties do not  presently  intend to go
forward with any maintenance arrangements.

Agreements with Oceans Tire Recycling & Processing Co., Inc.

      On May 29, 1997, the Company  entered into an Equipment Lease and Purchase
Agreement  (the "OTRP L&P  Agreement")  with Oceans Tire  Recycling & Processing
Co., Inc. ("OTRP"),  a New Jersey corporation under common control with O/V III.
Pursuant to the OTRP L&P  Agreement,  OTRP was to purchase the first  production
model TCS-1 Plant.  Under the terms of the OTRP L&P Agreement,  the  anticipated
delivery date for this Plant was September 15, 1997. However, while construction
of the first full scale  prototype of the TCS-1 Plant began in February of 1997,
its  completion  was delayed  because of the limited  funds  available  for such
purpose.  As a result,  OTRP waived the delivery  date and agreed to  reschedule
delivery.  In December  1997,  OTRP and the Company  agreed that,  to the extent
necessary  for OTRP to obtain sale and  lease-back  financing  for the front-end
module  ("Front-End")  and for  certain  parts of the Air Plant  portion  of the
Plant,  the said OTRP Agreement would be deemed to be modified,  as required for
such purpose. In connection  therewith OTRP arranged with an equipment financing
company  for sale and  lease-back  financing,  pursuant  to which:  (i) the said
financing company purchased the Front-End and certain designated portions of the
TCS-1  Plant's  Air  Plant  directly  from the  Company;  and (ii)  


                                       23
<PAGE>

leased such equipment back to OTRP pursuant to its arrangements with OTRP and/or
the OTRP principals. The Front-End was delivered to OTRP's site in New Jersey in
January of 1998. The parties  rescheduled a new delivery date for the Air Plant,
which occurred  during the first week of May 1998.  Upon the Company's  entering
into a lease for its  Research  and  Manufacturing  facility  in  Montreal  (the
"Company  Facility"),  OTRP shipped the Front-End Module of the Plant, which had
originally  been  delivered to OTRP in New Jersey,  to the Company  Facility and
OTRP's equipment financing provider took delivery of the balance of the Plant at
the Company  Facility.  This  allowed for the  assembly of the First  Production
Model of the TCS-1 Plant,  and the initial test phase  operations  thereof to be
conducted under supervision of both the Company and OTRP,  jointly.  The Company
sold the  Front-End for a total  purchase  price of $300,000,  with  irrevocable
acceptance  and final  payment  therefor  obtained by the Company in December of
1997.  The  designated  portions of the Air Plant were sold for a total purchase
price of  $580,000,  with  irrevocable  acceptance  and final  payment  therefor
obtained by the Company in April of 1998.

      It is the  present  intention  of the  parties  to reform or  rescind  the
remaining  provisions  of the OTRP  Agreement  for the  purpose of  transferring
ownership of the entire First  Production  Model to the Company,  any one of its
existing  subsidiaries,  or to some other entity established jointly, or singly,
by the parties, or either one of them, for such purpose. The structure and terms
of the  ownership  of the First  Production  Model have not yet been  finalized.
However, in connection therewith, on December 16, 1998, the Company entered into
two sale and  lease-back  transactions  by and among the  Company,  North  Shore
Leasing &  Funding  Inc.  ("NLFI"),  and an  affiliate  of OTRP,  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 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 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 said leases (see this
Item 1.  "Existing and Proposed  Businesses - Proposed  TCS-1 Plant  Operations:
Sales of Rubber  Crumb and  Manufacture  and Sale of Finished  Products  Product
Manufacturing").

The Recycletron Inc. Agreements

      On July 8, 1997, the Company  entered into an Equipment Lease and Purchase
Agreement   (the    "Recycletron   L&P   Agreement")   with   Recycletron   Inc.
("Recycletron") of Montreal,  Quebec. Pursuant to the Recycletron L&P Agreement,
Recycletron  will purchase one TCS-1 Plant.  The Agreement  calls for a delivery
date at the end of the second  quarter of 1998 or such other date as the parties
shall mutually  agree. To date, the Company has not been able to deliver a TCS-1
Plant to  Recycletron  and does not  expect to be able to do so until  after the
current  fiscal year. To the best of the  Company's  knowledge,  Recycletron  is
willing to schedule a delivery  date  within  such time frame.  The terms of the
Recycletron L&P Agreement,  pursuant to which the constituent  components of the
TCS-1 Plant will be leased and or  purchased,  are  substantially  identical  to
those of the O/V III L&P Agreement,  as described  above.  The only  significant
differences are in the purchase price and payment terms.  The purchase price for
the Purchasable  Equipment is $2,000,000 and the terms of the 60-month operating
lease  call for  monthly  lease  payments  of  $12,500  each.  Accordingly,  the
aggregate   lease/purchase   price  under  the   Recycletron  L&P  Agreement  is
$2,750,000.  Upon  execution of the Agreement,  Recycletron  paid a $25,000 down
payment.  Other payment terms require additional payments of $100,000 six months
prior to the  anticipated  delivery  date,  $125,000  prior  to the  anticipated
delivery date, and $1,750,000 upon Recycletron's acceptance of the Plant.


                                       24
<PAGE>

      Pursuant to the terms of the  Recycletron  L&P  Agreement,  upon execution
thereof,  the parties also entered,  or agreed to enter,  into the same types of
ancillary  agreements  as are  described  above with  respect to the O/V III L&P
Agreement,  i.e., a  maintenance  and  technical  support  agreement,  a royalty
agreement,  and a rubber crumb purchase  option  agreement.  The terms of all of
such ancillary  agreements are identical to those  described above in connection
with  the O/V III  Agreements.  However,  for  reasons  described  above,  under
"Formerly  Proposed  Services",  as at  the  date  hereof,  the  parties  do not
presently intend to go forward with any maintenance arrangements.

Agreements with 750824 Alberta Ltd.

      On December 12,  1997,  the Company  entered  into an Equipment  Lease and
Purchase  Agreement (the "Alberta Ltd. L&P Agreement")  with 750824 Alberta Ltd.
("Alberta Ltd") of Calgary,  Alberta.  Pursuant thereto, Alberta Ltd. has agreed
to purchase  one TCS-1  Plant.  Delivery  date for the Plant was  scheduled  for
September 15, 1998 or such other date as the parties shall  mutually  agree.  To
date, the Company has not been able to deliver a TCS-1 Plant to Alberta Ltd. and
does not expect to be able to do so at any time  during the fiscal  year  ending
June 30, 1999.  The terms of the Alberta Ltd. L&P  Agreement,  pursuant to which
the  constituent  components of the TCS-1 Plant will be leased and or purchased,
is substantially  identical to those of the O/V III L&P Agreement,  as described
above. The only  significant  differences are in the payment terms. The purchase
price for the Purchasable Equipment in the Alberta Ltd. Plant is $2,250,000.  As
with all other Plants  contracted  for to date,  the monthly  payments under the
60-month  operating  lease for the Leased  Equipment  will be  $12,500  for each
Plant.  Accordingly,  the aggregate  lease/purchase price under the Alberta Ltd.
L&P Agreement is  $3,000,000.  Upon execution of the Alberta Ltd. L&P Agreement,
Alberta Ltd.  paid $25,000 into escrow as a down payment on the Plant.  Although
the  Agreement  called for an initial  payment of $225,000  for the Alberta Ltd.
Plant  within sixty days of the  execution  of the Alberta  Ltd. L&P  Agreement,
initial  payment has not yet been  received.  Alberta  Ltd. and the Company have
mutually agreed that the due date for such payment will be established by mutual
agreement after all testing on the First Production Model of the TCS-1 Plant has
been successfully completed. To date, no date has been agreed on and the Company
is not able to state with certainty  whether this  transaction will be effected.
The $2,000,000  balance of the purchase price for the  Purchasable  Equipment is
due upon delivery of the TCS-1 Plant.

      Pursuant to the terms of the Alberta Ltd. L&P  Agreement,  upon  execution
thereof, the parties also entered into the same types of ancillary agreements as
are described  above with respect to the O/V III L&P Agreement,  i.e., a royalty
agreement and a rubber crumb purchase option agreement. The terms of all of such
ancillary  agreements are identical to those  described above in connection with
the O/V III  Agreements.  The Alberta Ltd. L&P  Agreement  also provides for the
preparation  of an agreement for the  maintenance  of the TCS-1 Plant to be done
jointly by the Company and Alberta Ltd., on mutually agreeable terms.

The ENERCON Agreements

      On each of August 19, 1998 and October 13, 1998, the Company  entered into
two Equipment Lease and Purchase  Agreements (the "Enercon L&P Agreements") with
ENERCON America Distribution Limited ("Enercon") of Westerville,  Ohio. Pursuant
to each of the Enercon L&P Agreements,  Enercon has agreed to purchase one TCS-1
Plant  configured  to  process  car  tires  only  and a second  Plant  specially
configured to process truck tires only. The terms of the Enercon L&P Agreements,
pursuant to which the  constituent  components of the TCS-1 Plant will be leased
and or  purchased,  are  substantially  identical  to  those  of the O/V III L&P
Agreement,  as described  above.  The only  significant  differences  are in the
payment terms.  The purchase price for the Purchasable  Equipment in each of the
Enercon Plants is 


                                       25
<PAGE>

$2,250,000.  As with  all  other  Plants  contracted  for to date,  the  monthly
payments  under the 60-month  operating  lease for the Leased  Equipment will be
$12,500 for each Plant.  Accordingly,  the aggregate  lease/purchase price under
the four Enercon L&P Agreements aggregates to $12,000,000.  Although the Enercon
L&P  Agreements  called for an initial  payment of $337,500  for each of the two
Enercon  Plants upon execution of the  Agreements,  as of February 16, 1999, the
Company had not yet received such payments because, as at such date, Enercon had
not yet received  custody of funds which it expects to use toward such payments.
Enercon  has  advised  the  Company  that  it  expects  to  receive  such  funds
imminently,  but, as of February 16,  1999,  the Company was not able to predict
with certainty when or if Enercon would in fact receive such funds.  All four of
these sales are completely  dependent upon Enercon raising sufficient  financing
to meet its obligations under the respective Enercon L&P Agreements. In addition
to the initial payments,  terms under each of the Enercon L&P Agreements require
additional payments on each of the four Enercon Plants, as follows:

(a)  15%  (US $337,500) upon acceptance by Enercon of equipment drawings, layout
                        drawings,   and  other  written   specifications,   such
                        acceptance  to  be  based  upon  local   permitting  and
                        applicable operating requirements;

(b)  30%  (US $675,000) two months  after the  Company  gives  notice to Enercon
                        that it has commenced manufacture of the Plants;

(c)  10%  (US $225,000) two months prior to the anticipated Delivery Date.

(d)  15%  (US $337,500) on Delivery; and

(e)  15%  (US $337,500) on Acceptance of the Plants by Enercon.

      Pursuant  to the  terms of the  Enercon  L&P  Agreements,  upon  execution
thereof, the parties also entered into the same types of ancillary agreements as
are described  above with respect to the O/V III L&P Agreement,  i.e., a royalty
agreement and a rubber crumb purchase option agreement. The terms of all of such
ancillary  agreements are identical to those  described above in connection with
the O/V III Agreements.  The Enercon L&P Agreements  provide for the preparation
of an agreement for the maintenance of the TCS-1 Plant to be done jointly by the
Company and Enercon, on mutually agreeable terms.

Backlog

      The  Company  includes in its  "backlog,"  orders for TCS-1  Plants  under
executed  Equipment  Purchase and Lease Agreements.  Although the stated backlog
may be used as a  guideline  in  determining  the  value  of  orders  which  are
presently  scheduled for delivery during the period indicated,  it is subject to
change by reason of several factors including  possible  cancellation of orders,
change in the 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  revenues or of the profits  which the Company  might realize when the
results of such contracts are reported.  The ultimate  consummation of each sale
included  in the  backlog  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 System (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.


                                       26
<PAGE>

      Based on the  foregoing,  as of February 16, 1999,  the Company's  backlog
amounted to $41,750,000.  This includes, for fourteen TCS-1 Plants: (i) the full
purchase price for the Purchasable  Equipment which will be sold by the Company,
and (ii) total  lease  payments  for the Leased  Equipment  under the  five-year
operating lease.  Together,  the Purchasable  Equipment and the Leased Equipment
constitute a complete TCS-1 Plant.

      The Plants included in the above stated backlog  include:  (i) eight TCS-1
Plants  ordered by O/V III for an aggregate  lease/purchase  price of $3,000,000
each, in respect of which the Company has already  received over $130,000 by way
of prepayments of the $25,000  downpayments (due for each system fourteen months
before the  scheduled  delivery  date of such Plant) on five of the eight Plants
ordered by O/V III; (ii) one TCS-1 Plant ordered by Recycletron for an aggregate
lease/purchase price of $2,750,000, in respect of which the Company has received
a $25,000 down payment;  (iii) one TCS-1 Plant ordered by 750824 Alberta,  Ltd.,
for an aggregate  lease/purchase  price of  $3,000,000,  in respect of which the
Company has received a $25,000  downpayment;  and (iv) four TCS-1 Plants ordered
by ENERCON America Distribution Limited ("Enercon") of Westerville,  Ohio for an
aggregate lease/purchase price of $12,000,000.

      The Company is unable to state when, if ever, it will make delivery of the
four Plants ordered by Enercon.  In this regard,  it should be noted that, as of
February  16, 1999,  the Company had not yet received any payments  from Enercon
and, to the extent that receipt of payments from Enercon are materially delayed,
construction  and delivery of the TCS-1  Plants  ordered by Enercon will also be
delayed. Delivery dates for the remaining ten Plants included in the backlog are
anticipated to be scheduled  throughout the year 2000. While Management believes
that all operating  problems  respecting the TCS-1 Plant were identified  during
continuous testing and that all modifications  required to resolve such problems
were completed in December 1998, it should be noted that the TCS-1 Plant has not
yet functioned under commercial  operating conditions over an extended period of
time. Therefore,  delivery dates for all Plants on order remain subject to delay
principally  because  of  presently  unforeseeable  problems  which  may  become
manifest under long-term, commercial use.

      The Company has not included in its backlog any revenues  which may result
from the Royalty  Agreements  which all TCS-1 Plant  purchasers  must enter into
with the  Company.  These  Royalty  Agreements  entitle the Company to receive a
royalty in the  amount of 3% of the gross  revenues  from sales of rubber  crumb
produced by the TCS-1 Plant.

Dependence on Major Customers

      To date the Company has received orders for fifteen TCS-1 Plants, eight of
which were  ordered by O/V III and parts of one of which have been  purchased by
OTRP, an affiliate of O/V III.  Proceeds from the sale to OTRP  constituted  one
hundred percent (100%) of the Company's  revenues from operations  during fiscal
1998.  The eight Plants ordered by O/V III  constitute  approximately  fifty-six
percent (56%) of the Company's present backlog. The loss of O/V III would have a
major  adverse  effect on the  Company.  O/V III is under the  control  of Louis
Sanzaro.  For  purposes  of this  discussion,  O/V III and  OTRP  are  sometimes
referred to herein,  collectively,  as the "Sanzaro  Entities".  The Company has
also received orders for four TCS-1 Plants from Enercon. These orders constitute
approximately twenty-eight percent (28%) of the Company's present backlog. As is
the case with O/V III,  the loss of this  customer  would  have a major  adverse
effect on the Company.  Notwithstanding the foregoing, the Company also believes
that while Mr. Sanzaro's  companies and Enercon comprise the initial TCS-1 Plant
purchasers,  future sales efforts will be widespread and, as the Company matures
and its business develops,  it will not be dependent upon the business of one or
more major customers.


                                       27
<PAGE>

      Mr. Sanzaro's  initial contacts with the Company occurred in the summer of
1995. On October 5, 1995, Mr. Sanzaro, through O/V III, entered into the initial
agreement  to  purchase  and lease  eight  TCS-1  Plants.  At that  time,  three
associates  and/or  employees  of  O/V  III  were  retained  by the  Company  as
consultants respecting various aspects of the Company's plans to design, develop
and manufacture the TCS-1 Plant. Following his initial contacts with the Company
in October 1995, Mr. Sanzaro also worked  actively with the Company to assist it
in these  efforts.  On or about  January 1, 1997,  the Company  and Mr.  Sanzaro
agreed that he should be fairly  compensated  for his consulting  services.  The
Company did not formalize its  arrangements  with Mr.  Sanzaro or compensate him
for his  services  until  January  28,  1998,  when it  entered  into a two year
consulting agreement with him, retroactively effective to January 1, 1997. Total
compensation under the Sanzaro consulting  agreement was 1,000,000  unregistered
shares of the  Company's  common  stock.  On January  17,  1997 Mr.  Sanzaro was
appointed as a Director of the  Company.  In October  1995,  the Company and Mr.
Sanzaro had agreed that Mr. Sanzaro would be the sole and exclusive  distributor
of TCS-1  Plants in North  America and that he would be entitled to a commission
of 10% of the total  lease and  purchase  price on all sales of TCS-1  Plants in
North  America.  In July 1998,  Mr.  Sanzaro  and the  Company  entered  into an
employment agreement pursuant to which Mr. Sanzaro was retained as the Company's
Vice  President  in  charge  of  operations,  to serve in such  position  as the
Company's  chief operating  officer.  In connection with his appointment to such
position, Mr. Sanzaro agreed to give up all rights which he theretofore had with
respect to his serving as  exclusive  distributor.  Mr.  Sanzaro  also agreed to
serve full time in his position as the Company's COO and in connection therewith
to terminate  virtually all of his  activities  connected with his own recycling
businesses  in New  Jersey.  In  consideration  of Mr.  Sanzaro's  agreement  to
discontinue  his other business  activities in order to enter into the Company's
employ,  the  Company  issued  500,000  shares of its  common  stock to him as a
signing  bonus.  In  addition,  for  agreeing to release  the  Company  from its
obligation  to  appoint  him as  exclusive  distributor  of the  TCS-1  in North
America, the Company issued to Mr. Sanzaro an additional 2,500,000 shares of its
common stock. (see ""Management - Executive  Officers and Directors" and Certain
Relationships and Related Transactions" ).

Research and Development - TCS-1 Plant Manufacturing Segment

      Research and  development  activities and  expenditures  for the Company's
existing  TCS-1  Plant  manufacturing  segment  and  its  proposed  TCS-1  Plant
Operations and TAP segment are discussed on a combined basis,  below,  following
the  description  of the Company's  proposed  TCS-1 Plant  Operations  under the
caption "Research and Development - Combined Segments".

Employees - TCS-1 Plant Manufacturing Segment

      The number and  categories of persons  employed in the Company's  existing
TCS-1 Plant manufacturing segment and in its proposed TCS-1 Plant Operations and
TAP  segment  are  discussed  on a  combined  basis,  below,  under the  caption
"Employees - Combined Segments".

Patent Protection

      The  Company  was  issued a United  States  patent on its  Cryogenic  Tire
Disintegration  Process and  Apparatus on April 7, 1998 (Patent No.  5,735,471).
The  duration of the patent is 20 years from the date the  original  application
was filed. In November 1998, the Company filed its patent, for review,  with the
Canadian Patent Office. The Company is unable to state at this time how long the
Canadian  review process will take and is unable to give any assurances that the
Canadian  Patent will be granted.  Prior to 


                                       28
<PAGE>

the  issuance  of such  patent,  the  Company  relied  solely on trade  secrets,
proprietary know-how and technological  innovation to develop its technology and
the designs and  specifications  for the TCS-1 Plant.  In connection with a loan
made by the Bank of Montreal to the  Company,  a lien on this patent was granted
to the said bank (see below in Item I of this  Report  "Management's  Discussion
and Analysis - Liquidity and Capital Resources").

      The Company has entered  into  confidentiality  and  invention  assignment
agreements  with certain  employees and  consultants  which limit access to, and
disclosure  or use of,  the  Company's  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  technologies 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.  The Company
believes  that the  steps it has  taken to date  will  provide  some  degree  of
protection, however, no assurance can be given that this will be the case.

      On or about  September  13,  1996,  the  Company  received  a letter  from
attorneys  for a New York  based  recycling  company  respecting  its filing for
worldwide patent protection for a tire recycling process utilizing a natural air
freezing  system and claiming that,  upon issuance of its Canadian  patent,  the
Company's recycling process would be the subject of a patent infringement claim.
The Company  responded to such letter on September 20, 1996 stating its position
that any such claim would be completely  without merit. The Company has received
no further  communications  respecting this matter. Since that time, a member of
the Company's engineering staff and the Company's patent agent have examined the
patent  which was  involved in this matter and have  advised the Company that to
the best of their knowledge, the specifications thereof are different from those
of the patent for which the Company has applied and that no  meritorious  patent
infringement claim could arise in connection  therewith.  However,  no assurance
can be given in the absence of a final court determination,  that any particular
patent is valid and  enforceable  or that any patent  may not be the  subject of
patent  infringement  claims.  The  Company  has  no  present  knowledge  of any
information  which  would  adversely  affect  the  validity  of its  patent,  as
described above.

Competition - Equipment Manufacturing Segment

      Management  knows  of  no  devices,  apparatus  or  equipment,   utilizing
technology  which is  identical  or  comparable  to the TCS-1  Plant,  which are
presently  being  sold or used  anywhere  in the  world,  nor is it aware of any
competing patents relating to the Company's disintegration technology.  However,
the TCS-1 Plant,  may  reasonably be expected to compete with related or similar
processes,  machines, apparata or devices for tire disintegration,  cryogenic or
otherwise.  Moreover,  prospective  competitors which may enter the field may be
considerably  larger than the Company in total assets and resources.  This could
enable  them to  bring  their  own  technologies  to  more  advanced  stages  of
development  with more speed and  efficiency  than the  Company  will be able to
apply to the TCS-1 Plant.  Additionally,  manufacturers  of presently  available
equipment may be in a position to operate  research and development  departments
dedicated  continually to improving  conventional  systems and to developing new
and  improved  systems.  There can be no assurance  that the TCS-1  Plant,  will
successfully  compete with existing  systems or with any improved or new systems
which may be developed in the future.


                                       29
<PAGE>

Proposed TCS-1 Plant Operations:  Sales of Rubber Crumb
  and Manufacture and Sale of Finished Products

Proposed Ownership, Establishment, and
  Operation of Tirex Advanced Products Plant

      The Company is presently in the process of making  arrangements to own and
operate the First  Production  Model of the TCS Plant, on either an exclusive or
joint  basis (see the  discussion  below) 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 and selling finished products,  made wholly or
partially  from such rubber  crumb.  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 (see, below, "Proposed Products" and "The IM2/Tirex Agreement")).

      The First Production Model is presently  installed at the Company's 90,000
square foot  Montreal  manufacturing  facility.  This Plant was the subject of a
Lease and  Purchase  Agreement  (the "OTRP  Agreement")  between the Company and
Oceans Tire Recycling & Processing Co., Inc.  ("OTRP"),  a company controlled by
Louis  Sanzaro,  the  Company's  chief  operating  officer.  The OTRP  Agreement
provided for certain  sections of the First  Production Model to be purchased by
OTRP for a purchase  price of $1,225,000  and for the balance of the Plant to be
leased  under a five year  operating  lease at a monthly  rental of $12,500 (see
"Existing  and  Proposed  Businesses  -  Equipment  Manufacturing  -  Sales  and
Marketing - Agreements with Oceans Tire Recycling & Processing Co.,  Inc.").  In
December  1997,  OTRP and the Company  agreed that, to the extent  necessary for
OTRP  to  obtain  sale  and  lease-back   financing  for  the  front-end  module
("Front-End")  and for certain parts of the Air Plant portion of the Plant,  the
said OTRP  Agreement  would be  deemed  to be  modified,  as  required  for such
purpose.  In connection  therewith  OTRP  arranged  with an equipment  financing
company for sale and lease financing,  pursuant to which: (i) the said financing
company  purchased the Front-End  and certain  designated  portions of the TCS-1
Plant's Air Plant directly from the Company; and (ii) leased such equipment back
to OTRP pursuant to its arrangements  with OTRP and/or the OTRP principals.  The
Company  sold  the  Front-End  for a total  purchase  price  of  $300,000,  with
irrevocable  acceptance  and final payment  therefor  obtained by the Company in
December of 1997. The designated portions of the Air Plant were sold for a total
purchase  price of  $580,000,  with  irrevocable  acceptance  and final  payment
therefor  obtained by the Company in April of 1998. It is the present  intention
of the  parties  to reform  or  rescind  the  remaining  provisions  of the OTRP
Agreement  for  the  purpose  of  transferring  ownership  of the  entire  First
Production  Model to the Company,  any one of its existing  subsidiaries,  or to
some other entity established  jointly, or singly, by the parties, or either one
of them, for such purpose. The structure and terms of the ownership of the First
Production Model have not yet been finalized (see the discussion, above, in this
Item  1,  under  the  subcaption,  "Agreements  with  Oceans  Tire  Recycling  &
Processing Co., Inc.").

      In order to establish and operate the Montreal T.A.P.  Plant,  the Company
will be required to make modifications and improvements to its Montreal facility
to accommodate such operations and to meet local fire, environmental,  and other
applicable  regulations.  Renovations and improvements to the Montreal  facility
required to be made,  or already  made,  in order to  establish  and operate the
Montreal  T.A.P.  Plant  include  the  installation  or  renovation  of:  (i)  a
ventilation system; (ii) lighting; (iii) additional office space; (iv) a heating
system;  (v) a new floor in the  manufacturing  area;  and (vi) a new sprinkling
system throughout the building. In addition, the Company will have to construct:
(i) a loading  dock area;  (ii) a new  parking  area  (necessitated  by devoting
present parking area to loading docks);  and (iii) a storm drainage system.  The
Company will also incur civil  engineering fees in connection with the foregoing
and  will be  required  


                                       30
<PAGE>

to purchase  materials  handling  equipment,  including  forklifts.  The Company
estimates that such plant modifications and improvements will cost approximately
$325,000.

      In addition,  the Company will require approximately $600,000 to cover the
costs of purchasing and installing product  manufacturing  equipment (other than
the molds which will be furnished by IM2) for the  establishment of a rubber mat
molding and  flocking  facility at the  Montreal  T.A.P.  Plant.  In  connection
therewith  the Company is presently  finalizing  the terms of an agreement  with
Plasti-Systemes Inc. of Ville D'Anjou, Quebec ("Plasti-Systemes"),  with respect
to their providing the Company with such a molding and flocking  facility,  as a
complete  "turnkey"  package,  including all equipment and labor.  Such facility
will be  designed  to be capable of  producing  rubber  mats of the  quality and
quantities required under the IM2 Agreement.  Negotiations with  Plasti-Systemes
indicate  that the total  costs,  in terms of  United  States  dollars,  will be
approximately  $600,000 and that the Company will be required to make an initial
payment of approximately  $135,000.  Management estimates that approximately 60%
of the total  $600,000  cost  represents  the costs of  equipment  which will be
financed,  on an installment payment basis, by the vendors thereof and that such
costs will be covered out of cash flow from the molding  operations.  Management
believes that the balance of cash required will be available out of the proceeds
of sale and lease-back financing and/or bank debt financing.

      The  foregoing  has resulted in delays which have  required the Company to
continue to cover its overhead  without  significant  cash flow from operations.
This is expected to continue until  approximately  May 1999. The Company intends
to finance the  establishment  of the foregoing  from:  (i) funds on hand;  (ii)
expected  cash  flow  from  recent  sales of four  TCS-1  Plants;  and (iii) the
possibility  of obtaining  sale and leaseback  financing on the TCS-1  equipment
components owned by the Company. However,  initiation of commercial operation of
the Montreal  T.A.P.  Plant is dependent  upon numerous  factors,  including the
successful  performance,  on a long term, continuous running basis, of the First
Production Model in accordance with operating  specifications (see "Existing and
Proposed  Businesses  - Equipment  Manufacturing  - Products  and Services - The
TCS-1  Plant").   The  other  material  factors  which  are  necessary  for  the
commencement of commercial  operations under the IM2 Agreement are completion of
site  preparation  and compliance of the site with all applicable  ordinances by
March of  1999.  While  the  Company  expects  to begin  full  scale  commercial
operation of the Montreal T.A.P.  Plant in March 1999, it cannot,  at this time,
state with certainty when all requisite factors will be in place therefor.

Proposed Products

      The Company presently plans to manufacture  finished products  exclusively
pursuant to prior purchase  orders.  On December 11, 1998,  the Company  entered
into an  agreement  (the  "IM2/Tirex  Agreement")  with  IM2  Merchandising  and
Manufacturing,  Inc. ("IM2"), in Quebec, pursuant to which IM2 agreed to use the
Company as its 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  (See,  below,  "The  IM2/Tirex
Agreement").  The  Company  intends to endeavor  to obtain  additional  purchase
contracts for all types of products  which are presently  manufactured  from, or
which utilize in their  composition,  recycled  rubber crumb. In addition to the
rubber welcome mats to be  manufactured  for IM2, the Company  intends to target
the following markets:  specialty molded construction  products,  industrial and
consumer  mats and athletic  surfaces.  The Company  believes  that crumb rubber
modified  (CRM)  asphalt also shows strong  market  potential  and that new tire
manufacturing  and  thermoplastic  compounds,  particularly  for the  automotive
sector  constitute  promising  potential  markets for rubber crumb in the future
(See,  below,   "Existing  and  Proposed  Businesses  -  Company  Marketing  and
Distribution - Potential Markets").


                                       31
<PAGE>

Product Sales

The IM2/Tirex Agreement

      On  December  11,  1998,  the  Company  entered  into  an  agreement  (the
"IM2/Tirex  Agreement") with IM2 Merchandising and Manufacturing,  Inc. ("IM2"),
in  Quebec,  pursuant  to which IM2 agreed to use the  Company as its  exclusive
supplier of rubber welcome mats and related  products molded out of rubber crumb
(the  "IM2  Products").  IM2  has  entered  into  a  contract  with  a  national
distributor of consumer and commercial  floor matting  products,  which has over
forty  years  of  market  presence,  national  trade  show  exposure,  and  well
established distribution channels in all areas of retail distribution, including
large national retail outlets such as Wal-Mart.  IM2's contract provides that it
will be such distributor's  exclusive  supplier of IM2 Products.  In turn, under
the  terms  of the  IM2/Tirex  Agreement,  all of  IM2's  requirements  for such
products  will be supplied by the  Company.  IM2's  contract  with its  customer
provides  for the  following  sales  goals,  in US dollars,  by  calendar  year,
beginning January 1, 1999:

                  Calendar Year             Sales Goal
                  -------------             ----------
                  1999                      $1,625,000
                  2000                      $3,000,000
                  2001                      $5,000,000
                  2002                      $7,500,000
                  2003                      $7,500,000

      The above dollar  amounts  reflect prices at which IM2 will resell the IM2
Products to its  customer.  While the Company has been advised that actual sales
may be substantially higher than those shown above, it should be noted that such
amounts represent sales goals, estimated for planning purposes only, and reflect
the quantities which IM2 anticipates that it will require under the terms of its
contract  with its  customer,  not required  minimum  purchases.  The  IM2/Tirex
Agreement  provides for the Company to sell the IM2 Products  exclusively to IM2
for 45% of the  profits  which  IM2 will  realize  from its  resales  of the IM2
Products,  net of all manufacturing and shipping costs,  including the Company's
overhead.  Pursuant to the terms of the IM2/Tirex Agreement, IM2 will supply the
Company with all molding  equipment and tooling  required for the manufacture of
the IM2  Products  and will grant the Company an  exclusive  license to use such
equipment.  The  IM2/Tirex  Agreement  calls  for  the  Company  to pay to IM2 a
one-time  license  fee in the amount of thirty  thousand  Canadian  dollars  (CA
$30,000).  The Company is also  obligated to pay, on behalf of IM2,  directly to
one of IM2's  employees,  ten thousand  Canadian dollars (CA $10,000) per month,
for a period of four months,  for the purpose of having such employee assist the
Company in setting up, and initiating  operations at, a product molding facility
at the Company's  Montreal  Plant.  The term of the IM2/Tirex  Agreement is five
years,  with IM2  having  the  option  to extend  such  term for two  additional
three-year  periods.  The Company intends to utilize,  in the manufacture of the
IM2  Products,  rubber  crumb  produced  by the  operation  of the  TCS-1  Plant
installed at its Montreal facility.  The Company expects the IM2/Tirex Agreement
to provide it with a steady  stream of  revenues  and  earnings  in the  current
fiscal year and,  since it will be  producing  the rubber crumb out of which the
mats will be made, the Company  expects to benefit from the economic  advantages
of vertical  integration.  However,  these operations are still at the projected
stage  and are  subject  to all of the  risks  inherent  in a new,  untried  and
unproven  venture with no history of operations to predict future  results.  The
Company expects to be recycling  sufficient  amounts of rubber crumb to meet all
of its molding  requirements,  and to begin active molding  operations under the
IM2/Tirex Agreement at its manufacturing facility in Montreal, in March 1999.


                                       32
<PAGE>

Raw Materials

      Based upon informal  conversations which management has had with officials
at La Societe  Quebecoise de  Recuperation  et de Recyclage  ("Recyc  Quebec") a
government agency involved with recycling used tires,  management  believes that
the Company will be able to obtain as many recyclable scrap tires as it can use,
and will receive a government  subsidy of $.07 (Canadian) or approximately  $.05
(U.S.) per pound of rubber processed at the Montreal T.A.P.  Plant.  Supplies of
recyclable  scrap tires,  as well as  subsidies  are expected for no cost to it,
from,  through, or under the auspices of,  Recyc-Quebec.  As at the date hereof,
however,  the Company has not  entered  into any formal or written  arrangements
with Recyc-Quebec or with any other potential supplier of recyclable scrap tires
for feedstock to be used in its proposed operations. Moreover, the Company could
encounter  legal  barriers  should it  attempt to import  tires from  outside of
Quebec. Notwithstanding the foregoing, the Company is confident that it will, at
least in the foreseeable  future,  be able to obtain adequate  feedstock for its
tire recycling operations, on a subsidized basis, or otherwise.

Proposed Rubber Crumb and Finished Product Marketing Activities

      Rubber crumb, of a quality which the Company believes the TCS-1 Plant will
be able to  produce  at the  outset,  currently  sells for  approximately  $.135
Canadian  (or  approximately  $.10  U.S.) per  pound in  Quebec.  Revenues  from
projected sales of rubber crumb will be in addition to the government  subsidies
noted above and are therefore expected to be approximately  $0.205 (Canadian) or
$0.15 (U.S.) per pound. The Company believes that it will be able to produce and
sell  between  20,000 and 50,000  pounds of rubber crumb per day  commencing  in
March of 1999.

      The Company's plans for marketing rubber crumb produced from the operation
of the Montreal T.A.P.  Plant and finished products  manufactured  therefrom are
discussed  in more  detail  below  under  the  caption  "Company  Marketing  and
Distribution".

Research and Development - Proposed TCS-1 Plant Operations and TAP Segment

      Research and  Development  activities and  expenditures  for the Company's
existing  TCS-1  Plant  manufacturing  segment  and  its  proposed  TCS-1  Plant
Operations and TAP segment are discussed on a combined basis,  below,  under the
caption "Research and Development - Combined Segments."

Employees - Proposed TCS-1 Plant Operations and TAP Segment

      The number and  categories of persons  employed in the Company's  existing
TCS-1 Plant  manufacturing  segment and its proposed TCS-1 Plant  Operations and
TAP  segment  are  discussed  on a  combined  basis,  below,  under the  caption
"Employees - Combined Segments."

Competition - Proposed TCS-1 Plant Operations and TAP Segment

      The Company  intends to market  rubber crumb  produced at the Montreal TAP
Plant  throughout  the  province  of Quebec.  The Company is aware of four crumb
rubber producers in Quebec who, to the best knowledge of the Company,  have been
producing an aggregate of  approximately  27 million  pounds of rubber crumb per
year from both scrap  tires and  "buffings"  (rubber  removed  from tires in the
re-treading  process).  Such  product is  consumed  by Quebec  manufacturers  of
outdoor mats,  construction  related  


                                       33
<PAGE>

products,  parking curbs, manhole seals,  acoustic panels, and mud flaps for the
automotive industry.  The Company believes that there presently exists in Quebec
demand for  approximately 23 million  additional pounds of rubber crumb per year
which,  because of  insufficient  local  product,  is now being filled by rubber
crumb imported from elsewhere. The Company believes that present local supply is
insufficient  to meet current  demands  because of equipment  limitations on the
part of the present  producers.  The Company believes it will be able to compete
successfully in the local area based on price and quality.

      The finished  products  which the Company  intends to  manufacture  at the
Montreal  TAP  Plant are  expected  to  include  specialty  molded  construction
products, industrial and consumer mats and athletic surfaces. These are intended
to be marketed in North  America  through  independent  distributors.  It is the
intention  of the  Company  that its  initial  finished  product  will  comprise
consumer  mats molded out of rubber  crumb  produced by  operation  of the TCS-1
Plant. The Company will have many competitors in this area, varying in size from
small  companies with limited  resources to large  companies with  substantially
greater  financial  and  management  resources  than  the  Company  and with the
technical  ability to  develop,  or the funds  necessary  to  acquire,  finished
products  similar to those  intended  to be offered by the  Company.  Many large
companies  with  sophisticated  product  marketing and  technical  abilities and
financial resources that do not presently compete with the Company may enter the
market for products  made from recycled  rubber.  Such  companies  could rapidly
become  significant  additional  competitors of the Company.  To the extent that
competitors  achieve either a performance or price advantage,  the Company could
be adversely  affected.  In addition,  competitive  pressures  from large,  well
financed  competitors  could  result in  lowering  of prices for goods made from
recycled rubber,  which would adversely affect the Company's ability to compete.
The Company intends to compete on the basis of quality and production  economies
which can be realized  from  vertical  integration,  whereby  the  Company  will
produce the raw material (rubber crumb) to be utilized in the manufacture of its
finished products.

Research and Development Activities - Combined Segments

      The  Company's  technical  expertise  has been an important  factor in its
development  and is  expected to serve as a basis for future  growth.  Since its
inception,  the  Company  has devoted  substantial  resources  to the design and
development of the TCS-1 Plant as well as to raising the financing necessary for
such  activities.  During the last two completed  fiscal years, the Company also
conducted research and development activities in the area of product development
focusing on  potential  commercial  applications  for the rubber  crumb which is
expected to be produced by operation of the TCS-1 Plant. During the fiscal years
ended June 30, 1997 and 1998,  respectively,  the Company expended approximately
$832,471  and  $606,227 on research and  development  activities  applied to the
design,  development,  and  construction of the first TCS-1 production model and
product development. The basic design, development and construction of the first
complete  production  model of the  TCS-1  Plant was  completed  in May of 1998.
Thereafter,   continuous  testing  procedures  revealed  the  need  for  certain
modifications,  which were completed in December of 1998 on a single  fracturing
mill and a single freezing tower in the First  Production  Model.  Completion of
the second  fracturing mill and freezing tower,  which will be included therein,
is scheduled to occur in April of 1999 (see "Existing and Proposed  Businesses -
Equipment Manufacturing - Products and Services - The TCS-1 Plant"). Thereafter,
the  Company  intends  to  continue  to seek to  refine  and  enhance  its  tire
disintegration  technology and to enhance it to comply with emerging  regulatory
or industry standards or the requirements of a particular customer.  The Company
also  intends to continue to endeavor to develop new  products  and uses for the
crumb rubber produced by the operation of the TCS-1 Plant.

      During the fiscal  years ended June 30, 1997 and 1998,  all  research  and
development  activities  respecting  the TCS-1  Plant  were  carried  out by the
Company's  engineering  and technical  staff,  consisting of Louis V. Muro, Vice
President in Charge of Engineering, and one other Company employed engineer, 


                                       34
<PAGE>

who devoted 100% of their time to such projects.  Such activities were conducted
in  conjunction   with  an  outside   consultant   and  the  Company's   outside
subcontractors, Plasti-Systemes, Fedico, Inc., and Lefebvre Freres, Limitee.

      Research and  Development  activities  in the area of product  development
were effected  principally by members of the Company's  executive and management
staff, who dedicated part of their time to such activities.

Employees - Combined Segments

      As of  February  16,  1999,  the  Company  had  twenty  including  its six
executive  officers,  the president of The Tirex  Corporation  Canada Inc.,  its
two-member   in-house  legal  staff,  its  technical   program   director,   two
secretary-receptionists,   and  its   managing   director  of  European   market
development,  with a balance of the Company's  staff comprised of mechanical and
other support personnel.  All of the foregoing persons devote their full time to
the business and affairs of the existing and proposed businesses of the Company,
on a combined  basis,  as  required.  At times,  the Company  also  utilizes the
services of several  part-time  consultants to assist them with market  research
and  development  and other  matters.  The  Company  intends to hire  additional
personnel, as needed.

      The Company does not  presently  have any  employees who devote their full
time to the  Company's  proposed  TCS-1 Plant  operations  or  finished  product
manufacturing  businesses.  However,  the  Company  expects  to  hire  up  to 61
additional  employees during the 1999 calendar year, on an as needed basis, with
the bulk of such new employees expected to be utilized in the Company's proposed
TCS-1 Plant Operations and TAP segment.

Marketing and Distribution - Combined Segments

Potential Markets

      The Company believes that the potential  markets for its: (i) TCS-1 Plant;
(ii) rubber crumb  produced by its proposed  ownership  and  operation of one or
more TCS-1 Plants ("Tirex Rubber Crumb");  and (iii) proposed  finished products
manufactured   from  or  incorporating   Tirex  Rubber  Crumb  ("Tirex  Advanced
Products") will all directly  reflect the level of demand for  economical,  high
quality rubber crumb derived from the recycling of scrap tires.  With respect to
TCS-1 Plant  operation,  the Company  intends  initially to target the following
markets:  specialty molded construction  products,  industrial and consumer mats
and athletic  surfaces.  The Company  believes that crumb rubber  modified (CRM)
asphalt  also shows  strong  market  potential  and it will be  targeted  by the
Company if the results and recommendations in a report, presently being prepared
by  the  National  Institute  for  Occupational   Safety  and  Health  (see  the
discussion,  below, under "Rubber Modified Asphalt"),  are positive. The Company
believes  also  that  new  tire   manufacturing  and  thermoplastic   compounds,
particularly for the automotive  sector constitute  promising  potential markets
for rubber crumb in the future.

      The following discussion of the potential markets for rubber crumb assumes
that the TCS-1  Plant will be capable of  economically  producing  high  quality
recycled  rubber crumb and in a variety of sizes,  capable of being used in wide
range of products.  The Company  believes that the First Production Model of the
TCS-1 Plant is presently  ready for commercial  operation,  utilizing one of its
two freezing towers and fracturing  mills, and that it will be fully operational
by April 1999 with both  freezing  towers  and  fracturing  


                                       35
<PAGE>

mills.  It should be noted,  however,  that  because of the lack of an operating
history,  the Company  cannot,  at this time, give any assurance with respect to
whether  the TCS-1  Plant will in fact  perform as  expected  under  continuous,
commercial operating conditions.  Moreover,  even if the demand for rubber crumb
should increase in accordance with the Company's  expectations,  there can be no
assurance  that a  concomitant  development  of demand for the TCS-1  Plant will
develop.

      Rubber is a valuable raw material and the Company  believes that recycling
this  valuable  resource from scrap tires is an ideal way to recover that value.
Recycled  scrap tire  rubber is  already  used in a great  variety of  products,
promoting longevity by adding it to asphalt pavement,  adding bulk and providing
drainage as a soil  additive,  providing  durability  as a carpet  underpadding,
increasing  resiliency  in running  track  surfaces and  gymnasium  floors,  and
absorbing  shock and  lessening the potential for injuries as a ground cover for
playgrounds and other recreational areas.

      Recycling tires into reusable crumb rubber (or "ground rubber") was, as of
1996, the third largest use of scrap tires. "Crumb rubber" is the end product of
the tire disintegration  process.  The ideal crumb rubber is a powder, which can
be produced in various particulate sizes, ranging from relatively coarse to very
fine, and which is not significantly  contaminated by fiber and metal particles.
It is generally derived from used automobile tires or tire parts such as treads.
The Scrap Tire Use Disposal Study - 1996 Update (the "STMC Study"), published by
the Scrap Tire Management  Council (the "STMC") in April of 1997,  reported that
of the  approximately  266 million scrap tires generated in the United States in
1996, market  applications  were found for 76% (or 202 million).  The STMC Study
reported  further that, as of the period covered by the STMC Study,  the largest
use  presently  being made of scrap tires is burning  them as tire  derived fuel
(sometimes  referred  to as  "TDF"),  which  serves  principally  as a  low-cost
substitute for, or supplement to, coal, wood chips, or other combustible  fuels.
In this regard,  152 million or 76% of the tires for which  market  applications
had been found,  were burned as TDF.  Exporting  used tires (for  refitting  and
re-use as tires) was the second  largest use for scrap  tires.  While  utilizing
scrap tires to produce crumb rubber still  constitutes a  significantly  smaller
market for used  tires,  the STMC  Study  reported  that this usage  experienced
significant   growth   during  1995  and  1996,   increasing   two  hundred  and
seventy-seven percent (277%) from 4,500,000 tires in 1994 to 12,500,000 tires in
1996.  Historically,  most  crumb  rubber  available  and sold in the market was
derived not from recycled scrap tires, but from tire "buffings", a by-product of
the  tire  re-treading   process.(3)   Recently,   however,   this  has  changed
significantly,   with  tire  buffings  now  representing  52%  and  scrap  tires
representing 48% of source material for crumb rubber. According to the STMC, the
demand for crumb rubber for various uses could  experience  further  substantial
increases over the next two to five years, with expected overall growth in sales
of crumb rubber from 25% to 33%. The Company believes that because the supply of
buffings is limited, the main source of an increased supply of crumb rubber must
come from scrap tires.

      At present,  there are at least seven  general  categories  of markets for
crumb rubber of various sizes and grades. These consist of the following:

      *     Rubber  Modified  Asphalt  ("RMA",  168 million pounds in the United
            States in 1996):  Crumb rubber can be blended with asphalt to modify
            the properties of asphalt used in highway construction. Crumb rubber
            can be used either as part of the asphalt rubber binder,  seal coat,
            cape seal spray, or joint and crack sealant  (generally  referred to
            as  "asphalt-rubber")  or  as  an  aggregate   substitution  (rubber
            modified asphalt concrete or 

---------
(3)   Tire buffing  consist of relatively  small piece of rubber which remain on
      the tire shell  during the  re-treading  process.  After the used tread is
      removed,  these small  pieces are  "buffed"  off the shell  before the new
      tread is attached.


                                       36
<PAGE>

            "RUMAC").  At present, the cost of using asphalt-rubber and RUMAC is
            somewhat higher than conventional  materials.  However,  the service
            life of such  products  has  proved in some cases to be two to three
            times that of conventional asphalt pavements. While the use of crumb
            rubber in asphalt  pavement has a large  potential  market,  certain
            technical  issues  must be  addressed  before the  potential  can be
            reached.  The ability to recycle asphalt  pavement  containing crumb
            rubber and the development of standards,  particularly for materials
            testing and the environment  are the key issues to be addressed.  In
            general, asphalt-rubber,  or the "wet process", has proven to be the
            most successful product,  representing  approximately 95% of the RMA
            market in 1996,  according  to the STMC.  Other key  issues  involve
            potential environmental and human health effects associated with the
            use of crumb rubber  modified  (CRM)  asphalt.  In this regard,  the
            National  Institute  for  Occupational  Safety  and  Health  (NIOSH)
            performed  a series of  exposure  and health  evaluations  from 1994
            through  1997.  To  date,  the  NIOSH  project  has  performed  site
            evaluations at seven paving projects  around the country  (Michigan,
            Indiana,   Florida,  Arizona,   Massachusetts  and  California).   A
            composite   report  of  the  overall  findings  and  conclusions  is
            currently being prepared by NIOSH but has not yet been issued.  This
            report will address issues of sampling  methods,  worker  exposures,
            and health effects  associated with conventional  versus CRM asphalt
            paving.

      *     Bound Rubber  Products  (134 million  pounds in the United States in
            1996):  Ground or  powdered  scrap tire  rubber is formed into a set
            shape,  usually  held  together  by an  adhesive  material  such  as
            urethane  or epoxy.  Examples  of such  applications  are  injection
            molded  products and extruded goods such as railroad  crossing pads;
            dock bumpers,  patio floor blocks,  flooring material,  roof walkway
            pads, and carpet underlay.

      *     New Tire  Manufacturing  (48 million  pounds in the United States in
            1996): Fine crumb rubber or powder reclaimed from scrap tires can be
            used as a low  volume  filler  material  in both the  tread  and the
            sidewalls of new tires.  The percentage of recycled  rubber that can
            be used in new tires is somewhat in excess of 1.5%.

      *     Athletic and  Recreational  Applications  (24 million  pounds in the
            United States in 1996) (US or Worldwide): Coarse crumb rubber can be
            used in several  applications,  such as in running  track  material,
            grass  surfaced  playing  areas,  or as a substitute  for playground
            surfaces.  The use of crumb rubber for these purposes will generally
            make playing  surfaces and running  tracks more  resilient  and less
            rigid, but capable of maintaining traction and shape.

      *     Molded and Extruded  Plastics  and Rubber (18 million  pounds in the
            United  States in 1996):  Finely  ground  scrap  tire  rubber can be
            placed into  production  molds to form  products for the  automotive
            industry,  such as sound  insulation,  step pads,  truck and trailer
            liners, matting and drip irrigation pipes.  Management believes that
            there are significant potential markets for these applications which
            may result from  continuing  research  and  development  of products
            using a surface  modified  rubber.  There  has also been  increasing
            interest on the part of automotive  manufacturers in the purchase of
            products which contain recycled rubber.

      *     Friction  Material (8 million  pounds in the United States in 1996):
            Coarse crumb rubber is used in friction  brake  materials  for brake
            pads and brake shoes.


                                       37
<PAGE>

Marketing Activities

      The  Company's   objective  is  to  market  and  distribute  its  products
worldwide,   through   national  and   international   distributors   and  sales
representatives. However, to a large extent the Company has to date concentrated
its efforts on completing the design, development, and construction of the first
production  model of the TCS-1 Plant and raising  adequate  financing to support
such  efforts.  It has,  therefore,  not yet  commenced  a full scale  marketing
campaign and does not intend to do so until the production model is complete and
adequate  funding is available to cover the costs  thereof.  During the last two
completed fiscal years and the subsequent  period, the Company has however taken
initial  steps to  prepare a  foundation  for a  world-wide  marketing  program,
appointing Alan Crossley as Managing Director of European Market Development. In
connection  therewith the Company has engaged in the following  market  research
activities  with  financial  assistance  from the  Canadian  Federal  Office  of
Regional  Development - Quebec ("FORDQ") under its IDEA Program,  which provides
loans in amounts of up to 50% of approved  expenditures made by the borrower for
the purpose of identifying and developing  export markets for Canadian  products
(the terms and amounts of these loans are  discussed,  above,  in "Existing  and
Proposed Business - Canadian  Operations - Canadian  Government,  and Government
Sponsored Loans and Grants"):

      (a)   From April,  1997 through March,  1998, the Company conducted market
            research  activities  respecting the potential United States markets
            for  rubber  crumb.  The  Company  retained  Plasti-Services  Inc. a
            non-profit  organization  founded by government and manufacturers of
            plastic   and  rubber   goods,   which   produced   a  report   (the
            "Plasti-Services  Report). This report indicated that the market was
            mature and well serviced with numerous non-rubber based products and
            that unless the  Company  was able to produce a product  which could
            replace any of those  presently  being  used,  at  substantial  cost
            savings,  this would not be an area which the Company should pursue.
            The PlastiServices  Report highlighted technical and economic issued
            that the Company must address, such as materials compatibility, lack
            of  sufficient  existing  technical  data,  and  cost  of  equipment
            modification  for potential  users of rubber crumb based  compounds.
            Based  upon  the   foregoing,   the   Company   believes   that  the
            Plasti-Services  Report is inconclusive  because the Company has not
            yet  produced  sufficient  samples  of the type of  rubber  crumb it
            expects to produce to effect a thorough  analysis of such  projected
            product.  Moreover, to the best of the Company's knowledge, there is
            no other tire derived  rubber crumb of the quality which the Company
            expects  to be able to produce  currently  available.  Further,  the
            Company  believes  that its overall  research  indicates  that:  (i)
            plastics and rubber  compounders  would be willing to consider using
            tire derived rubber in place of what they are using now and would be
            willing to enter  collaborative  ventures to test Tirex Rubber Crumb
            if and when it is produced in sufficient  quantities;  and (ii) with
            consistent materials specifications.

            The Company also retained a special  consultant,  with  expertise in
            the area of government assistance programs related to recycling, who
            investigated  public sector  incentives by region for any activities
            related to tire  recycling  business in forms of grants,  subsidies,
            tipping  fees and  legislation  related  to  tires.  Based  upon the
            foregoing,  the Company believes that in order to properly  identify
            the best potential  market  opportunities  and price  structures for
            Tirex Rubber  Crumb,  its present  market  research and  development
            priorities  should  focus,  in  the  following  sequence,   on:  (i)
            producing  sufficient  quantities  of Tirex  Rubber  Crumb (which is
            dependent upon the TCS-1 Plant's being able to operate in accordance
            with its specifications; (ii) developing appropriate test protocols;
            (iii)  analyzing  the  Tirex  Rubber  Crumb  for its  technical  and
            materials  properties;  (iv) doing  competitive  testing  with other
            products  currently  available in the market place;  and (v) working
            with potential users, focusing on using Tirex Rubber Crumb to reduce
            their material costs.


                                       38
<PAGE>

      (b)   In  January  of  1997,  the  Company  began  exploratory  activities
            respecting  the  feasibility  of marketing the TCS-1 Plant in Europe
            and Asia. In connection  therewith,  Alan Crossley, as the Company's
            European Market  Development  Consultant,  through his firm,  Gapco,
            Inc.,   conducted  market  studies  respecting  the  feasibility  of
            marketing TCS-1 Plants in the Iberian Peninsula and in India.

            The Iberian study indicated that Spain constitutes a sizeable market
            both in terms of scrap tires  requiring  elimination or disposal and
            in  terms of  rubber  crumb  utilization.  According  to the  study,
            Spain's tire disposal industry is presently dominated by landfilling
            practices due to the abundance of land useable as landfill sites and
            the relatively low short term costs  associated  with this method of
            tire disposal.  Another  popular method of tire disposal in Spain is
            incineration  although this method has been associated with problems
            ranging from cost inefficiency to causing air pollution.  Generally,
            the present circumstances in Spain regarding tire disposal have been
            acknowledged  to  be  environmentally  unsatisfactory  resulting  in
            pressure  to  develop  alternative   disposal  methods.   The  study
            concludes that none of the methods of tire disposal presently in use
            in  Spain  are  technically   satisfactory  or  cost  efficient.  It
            indicates  that  several  alternative   solutions  to  Spain's  tire
            disposal  problems are under  development  and that  although  there
            exists  the  potential  for  substantial  competition  in  the  tire
            disposal  industry in the future there is no such competition at the
            present time. At present,  the Company is not aware of any potential
            competitor in Spain having a tire disposal system  comparable to the
            TCS-1 Plant, although no assurance can be given that this is in fact
            the case.  A  substantial  portion of the study was also  devoted to
            assessing  the market in Spain for rubber in  general  and  recycled
            rubber crumb in particular. Spain is a net importer of all the types
            of rubber raw material it uses and consequently, the study concluded
            that Spain's rubber industry should be particularly receptive to new
            sources of cheaper raw materials. The study indicated that marketing
            efforts  in Spain  for  rubber  crumb  should  be  directed  at tire
            manufacturers,  users of rubber  crumb and other  tire  by-products,
            waste processors and government organizations  responsible for waste
            disposal.  It concluded that any entry strategy for a TCS-1 Plant in
            Spain would be dependent upon  identifying  potential  purchasers of
            Tirex rubber crumb, but that this could be done only after the TCS-1
            Plant is  capable of  producing  a  reliable  supply of  homogeneous
            product.

            In or  about  July  1997,  the  Company  commenced  European  market
            development  activities  aimed at positioning  the Company to Market
            TCS-1 Plants,  Rubber Crumb, and Related  Products in Europe.  These
            activities included appointing Alan Crossley as Managing Director of
            European Market Development and opening a sales office in Madrid for
            the purpose of  promoting  and  developing a market for TCS-1 Plants
            and for the rubber crumb  expected to be produced from the operation
            of such Plants. Mr. Crossley's  activities also included researching
            and  evaluating  current  developments  in European  production  and
            consumption, national and regional policies, and international trade
            of used tires. Results from European marketing activities, conducted
            subsequent to the completion of the Iberian market study,  appear to
            indicate that landfill bans, producer responsibility, and management
            of integrated  waste tire collection  systems are the priority items
            in the  recommendations  of the European  Economic  Union's European
            Commission - Environmental Council. To this end, Germany, the United
            Kingdom   and  other  areas  in   northern   Europe  are   currently
            implementing,  and, for the near future, are expected to continue to
            implement,  the recycling  directives of the European Economic Union
            substantially  ahead of areas in southern Europe.  As a result,  the
            Company  had  decided  to move its  European  marketing  efforts  to
            London.  The  Company  believes  it will be able to do so during the
            current fiscal year.


                                       39
<PAGE>

      (c)   Since April,  1998, the Company has been engaged in market  research
            activities  respecting  the  feasibility  of using  rubber  crumb in
            thermoplastic  elastomer  compounds in the United States and Canada.
            Such activities  included retaining Robert Eller and Associates Inc.
            a  consulting  firm  specializing  in rubber  industry,  to identify
            thermoplastic  applications  that can incorporate Tirex Rubber Crumb
            in significant (30 to 60 percent) quantities as a raw material.  The
            Company has also  retained MD  Technologies,  a Quebec  research and
            development   laboratory  with  expertise  in  rubber  and  plastics
            formulations, to develop formulations for the low end thermoplastics
            products  such as  flooring,  construction  and  road  and  athletic
            surface  applications.  Robert  Eller  and  Associates  has  not yet
            completed its final report.


                                       40
<PAGE>

      In November 1997, the Company also began working with a consultant who had
expertise and substantial  business and marketing experience and contacts in and
around  Puerto  Rico  in  connection   with:  (i)  market   development  in  the
Southeastern  United States and the Caribbean and (ii)  assistance in developing
and  implementing  a business plan designed to expand the Company's  business to
include participating, through joint ventures, or otherwise, in the recycling of
scrap tires into  useable  crumb  rubber and other  saleable  byproducts.  For a
discussion of compensation arrangements with such consultant,  reference is made
to Item 5 of this Report,  the  subtopic,  "Sales of  Unregistered  Securities -
Securities Issued As Compensation  Under Written  Consulting  Agreements".  As a
result of such consultant's  efforts, in the spring of 1998, the Company entered
into negotiations for a joint venture (the "Proposed P.R. Joint Venture") with a
group of persons who have knowledge of the operation of business  enterprises in
Puerto Rico and who believe that they have the ability to, establish and develop
contacts between the Company and government agencies in Puerto Rico with respect
to the  establishment  and operation of one or more TCS-1 Plant  equipped  scrap
tire recycling plants in Puerto Rico. It was intended that the prospective joint
venture  partners would devote their efforts and expertise to: (i) obtaining all
required licenses,  permits,  and available Puerto Rican government  incentives,
grants and aids needed to establish and develop the business of Tirex PR and the
operations  of the Tirex PR Plant;  (ii)  assisting  the Company in locating and
obtaining  private and/or  government  agency debt  financing,  grants,  and tax
credits,  as  available,  to  capitalize  the  Proposed PR Joint  Venture and to
provide  working capital for the  establishment  and development of its business
and operations;  (iii) locating  appropriate  plant sites; and (iv) establishing
and  developing  contacts  between the Proposed P.R. Joint Venture and potential
customers  for the  crumb  rubber  and  other  products  to be  produced  by the
operations  of such scrap  tire  recycling  plants.  The  present  status of the
Proposed  P.R.  Joint  Venture  is that  negotiations  are  continuing  with the
potential partners, but that no final decisions have been reached as of yet. The
Proposed P.R.  Joint Venture  continues to be of interest to the Company.  It is
hoped that  agreement can be reached on terms  acceptable to the Company  during
the third or fourth quarters of the 1999 calendar year.  However, as at the date
hereof,  management  is unable to give any  assurance  that any joint venture or
other operations in Puerto Rico will result from these efforts.

      The  Company  can make no  assurances  with  respect to the success of its
distribution strategy. Furthermore, the Company has limited resources to achieve
the distribution of its products and no assurances can be given that the Company
will not require additional  financing,  which may not be available,  to achieve
such objective.

Government Regulation

      While the Company's equipment manufacturing operations may not be directly
subject  to  extraordinary  government  regulations,  the  Company's  continuing
research and  development  activities,  and the operation of the Montreal T.A.P.
Plant will  involve,  to varying  degrees and for varying  periods of time,  the
storage of scrap tires which may subject the Company to stringent  environmental
regulations.

      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.  Furthermore,  to the best of the
Company's  knowledge,  operation  of the  TCS-1  Plant  will not  result  in the
emission of air pollutants,  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 potentially
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  


                                       41
<PAGE>

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  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.

      The Company  believes that it will be able to operate in  compliance  with
such  regulations.  In this regard it has  retained  environmental  attorneys in
Montreal  to advise it with  respect  to  compliance  with  local  environmental
regulations.  It has also engaged a consultant to advise purchasers of its TCS-1
Plants  with 


                                       42
<PAGE>

respect to compliance  with local  environmental  regulations  applicable to the
installation  and operation of the TCS-1 Plant.  Even prior to the initiation of
operations at the Montreal T.A.P. Plant, the Company has made, and will continue
to make  expenditures  relating to environmental  compliance  because at least a
limited  amount of storing and processing of tires has been required for testing
of the first TCS-1 Plant at the Montreal facility.

      Specifically,  with respect to the Montreal T.A.P. Plant, local ordinances
require that scrap tires be stored indoors,  under certain conditions  including
proper  segregation  of tires and adequacy of  sprinkler  systems and other fire
code  requirements.  In order to comply with such  regulations,  the Company has
installed  adequate  sprinkler  systems and  dedicated  segregated  areas of its
Montreal  facility to the storage of tires in  manageable  piles.  In connection
therewith,  the  Company's  plans  respecting  the use of the  building  for the
storage of tires has been  submitted to the Montreal  Building  Department  (the
"Building  Department").  In response,  the Company has been requested to submit
more detailed specifications,  drawn up by a certified architect, respecting the
construction  of the  outside  walls  of the  building,  so  that  the  Building
Department can determine whether they comply with the applicable portions of the
fire code.  The  Company  has  retained  a  certified  architect  to draw up the
required plans, but is not able to state at this date,  whether the construction
is adequate in its present state or whether reinforcements will be required, and
if required,  what the total cost of such  reinforcements  will be. To date, the
Company  has  expended   approximately   Cdn$40,000   or  US$28,000  on  capital
expenditures relating to environmental  compliance.  However, in addition to the
above noted possibility of mandated changes to the building in order to bring it
into conformance with fire regulations, the inception of equipment manufacturing
and TCS-1  Plant  operations,  together  with  continually  changing  compliance
standards and technology,  may affect the Company's  future capital  expenditure
requirements relating to environmental compliance.

ITEM 2.  DESCRIPTION OF PROPERTY

Corporate Headquarters

      The Company's corporate headquarters are located at 740 St. Maurice, Suite
201, Montreal, Quebec, H3C 1L5. The Company occupies a 1988 square foot suite in
a modern office  building  located in the  commercial  and business  district of
South West  Montreal.  All of such  facility  is devoted to  executive  offices,
reception,  and conference  areas including six executive  offices.  The Company
occupies these premises under a three-year lease, dated June 23, 1997,  (expires
on June 30, 2000) with Les Immeubles 740  Saint-Maurice  Inc. The lease provides
for  monthly  rental  payments of  Cdn$2,825  (approximately  US$2,034).  Rental
payments are inclusive of all taxes, utilities, and any other applicable fees or
charges.  The lease is renewable for an  additional  three years at market rates
then prevailing.

Research and Manufacturing Facility

      On February 17, 1998, the Company entered into a five-year term lease (the
"Tri-Steel Lease") with Tri-Steel Industries Inc. ("Tri-Steel"), effective as of
March 1, 1998 for a 90,000 square foot research and manufacturing  facility on a
completely  fenced  180,000  square  foot  contiguous  lot located at 3828 Saint
Patrick  Street and 2200 Pitt  Street in  Montreal,  Canada.  The  facility is a
concrete  and  reinforced   steel  structure   consisting  of  three  completely
integrated areas, including:

      (a)   a 40,000 square foot reinforced  concrete and galvanized  structural
            steel, area, with a reinforced concrete floor and a mezzanine, which
            was  constructed  in 1941.  Approximately  800  square  feet will be
            dedicated  to  administrative  offices,  a  reception  area,  and  a


                                       43
<PAGE>

            conference  room.  The  balance of this  structure  will be used for
            fabrication of TCS-1 Plants and ancillary equipment;

      (b)   a 20,000  square  foot area  constructed  of  galvanized  structural
            steel,  one-story (thirty to forty feet) in height,  with a concrete
            floor, added at or around 1982. This structure will be used for test
            operations  of the TCS-1 and further  development  and  improvements
            thereon.

      (c)   a 30,000 square foot area constructed of galvanized structural steel
            with a dirt floor,  constructed  at or around  1986,  to be used for
            warehousing purposes.

      When the Company  entered into the  Tri-Steel  Lease,  the facility was in
excellent  repair and was well suited to the requirements of the Company for the
purpose of manufacturing  TCS-1 Plants.  The only  improvement  required at that
time,  was an  updated  fire  suppression  system in  compliance  with the local
Montreal  fire code  respecting  the  storage of rubber  product.  However,  the
planned  expansion of the  Company's  activities to encompass the operation of a
TCS-1 Plant and the  manufacture  of finished  products  out of the rubber crumb
produced thereby, has necessitated  additional  modifications and renovations to
the building.  These have included the  installation of the new fire suppression
system noted above and new lighting, heating, electric, and ventilation systems,
as well as the  construction of new concrete and asphalt  floors,  garage doors,
and loading docks.  The aggregate cost of the foregoing  improvements,  together
with the cost of a six thousand pound  forklift,  is  approximately  US$300,000,
US$100,000 of which have already been paid by the Company.  The Company  expects
all of the foregoing  renovations and  improvements to be completed in or before
June 1999.

      A Canadian  National Railway spur terminates within the building which has
both entrance and exit railway track openings. In addition, the facility has two
additional  "drive-through"  entrance ways which accommodate  trucks and tractor
trailers  for indoor  loading and  unloading,  as well as an  extensive  (30,000
square foot) covered  outdoor  parking and loading area,  which can also be used
for protected  outdoor  storage.  The facility  comes  equipped with three 5-ton
overhead  bridge  cranes,  each one spanning  50-60 feet cranes.  All  utilities
(electricity, gas, heat, and water) are in place and in working order.

      The Facility is situated, adjacent to an interstate highway and a Canadian
National Railway line in an industrial area located approximately two miles from
the principal  downtown  Montreal  business  center and the Company's  executive
headquarters.

      The Tri-Steel Lease provides for rental payments, as follows: (i) year-one
(commencing March 1, 1998): Cdn$10,000 per month (approximately  US$7,000); (ii)
year-two: Cdn$20,000 per month (approximately US$14,000); and (iii) years-three,
four, and five: Cdn$25,000 per month (approximately US$17,500 US ). Quebec sales
taxes ("QST") and (Canadian)  Government sales taxes ("GST") are also payable by
the  Company on all rental  payments.  Management  believes  that under  present
regulations,  these taxes are either  refundable to the Company or are available
as reductions of required  remissions of sales taxes  collected on sales made to
other taxable Canadian entities.  It is estimated that year-one sales taxes will
aggregate  to  approximately  15% of all rental  payments  made.  The  Company's
present  sales tax status is such,  however,  that QST and GST payments  will be
refunded to it by the  government.  The Company is obligated  to pay  additional
costs,  including all fuel and utility  charges,  real estate  taxes.  The Lease
requires  the company to carry  insurance  on the  premises for not less than CA
$4,000,000  (approximately $2,800,000 US) and public liability insurance for not
less than CA $3,000,000  (approximately  $2,100,000  US). The Company  estimates
that the aggregate  amount of such  additional  costs will be  approximately  CA
$10,265  (approximately  $7,153 US) for temporary coverage for the first year of
the lease.


                                       44
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

Settlement of Great American Matter

      On November 12, 1998, the Company  entered into a settlement  agreement by
and among  Great  American  Commercial  Funding  Corp  ("Great  American"),  the
Company,  and a third party  unrelated  to the  Company,  who also had  business
dealings with Great American. The matter between Great American and the Company,
to which the said  settlement  agreement  pertains,  is an action which had been
commenced by Great American on June 18, 1997 in the United States District Court
for the District of New Jersey, entitled Great American Commercial Funding Corp.
vs.  Tirex  America  Inc.  The  action  arises  out of a certain  placement  fee
agreement (the "Placement Fee  Agreement"),  executed by the Company in February
of 1996, under which the Company, among other things, undertook to pay the Great
American a placement fee in the amount of $250,000 and to grant to the plaintiff
an option to acquire 400,000 shares of the company's common stock, at a price of
$0.01 per share,  in the  event,  and only in the  event,  that  Great  American
succeeded in obtaining financing acceptable to the Company.  Although the amount
and terms of the "financing" were not mentioned in the documents, it was clearly
understood by the parties that the Company was then seeking to obtain,  and that
the agreement contemplated, financing in an amount (assumed necessarily to be in
the multi-million dollar range),  adequate to fund the design and development of
the TCS-1 Plant and to enable the Company to initiate  manufacturing such Plants
on a  commercial  basis.  Great  American  claimed  that  it had  fulfilled  its
obligations under the said Placement Fee Agreement by introducing to the Company
a firm which was engaged in the business of equipment  lease financing and which
the  Company  subsequently  introduced  to one of its  prospective  TCS-1  Plant
purchasers. Such purchaser ultimately entered into a lease financing arrangement
with such firm,  pursuant to which the  Company was able to obtain some  limited
amounts of pre-delivery  funds. It was the Company's  position that the advances
made to the Company pursuant to such lease-financing  arrangement did not in any
way  constitute  the  type  of  financing  contemplated  by the  parties  or the
Placement  Fee  Agreement  and that the Company had no financial  obligation  to
Great  American  pursuant  thereto.  The  Company  filed an Answer  denying  any
liability to the plaintiff in light, among other things, of the foregoing facts,
and  asserting,  among other  things,  that:  (i) the  agreement  was induced by
plaintiff's  material  misrepresentations;  (ii)  enforcement  thereof  would be
clearly unconscionable under the circumstances; (iii) plaintiff never introduced
the Company to any third party which was ready, willing, and able to produce the
type of financing  which the plaintiff  knew the Company was seeking and needed;
and (iv) the  so-called  "placement  fee  agreement"  was  merely an offer for a
unilateral  contract  which  was  terminated  or  revoked,  and  notice  of such
revocation  was  timely   communicated  to  plaintiff  before  it  rendered  any
substantial performance in reliance upon the offer.

      In fulfillment of the terms of the Great  American  Settlement  Agreement,
the  Company  paid to Great  American  the sum of  $32,500 in cash and issued to
Great  American and its  attorneys,  Kuritsky,  Giasullo  and Messina,  one-year
options to purchase an aggregate of up to fifty thousand shares of the Company's
unregistered common stock at a price of $0.20 per share.

Settlement of Nais Corporation Matter

      Effective,  December  18,  1998,  the  Company  and the  Nais  Corporation
("NAIS") settled an action (the "NAIS Settlement  Agreement") brought by NAIS on
May 27, 1998  against the Company in the U.S.  District  Court for the  Southern
District  of New  York.  This  action  was  based  upon a  financial  consulting
agreement  (the  "NAIS  Agreement"),  dated May 3,  1997,  between  NAIS and the
Company.  The Complaint  alleged that the Company  failed to comply with certain
compensatory arrangements contained in the said NAIS Agreement and sought relief
by way of immediate  registration  of 5,231,092  shares of the Company's  common
stock  issued to NAIS as  compensation  (the "NAIS  Shares")  and damages in the
amount of 


                                       45
<PAGE>

$630,000.  The Company  filed an Answer and  Counterclaim,  dated July 27, 1998,
denying any liability to NAIS and alleging,  among other things,  that: (i) NAIS
failed to perform; and (ii) NAIS made material misrepresentations  regarding its
expertise  and  ability to perform in order to induce the  Company to enter into
the NAIS Agreement.

      In  fulfillment  of the  terms  of the  NAIS  Settlement  Agreement,  NAIS
returned  500,000  NAIS Shares to the  Company,  gave to Terence C.  Byrne,  the
chairman of the board of directors and chief executive officer of the Company, a
voting proxy  respecting the remaining  4,731,092  NAIS Shares,  NAIS's right to
have any of the NAIS Shares registered by the Company was rescinded,  and NAIS's
right to sell any of the NAIS Shares is limited to sales made in compliance with
Rule 144 of the General Rules and  Regulations of the Securities Act of 1933, as
amended ("Rule 144"),  on a limited basis only,  with not more than 200,000 NAIS
Shares  saleable  per  thirty-day  period  during  the period  (the  "Restricted
Period")  ending at the earlier of: (i) six months  following the effective date
of a registration  statement  filed by the Company with the SEC on May 21, 1998;
or (ii) August 11, 1999.  Following the Restricted Period,  sales of Nais Shares
will be  governed by normal  Rule 144  requirements.  At no time will any of the
NAIS Shares be eligible for sale under  Paragraph  (k) of Rule 144 which,  among
other  things,  would allow for the sale of stock  without  regard to the volume
limitations and manner of sale  restrictions  otherwise imposed by Rule 144. The
NAIS  Settlement  Agreement did not provide for any damages to be paid by either
party.

Threatened Litigation with Dr. Laura Gabiger

      On November 18, 1998,  attorneys for Dr. Laura Gabiger advised the Company
that they had been  authorized  by Dr.  Gabiger to file suit against the Company
for  breach  of  contract.  It is the  position  of the  Company  that it has no
obligations  whatsoever to Dr.  Gabiger and,  moreover,  that Dr. Gabiger should
return compensation paid to her in stock and in cash, for services which she was
either unwilling or unable to render to the Company. This matter arises out of a
consulting  agreement,  dated June 18,  1997,  between the Company and Dr. Laura
Gabiger (the "Gabiger Agreement").  The Gabiger Agreement provided for a term of
three years,  commencing on July 1, 1997, and compensation at the annual rate of
$96,000  during the first two years and at an annual rate of $58,000  during the
third year.  The Agreement  provided  further that thirty  percent (30%) of such
compensation  would be paid in cash and seventy  percent  (70%) would be paid in
shares of the Company's common stock. On July 7, 1997, the Company issued to Dr.
Gabiger  263,529 shares of its common stock,  which covered the Company's  stock
compensation  obligations for the entire first year of the Gabiger Agreement. In
addition,  between  October 1997 and June 1998,  the Company paid Dr.  Gabiger a
total of $28,800,  representing the full amount of cash  compensation due to her
for that period.  It is the Company's  position that any suit which Dr.  Gabiger
would bring  against the  Company for breach of the Gabiger  Agreement  would be
completely  without  merit and that,  should such suit be  brought,  the Company
would defend it vigorously  and bring a counter suit against Dr. Gabiger for the
return of monies and stock  paid to her in  advance,  for  failure to perform in
accordance with the terms and conditions of the Gabiger  Agreement.  As of March
3, 1999,  the Company had received no further  communications  from Dr.  Gabiger
with respect to this or any other matter.

      The  Company  is  unaware  of  any  other  pending  or  threatened   legal
proceedings  to which  Company  is a party or of which any of its  assets is the
subject. No director,  officer, or affiliate of the Company, or any associate of
any of them, is a party to or has a material interest in any proceeding  adverse
to the Company.


                                       46
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      During the  fourth  quarter of the  fiscal  year ended June 30,  1998,  no
matters were submitted to a vote of the shareholders of the Company.

                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The  Company's  common  stock,  is  traded  on  a  limited  basis  in  the
over-the-counter  market  and  quoted  on  the  OTC  Electronic  Bulletin  Board
maintained by the National  Association  of Securities  Dealers,  Inc. (the "OTC
Bulletin Board"). The following table sets forth representative high and low bid
prices by calendar  quarters as reported in the OTC  Bulletin  Board  during the
last two fiscal years and the subsequent  interim  period  through  February 12,
1999.  The level of trading in the  Company's  common stock has been limited and
the bid prices  reported may not be  indicative of the value of the common stock
or the  existence  of an  active  market.  The  OTC  market  quotations  reflect
inter-dealer  prices  without  retail  markup,   mark-down,  or  other  fees  or
commissions, and may not necessarily represent actual transactions.

                                                           Bid Prices
                  Period                                  Common Stock
                  ------                                  ------------

       Fiscal Year Ended June 30, 1997               Low               High
                                                     ---               ----

          September 30, 1996                        $0.19             $0.45
          December 31, 1996                          0.13              0.44
          March 31, 1997                             0.23              0.58
          June 30, 1997                              0.18              0.44


       Fiscal Year Ending June 30, 1998

          September 30, 1997                        $0.13             $0.4375
          December 31, 1997                          0.20              0.37
          March 31, 1998                             0.19              0.39
          June 30, 1998                              0.23              0.375


       Fiscal Year Ending June 30, 1999

          September 30, 1998                        $0.12             $0.30
          December 31, 1998                          0.10              0.28
          March 31, 1999*                            0.15              0.25

---------
* Through February 12, 1999.


                                       47
<PAGE>

Shareholders

      As of February 4, 1999,  the number of holders of record of the  Company's
common stock, $.001 par value, was 450.

Dividends

      The Company has paid no cash dividends and has no present plan to pay cash
dividends, intending instead to reinvest its earnings, if any. Payment of future
cash dividends  will be determined  from time to time by its board of directors,
based  upon  its  future  earnings  (if  any),  financial   condition,   capital
requirements  and other  factors,  the company is not  presently  subject to any
contractual or similar  restriction on its present or future ability to pay such
dividends.

Sales of Unregistered Securities

      The following sets forth information respecting the dates, purchasers, and
consideration   respecting   sales  of  common  stock  by  the  Company  without
registration under the Securities Act of 1933, as amended (the "Securities Act")
during the fiscal year ended June 30,  1998,  and not  previously  reported in a
quarterly report on Form 10-Q.(4)

Sales to Executive Officers in Respect of Services Rendered

      As  discussed  extensively,   below,  in  the  footnotes  to  the  Summary
Compensation  Table,  which  appears  in  Item  10 of  this  Report,  "Executive
Compensation  - Current  Remuneration"  and in Item 12 of this Report,  "Certain
Relationships  and Related  Transactions - Issuance of Stock in Lieu of Salaries
and  Consulting  Fees",  during the fiscal year ended June 30, 1998, the Company
had available financial resources to meet only part of its salary obligations to
its  executive  officers  and  its  corporate  and  securities  counsel,  and to
reimburse  such  persons for  out-of-pocket  disbursements  made by them for the
account,  or on behalf,  of the  Company.  As a result,  such  persons  accepted
unregistered  shares of the  Company's  common stock,  valued,  for this purpose
only,  at fifty percent of the average of the bid and ask prices for of stock as
traded in the  over-the-counter  market and reported in the electronic  bulletin
board of the NASD, as follows:

      On April 15,  1998,  in  consideration  of unpaid  executive  services and
unreimbursed  expenses  rendered under the terms of their respective  employment
agreements  and  paid by such  persons  for the  account  and on  behalf  of the
Company,  during the four-month  period which  commenced on December 1, 1997 and
ended on March 31,  1998,  Tirex  issued  shares of its common stock to its four
executive  officers and its corporate  counsel.  These  issuances were valued at
$0.1399  per share,  which  value was equal to 50% of the average of the bid and
ask price for the common stock  during the period when such unpaid  

---------
(4)   For  information  respecting  sales of  unregistered  shares of its common
      stock made by the Company  during the first three quarters of fiscal 1998,
      reference is made to the disclosure  thereof contained in Part II, Item 2.
      "Changes in Securities"  contained in the Company's  quarterly  reports on
      Forms 10-QSB for the quarters ended September 30, 1997, December 31, 1997,
      and March 31, 1998.


                                       48
<PAGE>

salaries   and   expenses   were   earned  and   incurred,   as  traded  in  the
over-the-counter market and quoted in the OTC Bulletin Board, as follows:

                                          Amount of              No. of
                                       Salary & Expenses         Shares
              Name                          Owed                 Issued
              ----                          ----                 ------

        Terence C. Byrne                  $59,183                423,038
        Frances Katz Levine                45,191                323,023
        Louis V. Muro                      33,200                237,312
        John L. Threshie, Jr.               6,167                 44,081
        Vijay Kachru                        9,450                 67,548

      On April 15, 1998,  the Company issued shares of its common stock in order
to correct an error, made on December 15, 1997 in the price at which shares were
issued  to  four  of  its  executive  officers  and  its  corporate  counsel  in
consideration of unpaid  executive  services and unreimbursed for the five-month
period  which  commenced  on July 1, 1997 and ended on November  30,  1997.  The
December  15,  1997 error  consisted  of issuing  shares at a value of $.275 per
share,  which  value was equal to the  average  of the bid and ask price for the
Common  Stock  during the period when such unpaid  salaries  and  expenses  were
earned and incurred. It is the policy of the Company, and the board of directors
had approved,  that shares  issued for such purposes  should be valued of 50% of
market value.  Therefore the shares should have been issued at a value of $.1375
per share  instead  of $.275 per  share.  Accordingly,  on April 15,  1998,  the
Company  authorized the issuance of additional  shares to correct such error, as
follows:

<TABLE>
<CAPTION>
======================================================================================
        Name              No. Of Shares     No. of Shares Which   No. of Shares Issued
                       Erroneously Issued     Would Have Been     On April 15, 1998 to
                       at $.275 per Share   Correctly Issued at     Correct Dec. 15,
                                                  $0.1375             1997 Error
--------------------------------------------------------------------------------------
<S>                          <C>                  <C>                  <C>    
   Terence C. Byrne          336,353              672,705              336,352
-------------------------------------------------------------------------------------- 
    Louis V. Muro            151,309              302,618              151,309
-------------------------------------------------------------------------------------- 
John L. Threshie, Jr.         19,756               39,512               15,512
--------------------------------------------------------------------------------------
    Vijay Kachru              47,691               95,382               47,690
--------------------------------------------------------------------------------------
 Frances Katz Levine         206,379              412,758              206,379
======================================================================================
</TABLE>

      On April 20,  1998,  in  consideration  of unpaid  executive  services and
unreimbursed  expenses rendered under the terms of his employment agreements and
paid by him for the account and on behalf of Tirex,  during the six-month period
which  commenced on July 15, 1997 and ended on December  31,  1997,  the Company
issued  597,966  shares of its  common  stock to Alan  Crossley,  the  Company's
Managing Director of European Market Development. For purposes of such issuance,
the shares were valued at $0.1475 per share, which value was equal to 50% of the
average of the bid and ask price for the  common  stock  during the period  when
such  unpaid  salary and  expenses  were earned and  incurred,  as traded in the
over-the-counter market and quoted in the OTC Bulletin Board.


                                       49
<PAGE>

      Securities Issued as Compensation Under Written Employment Agreements

      On April 20, 1998, in consideration of executive  services  rendered under
the terms of his employment agreement and unreimbursed  expenses paid by him for
the account and on behalf of the  Company,  during the six -month  period  which
commenced  on July 1, 1997 and ended on December 31,  1997,  the Company  issued
597,966  shares of its Common Stock to Alan  Crossley,  the  Company's  Managing
Director of European  Market  Development.  For purposes of such  issuance,  the
shares  were  valued at $0.1475  per share,  which value was equal to 50% of the
average of the bid and ask price for the  common  stock  during the period  when
such  unpaid  salary and  expenses  were earned and  incurred,  as traded in the
over-the-counter market and quoted in the OTC Bulletin Board.

      On or about July 28, 1998 the Company  issued an  aggregate  of  4,095,057
shares of its common stock to Louis  Sanzaro,  Jean Frechette and Scott Rapfogel
pursuant  to  their  respective  employment  agreements  with the  Company.  The
foregoing issuances comprised 3,000,000 shares to Mr. Sanzaro,  1,000,000 shares
to Mr. Frechette and 95,057 shares to Mr. Rapfogel.

      The  3,000,000  shares  issued  to Mr.  Sanzaro,  in  connection  with his
agreement to serve as the Company's  vice  president in charge of operations and
chief operating officer, were issued in consideration for Mr. Sanzaro's agreeing
to  discontinue  his  other  business  activities  in order to enter  into  such
employment  agreement  (500,000 shares) and in  consideration  for Mr. Sanzaro'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 (2,500,000 shares).  The 1,000,000 shares issued to Mr.
Frechette  constituted a signing bonus which was issued in consideration for Mr.
Frechette's  agreeing to discontinue  his other business  activities in order to
enter  into an  employment  agreement  with the  Company  and TCCI  whereby  Mr.
Frechette agreed to serve as the president and chief operating  officer of TCCI.
The  95,057  shares  issued to Mr.  Rapfogel  were  issued in lieu of $12,500 in
salary due to Mr. Rapfogel under the terms of his employment  agreement with the
Company whereby he agreed to serve as the Company's Assistant U.S. Corporate and
Securities Counsel.  For purposes of such issuance,  the stock was valued at 50%
of the  average  bid and ask price for the  Company's  common  stock  during the
period in which such stock was earned.

      Issuance of Stock in Consideration for Financial Accommodations

      On or about July 9, 1998, the Company authorized the issuance of 4,000,000
shares of its common  stock to Terence C.  Byrne,  the  chairman of the board of
directors and CEO of the Company and 2,000 shares of its common stock to Frances
Katz  Levine,  formerly  the  secretary  and a  director,  and  presently  chief
corporate and US securities counsel of the Company.  Such issuances were made in
consideration of financial  accommodations  made by such persons for the benefit
of the Company  including,  but not limited to, the following:  since January of
1995,  on behalf,  and for the  benefit,  of the  Company  and  without any cash
compensation therefor,  Terence C. Byrne, the chairman of the board of directors
and CEO of the Company and Frances Katz Levine,  formerly  the  secretary  and a
director,  and presently corporate and US securities counsel of the Company, had
made substantial financial  accommodations and had put themselves at significant
financial risk,  including,  but not limited to the following:  Mr. Byrne's; (i)
having made  personal  loans to the  Company,  including a loan in the amount of
$102,000 made in January of 1998;  (ii) having been  personally  responsible for
all credit card debt of the  Company,  covering all travel,  entertainment,  and
significant  day-to-day  operating  expenses  of the  Company;  (iii)  being the
co-guarantor  of all bank debt of the  Company  and its  subsidiaries;  and (iv)
being the  co-guarantor on all equipment  leases of the Company;  and Ms. Levine
having for a continuous period of three and one-half years, provided,  rent-free
and with no charge for the costs of  utilities,  a  fully-equipped  law  office,
dedicated  solely  and  exclusively  to  the  requirements  of the  Company  and
throughout such period,  having paid, without any 


                                       50
<PAGE>

cash reimbursement ever having been made to her, all costs and expenses incurred
by the Company in connection with its legal service requirements,  including but
not limited to: (i) telephone charges (ii) office  furnishings,  equipment,  and
supplies;  (iii) Federal  Express and other postage;  and (iv)  secretarial  and
clerical staff salaries.

      Securities Issued As Compensation Under Written Consulting Agreements

      On April  13,  1998,  the  Company  issued  to Alan  Epstein  an option to
purchase  1,500,000 shares of the Company's common stock at a price of $.001 per
share,  as  total  compensation  under  the  terms  of  a  Puerto  Rican  Market
Development and Business Consulting Agreement,  dated April 13, 1998 between the
Company and Mr. Epstein (the "Epstein  Consulting  Agreement"),  which agreement
was made  retroactively  effective as of November 1, 1997, the approximate  date
when Mr.  Epstein  began his market  development  activities in Puerto Rico . On
April 14, Mr. Epstein  exercised the said option and the Company  authorized the
issuance thereof on April 15, 1998.

      On April 1, 1998,  the Company  entered into a consulting  agreement  (the
"SCT  Agreement")  with Security  Capital  Trading,  Inc.  ("SCT"),  a financial
consulting firm, and pursuant thereto: (i) issued to SCT stock purchase warrants
(the "SCT  Warrants")  to purchase a total of 2,000,000  shares of the Company's
common stock at exercise  prices of $.25 per share for the first 666,666 shares,
$.40 per share for the next 666,666 shares, and $.50 per share for the remaining
666,667 shares. The Company has the shares issuable upon the exercise of the SCT
Warrants  in a  registration  statement  on Form SB-2  which was filed  with the
Securities and Exchange Commission on May 21, 1998.

      On January 28, 1998, the Company entered into a consulting  agreement with
Louis  Sanzaro  (the  "Consulting  Agreement"),  who is currently an officer and
director of the Company.  Compensation for all consulting  services  rendered by
Mr.  Sanzaro  under  the terms of the  Consulting  Agreement,  consisted  of the
issuance  to Mr.  Sanzaro of one  million  (1,000,000)  shares of the  Company's
common  stock,  600,000 of which were issued to Mr.  Sanzaro on January 30, 1998
and 400,000 of which were issued on or about April 30, 1998.

Securities Issued As Compensation For Goods and Services Rendered

      On April 24, 1998 Hydroco Inc., of Dorval, Quebec ("Hydroco") invoiced the
Company for  electrical  layout  goods and services in the  aggregate  amount of
$57,224.94 (Canadian)  (approximately $40,057 U.S.). In May 1998, Hydroco agreed
to accept  payment  of $5,000  (Canadian)  (approximately  $3,500  U.S.) of such
amount in common  stock of the  Company,  at a value of $0.23  (U.S.) per share.
Pursuant thereto,  on or about June 19, 1998, the Company issued an aggregate of
15,152 shares of its common stock to two assignees of Hydroco.

      During the fiscal year ended June 30, 1998, Mila  Shvartsman  invoiced the
Company for  services  rendered in  connection  with United  States and Canadian
patent  application  filings and various  other patent  related  services in the
aggregate amount of $6,513.50. On June 19, 1998, Ms. Shvartsman agreed to accept
shares of the Company's  common  stock,  at a value of  approximately  $0.20 per
share, in lieu of a cash payment.  Pursuant  thereto,  on or about such date the
Company issued 32,568 shares of its common stock to Mila Shvartsman.


                                       51
<PAGE>

Securities Issued For Waiver of Advance Payment on Lease

      On  February  17,  1998 the  Company  entered  into a five year lease with
Tri-Steel  Industries  for a  90,000  square  foot  research  and  manufacturing
facility  located at 3828 Saint Patrick  Street in Montreal,  Canada.  Tri-Steel
agreed to accept 388,889 shares of the Company's  common stock in  consideration
of its  waiver  of its  customary  requirement  that the last two  monthly  rent
payments  under a lease be paid at the time of  execution  of the  lease.  These
388,889 shares were issued to Tri-Steel on or about June 19,1998.

      The sales  discussed  above  under  the  subheadings  "Sales to  Executive
Officers in Respect of Services  Rendered",  "Securities  Issued as Compensation
under Written  Employment  Agreements",  "Issuance of Stock in Consideration for
Financial  Accommodations",  "Securities  Issued as  Compensation  Under Written
Consulting Agreements",  "Sales to Non-Affiliated Parties in Respect of Services
Rendered" and "Securities  Issued in Lieu of Rent" are each claimed to have been
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereof, as more fully described below.

Basis for Section 4(2) Claimed

      With  respect to all  shares and other  issuances  of  securities  made in
reliance on Section 4(2):

      (a)   The  Company  did not  engage  in  general  advertising  or  general
            solicitation  and  paid  no  commission  or  similar   renumeration,
            directly or indirectly, with respect to such transactions.

      (b)   The  persons who  acquired  these  securities  are current or former
            executive officers and directors of the Company,  consultants to the
            Company, and providers of professional or other significant service;
            Such  persons  had   continuing   direct   access  to  all  relevant
            information  concerning  the Company  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.

      (c)   The persons who acquired these  securities  advised the Company 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.

      Accordingly, the Company claims the transactions hereinabove described, to
have  been  exempt  from  the  registration  requirements  of  Section  5 of the
Securities Act by reason of Section 4(2) thereof in that such  transactions  did
not form part of a single  financing plan and did not involve a public  offering
of securities.

Sales Made Pursuant to Exemption From  Registration  Available Under Rule 506 of
the Securities Act.

      On April 9, 1998, the Company sold twenty 10% convertible Debentures, each
in the  principal  amount of $25,000 and two million stock  purchase  options to
purchase a like number of shares of common  stock at a price of $.001 per share,
to two  private  investors,  who had no  affiliation  with  the  Company.  


                                       52
<PAGE>

These  securities  were sold as twenty  units  (the "Type A Units") in a private
placement (the "Type A Private Placement",  made by the Company between November
5, 1997 and May 11, 1998,  through H.J.  Meyers & Co., Inc., as placement  agent
(the  "Placement  Agent"),  at a price of  $25,000  per  Unit.  Each Type A Unit
consisted 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  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 were 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.  The Type A Debentures  are  convertible  commencing on the day
following  the  effective  date of the  Company's  Registration  Statement  at a
conversion  ratio  equal to a maximum  of 67.5%  and a  minimum  of 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.  The
factors which affect the  conversion  ratio are discussed,  above,  in Item 1 of
this Report  under the  caption,  "Material  Financing  Activities  - The Type A
Private  Placement".  After  December  31, 1999,  the Type A Debentures  will be
redeemable,  at the request of the holder,  at 125% of the principal amount plus
all accrued unpaid interest on the principal amount.

      The 2,000,000 Type A Warrant Shares and the shares of the Company's common
stock issuable  pursuant to the conversion of the Type A Debentures (the "Type A
Debenture Shares"), are being registered by way of inclusion in the Registration
Statement.

      Between January 23, 1998 and May 11, 1998, the Company sold 230,000 shares
of its common stock and 23 10%  convertible  Debentures,  each in the  principal
amount of $10,000,  to 21 private  investors,  who had no  affiliation  with the
Company.  These  securities  were sold as 23 units (the  "Type B  Units"),  in a
private placement (the "Type B Private  Placement",  made by the Company between
January 20, 1997 and May 11, 1998, through H.J. Meyers & Co., Inc., as placement
agent  (the  "Placement  Agent"),  at a price of  $10,300  per Unit.  The Type B
Private  Placement was a continuance by the Company of a private  placement (the
"RPM Private Placement") made by RPM Incorporated ("RPM"),  which commenced upon
the  effective  date of a merger (the "RPM  Merger")  of RPM into the  Company's
wholly-owned  subsidiary,  Tirex  Acquisition  Corp.  ("TAC").  Each Type B Unit
consisted of one 10% Convertible  Subordinated Debenture in the principal amount
of $10,000 (the "Type A  Debentures")  and 10,000  shares of the common stock of
the  Company.  The Type B Units  were  sold in a series  of three  closings,  as
follows:

                                          No. Of          No. Of
                 Closing Date           Units Sold      Purchasers
                 ------------           ----------      ----------
               January 23, 1998         8.5 Units           8
               February 19, 1998        5.5 Units           6
               May 11, 1998             9   Unit            7

      The Type B Private  Placement was effected in compliance with Rule 506 and
the Type B Units 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 


                                       53
<PAGE>

complete loss of such investment, and who were "Accredited Investors" within the
meaning prescribed by Regulation D and Rule 501 of the Securities Act.

      All of the Type B  Debentures  were  amended  prior to the  filing  of the
Registration  Statement to provide for: (i) the  registration of the shares (the
"Type B Conversion Shares") issuable upon the conversion of the Debentures; (ii)
the  termination  of the  holder's  right  to  convert  the  Type B  Debentures,
effective the day immediately prior to the filing of the Registration Statement,
and the  commencement  of a new  conversion  period as of the date following the
effective date of the said Registration Statement; and (iii) 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  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 Type B
Debentures are  redeemable at face value plus all earned  interest from the date
of  issuance on the first to occur of: (i) two years from the issue date or (ii)
the  completion  and  closing  of a public  offering  of its  securities  by the
Company.

      Between  the  last  week in  March  1998 and May 11,  1998,  in a  private
placement (the "Type C Private  Placement")  made directly by the Company,  with
all  offers and sales made by  officers  of the  Company,  the  Company  sold an
aggregate  of  11,760,000  shares of the  Company's  common  stock  (the "Type C
Shares")  at a price  of $.10  per  share to 57  private  investors.  The Type C
Private Placement was effected in compliance with Rule 506 and the Type C Shares
were offered and sold only to a limited  number of  sophisticated  investors who
understood and were economically  capable of accepting the risks associated with
a speculative  investment,  including the complete loss of such investment,  and
who were "Accredited  Investors"  within the meaning  prescribed by Regulation D
and Rule 501 of the Securities Act.

      The  11,760,000  Type C Shares  which were sold are being  registered  for
resale to the public by the  holders  thereof by way of their  inclusion  in the
Registration Statement.

Basis for Section Rule 506 Exemption Claimed

      With  respect  sales and other  issuances  of  securities  as  hereinabove
described and claimed to have been exempt from the registration  requirements of
Section 5 of the Securities Act pursuant to Rule 506 thereof:

      (a)  The  Company  did  not  engage  in  general  advertising  or  general
solicitation  and  paid no  commission  or  similar  remuneration,  directly  or
indirectly, with respect to such transaction.

      (b) The Company made reasonable inquiry to determine the investment intent
of the  purchasers  (i.e.,  to  determine  that such shares were  purchased  for
investment  and  without  a view to  their  resale  and  informed  them  that an
appropriate legend would be placed on certificates or documents  evidencing such
securities  reciting  the  absence  of  their  registration  under  the  Act and
referring to the restrictions on their transferability and resale).

      (c) The  purchasers  have been  provided  with,  or have  access  to,  all
information  requested  by them and with  what the  Company  believes  to be all
relevant  information  concerning the Company, and the Company believes such the
purchasers are knowledgeable with respect to the affairs of the Company.

      (d) Each of the  Purchasers  is an  accredited  investor,  as that term is
defined  in Rule  501(a)  of the  Securities  Act,  and has such  knowledge  and
experience  in  financial  and  business  matters  that he or she 


                                       54
<PAGE>

is capable of evaluating the merits and risks of such investments and is able to
bear the economic risk thereof.

      (e) The Company made no sales of  unregistered  securities  during the six
month period preceding the sales made pursuant to Rule 506 except for sales made
pursuant  to Employee  Benefit  Plans as that term is defined in Rule 405 of the
Securities Act.

ITEM 6.  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 fiscal years ended June 30, 1997 ("Fiscal  1997"),  and June 30, 1998
("Fiscal 1998").  This discussion also includes events which occurred subsequent
to the end of Fiscal 1998 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.  Factors  that  might  cause  or
contribute to such differences  include, but are not limited to, those discussed
in "Risk  Factors".  Readers are cautioned not to place undue  reliance on these
forward-looking statements,  which speak only as of the date hereof. Readers are
also urged to carefully review and consider the various disclosures elsewhere in
this Report which discuss factors which affect the Company's business, including
the discussion at the end of this  Management's  Discussion and Analysis,  under
the subcaption  "Risk Factors".  This  discussion  should be read in conjunction
with the  Company's  Consolidated  Financial  Statements,  respective  notes and
Selected Consolidated Financial Data included elsewhere in this Report.

      The Company is in the very early stages of the  business of  manufacturing
its patented cryogenic scrap tire recycling equipment (the "TCS-1 Plant"). It is
also currently 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
which will manufacture finished products out of recycled rubber crumb. The first
of such  operations will involve the  establishment  of a rubber mat molding and
flocking plant at the Company's  Montreal  facility for the production of rubber
floor mats pursuant to the IM2 Agreement,  (see Item 1 of this Report  "Existing
and Proposed Business - Proposed TCS-1 Plant  Operations:  Sales of Rubber Crumb
and Manufacture and Sale of Finished Products").

      In January 1998, the  fully-automated  front-end tire preparation  module,
and in March 1998, the cryogenic tire freezing  section of the first  full-scale
TCS-1 Plant (the "First Production Model") were completed and delivered to OTRP.
As discussed in more detail,  below, the Company received a total of $880,000 in
respect  thereof and this Plant is presently  installed at the Company's  90,000
square  foot  Montreal  manufacturing  facility  (see also Item 1 of this Report
"Existing and Proposed Businesses - Sales and Marketing - Agreements with Oceans
Tire  Recycling  &  Processing  Co.,   Inc.["OTRP"]  and  Proposed  TCS-1  Plant
Operations:  Sales  of  Rubber  Crumb  and  Manufacture  and  Sale  of  Finished
Products"). All major components of the First Production Model were successfully
tested and were  operational on a  non-continuous  running basis by May 1998. In
mid-June  1998,  the  Company  initiated  the  second  stage of  testing,  which
consisted  of  testing  all  major  components  and all  functions  of the First
Production Model, individually, on a continuous running basis. By September 1998
(subsequent to the period covered by this Report), results of second stage tests
indicated that  approximately  85% of the TCS-1 Plant  components met all of the
Company's  specifications.  In addition,  under continuous  testing  conditions,
certain   unanticipated   design  anomalies  were  discovered,   which  required
modification. The Company also identified several opportunities for improvements
in the  original  design of the TCS-1  Plant,  which the 


                                       55
<PAGE>

Company  believes will increase  economy and  efficiency  of its  operation.  In
September 1998, the Company retained the Montreal  engineering firm of Beaudoin,
Hurens and Associates,  Inc.  ("BHA") to: (i) prepare and/or finalize all design
and  engineering   drawings,   operation  and  technical   manuals,   and  other
documentation   respecting  the  TCS-1  Plant;  and  (ii)  make  an  independent
engineering  assessment of the Company's  findings from its second stage testing
of the TCS-1  Plant to verify  and  authenticate  the  modifications  which were
required to assure the Plant's  conformity with targeted  performance  criteria.
The Company  retained  Plasti-Systemes  Inc.  of  Montreal to do all  mechanical
fabrications  required  during the final  stage of the  project.  The  foregoing
modifications,   including  engineering  fees,  required  previously  unbudgeted
expenditures in the aggregate  amount of approximately  $500,000,  approximately
$250,000  of  which  had  been  paid  as of  December  31,  1998.  The  required
modifications were completed  subsequent to the period covered by this Report in
December of 1998 on a single  fracturing mill and a single freezing tower in the
First Production  Model.  Completion of the second  fracturing mill and freezing
tower,  which will be included therein,  is scheduled to occur in April of 1999.
Management  presently  estimates  that  commencement  of  full-scale  commercial
manufacture of TCS-1 Plants will occur in March of 1999.

      The Company will also be required to make additional  capital  investments
and   expenditures   over  the  next  twelve  months  in  connection   with  the
establishment  at  the  Company's   Montreal  facility  of  rubber  mat  molding
operations  under the IM2  Agreement.  Management  estimates  that costs for the
entire  project will aggregate to  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,
approximately  $168,000 of which had been paid as of December 31, 1998; and (ii)
approximately  $600,000 to acquire and install a complete rubber mat molding and
flocking plant (with the exception of the molds which will be furnished by IM2),
approximately  $132,000  of which had been paid as of  December  31,  1998.  The
Company plans to use the output of the First  Production  Model of the TCS Plant
in its rubber mat molding operations.

      The First Production Model, which is presently  installed at the Company's
manufacturing  facility,  was the subject of a Lease and Purchase Agreement (the
"OTRP  Agreement")  between the Company and Oceans Tire  Recycling &  Processing
Co., Inc. ("OTRP"),  a company controlled by Louis Sanzaro,  the Company's chief
operations  officer.  The OTRP Agreement  called for a total purchase price, for
the  purchasable  components  of the Plant,  of $1,225,000  and total  five-year
operating  lease payments for the leasable  components of the Plant, of $750,000
(see  Item 1 of this  Report  "Existing  and  Proposed  Businesses  -  Equipment
Manufacturing  - Sales and  Marketing  Agreements  with Oceans Tire  Recycling &
Processing Co.,  Inc.").  In December 1997, OTRP and the Company agreed that, to
the extent  necessary for OTRP to obtain sale and  lease-back  financing for the
front-end module ("Front-End") and for certain parts of the Air Plant portion of
the Plant,  the said OTRP Agreement would be deemed to be modified,  as required
for such purpose. OTRP arranged with an equipment financing company for sale and
lease financing, pursuant to which: (i) the said financing company purchased the
Front-End  and  certain  designated  portions  of the  TCS-1  Plant's  Air Plant
directly from the Company;  and (ii) leased such  equipment  back to OTRP and/or
the OTRP principals.  The Company received a total purchase price of $880,000 in
respect of the foregoing sales, with irrevocable  acceptances and final payments
obtained in December  1997 and April  1998,  respectively.  The Company and OTRP
agreed that the remaining provisions of the OTRP Agreement would be deemed to be
reformed or rescinded so as to allow  ownership of the  components  of the First
Production  Model to be  transferred,  sold, or allocated,  as the parties agree
will be in their  best  interests  (see  Item 1 of this  Report,  "Existing  and
Proposed Businesses - Proposed TCS-1 Plant Operations: Sales of Rubber Crumb and
Manufacture  and  Sale  of  Finished  Products"  and  Item  2,  "Description  of
Property").

      On December 16, 1998, subsequent to the period covered by this Report, the
Company entered into two sale and lease-back  transactions respecting the single
fracturing mill and the single freezing tower contained in the First  Production
Model.  Such  transactions  were effected by and among the Company,  


                                       56
<PAGE>

North Shore Leasing & Funding Inc. ("NLFI"), and Ocean Utility Contracting, Inc.
("OUCI"),  a company  affiliated with OTRP through common ownership and control.
Pursuant  thereto,  the Company sold the  foregoing  components to NLFI and NLFI
leased them back 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  respective  leases will be assigned to the
Company and the Company will assume all of OUCI's  liabilities  thereunder  (see
Item 1 of this Report  "Existing and Proposed  Businesses - Sale and  Lease-back
Transactions").  The Company and OTRP have not yet  finalized  the structure and
ownership of the First  Production  Model,  but it is anticipated that they will
each contribute,  among other things, the respective portions of the Plant which
they own (or lease) and that profits and liabilities from operation of the First
Production   Model   will  be  divided  in   proportion   to  their   respective
contributions.

      Because  of  the  lengthy  delays  in  the   commencement   of  commercial
operations, 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  revenues  from
operations.  As at January 15, 1999, the Company  estimates that overhead costs,
which will be incurred  prior to the  generation  of revenues  adequate to cover
them, will aggregate to approximately $250,000.

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,  including  three  private  placements to a
limited number of accredited  investors,  which the Company completed on May 11,
1998, and which yielded aggregate net proceeds of $2,063,795 (see "The Company -
Material  Financing  Activities").  In total,  funds  raised by the Company from
private sales of its securities are as follows:

                                                  Proceeds From
                  Year Ended                        Sales of
                  June 30th                        Securities
                  ---------                        ----------
                     1998                         $2,063,795
                     1997                            345,391
                     1996                             80,872
                     1995                             22,316
                     1994                            237,430
                     1993                             76,055
                     1990                             80,812
                     1989                             77,000
     

      During the fiscal  years  ended  June 30,  1997 and June 30,  1998 and the
interim   six-month  period  ended  December  31,  1998,  the  Company  received
additional  funding  from Quebec and Canadian  government  grants,  loans,  loan
guarantees and refundable tax credits for purposes of completing the development
of the TCS-1 Plant and for the international  marketing of such plants (see Item
1. of this Report,  "Existing  and Proposed  Businesses - Canadian  Operations -
Canadian Financial Assistance - Grants,  Loans, and Commitments").  Canadian and
Quebec government  research and development tax incentives take the form of both
tax  deductions  from otherwise  taxable  income and tax credits  respecting the
eligible research and development expenditures of the Company (see "Existing and
Proposed  Businesses  -  Canadian  Operations").  Insofar  as  tax  credits  for
scientific research and experimental 


                                       57
<PAGE>

development  are concerned,  such credits are offered by both the governments of
Canada and of Quebec. The tax credits are calculated as a percentage of research
and development  expenditures deemed eligible by the Revenue Departments of each
government.  The percentages  vary according to the size of the company (defined
according  to the  asset  base  and  revenues  generated  by the  company),  the
residency of the majority of the voting control and other  factors.  In the case
of both the provincial and the federal governments,  where the amount of the tax
credit  exceeds other tax  liabilities,  such as taxes on income and on capital,
and subject to certain other conditions which a company meets, the amount of any
difference is paid to the company, thus the term,  "Refundable Tax Credits". The
effective rate of the credit varies from one company to another as a function of
a number of factors,  not least of which are:  (i) the nature of the costs being
claimed such as labor costs versus  non-labor  costs (the credit for labor costs
is higher than for non-labor  costs);  and (ii) the  proportion of  expenditures
which can be  attributed  to research and  development  but which are not deemed
eligible  for the tax  credits  by  their  nature.  Insofar  as the  Company  is
concerned,  the tax credits have varied from  approximately  25% to 30% of total
research and development  expenditures,  including certain types of expenditures
deemed ineligible for tax credits. During the last three fiscal years, virtually
all of the activities  connected with the  development  and  construction of the
First  Production  Model of the TCS-1 Plant have qualified as expenses  eligible
for refundable tax credits.

      As a further  measure to stimulate  research and  development,  the Quebec
Government,  through the Societe de developpement industriel du Quebec, a public
sector  corporation  wholly owned by the  Government  of Quebec,  (the "SDI") (a
former  English  version  of this  name was the  Quebec  Industrial  Development
Corporation),  has put  into  place a loan  guarantee  program  (the  "SDI  Loan
Guarantee  Program")  which provides the SDI's  guarantee of repayment of 75% of
the amount of bank loans made to companies  in  anticipation  of such  companies
receiving  refundable  tax credits.  The SDI Loan  Guarantee  Program  therefore
enhances a company's ability to borrow from financial  institutions up to 75% of
the  amount of the  anticipated  tax credit for  expenditures  already  incurred
("Allowable  Post-Expenditure  Loans"),  prior to the receipt of the anticipated
tax credit.  Alternatively,  the SDI Loan Guarantee  Program allows companies to
borrow,  prior  to  making  any  expenditures,  up to 60% of the  amount  of the
anticipated tax credit based on budgeted  expenditures  not yet incurred (80% of
the amount of an Allowable  Post-Expenditure  Loan). This provides the cash flow
essential  to the research and  development  efforts.  In the absence of any tax
liabilities,   these  tax  credits  have   functioned  as  monetary  grants  and
constituted  receivables  which  were  used,  prior to their  being  paid to the
Company,  to secure  conventional  bank financing,  supported in part by the SDI
guarantee noted above.

      In connection with the Refundable Tax Credits, during the first quarter of
1998,  the Bank of  Montreal  ("BOM")  approved  a loan to the  Company of up to
Cdn$937,000,  or approximately US$655,900 ("the BOM Tax Credit Loan") to be used
to pay expenses which would then be eligible for  refundable tax credits.  As at
June 30,  1998,  Cdn.$828,230  (approximately  US$579,761)  had been lent to the
Company pursuant to the BOM Tax Credit Loan. Subsequent to the period covered by
this Report, during the six-months ended December 31, 1998, the Company borrowed
an additional  Cdn.$108,770  (approximately  US$76,139) under the BOM Tax Credit
Loan. As at June 30, 1998 and December 31, 1998,  respectively,  the outstanding
balance  payable  on the BOM Tax  Credit  Loan  was  Cdn$597,820  (approximately
US$418,474) and Cdn$502,520 (approximately US$351,764).  The BOM Tax Credit Loan
was secured by: (i) a  first-ranking  lien on all of the  assets,  tangible  and
intangible,  present and future of the Company's Canadian subsidiary, Tirex R&D;
(ii) a lien on the  Company's  patent  for  the  cryogenic  tire  disintegration
process and apparatus of the TCS-1 Plant;  and (iii) personal  guarantees of two
officers and directors of the Company.

      The SDI,  under its above  described Loan  Guarantee  Program,  guaranteed
repayment  of 75% of the BOM Tax  Credit  Loan  ("the SDI  Guarantee").  The SDI
Guarantee  was  secured  by  a  lien  on  the  Company's  projected  tax  credit
receivables.


                                       58
<PAGE>

      Borrowings  drawn down under the BOM Tax Credit Loan bear  interest,  from
the date the funds are  drawn  down  until  the  outstanding  principal  and all
accrued and unpaid interest  thereon are repaid,  at an annual rate equal to the
Bank of Montreal Prime Rate (which,  for reasons of inter-bank  competition,  is
usually  equivalent  to  Canadian  Prime  Rate)  plus  1.25%.  Interest  on  the
outstanding  balance of the BOM Tax Credit Loan is due and payable monthly.  The
outstanding  principal  amount is repayable  upon the  Company's  receipt of tax
credit refunds from the Canadian  and/or Quebec tax  authorities and the release
of the funds by SDI to the Bank of Montreal. During the last three fiscal years,
and the  six-month  interim  period ended  December  31, 1998,  the Company made
research and development expenditures, generated tax credit claims, and received
funds by way of  borrowings  under the BOM Tax Credit Loan,  as set forth in the
following table:


                                       59
<PAGE>
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
      Period          Amount of     Amount of R&D     Amount of Tax       Amount           Amount of Tax         Cumulative
   R&D Expenses          R&D         Expenditures        Credits         Borrowed         Credit Received       Outstanding 
  Were Incurred      Expenditures   Eligible for      Estimated by       Against                                 Balance of 
                       Incurred      Tax Credits       BOM and SDI      Estimated                              Loan as at End
                                                                        Tax Credits                              of Period
-----------------------------------------------------------------------------------------------------------------------------
<S>                 <C>                  <C>               <C>             <C>                 <C>                  <C>     
July 1, 1995 to          -0-             -0-               -0-             -0-                 -0-                  -0-
June 30, 1996
-----------------------------------------------------------------------------------------------------------------------------
July 1, 1996 to     Cdn$1,576,761   Cdn$1,576,761      Cdn$579,305         -0-(1)              -0-(2)               -0-
June 30, 1997
-----------------------------------------------------------------------------------------------------------------------------
July 1, 1997 to     Cdn$2,723,443   Cdn$2,723,443      Cdn$982,113      Cdn$828,230(1)     Cdn$307,208(2)       Cdn$597,820
June 30, 1998
-----------------------------------------------------------------------------------------------------------------------------
Interim Period      Cdn$1,167,892        (3)               (4)          Cdn$108,770(1)     Cdn$245,517(5)       Cdn$502,520
July 1, 1998 to                                                                                 (6)
December 31, 1998
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes to this table appear on the following page.


                                       60
<PAGE>

      (1)   Prior to June 30, 1998,  the Company  received  three  disbursements
            from the BOM in the aggregate  amount of Cdn$828,230  (approximately
            US$579,761)  with  the  first  of these  disbursements  received  on
            January 30, 1998. These amounts were based upon estimated tax credit
            receivables in the following amounts: (i) Cdn$579,305 (approximately
            US$405,514)  for research and development  expenditures  made by the
            Company  during the fiscal  year  ended  June 30,  1997;  and (ii) a
            portion of the Cdn$982,113  (approximately  US$687,479) for research
            and development  expenditures  made by the Company during the fiscal
            year ended June 30, 1998.  Subsequent to June 30, 1998,  the Company
            received a further cash  disbursement of Cdn$108,770  (approximately
            US$76,139),  in respect of eligible tax credit expenditures incurred
            prior to June 30,  1998,  effecting  the  complete  draw down of the
            entire  authorized  loan  amount of  Cdn$937,000  against tax credit
            receivables for the cumulative period ended June 30, 1998.

      (2)   All  funds by way of Tax  credits  received  by the  Company  during
            fiscal  1998  were   attributable   to  research   and   development
            expenditures made by the Company during fiscal 1997.

      (3)   As of February 17,  1999,  and in  accordance  with the tax laws and
            procedures of the Revenue  Departments of the  governments of Canada
            and of Quebec,  the  Company  had not yet  submitted a claim for tax
            credits based upon any research and  development  expenditures  made
            since  July 1,  1998.  The  Company  expects  that a portion of such
            expenditures  will  be  eligible  for  Refundable  Tax  Credits.  In
            connection  therewith,  the  Company  will  seek  credit  facilities
            similar  to the BOM  Tax  Credit  Loan,  with  one or  more  lending
            institutions, based upon estimated tax credit receivables.

      (4)   Although the Company made research and  development  expenditures in
            the amount of  Cdn$1,167,892  during the six-month  period,  July 1,
            1998 through  December 31, 1998, and while the Company believes that
            a portion of such  expenditures  will be eligible for Refundable Tax
            Credits,  it should be noted that no credit  facilities were or have
            yet  been  made   available   to  the   Company  to  finance   these
            expenditures.  The SDI  Loan  Guarantee  Program,  which  guaranteed
            repayment of 75% of the BOM Tax Credit Loan,  was available only for
            bank loans based on estimated  tax credit  receivables  for research
            and  development  expenditures  made on or before June 30, 1998.  It
            should be noted  further  that the entire  amount  available  to the
            Company  under the BOM Tax Credit Loan has already been  borrowed by
            the Company in connection with research and development expenditures
            made by the  Company  during the years ended June 30, 1997 and 1998.
            However,  the SDI Loan  Guarantee  Program is still in existence and
            may be  available  to  guarantee  new loans which may be made to the
            Company by other Canadian  lending  institutions.  Accordingly,  (as
            noted above in  footnote 3 to this  table),  the Company  intends to
            seek new credit  facilities,  similar to the BOM Tax Credit Loan, to
            finance  research and development  expenditures  made after June 30,
            1998.

      (5)   Tax credits received by the Company during this interim period, July
            1, 1998 through  December 31, 1998, are attributable to research and
            development  expenditures made by the Company during the fiscal year
            ended June 30, 1997.  As at December  31, 1998,  the Company had not
            yet  received   any  tax  credits  for   research  and   development
            expenditures  made from  July 1, 1997  through  December  31,  1998.
            However, as described below in footnote 6 to this table,  subsequent
            to  December  31,  1998,  some  funds  were  received  in respect of
            research and  development  expenditures  made during the fiscal year
            ended June 30, 1998, on a "preliminary advance payment" basis.


                                       61
<PAGE>

      (6)   The annual Canadian federal  government  audit of eligible  research
            and  development  expenditures  for the fiscal  year ending June 30,
            1998 took place in January  1999.  Results of the audit are expected
            prior to March 31,  1999.  However,  as a result  of a  preliminary,
            cursory review of the accounts,  a preliminary advance payment check
            in the amount of Cdn$320,000, representing approximately half of the
            amount of the Canadian  federal tax credit claimed on the Government
            of Canada,  was  received by the Company in January  1999,  of which
            amount,  the sum of Cdn$175,000  was used to reduce the  outstanding
            balance of the BOM Tax Credit Loan, in accordance with the terms and
            conditions of the SDI Loan Guarantee.

      During the last three fiscal years and the six month interim  period ended
December 31, 1998, the Company also received additional  financial assistance by
way of loans and grants from Quebec  governmental  agencies,  for the design and
development of the TCS-1 Plant and for export market development as follows:

      1. In March of 1996, the Company qualified for an interest-free, unsecured
loan (the  "FORD-Q  Loan") of up to  $500,000  (Canadian),  or  approximately  $
350,000  (U.S.).  This loan was made available by the Government of Canada under
the Industrial Recovery Program for Southwest Montreal, which is administered by
the federal  government agency,  Canada Economic  Development for Quebec Regions
("CEDQR"),  which  was  previously  known  as the  Federal  Office  of  Regional
Development  - Quebec or  "FORD-Q".  Under the  terms of the loan,  the  Company
received funds in the total amount of Cdn$500,000 or  approximately  US$350,000,
representing  20% of  eligible  expenditures  made  by the  Company  to  design,
develop, and manufacture the first full-scale model of the TCS-1 Plant. The loan
money was disbursed  pursuant to the  submission of claims of eligible  expenses
incurred.  The Company did not have funds available to expend for these purposes
until February of 1997. Because of the limited funds available to the Company at
that  time,  the Bank of  Montreal  agreed to make  short-term  loans  (the "BOM
Secured Loans") to the Company,  secured by CEDQR's  acceptance of the Company's
claims for  reimbursement  of  expenditures.  All of the BOM Secured  Loans were
repaid by the  Company as funds were  released  to the  Company  under the CEDQR
Loan.

      The proceeds of the CEDQR Loan were paid to the Company  during the fiscal
years ended June 30, 1997 and 1998, as follows:

                           Canadian Dollars          US Dollar Approximation
                           ----------------          -----------------------
Fiscal 1997                   $246,752                      $172,725
Fiscal 1998                   $253,248                      $177,275

Under the terms of the CEDQR Loan,  repayment  must commence  twelve months from
the date CEDQR  declares that the project has been  completed.  This occurred on
March 31, 1998.  The  repayment  schedule  therefore  calls for four,  graduated
annual payments as follows:

                           Canadian Dollars          US Dollar Approximation
                           ----------------          -----------------------
March 31, 1999                $ 50,000                      $ 35,000
March 31, 2000                $100,000                      $ 70,000
March 31, 2001                $150,000                      $105,000
March 31, 2002                $200,000                      $140,000


                                       62
<PAGE>

      The terms and  purposes of the CEDQR Loan are  discussed in more detail in
"Existing  and Proposed  Businesses - Canadian  Operations - Canadian  Financial
Assistance - Grants, Loans, and Commitments".

      2. In  April of 1996,  the  Company  qualified  for a grant  from  Societe
Quebecoise de Recuperation et de Recyclage  ("Recyc-Quebec"),  a  self-financed,
Quebec  Government-owned  corporation  established  to  facilitate  and  promote
materials recovery and recycling.  The amount of such grant was $75,000 Canadian
(approximately  $52,500  U.S.).  Of this amount,  the Company  received  $50,000
Canadian  (approximately $35,000 US) during the fiscal year ended June 30, 1997.
The terms of the grant  provide  that the  Company  will  receive the balance of
$25,000  Canadian  (approximately  $17,500  U.S.) when the Company files a final
report on the  completion  of the  project.  The Company  anticipates  that such
report will be filed in or about  February  1999. The terms and purposes of this
grant are  discussed  in more detail in  "Existing  and  Proposed  Businesses  -
Canadian  Operations  -  Canadian  Financial  Assistance  - Grants,  Loans,  and
Commitments".

      3. The Company has also qualified for five interest-free,  unsecured loans
from the  Government  of Canada in the  aggregate  amount of $ 232,773  Canadian
(approximately $ 162,900 U.S.).  These loans were made available by CEDQR, under
the  Innovation,  Development,  Entrepreneurship  Assistance  - Small and Medium
Enterprises Program ("IDEA-SME  Program").  Under these loan agreements,  during
Fiscal 1997 and 1998, the Company  received  $30,000  Canadian  (approximately $
21,000 U.S.) and $ 202,773 Canadian (approximately $ 141,900 U.S.) respectively.
The IDEA-SME Program loans represent up to 50% of approved Company expenditures,
based  on  submitted   claims,   subject  to  maximum  amounts  for  each  loan.
Expenditures  are required to have been made for the purposes of identifying and
developing export markets for Canadian products.  All of the projects which gave
rise to these  loans have been  declared  completed  by CEDQR and the  repayment
terms have  accordingly  been  established.  The following table  identifies the
nature of the projects for which these loans were granted, the maximum amount of
the loans approved the government  agency, the aggregate amounts received by the
Company as of October 31, 1998 and the repayment terms of each loan.


                                       63
<PAGE>
<TABLE>
<CAPTION>

====================================================================================================================================
                                                      Amount of Funds
                                                       Received By
                                                      Company as of
                                    Maximum Amount     December 31,                                                         Rate of
                                       of Loan            1998                                                              Interest

        Nature of Project                                                                Repayment Terms
                                                                   ---------------------------------------------------------
                                                                                                       Amount of Payment
                                                                              Date Due
------------------------------------------------------------------------------------------------------------------------------------

<S>                                  <C>                <C>       <C>                                 <C>                     <C>
Market Research  Feasibility         Cdn $20,000            Cdn    At the end of any fiscal year      1% of gross annual      None
Study for Iberian Peninsula                             $20,000      in which the Company has          revenue from sales
                                                                    revenues from sales of TCS-1           in Iberia
                                                                  Plants in the Iberian Peninsula
------------------------------------------------------------------------------------------------------------------------------------
Market Research  Feasibility         Cdn $20,000            Cdn     At the end of any fiscal year       1% of gross           None
Study for India                                         $20,000       in which the Company has         anual revenue
                                                                    revenues from sales of TCS-1        from sales
                                                                          Plants in India                in India
------------------------------------------------------------------------------------------------------------------------------------
Market  Research  Respecting         Cdn $95,000            Cdn           June 30, 2001                   Cdn$6,333           None
Potential United States Markets                         $95,000           June 30, 2002                  Cdn$12,666
for Rubber Crumb                                                          June 30, 2003                  Cdn$18,999
                                                                          June 30, 2004                  Cdn$25,333
                                                                          June 30, 2005                  Cdn$31,666
------------------------------------------------------------------------------------------------------------------------------------
Iberian Market  Development          Cdn $95,000          Cdn       At the end of any fiscal year       1.5% of gross         None
Activities Related to Positioning                     $95,000       in which the Company has         annual revenue
the Company to Market TCS-1                                        revenues from sales of TCS-1         from sales
Plants, Rubber Crumb, and Related1                                       Plants in Iberia                in Iberia
Products in Iberia
------------------------------------------------------------------------------------------------------------------------------------
Market Research Activities           Cdn $98,000        $98,000           June 30, 2001                Cdn $ 6,533.33         None
Respecting the Feasibility of                             Cdn             June 30, 2002                Cdn $13,066.66
using Rubber Crumb in                                                     June 30, 2003                Cdn $19,600.00
Thermoplastic Elastomer Compounds                                         June 30, 2004                Cdn $26,133.33
in the United States and Canada.                                          June 30, 2005                Cdn $32,666.66
============================================================================================================================ =======
</TABLE>


      These loans and the projects  which they  supported  are discussed in more
detail in "Existing and Proposed Businesses - Canadian Operations" and "Existing
and Proposed Businesses - Sales and Marketing".


                                       64
<PAGE>

      The  Company  believes it will be able to cover the balance of the capital
investments  and  expenditures  which it will be required to make in  connection
with:  (i)  modifications   which  were  made  to  the  TCS-1  Plant;  (ii)  the
establishment,  and  commencement  of operations,  of the rubber mat molding and
flocking  plant;  (iii)  commencement of full scale,  commercial  manufacture of
TCS-1 Plants; and (iv) meeting its overhead on a level sufficient to sustain the
Company for at least the next twelve  months,  from a combination of some or all
of the following sources: (i) expected cash flow from sales of four TCS-1 Plants
to ENERCON America Distribution  Limited ("Enercon") of Westerville,  Ohio. (see
Item 1 of this Report "Existing and Proposed  Businesses - Sales and Marketing -
The Enercon  Agreements");  (ii) Canadian and Quebec government and governmental
agency grants,  loans,  and  refundable  tax credits;  (iii) sale and lease back
financing on inventory and  equipment  owned by the Company;  (iv)  conventional
asset based debt financing against receivables and inventory; (v) refunds of all
of the 15% sales taxes paid by the Company on all goods and  services  purchased
in connection with the Company's manufacturing activities, which the Company, as
a  manufacturer  and exporter of goods is entitled to (in  September  1998,  the
Company  received Cdn $200,000 by way of such tax refunds for the quarter  ended
June 30, 1998); (vi)  subcontractor  financing;  (vii) vendor financed equipment
purchases  and/or (viii) a research and development tax credit facility from the
Bank of Montreal for the 1999 calendar year.  The Company is presently  actively
pursuing all of the  foregoing  avenues of  financing.  In addition,  management
believes that the Company will be able to obtain sufficient production financing
to  cover  the  costs  of  constructing   subsequent  TCS-1  Plants,  using  the
constituent  components  of the Plant to be  financed,  as  collateral  for debt
financing to cover its construction costs.

      Whether  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:  (i) the  amount  of such
financing which the Company is actually able to raise; (ii) Enercon's receipt of
its  funding;  (iii) the as yet  unproven  ability of the TCS-1 Plant to operate
continuously on a long-term  commercial basis in accordance with its anticipated
performance  specifications;  and (iv) the  ability of the  proposed  rubber mat
molding facility to operate profitably (see, below, in this Item 6, "Risk Factor
No. 2 - "Need For  Substantial  Additional  Capital"  and Item 1 of this Report,
"Existing and Proposed Businesses - Equipment  Manufacturing - The TCS-1 Plant",
and  "Existing  and Proposed  Businesses - Equipment  Manufacturing  - Sales and
Marketing - The Enercon Contracts").

      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: (i) full scale  manufacturing  of TCS-1  Plants;  and (ii) the
commercial  operation of the First  Production Model and the  establishment  and
initiation  of rubber mat molding  operations.  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 First  Production  Model,  which
may become apparent when it is subjected to continuous operation on a long term,
commercial basis. Moreover, given the early stage of development of the Company,
it is  impossible  at this time to  estimate  with any  certainty  the amount of
income from operations, if any, during the next twelve months.

      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,  it would be  necessary  for the
Company to raise additional equity capital.  During Fiscal 1998, in an effort to
put such funding into place,  the Company  entered into a non-binding  letter of
intent with H.J. Meyers & Co., Inc.  ("Meyers"),  for a proposed public offering
of its  securities  in an  amount  of not  less  than  $8,000,000.  On or  about
September 16, 1998, however,  Meyers abruptly ceased doing business.  Therefore,
if the Company should wish to raise funds through a public offering,  it will be
required to locate 


                                       65
<PAGE>

another broker-dealer,  ready, willing, and able 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 outside
funding,  the Company's  financial  position and its prospects for beginning and
developing   profitable  business  operations  could  be  materially   adversely
affected.

      As at June 30,  1998,  the  Company  had  total  assets of  $3,814,648  as
compared to  $1,555,620 at June 30, 1997  reflecting an increase of  $2,259,028.
Fiscal year-end total assets at June 30, 1997 had reflected a previous  increase
of $1,357,988 over $197,632 at June 30, 1996. Management attributes the increase
in total  assets  at June 30,  1998  principally  to (i)  continuing  consulting
agreements  which have been recorded as prepaid expenses on the Balance Sheet in
the  approximate  amount  of  $970,000;  all  compensation  payable  under  such
agreements was paid by way of the issuance of an aggregate of 4,000,000 share of
Common Stock to two consultants and the granting of the CGT Option, the terms of
which are  discussed,  below,  in Risk Factor No. 6 "Dilutive  and Other Adverse
Effects  of  Presently  Outstanding  Debentures,  Warrants,  and  Options";  the
attributed value of all shares of Common Stock issued as compensation under such
consulting  agreements and the CGT Option has been included in Paid-in  Capital;
(ii)  Property  and  Equipment  in the amount of $977,288  which  represents  an
increase of $190,630  over Property and Equipment of $786,658 at June 30, 1997;.
(iii) cash assets in the amount  $398,971 at June 30,  1998,  which  reflects an
increase  of  $243,934  over cash  assets in the amount of  $155,037 at June 30,
1997.  The cash  position  of the  Company  at June 30,  1997 had  reflected  an
increase of $154,797  over $240 in cash assets at June 30, 1996;  (iv)  research
and development tax credit  receivables  ("R&D TCR's") in the amount of $855,818
at June 30, 1998,  which  reflects an increase of $535,498 over R&D TCR's in the
amount of $320,320 at June 30, 1997 R&D TCR's at June 30, 1997 had  reflected an
increase of $269,918  over  $50,402 in R&D TCR's at June 30,  1996;  and (v) the
recognition of deferred financing costs in the amount of $158,255.

      As at June 30, 1998,  the Company had total  liabilities  of $3,360,588 as
compared to $1,695,350 at June 30, 1997,  reflecting an increase in  liabilities
of  $1,665,238.  Total  liabilities  at June 30,  1997 had  reflected a previous
increase of  $1,327,921  over  $367,429 in total  liabilities  at June 30, 1996.
Management  attributes  such  increases  in total  liabilities  at June 30, 1998
primarily to: (i) advances from the Canadian federal government  agency,  Canada
Economic  Development-Quebec  Regions (CEDQR),  formerly known as, and sometimes
referred  to herein  as, the  Federal  Office  for  Regional  Development-Quebec
(FORD-Q),  pursuant to loans  contributed  by such agency  under the  Industrial
Recovery   Program  for  Southwest   Montreal   (IRPSWM)  and  the   Innovation,
Development,   Entrepreneurship   and  Access   Program  for  Quebec  Small  and
Medium-Size  Enterprises (IDEA-SME) in the amount of $500,012,  which represents
an increase of $299,467 over CEDQR  balances of $200,545 at June 30, 1997;  (ii)
the issuance  during  Fiscal 1998, in two of the Private  Placements  (including
debentures  assumed  in the  merger  with RPM) of 10%  Convertible  Subordinated
Debentures  in  the  aggregate  principal  amount  of  $1,035,000;   (iii)  bank
indebtedness in the amount of $407,926 which  represents an increase of $285,375
over bank  indebtedness of $122,551 at June 30, 1997; and (iv) outstanding loans
to officers in the aggregate amount of $195,969, which represents an increase of
$__________ over $__________ in outstanding  loans at June 30, 1997 (see Item 12
of  this  Report,  "Certain  Relationships  and  Related  Transactions"  - "Loan
Transactions  with Terence C. Byrne and  Affiliated  Entity" and "Loans to Louis
Sanzaro and Affiliate.

      Reflecting the  foregoing,  the financial  statements  indicate that as at
June 30, 1998, the Company had a working capital  surplus  (current assets minus
current liabilities) of $373,198 and that as at June 30, 1997, the Company had a
working capital  deficit of $1,013,659.  The primary causes of this net increase
in net working  capital were:  (i) an increase in research and  development  tax
credits  receivable  in the  


                                       66
<PAGE>

amount of $585,900, (ii) an increase of prepaid expenses and deposits respecting
on-going consulting agreements in the amount of $970,000,  and, (iii) a decrease
in deposits payable of $336,500.

      The Company currently has limited material assets (see, below, Risk Factor
No.  3.  "History  of Losses  and  Accumulated  Deficit").  The  success  of the
Company's tire recycling equipment  manufacturing  business, its proposed rubber
mat molding  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 and is also currently engaged
in establishing a complete rubber mat molding and flocking  facility in which it
intends to utilize the First  Production  Model of the TCS-1 Plant.  The Company
intends to begin manufacturing TCS-1 Plants and operating its rubber mat molding
facility on  commercial  bases by March of 1999.  The Company had no income from
operations  during Fiscal 1997; It generated  $880,000 in revenues during fiscal
1998 from the sale of the single front-end module and the single fracturing mill
of the First Production Model of the TCS-1 Plant. However,  unless and until the
Company successfully  develops and commences TCS-1 Plant manufacturing and sales
operations  and/or  profitable  rubber mat molding  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 $1,970,277 for Fiscal 1998 which reflects
an increase of  $1,691,329  over Fiscal 1997,  when  general and  administrative
expenses were $278,948.  During fiscal 1998, the Company's total operating costs
increased by  $2,198,031,  from  $2,366,535  for fiscal 1997 to  $4,564,566  for
fiscal  1998.  The majority of such  increase is the result of various  factors,
including:  (i) an increase of $510,000 in respect of  valuations  attributed to
stock bonuses  granted to officers and counsel;  (ii) an increase of $358,000 in
respect of  valuations  attributed  to stock issued for various  consulting  and
professional  fees;  (iii) an increase of $112,000 in financing  fees, by way of
commissions and expense  allowance to the Selling Agent in the Type A and Type B
Private  Placements;  (iv) an increase  of $229,000 in travel and  entertainment
costs; (v) an increase of $406,000 in respect of valuations  attributed to stock
issued in  consideration  for the release of an exclusive  rights agreement (see
Item 12 of this  Report,  "Certain  Relationships  and  Related  Transactions  -
Consulting and Executive  Agreements with Louis Sanzaro");  and (vi) an increase
of $306,000  in costs  directly  associated  with the  development  of the TCS-1
Plant.  Total research and development  costs during Fiscal 1998 were $2,581,928
which reflected an increase of $498,640 over research and development  costs for
Fiscal 1997. During the year ended June 30, 1998, shares of Common Stock with an
aggregate attributed value of $1,870,000 were issued in exchange for services as
compared to Common Stock with an aggregate attributed value of $1,600,000 during
the year ended June 30, 1997.

      Management  believes  that the  amounts  accrued  in respect of the shares
issued to compensate the executive  officers and corporate  counsel  reflect the
fair value of the  services  rendered,  and that the  recipients  of such shares
accepted  such  numbers  of  shares  as a  function  of a  combination  of their
perceived  valuation of both  present and  possible  future value of the shares,
rather than the actual value of the stock at the time it was issued.  Management
believes  that,  as of the  dates  such  shares  were  issued  in  lieu  of cash
compensation, their actual and potential value, if any, could not be determined,
and  that any  attempt  to  specify  a  current  valuation  with any  reasonable
assurance,  would be flawed, without 


                                       67
<PAGE>

substance,  and highly  contingent  upon,  and subject to,  extremely high risks
including  but not  limited  to the  following  factors:  (i) the  absence  of a
reliable,  stable, or substantial trading market for the Company's common stock,
the possibility  that such a market might never be developed,  and the resultant
minimal,  or total absence of, market value for any substantial  block of common
stock;  (ii) the very high intrinsic  risks  associated  with early  development
stage businesses,  such as the Company's;  (iii) theCompany's lack of sufficient
funds, as at such issuance dates, to implement its business plan and the absence
of any  commitments,  at such times,  from  potential  investors to provide such
funds;  (iv)  the  restrictions  on  transfer  arising  out  of the  absence  of
registration of such shares;  and (v) the  uncertainty  respecting the Company's
ability to continue as a going concern, (See "Existing and Proposed Businesses",
"Market for the Company's Common Equity and Related  Stockholder  Matters",  and
"Management - Certain Relationships and Related Transactions - Issuance of Stock
in Lieu of Salaries and Consulting Fees").

      From  inception  (July 15, 1987)  through  June 30, 1998,  the Company has
incurred a cumulative net loss of $10,051,483.  Approximately $1,057,356 of such
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.

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 Report 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 


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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" and "The Company -
Material Financing  Activities").  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  applicable  provincial  and  municipal
regulations  (see  "Description  of  Property");  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 (see  "Existing  and  Proposed  Businesses - Product
Manufacturing and Sales of Rubber Crumb" and "Description of Property").

      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 


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<PAGE>

all of the 15% salestax 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.

      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
(see  "Existing and Proposed  Businesses - Equipment  Manufacturing  - The TCS-1
Plant", and "Existing and Proposed Businesses - Equipment  Manufacturing - Sales
and Marketing - The Enercon Contracts" and "Management's Discussion and Analysis
of Financial Condition and Results of 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 


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<PAGE>

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. 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 (see  "Management's  Discussion and
Analysis of Financial Condition and Results of 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  


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<PAGE>

indicating  that:  (i) the Company is still in the  development  stage;  (ii) it
cannot  be  determined  at this  time  that the  Company's  tire  disintegration
technology  will be  developed to a productive  stage;  and (iii) the  Company's
uncertainty as to its productivity  and its ability to raise sufficient  capital
raise  substantial  doubt about its ability to continue as a going  concern.  In
addition,  the Company had an accumulated  deficit of $10,051,483 as at June 30,
1998. The Company will require  substantial  additional funds in the future, and
there can be no assurance that any independent auditors' report on the Company's
future financial statements will not include a similar explanatory  paragraph if
the Company is unable to raise sufficient funds or generate sufficient cash from
operations to cover the cost of its operations. The existence of the explanatory
paragraph  may  materially  adversely  affect the  Company's  relationship  with
prospective customers and suppliers, and therefore could have a material adverse
effect on the Company's business, financial condition and results of operations.

      5.ab 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  (see
"Existing and Proposed Businesses-Sales and Marketing").

      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.

      (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.
            To the extent  that the  interest  portion of the  Debenture  is not
            converted, all accrued interest will be payable in cash.

      (c)   10% convertible Type B Debentures in the aggregate  principal amount
            of $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 


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<PAGE>

            issuable  would be  2,675,000,  the  resale of all which  shares are
            included  in the  Registration  Statement.  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.  For a  discussion  in more
            detail  of the  terms  of  this  option  and the  purchase  thereof,
            reference   is   made  to   "Certain   Relationships   and   Related
            Transactions"  under the caption,  "Extension of Exercise  Period of
            Option Held by John G. Hartley", below; and

      (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 


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<PAGE>

            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.

      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
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",  "Management -
Executive Compensation",  "Management - Security Ownership of Certain Beneficial
Owners and Management", and "Certain Relationships and Related Transactions").


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<PAGE>

      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.  11,760,000  of such  shares  will be freely  tradeable
commencing  on the  effective  date of the  Registration  Statement  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 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  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 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


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possibility  could  have a  depressive  effect  on the  price  of the  Company's
Securities.  (See  "Risk  Factor No. 25  "Adverse  Effects  of  Proposals  to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions,  Limitations
on Shareholders  Voting Rights,  and Stock Bonuses to Management" and "Principal
Shareholders").

      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 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.


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<PAGE>

      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.  Mr.  Sanzaro's  past and present  relationships  and
transactions  with the Company are discussed in detail in "Existing and Proposed
Businesses  -  Proposed  TCS-1  Plant  Operations:  Sales of  Rubber  Crumb  and
Manufacture and Sale of Finished Products."

      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 permits and licenses to
operate  a  Plant),  and  to  the  Company's  obtaining  sufficient  production,
financing and capacity to meet delivery requirements.  (See "Existing & Proposed
Businesses  -  "Equipment  Manufacturing  - Dependence  on 


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<PAGE>

Major Customer" and "Proposed TCS-1 Plant Operations:  Sales of Rubber Crumb and
Manufacture and Sale of Finished Products."

      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 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


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<PAGE>

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(5)  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 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,15.ab  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.

---------
(5)   "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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<PAGE>

      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. See "Market Information".

      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 (see  "Market  Information").  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 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) (see  "Management -
Directors and Executive Officers").


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<PAGE>

      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 (see "Management - Employment Contracts and Termination
of Employment  and Changes - in - Control  Arrangements").  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
crumb (see "Existing and Proposed  Businesses - Proposed TCS-1 Plant Operations:
Sales of Rubber Crumb and Manufacture and Sale of Finished Products"). 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  


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<PAGE>

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  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  (See "Existing and
Proposed Businesses - Government Regulation").

      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 (see Existing & Proposed Businesses "Agreements With Subcontractors").  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 (see Existing & Proposed BusinesseS:  "Production
and Supply").


                                       82
<PAGE>

      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  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.  (see  "Existing and
Proposed Businesses - Competition").

      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.


                                       83
<PAGE>

      25. The Company's  amended  Certificate  of  Incorporation  authorizes the
issuance of 5,000,000 shares of "Class A Stock".  Twenty thousand of such shares
are  reserved  for  issuance  as  preferred  stock under an  outstanding  option
therefor. The Board of Directors has the power to issue the balance of the Class
A Stock in such  series  and  classes  and with such  designations,  rights  and
preferences  as may be  determined  from time to time by the Board of Directors.
The issuance of any series of preferred stock having rights superior to those of
the common  stock may result in a decrease  in the value or market  price of the
common stock and could be used by the Board of Directors as a means to prevent a
change in control of the Company.  Such preferred stock issuances could make the
possible  takeover of the Company,  or the removal of management of the Company,
more difficult.  The issuance of such preferred stock could  discourage  hostile
bids for control of the Company in which shareholders could receive premiums for
their  common  stock or warrants,  could  adversely  affect the voting and other
rights of the holders of the common stock,  or could depress the market price of
the common stock.  Also, the voting power and  percentage of stock  ownership of
the shareholders of the Company's outstanding capital stock can be substantially
diluted by such preferred stock issuance.  See also, Risk Factor No. 27 "Adverse
Effects  of  Proposals  to  Be   Presented  at  Annual   Shareholders   Meeting:
Anti-Takeover  Provisions,  Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management".

      26.  Prior  Notice  Not  Required  For  Shareholder  Actions.  None of the
Company's  securities is 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:  Anti-Takeover  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


                                       84
<PAGE>

(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  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 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  


                                       85
<PAGE>

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").

ITEM 7. FINANCIAL STATEMENTS

      The financial  statements of the Company,  required to be included in this
Report pursuant to Item 310(a) of Regulation S-B, are set forth below.


                                       86
<PAGE>

                              THE TIREX CORPORATION

                         (A Developmental Stage Company)

                              THE TIREX CORPORATION

                         (A Developmental Stage Company)

                                    I N D E X

                                                                            Page
                                                                            ----

Report of Independent Auditors                                               88

Consolidated Balance Sheet                                                   89

Consolidated Statements of Operations                                        90

Consolidated Statements of Stockholders' Equity (Deficit)                    91

Consolidated Statements of Cash Flows                                        93

Notes to Consolidated Financial Statements                                   95


                                       87
<PAGE>

                         Report of Independent Auditors

Board of Directors
The Tirex Corporation

We have  audited  the  accompanying  consolidated  balance  sheet  of The  Tirex
Corporation (a  development  stage company) as of June 30, 1998, and the related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows for the years ended,  June 30, 1998 and 1997 and for the cumulative period
from March 26,  1993,  (date of  inception)  to June 30, 1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  The  Tirex
Corporation (a  development  stage company) at June 30, 1998, and the results of
their  operations,  and their cash flows for the years  ended June 30,  1998 and
1997, and for the cumulative  period from March 26, 1993, (date of inception) to
June 30, 1998, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the  Company  is still in the  development  stage and it
cannot be determined at this time that the technology acquired will be developed
to a productive stage. The Company's  uncertainty as to its productivity and its
ability to raise sufficient  capital raise  substantial doubt about the entity's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                                Pinkham & Pinkham, P.C.
                                                Certified Public Accountants, PA

February 9, 1999
Cranford, New Jersey


                                       88
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                           Consolidated Balance Sheet
                                  June 30, 1998

                                     Assets

Current assets
  Cash and cash equivalents (Note 1)                     $  398,971
  Notes receivable (Note 8)                                 225,969
  Sales tax receivable                                      133,868
  R&D Investment tax credit receivable (Note 1)             855,818
  Prepaid expenses and deposits                             618,266
                                                         ----------
                                                                       2,232,892

Property and equipment, at cost, net of accumulated
depreciation of $16,747 (Notes 1 & 4)                                    977,288

Other assets
  Organization costs, net of accumulated
   amortization of $863 (Note 1)                                536
  Prepaid expenses and deposits                             445,677
Deferred financing costs (Note 3)                           158,255
                                                         ----------
                                                                         604,468
                                                                      ----------
                                                                      $3,814,648
                                                                      ==========

                       Liability and Stockholders' Equity

Current liabilities
  Notes payable (Note 5)                                 $  407,926
  Accrued expenses (Note 8)                               1,274,150
  Deposits payable (Note 8)                                 143,500
  Current portion of long-term debt (Note 6)                 34,118
                                                        -----------
                                                                       1,859,694

Other liabilities
Long term debt (net of current portion) (Note 6)            465,894
  Convertible subordinated debentures,
    long-term portion (Note 7)                            1,035,000
                                                        -----------
                                                                       1,500,894
Stockholders' equity (Notes 1,2,7,8,9,10,11 & 12)
 Common stock,  $.001 par value, authorized
  120,000,000 shares,  issued and outstanding,
   63,641,438 shares                                         63,642
 Class A stock;.001 par value, authorized 5,000,000
   shares issued and outstanding, 0 shares                     --     
 Additional paid-in capital                              10,258,116
 Deficit accumulated during the development stage       (10,051,483)
 Unrealized gain on foreign exchange                        183,785
                                                                         454,060
                                                                    ------------
                                                                    $  3,814,648
                                                                    ============

                 See Notes to Consolidated Financial Statements


                                       89
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                      Consolidated Statements of Operations

                                                                    Cumulative
                                                                   Period from
                                                                  March 26, 1993
                                                                     (Date of
                                                                    Inception)
                                       Year Ended June 30,              to
                                                      1997         June 30, 1998
                                       1998        (Restated)       (Restated)
                                       ----        ----------       ----------

Revenues                          $    880,000    $       --      $    934,725

Cost of sales                          796,490            --           810,842
                                  ------------    ------------    ------------

Gross profit                            83,510            --           123,883

Operations
  General and administrative         1,970,277         278,948       2,956,340
  Depreciation and amortization         12,361           4,299          24,028
    Research and development         2,581,928       2,083,288       6,046,100
                                  ------------    ------------    ------------

Total expense                        4,564,566       2,366,535       9,026,468
                                  ------------    ------------    ------------

Loss before other income and 
  expenses                          (4,481,056)     (2,366,535)     (8,902,585)
                                  ------------    ------------    ------------

Other income (expenses)
  Interest expense                     (53,387)         (8,531)        (64,006)
  Interest income                        2,540            --             2,540
    Income from stock options             --              --            10,855
    Loss on disposal of equipment         --            (2,240)         (2,240)
    Loss on foreign
    exchange (Note 1)                  (38,538)          1,027         (38,691)
                                  ------------    ------------    ------------

                                       (89,385)         (9,744)        (91,542)
                                  ------------    ------------    ------------

Net loss                          $ (4,570,441)   $ (2,376,279)   $ (8,994,127)
                                  ============    ============    ============

Net loss per common share         $       (.10)           (.08)   $       (.50) 
                                  ============    ============    ============
                                                                              
                                                                              

Weighted average shares of common
 stock outstanding (Note 1)         45,704,410      27,992,502      17,988,254
                                 =============    ============    ============

                 See Notes to Consolidated Financial Statements


                                       90
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

            Consolidated Statement of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                              Deficit
                                                                            Accumulated
                                                                Additional     During                                          
                                                                  Paid-in   Developmental     Unrealized
                                             Common Stock         Capital      Stage            Foreign         Total
                                         Shares       Amount    (Restated)   (Restated)        Exchange       (Restated)
                                         ------       ------    ----------   ----------        --------       ----------

<S>                                    <C>            <C>         <C>        <C>                   <C>         <C>  
Balance at June 30, 1992               3,383,020      3,383       194,980    (1,057,356)           --          (858,993)


Stock issued for reorganization       18,650,000     18,650        76,155          --              --            94,805
Stock issued for services                100,000        100          (100)         --              --               --
Stock issued in exchange for
 warrants                                363,656        364          (364)         --              --               --
Forgiveness of debt                         --         --         728,023          --              --           728,023
Net loss for the year                       --         --            --        (165,296)           --          (165,296)
                                      ----------     ------       -------     ---------          ------        --------

Balance at June 30, 1993              22,496,676     22,497       998,694    (1,222,652)           --          (201,461)

Stock issued                               2,000          2            (2)          --             --               --
Exchange for debt                           --         --         149,170           --             --           149,170
Payments received for stock
 previously issued                          --         --         237,430          --              --           237,430
Net loss for year                           --         --            --        (179,296)           --          (179,296)
                                      ----------      -----       -------     ---------          ------         -------

Balance at June 30, 1994              22,498,676     22,499     1,385,292    (1,401,948)           --             5,843

Revision of common stock             (11,900,000)   (11,900)       11,900          --              --               --
Stock issued for services              5,592,857      5,592       513,908          --              --           519,500
Shares issued in exchange
 for debt                                200,000        200        24,300          --              --            24,500
Issuance of common stock                 402,857        401        21,915          --              --            22,316
Net loss for year                           --         --            --        (575,771)           --          (575,771)
                                      ----------    -------    ----------     ---------        --------         -------

Balance at June 30, 1995              16,794,390     16,792     1,957,315    (1,977,719)           --            (3,612)
                                      ----------    -------    ----------     ---------        --------         -------
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       91
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

            Consolidated Statement of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                              Deficit
                                                                            Accumulated
                                                                Additional     During                                          
                                                                  Paid-in   Developmental     Unrealized
                                             Common Stock         Capital      Stage            Foreign         Total
                                         Shares       Amount    (Restated)   (Restated)        Exchange       (Restated)
                                         ------       ------    ----------   ----------        --------       ----------

<S>                                    <C>            <C>         <C>        <C>                   <C>          <C>   
Balance at June 30, 1995               16,794,390      16,792    1,957,315   (1,977,719)           --           (3,612)

Stock issued for services               3,975,662       5,090      846,612          --             --          851,702
Shares issued in exchange
 for debt                                 391,857         392       29,008          --             --           29,400
Issuance of common stock                  710,833         710       80,161          --             --           80,871
Net loss for year                             --          --           --    (1,127,044)           --       (1,127,044)
                                       ----------     -------    ---------    ---------         -------      ---------

Balance at June 30, 1996               21,872,742      22,984    2,913,096   (3,104,763)           --         (168,683)

Stock issued for options                      --          --       912,838          --             --          912,838
Stock issued for services               5,067,912       3,955      690,234          --             --          694,189
Shares issued in exchange
 for debt                                 251,382         252       43,965          --             --           44,217
Issuance of common stock               10,257,936      10,259      335,132          --             --          345,391
Grants issued                                 --          --       408,597          --             --          408,597
Net loss for year                             --          --           --    (2,376,279)           --       (2,376,279)
                                     ------------     -------    ---------   ----------         -------      ---------

Balance at June 30, 1997               37,449,972      37,450    5,303,862   (5,481,042)           --         (139,730)

Stock issued for services               4,396,466       4,396      922,180          --             --          926,576
Stock issued for options                      --          --       948,500          --             --          948,500
Issuance of common stock               21,795,000      21,796    1,176,755          --             --        1,198,551
Unrealized foreign exchange                   --          --           --           --          183,785        193,785
Stock options issued and
 outstanding                                  --          --     1,236,913          --             --        1,236,913
Grants issued                                 --          --       669,906          --             --          669,906
Net loss for year                             --          --           --    (4,570,441)           --       (4,570,441)
                                     ------------     -------  ----------- ------------        --------      ---------

Balance at June 30, 1998               63,641,438     $63,642  $10,258,116 $(10,051,483)       $183,785      $ 454,060
                                     ============     =======  =========== ============        ========      =========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       92
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                    Cumulative
                                                                                   Period from
                                                                                  March 26, 1993
                                                                                     (Date of
                                                                                    Inception)
                                                          Year ended June 30,           to
                                                                        1997       June 30, 1998
                                                         1998        (Restated)     (Restated)
                                                         ----        ----------     ----------

<S>                                                  <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                             $(4,570,441)   $(2,376,279)   $(8,994,127)
Adjustments to reconcile net loss to net cash
  Used in operating activities:
  Depreciation and amortization                           11,952          4,299         23,620
  Loss on disposal and abandonment of assets                --            2,240         15,559
  Stock issued in exchange for interest                     --            4,217          4,217
Stock issued in exchange for services and expenses       926,576      1,608,143      3,934,207
Stock options issued in exchange for services          2,185,413           --        2,185,413
  Unrealized gain on foreign exchange                    183,785           --          183,785
Change in assets and liabilities:
  (Increase) decrease  in:
 Employee advances                                       185,942       (185,942)          --
 Sales tax receivable                                    (83,584)       (50,284)      (133,868)
   R&D investment  tax credit receivable                (585,900)      (269,918)      (855,818)
 Other assets                                         (1,063,943)          --       (1,070,143)
  Increase in:
 Accrued expenses                                        381,896        656,325      1,295,274
 Due to stockholders                                        --             --            5,000
                                                     -----------    -----------    -----------
Net cash used in operating activities                 (2,428,304)      (607,199)    (3,406,881)
                                                     -----------    -----------    -----------

Cash flow from investing activities:

  Increase in note receivable                           (216,240)        (8,571)      (225,969)
  Equipment                                              (72,871)        (5,924)      (113,632)
  Equipment assembly costs                              (117,759)      (606,028)      (901,011)
  Organization cost                                         --             --            6,700
  Reduction of security deposit                             --             --           (1,542)
  Deferred start up costs                                 74,683        (74,683)          --
                                                     -----------    -----------    -----------

Net cash used in investing activities                   (332,187)      (695,206)    (1,235,454)
                                                     -----------    -----------    -----------

Cash flows from financing activities:
  Loan granted to director                                10,881        (10,881)          --
  Deferred financing costs                              (158,255)          --         (158,255)
  Proceeds from deposit                                 (336,500)       415,000        143,500
  Proceeds from note payable                             285,375         98,551        407,926
  Proceeds from issuance of convertible
   debentures                                          1,035,000           --        1,035,000
  Proceeds from loan payable                             299,467        200,545        535,012
  Proceeds from issuance of stock options                   --             --           20,000
                                                     -----------    -----------    -----------
Sub-total                                            $ 1,135,968    $   703,215    $ 1,983,183
                                                     -----------    -----------    -----------
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       93
<PAGE>

                              THE TIREX CORPORATION
                          A Developmental Stage Company

                      Consolidated Statements of Cash Flows

                                                                    Cumulative
                                                                    Period from
                                                                  March 26, 1993
                                                                     (Date of
                                                                     Inception)
                                              Year Ended June 30,        to
                                                            1997   June 30, 1998
                                                1998     (Restated)   (Restated)
                                                ----     ----------   ----------

Sub-total from prior page                   $1,135,968   $  703,215   $1,983,183

  Proceeds from grants                         669,906      408,597    1,078,503
  Proceeds from issuance of common
    stock                                       21,796       10,258       54,216
  Proceeds from additional paid-in
    capital                                  1,176,755      335,132    1,925,147
                                            ----------   ----------   ----------

  Net cash provided by  financing
    activities                               3,004,425    1,457,202    5,041,049
                                            ----------   ----------   ----------

 Net increase in cash                          243,934      154,797      398,714

  Cash and cash equivalents - beginning
   of year                                     155,037          240          257
                                            ----------   ----------   ----------

Cash and cash equivalents - end of period   $  398,971   $  155,037   $  398,971
                                            ==========   ==========   ==========

Supplemental Disclosure of Non-Cash Activities:

   In 1998 and 1997,  the Company  recorded  an increase in common  stock and in
     additional paid-in capital of $126,347 and $44,217, respectively, which was
     in recognition of the payment of debt. In 1998 and 1997 stock was issued in
     exchange for services  performed and expenses in the amount of $800,229 and
     $1,608,143 respectively. In 1998 stock  options were issued in exchange for
     services totaling $2,185,413.

   In 1997 the company  exchanged a piece of equipment for forgiveness of a debt
     in the amount of $2,500.

Supplemental Disclosure of Cash Flow Information:

  Interest paid                             $       --   $       --   $   30,432
                                            ===========  ==========   ==========

  Income taxes paid                         $        --  $       --   $       --
                                            ===========  ==========   ==========

                 See Notes to Consolidated Financial Statements



                                       94
<PAGE>

                    The TIREX CORPORATION INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 1 -    Summary of Accounting Policies 
            Change of Name

            In June, 1998 the Company changed its name from Tirex America,  Inc.
            to The Tirex Corporation.

            Nature of Business

            The Tirex  Corporation  (the "Company") was  incorporated  under the
            laws of the  State of  Delaware  on August  19,  1987.  The  Company
            originally planned to provide  comprehensive health care services to
            persons with Acquired Immune Deficiency Syndrome, however due to its
            inability to raise sufficient capital it was unable to implement its
            business  plan.  The  Company  had been  inactive  since  it  ceased
            operations in November 1990.

            In the Fall of 1992,  a group of  shareholders  lead by Edward Mihal
            and including 16 other shareholders acting in concert with Mr. Mihal
            along with Patrick McLaren and George Fattell,  individuals  without
            any prior  affiliation  with the Company,  became  interested in the
            Company  as an entity  potentially  suitable  for  merger or similar
            transaction  with an  operating  private  company  seeking to become
            public in this manner. This group approached the Company's incumbent
            management with a proposal whereby they agreed to assume  management
            control,  make  all  delinquent  filings  with  the  Securities  and
            Exchange  Commission,  restore service by transfer agent and pay all
            other  expenses  required to enable the Company to begin trading its
            stock and completing a merger or similar transaction.

            In  furtherance  of the  foregoing,  on November 5, 1992, J. Richard
            Goldstein,  MD, Peter R. Stratton and Robert  Kopsack  resigned from
            their positions as officers and directors of the Company.  From June
            1989  until the date of such  resignations,  Dr.  Goldstein  was the
            Company's  President and Chief Executive  Officer,  Mr. Stratton was
            Vice-President,  Chief Operating  Officer,  Secretary and Treasurer,
            and Mr. Kopsack was the Company's Vice President. In resigning their
            positions,   Dr.   Goldstein   and  Messrs.   Stratton  and  Kopsack
            acknowledged that they acceded to their respective positions and had
            received compensation in consideration of their representations that
            they would, and their best efforts to, implement a business plan for
            the  Company  which  would  encompass,   among  other  things,   the
            establishment  and operating of skilled  nursing care facilities for
            patients  with Acquired  Immune  Deficiency  Syndrome.  Compensation
            received by Dr. Goldstein and Messrs. Stratton and Kopsack consisted
            of cash payments,  stock issuances,  and the grants of stock options
            and/or stock purchase warrants.  As part of their resignations,  Dr.
            Goldstein and Messrs.  Stratton and Kopsack each  executed  releases
            whereby the Company was  released  and forever  discharged  from all
            debts,  obligations,  covenants,  agreements,  contracts,  claims or
            demands in law or in equity,  including but not limited to any stock
            options or stock  purchase  warrants  granted or  promised  to them,
            which against the Company, each ever had, or thereafter may have for
            or by  reason  of any  matter,  cause  or  thing  up to and  through
            November 5, 1992.  Each of Dr.  Goldstein  and Messrs.  Stratton and
            Kopsack also  acknowledged  the  termination and rescission of their
            respective employment agreements with the Company to such persons as
            the Company  should direct for the purpose of satisfying  certain of
            the Company's obligations to third parties.

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            In consideration  of the  resignations and releases  executed by Dr.
            Goldstein and Messrs. Stratton and Kopsack, Edward Mihal and each of
            the sixteen  shareholders  of the Company acting in concert with Mr.
            Mihal executed and delivered  reciprocal personal releases to and on
            behalf  of Dr.  Goldstein  and  Messrs.  Stratton  and  Kopsack.  In
            connection  with  the  foregoing  resignations,  Dr.  Goldstein  and
            Messrs.  Stratton  and  Kopsack  appointed,  as an interim  board of
            directors,  Patrick McLaren,  George Fattell,  and Edward Mihal (the
            "Interim Management").  It was the goal of the Interim Management to
            find suitable  acquisition  and/or  development  by the Company.  On
            December 29, 1992,  Edward Mihal resigned his position as an officer
            and a director 


                                       95
<PAGE>

            of the  Company  and Louis V. Muro was  appointed  as an officer and
            director  of the  Company to fill the vacancy  created  thereby.  

            On March 26, 1993, the Company entered into an acquisition agreement
            (the  "Acquisition  Agreement") with Louis V. Muro,  Patrick McLaren
            and  George   Fattell,   officers  and   directors  of  the  Company
            (collectively the "Sellers"), for the purchase of certain technology
            owned and developed by the Sellers (the  "Technology") and extensive
            and detailed plans (the  "Business  Plan") for a business which will
            engage in the exploitation of the Technology. The Technology will be
            used to design,  develop  and  construct  a  prototype  machine  and
            thereafter  a   production   quality   machine  for  the   cryogenic
            disintegration of used tires. Pursuant to the Acquisition Agreement,
            Sellers  agreed to assign,  transfer  and sell to the Company all of
            their right,  title and interest in the Technology and Business Plan
            in exchange for fifteen million nine hundred  thousand  (15,900,000)
            shares of the Company's common stock, $.001 par value per share (the
            "Sellers'  Stock") of which eleven  million  nine  hundred  thousand
            (11,900,000)  shares were put into  escrow.  The  Business  Plan and
            Technology were developed by the Sellers prior to their  affiliation
            or  association  with the  Company.  The Sellers were engaged as the
            Company's officers and directors for the purpose of implementing the
            Business  Plan with the  Technology or such other  technology  which
            they  believed  could  reasonably  satisfy the  requirements  of the
            Business Plan.

            Effective with the March 26, 1993,  closing date of the  Acquisition
            Agreement (the "Closing Date"),  the Company  authorized an increase
            in the  number  of  directors  of the  Company  from  three  to six.
            Pursuant  thereto,  the Company  appointed  Messrs.  Kenneth Forbes,
            Nicholas  Campagna,  and  Alfred J.  Viscido  to fill the  vacancies
            created  in the  size of the  board.  As an  inducement  to  Messrs.
            Forbes,  Campagna  and Viscido to join the board of  directors,  the
            Company issued  250,000 shares of its common stock,  $.001 par value
            to each of them. The  Acquisition  Agreement also provided for stock
            issuances  in the  form of  finder's  fees.  Pursuant  thereto,  the
            Company  issued  300,000 and  1,700,000  shares of its common stock,
            $.001 par value, to Joseph Territo and Edward Mihal, respectively.

            Effective March 24, 1994,  George Fattell resigned as an officer and
            director of the Company. Per the terms of his resignation any future
            shares of the Company's common stock issued to Mr. Fattell are to be
            equally distributed to Louis V. Muro and Patrick McLaren.

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)
                   Notes to Consolidated Financial Statements

            Effective January 18, 1995, Louis V. Muro and Patrick McLaren resign
            their  positions  as  officers  and  directors  of the  Company.  In
            addition to their  resignations  they  acknowledged that none of the
            requisite   performance  levels  for  the  release  of  any  of  the
            11,900,000  escrow  shares had been met and  renounced all rights to
            such shares.

            Developmental Stage

            At June 30, 1998 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,  Inc.. Tirex Canada, Inc. is held 49% by the Company and 51%
            by  the  shareholders  of  the  Company.  The  shares  owned  by the
            shareholders  are held in 


                                       96
<PAGE>

            escrow by the Company's  attorney and are restricted from transfer .
            All  intercompany  transactions and accounts have been eliminated in
            consolidation.

            Cash and Cash Equivalents

            For  purposes of the  statement  of cash flows all  certificates  of
            deposits with  maturities of 90 days or less, were deemed to be cash
            equivalents

            Property and Equipment

            Property  and  equipment  are  recorded  at  cost  less  accumulated
            depreciation.   Depreciation   is   computed   provided   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  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.

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)
                   Notes to Consolidated Financial Statements

            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  required  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.

            Organization Costs

            Organization costs are being amortized on a straight-line basis over
            a sixty month period.

                                       97
<PAGE>

            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.

            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 TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 1 -    Summary of Accounting Policies  (continued) Adoption of Statement of
            Accounting Standard No. 128

            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, 1998 and 1997, 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 1998 and 1997,
            and  accordingly,  in those years the  denominator  was equal to the
            weighted  average  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 9,212,673 and  2,000,000  shares at June
            30, 1998 and 1997,  respectively,  and  warrants for the purchase of
            2,000,000 shares at June 30, 1998 and 1997 were not included in loss
            per  share   calculations,   because   to  do  so  would  have  been
            anti-dilutive.


                                       98
<PAGE>

            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.

            The fair value 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, 1998 and
            1997, 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  $4
            million as of June 30,  1998,  expiring  in the years  2004  through
            2011.  However,  based upon  present  Internal  Revenue  regulations
            governing the utilization of net operating loss carryovers where the
            corporation has issued  substantial  additional  stock, most of this
            loss carryover may not be available to the Company.

            The Company  adopted  Statement  of Financial  Accounting  Standards
            (SFAS) No. 109,  Accounting  for Income Taxes,  effective July 1993.
            SFAS No.109 requires the  establishment  of a deferred tax asset for
            all   deductible   temporary    differences   and   operating   loss
            carryforwards.  Because of the  uncertainties  discussed  in Note 2,
            however,  any deferred tax asset  established for utilization of the
            Company's tax loss  carryforwards  would  correspondingly  require a
            valuation  allowance  of the same  amount  pursuant to SFAS No. 109.
            Accordingly,  no deferred tax asset is reflected in these  financial
            statements.

            The Company has  research  and  development  investment  tax credits
            receivable from Canada and Quebec amounting to $855,818.

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            Foreign Exchange

            Assets and  liabilities  of the  Company  which are  denominated  in
            foreign  currencies are  translated at exchange rates  prevailing at
            the balance  sheet date.  Revenues and expenses  are  translated  at
            average rates throughout the year.

Note 2 -    Going Concern

            As shown  in the  accompanying  financial  statements,  the  Company
            incurred  a net loss of  $4,500,042  during  the year ended June 30,
            1998.

            In March  1993,  the  Company,  which was  still in the  development
            stage,  developed  a new  Business  Plan.  As at June  30,  1998 the
            Company  was in the process of  constructing  a  production  quality
            machine for the cryogenic  disintegration of used tires. At June 30,
            1998, the Company was still in the development stage.


                                       99
<PAGE>

            The Company is  currently  in the process of  formulating  a plan to
            effect an additional public offering, the proceeds of which would be
            used for working  capital and capital  acquisitions.  The ability of
            the  Company to  continue  as a going  concern is  dependent  on the
            success of the plan.  The  financial  statements  do not include any
            adjustments  that  might be  necessary  if the  Company is unable to
            continue as a going concern.

Note 3 -    Financing Costs

            During the year ended June 30, 1998 the Company incurred $158,255 in
            connection  with debt  financing  (see Note).  These costs have been
            capitalized  in other assets and are being  amortized over the terms
            of the financing.  Amortization of financing costs and the write-off
            of other  long-term  assets  for the year  ended  June 30,  1998 was
            $112,355.

Note 4 -    Property and Equipment

            Financing Costs

            As of June 30, 1998 plant and equipment consisted of the following:

            Furniture, fixtures and equipment           $ 34,575
            Leasehold improvements                        58,250
            Construction in progress                     901,210
                                                       ---------
                                                         994,035
            Less accumulated depreciation and 
              amortization                                16,747
                                                       ---------
                                                       $ 977,288
                                                       =========

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            Depreciation  and  amortization  expense  charged to operations  was
            $12,361  and  $4,299  for the years  ended  June 30,  1998 and 1997,
            respectively.

Note 5 -    Notes Payable

            The Company  has  available  a $700,000  line of credit  which bears
            interest at the  Canadian  prime rate plus 1.25% . At June 30, 1998,
            $407,926 was  outstanding  against this line of credit.  The note is
            collateralized  by the  personal  guarantees  of  certain  officers,
            certain  equipment  of Tirex  Canada  and  guaranteed  by The  Tirex
            Corporation. The loan is guaranteed at a rate of 80% by the Societe'
            de  Developpement  industriel  du Quebec and is  repayable  from the
            research and  developmental  investment  tax credits  received.  The
            Canadian prime rate of interest at June 30, 1998 was 8%.


                                      100
<PAGE>

                             THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 6-     Long-Term Debt
           
            Federal Office of Regional Development (Ford-Q)              1998
            Loan payable under the Industrial  Recovery 
            Program amounting to 20% of certain eligible 
            costs incurred (maximum loan $500,000) 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)        $341,180

            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                                   64,823

            - Loan payable over five years, commencing
              June 2001, due 2005                                        9,918

            - Loan payable in amounts equal to 1% of the annual
              sales in India through June 30, 2002                      13,647

            - Loan payable in amounts equal to 1% of annual
              sales in Spain through June 30, 2007                      13,647

            - Loan payable in amounts equal to 11/2% of annual
              sales in Spain and Portugal through June 30, 2004         56,797
                                                                     ---------

                                                                       500,012
            Less:  current portion                                      34,118
                                                                     ---------
                                                                      $465,894
                                                                     =========

 
                                     101
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            Minimum principal repayments of each of the next five years as
            follows:

                  1999                                   $   34,118
                  2000                                       90,415
                  2001                                      129,517
                  2002                                      168,617
                  2003                                       32,581
                  Thereafter                                 44,764
                                                          ---------
                                                           $500,012
                                                          =========
Note 7 -    Convertible Subordinated Debentures

            Convertible subordinated debentures consist of the following:

                                             Type A                  Type B
                                             ------                  ------

     Balance a June 30, 1998                $500,000                $535,000

     Interest rate                             10%                     10%

     Maturity               Earlier of (i)-the           Earlier of (i)-two     
                            completion of a public       years from the issue 
                            offering yielding gross      date or (ii)-the 
                            proceeds of not less than    completion of a public
                            8,000,000, (ii)-the closing  offering of its
                            on financing inexcess of     securities by the Maker
                            4,500,000, (iii)-
                            December 31, 1999

     Redemption rights      If not converted the         If not converted the 
                            holder may require the       holder may require the 
                            Company to redeem at any     Company to redeem at 
                            time after maturity at a     any time after maturity
                            premium of 125%              for the principal 
                                                         amount plus interest


                                      102
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Conversion ratio       75% of the average of the                  $.20 per share
                         closing  bid  price  of  the  common
                         stock as reported  by NASDAQ  during
                         the five day  period  preceding  the
                         Company's  receipt  of a  notice  of
                         conversion by a debenture holder.

Warrants                 As  part of the  debenture  package,
                         the   Company    issued    2,000,000
                         warrants  to  purchase a like number
                         of shares  of common  stock at $.001
                         per share

Note 8 -    Related Party Transactions

            On July 22, 1994,  3,000,000 shares of The Tirex  Corporation,  Inc.
            were  released  from  escrow and issued to Louis V. Muro and Patrick
            McLaren  (1,500,000  shares each) in  accordance  with the terms and
            provisions of the Acquisition Agreement dated March 26, 1993.

            The Company  entered into  various  employment  agreements  with the
            executive  officers and general Counsel whereby the Company will pay
            a total of  $565,000  a year plus  benefits.  All of the  employment
            agreements  call 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.

            Included  in accrued  expenses at June 30, 1998 is $17,076 of salary
            to officers which the company subsequently issued common stock for.

            At June 30, 1998 and 1997,  the Company  had notes  receivable  from
            various officers in the amount of $195,969 and $9,729, respectively.
            One note in the amount of $70,405  bears  interest at an annual rate
            of 8% above prime through  September 1998 and 2% above prime through
            September 1999 (the due date).The  remaining notes are  non-interest
            bearing and will be repaid during the year ending June 30, 1999.

            At June 30, 1998 the Company had a note  receivable for $30,000 from
            a Company in which a director  has a  financial  interest.  The note
            bears interest at prime plus 2% and is due on demand.

            Deposits payable included an amount of $118,500 which are payable to
            companies which are owned by a director of the Company.


                                      103
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            The  revenue  recognized  during the year  ended  June 30,  1998 was
            received  by a Company  in which a  director  in the  Company  has a
            financial interest.

Note 9 -    Exchange of Debt for Common Stock

            In 1997, the Company recorded  increases in common stock and paid-in
            capital of $50,000,  which was in  recognition  for the  exchange of
            common  stock  for  debt  owed to  certain  related  parties  to the
            Company.

Note 10 -   Common Stock

            During the years  ended June 30, 1998 and 1997,  the Company  issued
            common  stock to  individuals  in exchange  for  services  performed
            totaling  $926,577 and $1,651,245,  respectively.  Included in these
            amounts are  payments  to  officers  of the Company in exchange  for
            salary in the amount of $361,945 and $1,393,114,  respectively.  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.

   Compensatory Common Stock Options
 
                                                              Compensation Cost
                                                              For the Year Ended
                                          Number of Shares      June 30, 1998
                                          ----------------      -------------

Balance July 1, 1997                                   --        $      --

Stock options granted during the year
 ended June 30, 1998                             15,712,673        2,185,413

Stock options exercised during the year
 ended June 30, 1998                             (6,500,000)        (948,500)
                                                -----------      -----------

Balance at June 30, 1998                          9,212,673      $ 1,236,913
                                                ===========      ===========


                                      104
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            The options expire at various dates through April 2000. The exercise
            price  ranges from .001 to .40 with the  weighted  average  exercise
            price equal to .1177.


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 consist
            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  is  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  receives  financial  assistance from Revenue Canada and
            Revenue Quebec in the form of scientific research tax credit. During
            the year  ended June 30,  1998 the  company  received  approximately
            $670,000 which has been recorded as paid in capital.

Note 14 -   Commitments

            The Company  leases  office space under an agreement for a term from
            July 1, 1997 to June 30,  2000.  The  Company has an option to renew
            this lease for an additional three years. Minimum rentals in each of
            the next three years is as follows:

                  June 30,                           Amount
                  --------                          -------
                    1999                            $18,967
                    2000                             18,967
                                                    -------
                                                    $37,934
                                                    =======


                                      105
<PAGE>

                              THE TIREX CORPORATION
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

            The Company also leases 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
                  --------                         ---------
                    1999                            $108,800
                    2000                             176,900
                    2001                             204,100
                    2002                             204,100
                    2003                             170,100
                                                   ---------
                                                   $ 864,000
                                                   =========

            Rental expense for the year ended June 30, 1998 amounted to $55,532.

Note 15 -   Subsequent Event

            Subsequent  to the year end,  the  Company  received  an  additional
            amount of approximately  $55,000 under the Innovation,  Development,
            Entrepreneurship and Access Program for Quebec SME's (IDEA-SME).

Note 16 -   Warrants

            Note 6 and note 10  address  stock  warrants  and  options  that are
            outstanding  at June 30,  1998.  The Company  also has  warrants and
            options outstanding to purchase 843,750 shares of common stock which
            expire at  various  dates  through  July 1999.  These  rights can be
            exercised at various rates from .125 through .40.

Note 17 -   Prior Period Adjustments

            The financial  statements  for June 30, 1997 and for the  cumulative
            period  from  March 26,  1983 to June 30,  1998 have been  stated to
            reflect  additional   officers   compensation  of  $912,838.   These
            financial  statements have also been restated to reclassify $306,250
            of consulting fees to June 30, 1996. The stock was issued during the
            year ended June 30, 1997 for  services  performed in the prior year.
            In addition, the financial statements for the cumulative period from
            March  26,  1993 to June 30,  1998  have been  adjusted  to  reflect
            additional  officers   compensation   totaling  $366,050  and  other
            compensation totaling $32,280. In addition, grants issued during the
            year ended June 30, 1997 totaling $408,597 have been reclassified to
            research and development expense.


                                      106
<PAGE>

ITEM 8.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

      There  was  no  resignation  or  dismissal  of  the  Company's   principal
independent  accountant  during the two most recent fiscal years and the interim
period subsequent thereto.

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors, Executive Officers and Significant Employees

      The following  sets forth,  as of February 19, 1999, the names and ages of
all  directors,  executive  officers,  and other  significant  employees  of the
Company;  the date when each  director  was  appointed;  and all  positions  and
offices in the Company held by each.  Each  director  will hold office until the
next annual  meeting of  shareholders  and until his or her  successor  has been
elected and qualified:

                                                                 Date
                                       Offices                Appointed
       Name             Age             Held                   Director
       ----             ---             ----                   --------

Terence C. Byrne        41        Chairman of the              Jan. 18, 1995
                                  Board of Directors and
                                  Chief Executive Officer

Louis V. Muro           66        Vice President               Jan. 1, 1996
                                  of Engineering
                                  and Director

John L. Threshie, Jr.   44        Vice President, and
                                  Assistant Secretary          Not Applicable

Louis Sanzaro           48        President,                   January 17, 1997
                                  Chief Operating Officer,
                                  and Director

Michael D.A. Ash        49        Secretary, Treasurer, and
                                  Chief Financial and 
                                  Accounting Officer           Not Applicable

John G. Hartley         51        Director                     February 21, 1995

Henry Meier             42        Director                     February 11, 1999

Jean Frechette          50        President and Chief          Not Applicable
                                  Operating Officer of 
                                  The Tirex Corporation 
                                  Canada Inc. and of
                                  Tirex Canada R&D Inc.


                                      107
<PAGE>

      The board of directors has no standing committees other than the executive
committee which consists of three members.  The present members of the executive
committee are Terence C. Byrne, Louis V. Muro, and Louis Sanzaro.  The executive
committee  can  exercise  all  powers  of the full  board  with  respect  to the
management of the Company's business.

      Subsequent to the period covered by this report, on February 11, 1999, the
Company instituted an overall management restructuring and reorganization, which
is  presently   being   implemented  by  the  Company.   The  reasons  for  such
reorganization  did not involve any  disagreements  among management  members or
between  the  Company  and any  such  individuals.  Rather,  it was  the  agreed
consensus  of all members of  management  that the Company is  presently  in the
process of evolving out of the developmental stage and into an early operational
stage and that,  reflecting  such  development,  its  management  and  personnel
requirements  are  growing  and  changing.  The  current  reorganization  of the
Company's management is being effected for the purpose of better positioning the
Company to change its focus from pure research and  development  activities to a
combination of commercial,  revenue producing operations and continuing research
and development activities.  The Company believes that the reorganization of its
management  will maximize and enhance its ability to meet the changing needs and
requirements of its business as it grows and develops.

      The management  reorganization  included the following:  Alan Crossley and
John L.  Threshie,  Jr.  resigned  from the  Board of  Directors.  Mr.  Threshie
resigned from the position of secretary, has been appointed assistant secretary,
and continues to serve as vice president of the Company.  Mr. Crossley continues
to serve as Director of European Market Development.  The Company intends to ask
Mr.  Crossley to join an advisory  board  proposed to be  established.  Further,
Terence C. Byrne  resigned his  positions  as  president,  treasurer,  and chief
financial and  accounting  officer,  and was appointed  chairman of the board of
directors.  Mr. Byrne continues to hold the office of chief executive officer of
the Company.  Louis  Sanzaro  resigned his  position as vice  president  and was
appointed president the Company. Mr. Sanzaro was also appointed to the executive
committee  of the board of  directors  to fill the  vacancy  created  by John G.
Hartley's  resignation  therefrom.  Mr. Sanzaro  continues to hold the office of
chief  operating  officer of the Company.  Jean Frechette  joined the Company in
August 1998 as  president,  chief  operating  officer,  and the  director of the
Company's wholly-owned subsidiary, The Tirex Corporation Canada, Inc. In January
1999, Michael Ash joined the Company and as part of the  reorganization,  he was
appointed  secretary,  treasurer,  and chief  financial and accounting  officer.
Finally,  Vijay  Kachru  resigned  her  position of vice  president of marketing
development.  Ms.  Kachru  will  continue to be employed by the Company in other
capacities.

Family Relationships

      No family  relationship  has ever existed between any director,  executive
officer of Company or any person contemplated to become such.

Business Experience

      The following summarizes the occupation and business experience during the
past five years for each director, executive officer and significant employee of
the Company. A significant  employee is a person who is not an executive officer
of the Company but who is expected  to make a  significant  contribution  to the
business of the Company.


                                      108
<PAGE>

      TERENCE C. BYRNE. Mr. Byrne joined the Company on January 18, 1995 and has
served as chief  executive  officer and director of the Company since such date.
From January 18, 1995 through  February 11, 1999, Mr. Byrne served as president,
treasurer,  and chief  financial  and  accounting  officer  of the  Company.  On
February 11, 1999,  Mr. Byrne was appointed  chairman of the board of directors.
He has also  served  as the  chairman  of the board of  directors  and the chief
executive officer of The Tirex Corporation Canada Inc. and Tirex Canada R&D Inc.
since  June  1998 and May 1995  respectively.  He holds a  Bachelor's  degree in
Economics  from  Villanova  University in  Philadelphia.  Mr. Byrne has been the
controlling  shareholder  and an officer and  director of  Bartholemew  & Byrne,
Inc., a consulting firm  specializing in corporate  finance and general business
consulting,  since its founding in January  1993.  From  September  1992 through
August 1993, he directed European  marketing and business  development for Pacer
Plants  Corporation,  a  public  company  engaged  in the  business  of  systems
engineering for high tech  industries.  From July 1989 to August 1992, Mr. Byrne
served as president of Digital  Optronics  Corporation,  a public company which,
until August 1992, was engaged in the business of manufacturing digital optronic
measuring  devices,  (principally) for the defense industry.  From November 1988
(prior to being acquired by Digital  Optronics) until March 1992, Mr. Byrne also
served  as  president  and  a  director  of  Byrne  Industries,  Inc.("BII"),  a
wholly-owned  subsidiary of Digital  Optronics,  Inc. BII was, until the drastic
down-turn  in the  defense  industry  in  March  of  1991,  in the  business  of
manufacturing   electronic  defense  equipment  as  a  sub-contractor  to  major
multi-billion dollar defense industry companies, such as Lockheed Aviation.

      LOUIS V. MURO. Mr. Muro acted as an engineering  consultant to the Company
from January 18, 1995 until  January 1, 1996 when he was appointed as a director
and as vice president in charge of engineering. Mr. Muro served as a director of
the Company from December 29, 1992 until January 18, 1995. He also served as the
Company's  secretary  from  December  29,  1992  until  March  1994  when he was
appointed  president of the Company,  a position he held until January 18, 1995.
He has also  served as the vice  president  in charge  of  engineering  and as a
director of The Tirex  Corporation  Canada Inc. and Tirex Canada R&D Inc.  since
June 1998 and May 1995 respectively. Mr. Muro received a B.S. degree in Chemical
Engineering  from Newark College of Engineering in 1954, since which time he has
continually been employed as a chemical engineer. From 1974 to 1993 Mr. Muro has
been the sole proprietor of Ace Refiners Corp. of New Jersey,  a precious metals
refinery.  From 1971 to 1974, he worked as an  independent  consultant  and from
1964  until  1971,  he was  director  of  research  and  development  for Vulcan
Materials  Corporation  in  Pittsburgh,  Pa.,  a public  company  engaged in the
business of  recovering  useable tin and clean steel from scrap tin plate.  From
1960 to 1964, Mr. Muro was the sole  proprietor of Space Metals  Refining Co. in
Woodbridge,  NJ, a company  involved in the  purification  of scrap germanium to
transistor  grade  metal.  From  1959  to  1960  he  was  employed  by  Chemical
Construction  Co., of New  Brunswick,  NJ,  where he developed a process for the
waste-free production of urea from ammonia,  carbon dioxide and water. From 1954
to 1959,  Mr. Muro worked in the research  and  development  department  at U.S.
Metals Refining Co. in Carteret, NJ where he was involved with the refinement of
precious metals.

      JOHN L. THRESHIE,  JR. Mr.  Threshie has served as a vice president of the
Company since June 1995. He was appointed  Assistant Secretary of the Company on
February 11, 1999. From December 1996 until February 11, 1999, Mr. Threshie held
the position of  secretary,  and from June 1995 until  February  11, 1999,  as a
director, of the Company. He also served as a director for The Tirex Corporation
Canada  Inc.  and  Tirex  Canada  R&D  Inc.   from  June  1998  and  June  1995,
respectively,  until  February  11,  1999.  He has more than  fourteen  years of
experience  in the areas of  management,  marketing  and sales  primarily in the
field of  advertising.  Mr.  Threshie  holds a  Bachelor  of  Science  Degree in
Business from the University of North Carolina.  He was employed as an insurance
and  


                                      109
<PAGE>

financial  broker by Primerica  Financial  Services from 1991 through 1994.
From 1988 to 1990,  Mr.  Threshie  was an  advertising  account  supervisor  for
Ammirati & Puris Inc., an  advertising  firm in New York.  From 1983 to 1988 Mr.
Threshie was employed as a senior account  executive at the advertising  firm of
Saatchi  and  Saatchi,  Inc.  From 1979 to 1983 Mr.  Threshie  was  employed  by
Milliken & Co. as a sales representative.

      LOUIS  SANZARO.  Mr.  Sanzaro  has been a director  of the  Company  since
January  1997 and a director of The Tirex  Corporation  Canada  Inc.  since June
1998.  He served as a consultant  to the Company from January 1, 1997 until June
1998,  when he was appointed Vice  President of Operations  and Chief  Operating
Officer (see,  below,  "Certain  Relationships  and Related  Transactions").  On
February 11, 1999, Mr. Sanzaro  resigned as vice president of operations and was
appointed  to the position of president  of the  Company.  Mr.  Sanzaro  holds a
degree in marketing from Marquette  University.  In 1997, he was named "Recycler
of the Year" for the State of New Jersey and was also awarded the distinction of
being named "Recycling  Processor of the Decade" by Ocean County, New Jersey. He
is the  President  and a member of the Board of  Directors  of the  nation-wide,
Construction Material Recycling Association.  Since 1986, Mr. Sanzaro has served
as President  and CEO of Ocean County  Recycling  Center,  Inc.  ("Ocean  County
Recycling"),  in Tom's  River,  New Jersey.  Ocean  County  Recycling  is in the
business of  remanufacturing  construction and demolition  debris for reuse as a
substitute  for  virgin   materials  in  the   construction  and  road  building
industries.  In addition,  since 1989,  Mr. Sanzaro has served as Vice President
and COO of Ocean Utility Contracting Co., Inc., a New Jersey the Company engaged
in the  installation  of sewer and water main pipelines and the  construction of
new roadway infrastructure.  From 1973 until 1990, Mr. Sanzaro was the President
and CEO of J and L Excavating and  Contracting  Co., Inc., a company  engaged in
the  construction  of  residential,   commercial,   industrial,  and  government
building.  Mr.  Sanzaro was a member of the Board of Directors of the New Jersey
state-wide Utility Transportation.

      JOHN G.  HARTLEY.  Mr.  Hartley  holds a  Bachelor  of  Science  Degree in
Economics  from  Manchester  University in England.  In addition to serving as a
director for the Company,  he has served as a director for The Tirex Corporation
Canada Inc since June 1998.  He has acted as a  director  of Pacer  Plants  Inc.
since 1985.  Pacer  Plants is a publicly  held  company  with offices in Boston,
Mass.  and is  engaged  in the  business  of  Plants  Engineering  for high tech
industries.  Since 1993,  Mr.  Hartley has also served as a consultant  to Moore
Rowland International, an investment banking firm headquartered in Monaco.

      MICHAEL  D.A.  ASH.  Mr. Ash joined the  Company on January 11,  1999.  On
February  11,  1999,  Mr.  Ash was  appointed  secretary,  treasurer,  and chief
financial  and  accounting  officer of the  Company.  Mr. Ash  graduated  with a
Bachelor's  Degree in business  Administration,  Magna Cum Laude,  from Bishop's
University in Quebec in 1970,  and with an MBA, with  Distinction,  from Harvard
Business  School in 1975.  Mr.  Ash is also a  Chartered  Accountant,  (Canadian
equivalent to a CPA), having qualified for this professional designation in 1972
while employed by Coopers & Lybrand.  Since graduation from Harvard, Mr. Ash has
spent most of his career with the Government of Canada, first with the Office of
the  Comptroller  General in Ottawa and,  for the last  eighteen  years,  with a
federal regional economic and industrial development agency in Montreal where he
gained wide-ranging  exposure to a very large number of companies and industrial
sectors,   ranging  from   developmental   companies  to  major   multi-national
corporations.  For ten  years  during  this  time  period,  Mr.  Ash was  also a
part-time  lecturer in  accountancy  at  Concordia  University  in Montreal  for
students  registered  in  the  program  leading  to  the  Chartered  Accountancy
designation.


                                      110
<PAGE>

      HENRY P. MEIER.  Mr. Meier was  appointed to the board of directors of the
Company on February 11, 1999. He holds a Bachelor of Science  Degree in Business
from Rider  University,  Lawrenceville,  New  Jersey  and a  Master's  Degree in
Business from Monmouth  University,  West Long Branch, New Jersey. Mr. Meier has
worked as a Certified Public  Accountant since 1984,  maintaining own accounting
practice (Henry P. Meier C.P.A.) since 1993. From 1992 until 1996, Mr. Meier was
Chief  Financial  Officer of Basic Line,  Inc., a  multi-million  dollar plastic
houseware manufacturer.  Since 1996, he has served as Chief Financial Officer of
the  "Ocean  Group",  a  group  of  companies  specializing  in  the  fields  of
remanufacturing of construction and demolition debris for reuse, tire recycling,
construction  payroll  leasing and real estate  ownership  from 1996 to present.
Louis  Sanzaro,  the  Company's  President  and  Chief  Operating  Officer  is a
controlling person of all entities included in the "Ocean Group".

      JEAN FRECHETTE. Mr. Frechette has served as the president, chief operating
officer and a director  of the  Company's  wholly  owned  subsidiary,  The Tirex
Corporation  Canada,  Inc., since August 17, 1998. He has also served in similar
capacities for Tirex Canada R&D Inc. since August 17, 1998. Mr.  Frechette holds
degrees and  certificates  in  business  management,  commercialization,  market
development,  and distribution.  Before joining the government of Quebec in 1990
he served in the private sectors of industrial and commercial companies for more
than 20 years in various management positions.  From 1990 to 1993, Mr. Frechette
was employed by the  Government of the Province of Quebec to manage a government
study respecting value added distribution services and to report on the problems
facing  Quebec  companies.  From 1993 to 1996,  Mr.  Frechette  served as Acting
Director for the Department of Market Development and Commercial  Activities and
the  Administration  of Business Laws of the  Government of Quebec.  During that
period he also served on the Committee for the  Reorganization of the Department
of Industry, Trade, Technologies, and Commerce and on the Inter Provincial Trade
Barriers Board. In 1996, Mr. Frechette was asked by the office of the Vice Prime
Minister  to join the  Foreign  Investment  Services  and to prepare and execute
strategies to attract  foreign  investment  to Quebec.  Serving in this capacity
until July 1998, Mr. Frechette has been involved with bringing  together foreign
investment  capital and  Canadian  companies  in need of  financing.  During his
tenure, Mr. Frechette introduced potential foreign investments, in the amount of
approximately  four billion  Canadian dollars (CA  $4,000,000,000),  to Canadian
companies.  As of July 31, 1998,  approximately  CA $1.4 billion dollars of such
foreign capital has been invested.  Non Canadian investors brought into Canadian
Companies  under Mr.  Frechette's  purview have  included,  among  others,  ABB,
Biomatrix,  Haig, Komatsu,  Nordx/CDT,  Lockheed Martin,  Mitec Telecom,  Ilco -
Unican, CES Group, Iris, SCI Systems, and Osram Sylvam.


                                      111
<PAGE>

Compliance With Section 16(a) of the Exchange Act.

      None of the Company's  securities have been registered pursuant to Section
12 of the Exchange  Act of 1934,  as amended (the  "Exchange  Act").  Therefore,
Section 16(a) of the Exchange Act is not applicable.

ITEM 10.  EXECUTIVE COMPENSATION

Current Remuneration

      Except  for  individually   negotiated   employment  agreements  with  its
executive  officers,  the  Company  has no stock  option  or stock  appreciation
rights, long term or other incentive  compensation plans,  deferred compensation
plans, stock bonus plans,  pension plans, or any other type of compensation plan
in place for its  executive  officers,  directors,  or other  employees.  Except
pursuant  to the terms of their  respective  agreements,  none of its  executive
officers or directors have ever received compensation of any such types from the
Company  pursuant  to  plans  or  otherwise.  The  following  table  sets  forth
information  concerning the annual compensation received or accrued for services
provided in all  capacities  to the Company for the fiscal  years ended June 30,
1996, 1997, and 1998 by the Company's chief executive and all executive officers
of the  Company  serving as such as at June 30,  1998 or at any time  during the
year ended June 30, 1998 whose  compensation may be deemed for these purposes to
have exceeded $100,000 (see "Executive  Compensation - Employment  Contracts and
Termination of Employment and Change-in-Control  Arrangements") In all instances
where cash salary  payments are described as having been "waived",  unregistered
shares of the  Company's  common stock were issued in lieu of such cash payments
and no further  payments,  in cash or stock, are due in respect of such waivers.
Stock issued in lieu of cash salary  payments was valued at one-half the average
market  price of such stock  during the periods in which such salary was earned.
Determination of the market price for such purpose was based upon the average of
the bid and ask prices of such stock, as traded in the  over-the-counter  market
and quoted in the OTC Bulletin Board. The 50% discount from the market price was
determined  arbitrarily,  by negotiation between the iteria such as assets, book
value, or prospective earnings.  The market prices of the Company's common stock
and  the  liquidity  of such  market  has  historically  been  volatile.  Future
announcements  concerning the Company or its competitors,  including the results
of testing,  technological  innovations  or new  commercial  products may have a
significant impact on the market price of the Company's  securities.  Management
believes that, as of the dates when such shares were issued, they had no or only
very minimal actual market value and the actual  potential  market value of such
shares,  if any, was at such dates,  and as at the date hereof  remains,  highly
contingent upon, and subject to, extremely high risks (see, below, Note 7 to the
Summary Compensation Table).


                                      112
<PAGE>

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

============================================================================================
                                                             Annual Compensation
--------------------------------------------------------------------------------------------
     Name and Principal
         Position                        Year
--------------------------------------------------------------------------------------------
                                                    Salary             Bonus        Other
                                                      ($)               ($)          ($)
--------------------------------------------------------------------------------------------
<S>                                      <C>    <C>                 <C>           <C> 
                                         1998   $250,000(1)(7)(8)   (7) (8) (9)   $5,075(10)
                                         ---------------------------------------------------
           Terence C. Byrne              1997   $250,000(2)(7)(8)   (7) (8) (9)   $  422(10)
President, and Chief Executive Officer   ---------------------------------------------------
                                         1996   $250,000(3)(7)(8)   (7) (8) (9)   $    0
--------------------------------------------------------------------------------------------
            Louis V. Muro                1998   $150,000(4)(7)(8)   (7) (8) (9)   $4,224(10)
    Vice President of Engineering        ---------------------------------------------------
                                         1997   $150,000(5)(7)(8)   (7) (8) (9)   $1,056(10)
                                         ---------------------------------------------------
                                         1996   $150,000(6(7)(8)    (7) (8) (9)   $    0
============================================================================================
</TABLE>

Notes To Summary Compensation Table Appear on Following Page:


                                      113
<PAGE>

(1) For the year ended June 30, 1998,  Mr. Byrne  received cash salary  payments
from the Company in the aggregate  amount of $70,362.68.  (This does not include
cash disbursements made to Mr. Byrne during fiscal 1998 by way of reimbursements
for expenses paid by him for or on behalf of the Company). Mr. Byrne waived cash
payment  of the  balance  of  $179,637.32  in  salary  payments  and  $3,750  in
reimbursable  expenses  due to him under the terms of his  employment  agreement
with the Company (the "Byrne  Executive  Agreement")  for fiscal 1998. The terms
and  conditions  of the Byrne  Executive  Agreement,  which  calls for an annual
salary in the amount of $250,000, are discussed in more detail, below, under the
caption,    "Employment    Contracts   and   Termination   of   Employment   and
Change-in-Control  Arrangements - Executive Agreements". In lieu of cash payment
of salary and  reimbursable  expenses,  Mr. Byrne agreed to accept shares of the
Company's  stock,  valued at  one-half  the average  market  price of such stock
during  the  periods  in which such  salary  was  earned or such  expenses  were
incurred.  The number of  Compensation  Shares  issued to Mr. Byrne for services
rendered  pursuant  to his  Executive  Agreement  during  fiscal  1998  and  for
unreimbursed  expenses  incurred  during  fiscal 1998  aggregated  to  1,303,920
shares.  However,  in  September  1998  computational  errors  that  resulted in
understatements  of  salary  paid to Mr.  Byrne for the  periods  July 1, 1997 -
November  30, 1997 and December 1, 1997 - March 31, 1998 were  discovered.  As a
consequence  thereof, Mr. Byrne was informed that he would have to return to the
Company for  cancellation  an aggregate of 508,109 (the "Return  Shares") of the
1,303,920   Compensation  Shares.   22,804  of  the  Return  Shares  consist  of
Compensation  Shares  received by Mr. Byrne in December 1997 and 485,305  Return
Shares consist of  Compensation  Shares  received by Mr. Byrne in April 1998. In
December 1998,  Mr. Byrne returned the 485,305 Return Shares  received by him in
April 1998.  The 22,804  Return  Shares  received  by him in December  1997 were
subsequently  transferred  to an assignee of Mr.  Byrne.  Mr. Byrne is currently
arranging  for the return of these  shares.  For a  discussion  in detail of all
issuances of Compensation Shares made to Mr. Byrne during fiscal 1998, including
the dates,  amounts,  and share prices  thereof,  reference is made to, "Certain
Relationships  and Related  Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees and Stock Restriction Agreements", below. Subsequent to June
30, 1998,  Mr. Byrne has continued to waive payment of  substantial  portions of
his  contractual  salary and he has agreed to  continue  to waive all or part of
such salary until the Company's financial position improves significantly.

(2) For the year ended June 30, 1997,  Mr. Byrne  received cash salary  payments
from the Company in the aggregate amount of $62,457. (This does not include cash
disbursements  made to Mr. Byrne during fiscal 1997 by way of reimbursements for
expenses  paid by him for or on behalf of the  Company).  Mr.  Byrne waived cash
payment of the balance of $187,543 in salary payments due to him under the terms
of his employment  agreement with the Company (the "Byrne Executive  Agreement")
for fiscal 1997.  The terms and  conditions  of the Byrne  Executive  Agreement,
which calls for an annual  salary in the amount of  $250,000,  are  discussed in
more detail, below, under the caption,  "Employment Contracts and Termination of
Employment and Change-in-Control  Arrangements - Executive Agreements".  In lieu
of cash payment of salary,  Mr. Byrne agreed to accept  shares of the  Company's
stock,  valued at one-half  the average  market  price of such stock  during the
periods  in which such  salary was  earned.  The number of  Compensation  Shares
issued to Mr. Byrne for services  rendered  pursuant to his Executive  Agreement
during fiscal 1997 aggregated to 1,130,217 shares. For a discussion in detail of
all  issuances of  Compensation  Shares made to Mr.  Byrne  during  fiscal 1997,
including the dates,  amounts,  and share prices thereof,  reference is made to,
"Certain  Relationships and Related  Transactions - Issuance of Stock in Lieu of
Salaries and Consulting Fees and Stock Restriction Agreements", below.


                                      114
<PAGE>

(3) For the year ended June 30, 1996,  Mr. Byrne  received cash salary  payments
from the Company in the aggregate amount of $17,424. (This does not include cash
disbursements  made to Mr. Byrne during fiscal 1996 by way of reimbursements for
expenses  paid by him for or on behalf of the  Company).  Mr.  Byrne waived cash
payment  of the  balance of $ 232,576  in salary  payments  due to him under the
terms of Byrne Executive  Agreement for the year ended June 30, 1996. In lieu of
cash  payment of salary,  Mr.  Byrne  agreed to accept  shares of the  Company's
stock,  valued at one-half the average  market price of such stock during all or
part of the period in which such salary was earned.  The number of  Compensation
Shares  issued to Mr.  Byrne for  services  rendered  pursuant to his  Executive
Agreement during fiscal 1996 aggregated to 1,676,075.

(4) For the fiscal  year ended June 30,  1998,  Mr.  Muro  received  cash salary
payments from the Company, in the aggregate amount of $62,023.44. (This does not
include  cash  disbursements  made  to Mr.  Muro  during  fiscal  1998 by way of
reimbursements  for expenses  paid by him for or on behalf of the  Company.) Mr.
Muro  waived  cash  payment of the  aggregate  balance of  $87,976.06  in salary
payments and $3,750 in  reimbursable  expenses due to him under the terms of his
employment  agreement  with the Company  (the "Muro  Executive  Agreement")  for
fiscal 1998. In lieu thereof,  Mr. Muro agreed to accept shares of the Company's
stock,  valued at one-half  the average  market  price of such stock  during the
periods in which such  salary was earned or such  expenses  were  incurred.  The
number of Compensation  Shares issued to Mr. Muro for services rendered pursuant
to his Executive Agreement and for unreimbursed  expenses incurred during fiscal
1998  aggregated to 650,957  shares.  However,  in September 1998  computational
errors  that  resulted  in  understatements  of salary  paid to Mr. Muro for the
periods  July 1, 1997 - November  30, 1997 and December 1, 1997 - March 31, 1998
were discovered.  As a consequence  thereof, Mr. Muro was informed that he would
have to return to the Company for  cancellation  an  aggregate  of 230,077  (the
"Return Shares") of the 650,957  Compensation Shares. 4,298 of the Return Shares
consist of Compensation Shares received by Mr. Muro in December 1997 and 225,779
Return Shares consist of Compensation Shares received by Mr. Muro in April 1998.
In December 1998,  Mr. Muro returned all of the Return Shares.  For a discussion
in detail of all issuances of Compensation Shares made to Mr. Muro during fiscal
1998, including the dates, amounts, and share prices thereof,  reference is made
to "Certain  Relationships and Related Transactions Issuance of Stock in Lieu of
Salaries and Consulting Fees", below.  Subsequent to June 30, 1998, Mr. Muro has
continued to waive payment of substantial portions of his contractual salary and
he has  agreed  to  continue  to  waive  all or part of such  salary  until  the
Company's financial position improves significantly.

(5) For the fiscal  year ended June 30,  1997,  Mr.  Muro  received  cash salary
payments  from the Company in the  aggregate  amount of $51,510.  (This does not
include  cash  disbursements  made  to Mr.  Muro  during  fiscal  1997 by way of
reimbursements  for expenses  paid by him for or on behalf of the  Company.) Mr.
Muro waived cash payment of the aggregate  balance of $98,490 in salary payments
due to him under the terms of his  employment  agreement  with the Company  (the
"Muro  Executive  Agreement") for the year ended June 30, 1997. In lieu thereof,
Mr. Muro agreed to accept shares of the Company's stock,  valued at one-half the
average  market  price of such stock during the periods in which such salary was
earned.  The  number of  Compensation  Shares  issued to Mr.  Muro for  services
rendered  pursuant to his Executive  Agreement  during fiscal 1997 aggregated to
595,540. For a discussion in detail of all issuances of Compensation Shares made
to Mr. Muro during fiscal 1997,  including the dates,  amounts, and share prices
thereof,  reference is made to "Certain Relationships and Related Transactions -
Issuance of Stock in Lieu of Salaries and Consulting Fees", below.


                                      115
<PAGE>

(6) From  January 18, 1995  through  December  31,  1995,  Mr. Muro served as an
Engineering  Consultant to the Company  pursuant to the terms of his  consulting
agreement  (the  "Muro  Consulting  Agreement")  which  provided  for  aggregate
consulting fees in the amount of $150,000.  Effective  January 1, 1996, Mr. Muro
served as the  Company's  vice  president  of  Engineering  pursuant to the Muro
Executive  Agreement,  which  provides  for salary  payments  to Mr. Muro in the
annual amount of $150,000.  For the six-month  period which commenced on July 1,
1995 and ended on December  31,  1995,  Mr.  Muro waived  payment in cash of all
consulting  fees due to him.  For the  balance of the fiscal year ended June 30,
1996,  Mr. Muro received cash salary  payments from the Company in the aggregate
amount of $7,592.  (This does not include  cash  disbursements  made to Mr. Muro
during fiscal 1996 by way of  reimbursements  for expenses paid by him for or on
behalf of the Company.) Mr. Muro waived cash payment of the aggregate balance of
$142,408 in  consulting  fees and salary  payments due to him under the terms of
the Muro  Consulting  Agreement  and the Muro  Executive  Agreement for the year
ended June 30, 1996.  In lieu  thereof,  Mr. Muro agreed to accept shares of the
Company's  stock,  valued at  one-half  the average  market  price of such stock
during all or part of the period in which such  consulting  fees and salary were
earned.  The  number of  Compensation  Shares  issued to Mr.  Muro for  services
rendered pursuant to his Consulting and Executive  Agreements during fiscal 1996
aggregated to 1,074,367.

(7) Management believes that it is impossible to determine the actual current or
potential  value,  if any, of such  shares in light of the fact that,  as of the
dates when such  shares were issued to the  executive  officers,  they had no or
only very minimal actual market value and the actual  potential  market value of
such  shares,  if any,  was at such dates,  and as at the date  hereof  remains,
highly  contingent  upon, and subject to, extremely high risks including but not
limited to the following factors: (I) the very early stage of development of the
Company's business; (ii) the Company's lack of sufficient funds to implement its
business plan and the absence of any  commitments  from  potential  investors to
provide  such funds;  (iii) the absence of a reliable,  stable,  or  substantial
trading market for such shares; (iv) the restrictions on transfer arising out of
the  absence of  registration  of such  shares  and  certain  stock  restriction
agreements  which each of such persons has entered into; and (v) the uncertainty
respecting  the  Company's  ability to  continue  as a going  concern,  (See the
discussions  included above,  in "Existing and Proposed  Businesses" and "Market
for the Company's Common Equity and Related Stockholder Matters").

(8) All Compensation  Shares and Stock Bonuses issued to the executive  officers
named  in this  Summary  Compensation  Table in lieu of cash  compensation  were
issued pursuant to certain special compensation agreements and stock restriction
agreements  between each of them and the Company.  The terms and  conditions  of
such agreements are discussed in detail below,  under "Employment  Contracts and
Termination  of  Employment  and  Change-in-Control   Arrangements  -  Executive
Agreements and Special  Compensation  Agreements" and in "Certain  Relationships
and Related Transactions - Sales of and Restrictions on Shares Held by Executive
Officers", below.

(9) On May 29, 1997, the Company awarded stock bonuses to Mr. Byrne and Mr. Muro
(the "Stock  Bonuses"),  for the fiscal  years ended June 30, 1995 and 1996 (the
"1995/1996 Bonuses"). On September 3, 1997, the Company awarded additional stock
bonuses to each of these persons in the form of options to purchase Common Stock
(the "1997 Bonus  Options") and on January 13, 1998, the Company awarded bonuses
to such persons (the "1998  Bonuses")  consisting of a reduction in the exercise
price of the 1997  Bonus-Options  from the full market price of the Common Stock
on the exercise  date  thereof to $.001 per share.  The  foregoing  bonuses were
granted to these  individuals in  recognition  of: (i) their success in bringing
the Company  from a virtual  start-up  position  in January  


                                      116
<PAGE>

1995 to its present  stage of  development,  and (ii) that such persons have not
been adequately compensated for their contributions because, among other things,
they have  accepted,  for all of the  services  rendered by them to the Company,
compensation consisting principally of shares of the Company's common stock, the
value  of which  has been and  continues  to be  completely  dependent  upon the
success of the Company and  therefore  has always  placed and continues to place
the recipients  thereof at risk.  The awarding of each of the aforesaid  bonuses
was  approved by the full board of directors  and was  effected  pursuant to the
terms of the Company's  employment  agreements  with each of such persons.  Such
Agreements  provide that Mr.  Byrne and Mr. Muro are each  eligible to receive a
discretionary  bonus for each year (or portion  thereof) during the term of such
Agreement and any extensions  thereof,  with the actual amount of any such bonus
to be determined in the sole discretion of the Board of Directors based upon its
evaluation  of the  Executive's  performance  during  such year.  The  1995/1996
Bonuses  consisted of options to purchase the following  numbers of shares, at a
per share exercise price of $.001 per share, in the following amounts: Mr. Byrne
- 1,413,382 shares;  Mr. Muro - 1,115,093 shares.  The 1997 Bonuses consisted of
options to purchase the following numbers of shares: Mr. Byrne - 2,000,000;  Mr.
Muro - 1,000,000 at the exercise price described  above, as reduced to $.001 per
share  pursuant to the award of the 1998 Bonuses.  Because the shares which were
purchased pursuant to the exercise of the foregoing  options,  were issued under
the terms of the above described employment agreements, they are also subject to
the terms of the  respective  stock  restriction  agreements  which each of such
persons  has entered  into.  The terms and  conditions  of such  agreements  are
discussed  in  detail  below,  in  "Employment   Contracts  and  Termination  of
Employment and Change-in-Control  Arrangements  Executive Agreements and Special
Compensation  Agreements" and in "Certain Relationships and Related Transactions
- Sales of and Restrictions on Shares Held by Executive Officers".

(10) Represents  additional  compensation  received in the form of car allowance
payments.

Compensation of Directors

      The  directors of the Company are not  compensated  for their  services as
such, except as follows:  Three of the Company's five present directors received
unregistered shares of the Company's common stock ("Directors Shares").  Messrs.
Byrne and Hartley received Directors Shares in consideration of their agreements
to join the  Company's  board of  directors  in  January  of 1995.  Mr.  Sanzaro
received  Directors  Shares as compensation  for services under the terms of his
Directors  Compensation  Agreement,  dated July 7, 1997.  Directors  Shares were
issued, or transferred to the Company's  directors as follows:  2,500,000 shares
were transferred by two members of the Company's former management to Terence C.
Byrne on January 18, 1995;  100,000 shares were issued by the Company to John G.
Hartley on February 16, 1995; and 100,000 shares were issued to Louis Sanzaro on
or about July 7, 1997.  At the time the  Directors  Shares were  transferred  or
issued  to  the  respective  directors,   they  accepted  shares  based  upon  a
combination  of their  perceived  valuation of both present and possible  future
value of the shares,  rather than the actual value of the Company's common stock
at that time.  It was the position of the  recipients of such shares that, as of
the dates they were received,  their actual and potential  value,  if any, could
not be  determined,  and that any  attempt to specify  such  valuation  with any
reasonable  assurance,  would have been flawed,  without  substance,  and highly
contingent  upon, and subject to, extremely high risks including but not limited
to the following factors: (i) the absence of a reliable,  stable, or substantial
trading  market for the Company's  common  stock,  the  possibility  that such a
market might never be developed, and the resultant minimal, 


                                      117
<PAGE>

or total  absence of,  market value for any  substantial  block of common stock;
(ii) the very high  intrinsic  risks  associated  with early  development  stage
businesses, such as the Company's; (iii) the Company's lack of sufficient funds,
as at such issuance dates, to implement its business plan and the absence of any
commitments, at such times, from potential investors to provide such funds; (iv)
the  restrictions on transfer arising out of the absence of registration of such
shares; and (v) the uncertainty  respecting the Company's ability to continue as
a going concern (See the  discussions  included above, in "Existing and Proposed
Businesses" and "Market for the Company's Common Equity and Related  Stockholder
Matters").


                                      118
<PAGE>

Employment Contracts and Termination of Employment
   and Change-in-Control Arrangements

Executive Agreements
  And Special Compensation Agreements

1.  Terms of the Executive Agreements

      The  Company  has  entered  into  employment  agreements  with  all of its
executive officers (the "Executive Agreements"). The respective commencement and
termination  dates,  and annual  salaries  under the  Executive  Agreements,  as
amended, are as follows:

OFFICER         COMMENCEMENT DATE     TERMINATION DATE        SALARY
-------         -----------------     ----------------        ------

Mr. Byrne       January 18, 1995      December 31, 2003     US$250,000

Mr. Muro        January 1, 1996       December 31, 2000     US$150,000

Mr. Sanzaro(6)  June 15, 1998         June 14, 2002         US$175,000

Mr. Threshie    January 1, 1996       December 31, 1999     US$ 62,500

Mr. Frechette   August 17, 1998       August 16, 2003       US$150,000

Mr. Ash         January 4, 1999       January 3, 2002       US$125,000

      All of the above agreements provide for the payment of bonuses at the sole
discretion of the board of directors based upon an evaluation of the executive's
performance, with payment of any such bonuses to be reviewed annually. As of the
date hereof, the board of directors has not established a Compensation Committee
and it has no plans to do so  until  such  time as the  financial  position  and
prospects of the Company improve  significantly.  The Executive  Agreements also
provide for the  participation  by each of the foregoing  persons in any pension
plan, profit-sharing plan, life insurance,  hospitalization or surgical program,
or  insurance  program  hereafter  adopted  by the  Company  (there  are no such
programs  in effect at the present  time),  reimbursement  of  business  related
expenses,  the  non-disclosure  of  information  which the  Company  deems to be
confidential  to it,  non-competition  by the executive with the Company for the
one-year  period  following  termination of employment  with the Company and for
various other terms and conditions of employment.

      The Executive Agreements with Messrs. Byrne, Muro, Frechette,  Sanzaro and
Ash also include  severance  provisions which provide,  among other things,  for
severance  compensation  in the event that the  employment  of the  executive is
terminated  by the Company  other than for cause,  or by the 

---------
(6)   Mr.  Sanzaro's  Executive  Agreement  cancelled  and  replaced  an earlier
      Consulting  Agreement  between the Company and Mr.  Sanzaro (see  "Certain
      Relationships and related Transactions").


                                      119
<PAGE>

executive  for  "good  reason",  as  that  term  is  defined  in  the  Executive
Agreements,  or  pursuant  to a change in control of the  Company.  The  various
Executive Agreements provide for severance compensation,  as follows: (i) In the
case of Messrs.  Byrne, Sanzaro, and Muro, 200% of the amount of the base salary
for a period of twelve  months;  (ii) In the case of Messrs.  Frechette and Ash,
the amount of severance  compensation  depends on when, during the term of their
Executive  Agreements,  termination  occurs, as follows:  If termination  occurs
during:  (a) year  one - no  severance  compensation;  (b) year two - 50% of the
amount of base  salary for a period of twelve  months;  (c) year three - 100% of
the amount of base salary for a period of twelve  months;  and (d) subsequent to
year three - 200% of the amount of base salary for a period of twelve months.

      Certain   executives   have  received   signing  bonuses  or  other  stock
compensation  in  consideration  of their  discontinuing  their  other  business
activities and entering into their executive agreements with the Company. During
the last two  fiscal  years,  these  included  Messrs.  Frechette  and Ash,  who
received one million shares,  and Mr. Sanzaro,  who received 500,000 shares,  as
signing bonuses.  Under the terms of his Executive  Agreement,  Mr. Sanzaro also
received an additional 2,500,000 shares for agreeing to release the Company from
its prior commitment to appoint him as its exclusive distributor of TCS-1 Plants
and to pay him commissions on all sales of TCS-1 Plants made in North America.

      Because of the early  stage of  development  of the  Company,  its lack of
operations and insignificant  cash flow, since January 18, 1995, the Company has
not  had the  resources  to meet  fully  its  financial  obligations  under  the
Executive  Agreements.  As a result, the major portion of the compensation which
has  been  available  to the  Company's  executive  officers  has  consisted  of
unregistered shares of the Company's common stock ("Compensation Shares"), which
such  individuals  accepted,  in lieu of cash  compensation,  for a  substantial
portion of salary and/or consulting fees due to them (see "Certain Relationships
and Related  Transactions - Issuance of Stock in Lieu of Salaries and Consulting
Fees"). As was the case with the value of Directors Shares, at the various dates
when Compensation  Shares were issued to the executive  officers,  they accepted
such  shares  based upon a  combination  of their  perceived  valuation  of both
present and possible future value of the shares, rather than the actual value of
the Company's  common stock at that time. It was the position of the  recipients
of such  shares  that,  as of the dates  they were  received,  their  actual and
potential  value,  if any,  could not be  determined,  and that any  attempt  to
specify such valuation with any  reasonable  assurance,  would have been flawed,
without  substance,  and highly  contingent upon, and subject to, extremely high
risks including but not limited to the following  factors:  (i) the absence of a
reliable,  stable, or substantial trading market for the Company's common stock,
the possibility  that such a market might never be developed,  and the resultant
minimal,  or total absence of, market value for any substantial  block of common
stock;  (ii) the very high intrinsic  risks  associated  with early  development
stage businesses,  such as the Company's; (iii) the Company's lack of sufficient
funds, as at such issuance dates, to implement its business plan and the absence
of any  commitments,  at such times,  from  potential  investors to provide such
funds;  (iv)  the  restrictions  on  transfer  arising  out  of the  absence  of
registration of such shares;  and (v) the  uncertainty  respecting the Company's
ability to continue as a going concern (see  "Existing and Proposed  Businesses"
and "Market for the Company's Common Equity and Related Stockholder Matters").

      All  of  the   Executive   Agreements,   as  amended,   provide  that,  as
compensation,  and in lieu of  payment in cash of salary,  due  thereunder,  the
Company may issue and the respective executive officers will accept unregistered
shares of the  Company's  common  stock,  valued at fifty  percent  (50%) of the
average  of  the  bid  and  ask  prices  of  such   stock,   as  traded  in  the
over-the-counter market and 


                                      120
<PAGE>

quoted in the OTC Bulletin Board,  during part or all of the period in which the
salary was earned under the Executive Agreement.  All of the Compensation Shares
issued to Mr. Byrne and Mr. Muro are also subject to the terms and conditions of
certain stock restriction  agreements between each of them and the Company. Such
stock  restriction  agreements,  as amended on May 30, 1996 and May 1, 1997 (the
"Amended  Stock  Restriction  Agreements"),  provide that shares subject to such
agreements  may be sold,  hypothecated,  donated or  otherwise  disposed  of, in
accordance  with the Rules and  Regulations  of the  Securities  Act of 1933, as
amended, and, under certain circumstances,  included in a registration statement
on Form S-8.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners.

      The following  table sets forth  information as of February 11, 1999, with
respect to the persons known to the Company to be the beneficial  owners of more
than 5% of the common stock,  $.001 par value of the Company and of more than 5%
of the Class A Common Stock of the Company's subsidiary,  Tirex R&D. Neither the
Company nor Tirex R&D have any shares of any other class issued or outstanding.

                          PRINCIPAL SHAREHOLDERS TABLE

--------------------------------------------------------------------------------
Title               Name and                      Amount and
 of                 Address of                     Nature of          Percent of
Class               Beneficial                    Beneficial            Class
                    Owner                         Ownership
--------------------------------------------------------------------------------

Common              Batholomew International    13,026,406(2)           16.68%
The Tirex           Investments, Ltd.
Corporation           P.O. Box 484
                    Basel House
                    108 Halkett Place
                    St. Helier, Jersey JE4 5SS
                    Chanel Islands

Common              Terence C. Byrne            18,941,794(3)           24.25%
The Tirex           489 Grosvner Street
Corporation           Westmount, Quebec
                    H3Y 2S5

Class A
Common                                             34(4)                 34%
Tirex
R&D


                                      121
<PAGE>

                    PRINCIPAL SHAREHOLDERS TABLE (CONTINUED)

--------------------------------------------------------------------------------
Title               Name and                      Amount and
 of                 Address of                     Nature of          Percent of
Class               Beneficial                    Beneficial            Class
                    Owner                         Ownership
--------------------------------------------------------------------------------

Common              CG TIRE, INC.                8,677,238(5)            10%
The Tirex           The Continental General
Corporation         Tire Recycling Effort
                    1800 Continental Blvd.
                    Charlotte, NC 28273

Common              Frances Katz Levine          4,985,460(6)           6.38%
The Tirex           621 Clove Road
Corporation         Staten Island, NY 10310

Common              Louis Sanzaro                4,561,905              5.84%
The Tirex           1497 Lakewood Road
Corporation         Toms River NJ 08755

Common              Louis V. Muro                4,328,550              5.54%
The Tirex           374 Oliver Avenue
Corporation         Westmount, Quebec
                    Canada H3Z 3C9

Class A
Common                                             17(4)                  17%
Tirex
R&D

Common              The Nais Corporation        4,731,902(7)            6.06%
The Tirex           94 Washington Avenue
Corporation         Lawrence, NY 11559

Notes

      The  footnotes  to this table  appear  after the  "Security  Ownership  of
Management Table" which is set forth on the following page.


                                      122
<PAGE>

Security Ownership of Management

      The following  table sets forth  information as of February 11, 1999, with
respect to the beneficial ownership of the Common Stock, $.001 par value, of the
Company and the Class A common stock of the Company's  subsidiary,  Tirex R&D by
each of the executive officers and directors of the Company and Tirex R&D and by
all respective executive officers and directors as a group:

                         MANAGEMENT SHAREHOLDINGS TABLE

--------------------------------------------------------------------------------
Title               Name and                      Amount and
 of                 Address of                     Nature of          Percent of
Class               Beneficial                    Beneficial           Class(1)
                    Owner                         Ownership
--------------------------------------------------------------------------------

Common              Terence C. Byrne            18,941,794(3)           24.25%
The Tirex           489 Grosvner Street
Corporation         Westmount, Quebec
                    H3Y 2S5

Class A
Common                                             34 (4)                  34%
Tirex
R&D

Common              Louis V. Muro                4,328,550               5.54%
The Tirex           374 Oliver Avenue
Corporation         Westmount, Quebec
                    Canada H3Z 3C9

Class A
Common                                            17 (4)                   17%
Tirex
R&D

Common              Louis V. Sanzaro             4,561,905               5.84%
The Tirex           1497 Lakewood Road
Corporation         Toms River, NJ 08755

Common              John L. Threshie, Jr.
The Tirex           200 Lansdowne,
Corporation         Westmount, Quebec
                    Canada, H3Z 3E1              44,050                    *


                                      123
<PAGE>

     MANAGEMENT SHAREHOLDINGS TABLE (CONTINUED)

--------------------------------------------------------------------------------
Title               Name and                      Amount and
 of                 Address of                     Nature of          Percent of
Class               Beneficial                    Beneficial           Class(1)
                    Owner                         Ownership
--------------------------------------------------------------------------------

Common              John G. Hartley                20,000 (8)             *
The Tirex           7/9 Boulevard D'Italie
Corporation         Monte Carlo MC 98000
                    Monaco

Common              Michael Ash                  1,000,000(9)             1.3%
The Tirex           310 Montee Sabourin
Corporation         St. Bruno, Quebec
                    Canada, J3V 4P6                                       -0-

Common              Henry P. Meier                 494,900                 *
The Tirex           1904 Waverly Place
Corporation         Oakhurst, New Jersey  07755

Common              All directors and           29,391,199              37.18%
The Tirex           officers as a group
Corporation           (7 persons)

Class A             All directors and              51 (4)                  51%
Common              officers as a group
Tirex                 (7 persons)
R&D

---------
* Percentages less than 1% not shown

Notes:

(1) The  percentages  listed  in the  tables  are  calculated  on the  basis  of
78,095,141  shares  of the  common  stock,  $.001  par  value,  of  the  Company
outstanding  as at February 11, 1999,  with the  following  exceptions:  (a) The
percentage deemed to be beneficially owned by CG TIRE, Inc. is calculated on the
basis of 78,095,141 shares of common stock currently issued and outstanding plus
8,677,238  shares  of  common  stock  which,  CG Tire has the  right to  acquire
pursuant to its option within 60 days from the date of this Report (see,  below,
footnote 5 to this Table),  and (b) the  percentages  deemed to be  beneficially
owned by Michael Ash and by all officers and directors as a group are calculated
on the  basis  of  78,095,141  shares  of  common  stock  currently  issued  and
outstanding plus 1,000,000 shares of common stock which Mr. Ash has the right to
receive within 60


                                      124
<PAGE>

days pursuant to the terms of his  employment  agreement  with the Company (see,
below, footnote 9 to this Table).

(2)  Bartholomew  International  Investments  Ltd.  is owned by the  Bartholomew
Trust, the beneficiaries of which are Terence C. Byrne, his spouse,  and his two
sons.

(3) Includes:  (i)  1,114,413  shares held of record by Mr. Byrne as of February
11,  1999;  and (ii) 69,883  shares held of record by Mr.  Byrne's  wife,  Darla
Sapone  Byrne,  over which  shares Mr.  Byrne has voting  power  pursuant  to an
irrevocable  proxy granted to him on September 27, 1996; (iii) 13,026,406 shares
held  of  record  by  Bartholomew  International  Investments,  Ltd.;  and  (iv)
4,731,902 shares owned by the NAIS Corporation,  over which shares Mr. Byrne has
voting power pursuant to an irrevocable  proxy granted to him in connection with
the December 18, 1998  settlement of a lawsuit  brought by the Nais  Corporation
against the Company (see Item 3 of this Report, "Legal Proceedings");

(4)  Messrs.  Byrne and Muro hold all  shares of Tirex R&D Class A Common  Stock
pursuant  to the terms of a  Shareholders  agreement  among them and the Company
(the  "Tirex  R&D  Shareholders  Agreement"),  pursuant  to which  they  will be
obligated to transfer all such shares to the Company,  for no consideration,  on
May 2, 2001,  unless the term of such Agreement is unilaterally  extended by the
Company.  The  Company  does not  intend  to take any  actions  of any kind with
respect to such shares which would be in  violation  of any Canadian  government
regulations  governing tax and other financial incentives which may be available
to Tirex R&D. The terms of the Tirex R&D Shareholders Agreement are discussed in
more detail, below, in "Certain Relationships and Related  Transactions",  under
the caption "Transfer of 17% of Tirex R&D Shares From Mr. Forbes to Mr. Byrne."

(5) Includes 8,677,238 shares which CG TIRE, Inc. (CGT) has the right to acquire
at anytime  prior to April 23,  2000  pursuant to an option to purchase at a per
share price equal to fifty percent (50%) of the average of the final bid and ask
prices of the Common Stock of Tirex,  as quoted in the OTC Bulletin Board during
the ten business days preceding the date of a notice of exercise given by the CG
TIRE,  all,  or any part of, the  number of shares of the Common  Stock of Tirex
which would  constitute  ten percent,  upon their  issuance  (10%) of the Common
Stock of Tirex,  issued and  outstanding at the date of exercise (the "Option"),
on a fully  diluted  basis.  The CGT Option was amended at or around  August 13,
1997 and May 18, 1998. The Option,  which has a three-year  term, was granted to
CGT on April 24, 1997, in  consideration  of CGT's agreement to (i) explore with
the Company the possibility of the Company's:  (a) furnishing  General Tire with
all or part of its 80-mesh crumb rubber  requirements and (b) establishing local
tire recycling  centers for the purpose of accepting for  disintegration,  scrap
tires from General Tire's network of  independent  dealers;  and (ii) advise the
Company  with  respect to General  Tire's  specifications  for its crumb  rubber
requirements,  any further development of such specifications in the future, the
suitability of the TCS-1 Plant for meeting such specifications,  and the further
development of the Company's  technology in coordination with Continental Tire's
product development requirements.  CGT has not, as of the date hereof, exercised
any part of the Option.

(6) Includes  3,875,271  shares held of record by Ms.  Levine's  spouse,  Robert
Levine, over which shares Ms. Levine disclaims any beneficial ownership.

(7) Pursuant to the settlement of a lawsuit  brought by NAIS against the Company
all shares held of record by NAIS are  subject,  for so long as they are held by
NAIS or any assignee of NAIS,  to a voting proxy held by Terence C. Byrne.  (See
Footnote 3 to this Table and Item 3. "Legal Proceedings").

(8) Mr.  Hartley  holds an option (the  "Hartley  Option")  to  purchase  twenty
thousand (or, under certain circumstances, more) shares of the Company's Class A
Cumulative  Convertible  Preferred Stock (the "Preferred  Stock"),  which shares
will be convertible into up to two million shares of the Company's Common Stock.
Mr.  Hartley has not  exercised  such option nor has he indicated to the Company
that 


                                      125
<PAGE>

he intends to do so in the foreseeable  future.  The figures shown in the Table,
above,  do not give  effect to the  exercise  of the  Hartley  Option and do not
include  any of the  shares  of  Common  Stock  which  would  be  issuable  upon
conversion of the Preferred  Stock. For a discussion in more detail of the terms
of the Hartley Option and Mr. Hartley's  purchase thereof,  reference is made to
"Certain  Relationships and Related Transactions" under the caption,  "Extension
of Exercise Period of Option Held by John G. Hartley", below.

(9) Under the terms of his  employment  agreement,  Michael  Ash is  entitled to
receive a signing bonus in the amount of 1,000,000. As of February 16, 1999, the
Company had not yet issued such shares.

Changes in Control

      The  Company is not aware of any  arrangements  which may at a  subsequent
date result in a change in control of the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED
           TRANSACTIONS

      The following is a  description  of any  transactions  during the last two
completed  fiscal  years,  the  current  fiscal year or any  presently  proposed
transactions,  to which the Company was or is to be a party, in which the amount
involved in such transaction (or series of transactions) was $60,000 or more (in
some  instances,  transactions  valued  at less  than  $60,000)  have  also been
included) and which any of the  following  persons had or is to have a direct or
indirect  material  interest:  (i) any  director  or  executive  officer  of the
Company;  (ii) any person who owns or has the right to acquire 5% or more of the
issued and outstanding common stock of the Company;  and (iii) any member of the
immediate family of any such persons.  The Company does not have any requirement
respecting the necessity for independent  directors to approve transactions with
related parties.  All transactions are approved by the vote or unanimous written
consent of the full board of directors or the  executive  committee of the board
of  directors,  which,  during the period  covered by this Report,  consisted of
Terence C. Byrne, John Hartley, and Louis V. Muro. On February 11, 1999, as part
of an overall  management  reorganization,  Mr.  Hartley  resigned from, and Mr.
Sanzaro was appointed to, the executive  committee.  All members of the board of
directors,  individually and/or  collectively,  could have possible conflicts of
interest with respect to transactions with related parties.

Issuance of Stock in Lieu of Salaries and Unreimbursed Expenses

      During the years ended June 30,  1998 and 1997,  the  Company's  executive
officers and,  since  December 22, 1996,  its in-house  corporate and securities
counsel,  Frances Katz Levine have waived substantial portions of their salaries
and unreimbursed  expenses made by them on behalf,  and for the account,  of the
Company, and have accepted shares of the Company's common stock in lieu thereof.
In connection  therewith;  shares have been issued for the periods  indicated as
follows:

Year Ended June 30, 1997

      For the fiscal quarter ended  September 30, 1996, Mr. Byrne waived payment
of $51,769,  Ms. Levine waived  payment of $31,062,  Mr. Muro waived  payment of
$29,324, and Mr. Threshie waived payment of $9,945. In connection therewith,  on
September 30, 1996, the Company authorized the 


                                      126
<PAGE>

issuance of 329,738 shares to Mr. Byrne,  197,847 shares to Ms. Levine,  186,777
shares to Mr.  Muro,  and 62,392  shares to Mr.  Threshie.  The number of shares
issued at such time was calculated on the basis of 50% of the average of the bid
and ask price for the Company's stock (50% of $.314 or  approximately  $.157 per
share)  during the  three-month  period ended  September  30, 1996. On April 28,
1997, the Company authorized the issuance to Vijay Kachru, who was an officer of
the Company  until  February  11,  1999,  of 32,396  shares in lieu of $5,475 in
salary waived by her for services  performed during the month of September 1996.
The number of shares  issued to Ms.  Kachru was  calculated  on the basis of the
price of the Company's common stock during the quarter ended September 30, 1996.

      For the fiscal  quarter ended  December 31, 1996, Mr. Byrne waived payment
of $40,966,  Ms. Levine waived  payment of $33,446,  Mr. Muro waived  payment of
$23,910,  Mr. Threshie waived payment of $12,074,  and Ms. Kachru waived payment
of $9,819. In connection therewith,  on January 17, 1997, the Company authorized
the  issuance of 285,876  shares to Mr.  Byrne,  233,402  shares to Ms.  Levine,
166,853  shares to Mr. Muro,  and 84,260  shares to Mr.  Threshie.  On April 28,
1997, the Company authorized the issuance to Ms. Kachru of 68,520 shares in lieu
of salary waived by her for services performed during this quarter.The number of
shares issued at such time was  calculated on the basis of 50% of the average of
the bid and ask price for the  Company's  stock  (50% of .2866 or  approximately
$.1433 per share) during the three-month period ended December 31, 1996.

      For the fiscal  quarter ended March 31, 1997,  Mr. Byrne waived payment of
$41,836,  Ms.  Levine  waived  payment of $30,554,  Mr.  Muro waived  payment of
$22,732, Mr. Threshie waived payment of $1,934, and Ms. Kachru waived payment of
$6,715. In connection  therewith,  on April 28, 1997, the Company authorized the
issuance of 195,495 shares to Mr. Byrne,  142,776 shares to Ms. Levine,  106,224
shares to Mr.  Muro,  9,037  shares to Mr.  Threshie,  and 31,383  shares to Ms.
Kachru.  The number of shares issued at such time was calculated on the basis of
50% of the average of the bid and ask price for the Company's stock (50% of .428
or approximately  $.214 per share) during the three-month period ended March 31,
1997.

      For the fiscal  quarter ended June 30, 1997,  Mr. Byrne waived  payment of
$52,972,  Ms.  Levine  waived  payment of $41,640,  Mr.  Muro waived  payment of
$22,524, Mr. Threshie waived payment of $3,140, and Ms. Kachru waived payment of
$5,905. In connection  therewith,  on April 28, 1997, the Company authorized the
issuance of 319,108 shares to Mr. Byrne,  250,843 shares to Ms. Levine,  135,686
shares to Mr. Muro,  18,915  shares to Mr.  Threshie,  and 35,572  shares to Ms.
Kachru.  The number of shares issued at such time was calculated on the basis of
50% of the average of the bid and ask price for the Company's stock (50% of .333
or approximately  $.166 per share) during the three-month  period ended June 30,
1997.

Year Ended June 30, 1998

      For the  five-month  period  ended  November  30,  1997,  Mr. Byrne waived
payment of  $92,497,  Ms.  Levine  waived  payment of  $56,574,  Mr. Muro waived
payment of $41,610, Mr. Threshie waived payment of $5,433, and Ms. Kachru waived
payment of $13,111. In connection  therewith,  on December 15, 1997, the Company
authorized  the issuance of 336,353  shares to Mr. Byrne,  206,379 shares to Ms.
Levine,  151,309 shares to Mr. Muro,  24,000 shares to Mr. Threshie,  and 47,692
shares to Ms. Kachru. The number of shares issued at such time was calculated on
the basis of 100% of the  average  of the bid and ask  price  for the  Company's
stock  (approximately  $.275 per  share)  during  the  five-month  period  ended
November 30, 1997.  The  issuance of these shares at such price  constituted  an
error because the executive  committee of the board of directors had  authorized
and directed that shares issued in lieu of cash compensations for such period be
issued at 50% of the average  market price of the  Company's  common  stock.  In
correction of the foregoing error, on April 15, 1998, the Company authorized the
issuance of additional shares, as follows:  336,352 to Mr. Byrne, 151,309 to Mr.
Muro, 15,512 to Mr. Threshie, 47,690 to Ms. Kachru, and 206,379 to Ms. Levine.


                                      127
<PAGE>

      For the  four-month  period ended March 31, 1998, Mr. Byrne waived payment
of $59,183,  Ms. Levine waived  payment of $45,191,  Mr. Muro waived  payment of
$33,200, Mr. Threshie waived payment of $6,167, and Ms. Kachru waived payment of
$9,450. In connection  therewith,  on April 15, 1998, the Company authorized the
issuance of 423,038 shares to Mr. Byrne,  323,023 shares to Ms. Levine,  237,312
shares to Mr. Muro,  44,081  shares to Mr.  Threshie,  and 67,548  shares to Ms.
Kachru.  The number of shares issued at such time was calculated on the basis of
50% of the average of the bid and ask price for the Company's stock (50% of $.28
per share or  approximately  $.14 per share) during the four-month  period ended
March 31, 1998.

      For the three month period ended June 30, 1998,  Mr. Byrne waived  payment
of $31,707, Ms. Levine waived payment of $36,615.90,  Mr. Muro waived payment of
$16,916, Mr. Threshie waived payment of $1,307.10,  Ms. Kachru waived payment of
$1,608.22,  and Mr.  Sanzaro,  whose  employment as an executive  officer of the
Company commenced on June 15, 1998,  waived payment of $7,291.67.  In connection
therewith,  in  December,  1998 the Company  authorized  the issuance of 208,177
shares to Mr. Byrne;  240,327 shares to Ms. Levine;  111,027 shares to Mr. Muro;
8,579 shares to Mr. Threshie;  10,555 shares to Ms. Kachru; and 47,859 shares to
Mr.  Sanzaro.  The number of shares  issued at such time was  calculated  on the
basis of 50% of the  average of the bid and ask price for the  Company's  common
stock (50% of $.3044177 or  approximately  $.1523588 per share) during the three
month period ended March 31, 1998.

      In September 1998  computational  errors were  discovered that resulted in
understatements of salary paid to all of the Company's executive officers and to
the Company's  corporate and securities  counsel for the five month period ended
November 30, 1997 and the four month period  March 31,  1998.  As a  consequence
thereof,  all  of  the  Company's  executive  officers  and  its  corporate  and
securities  counsel during the periods in question,  received share overpayments
of  Compensation  Stock with regard to such  periods.  Such  officers  and legal
counsel  were  promptly  notified  that they  would  have to return  such  share
overpayments to the Company so that the shares  representing  such  overpayments
could be  cancelled.  Pursuant to the  foregoing,  (i) Mr. Byrne was required to
return  an  aggregate  of  508,109  Compensation  Shares  consisting  of  22,804
Compensation  Shares  issued to him in December  1997 and  485,305  Compensation
Shares  issued to him in April  1998;  (ii) Mr.  Muro was  required to return an
aggregate of 230,077 Compensation Shares consisting of 4,298 Compensation Shares
issued to him in December 1997 and 225,779  Compensation Shares issued to him in
April 1998;  (iii) Mr.  Threshie  was  required to return an aggregate of 83,593
Compensation  Shares consisting of 24,800  Compensation  Shares issued to him in
December 1997 and 59,593  Compensation  Shares issued to him in April 1998; (iv)
Ms.  Kachru was required to return an aggregate of 162,930  Compensation  Shares
consisting  of 47,692  Compensation  Shares  issued to her in December  1997 and
115,238  Compensation Shares issued to her in April 1998; and (v) Ms. Levine was
required to return an aggregate of 31,353  Compensation  Shares issued to her in
April 1998. Each of Messrs. Byrne, Muro and Threshie,  Ms. Kachru and Ms. Levine
agreed to return such Compensation Shares  representing  overpayments and, as at
February 16, 1999, all of such Compensation Shares have been returned except for
22,804  Compensation  Shares issued to Mr. Byrne in December 1997.  These 22,804
Compensation Shares were transferred to an assignee of Mr. Byrne following their
issuance and Mr. Byrne has advised the Company that  arrangements are being made
by him regarding  their return for  cancellation.  In addition to the foregoing,
for the  nine-month  period  ended March 31, 1998 Mr.  Threshie  and Ms.  Kachru
received  cash  salary  overpayments  in the  respective  amounts of $712.63 and
$236.17. These amounts were treated by the Company as additional salary payments
to Mr. Threshie and Ms. Kachru during the three month period ended June 30, 1998
for the  purpose  of  calculating  the amount of  Compensation  Stock due to Mr.
Threshie and Ms. Kachru for such period.

      On April 20, 1998, in consideration of executive  services  rendered under
the terms of his employment agreement and unreimbursed  expenses paid by him for
the account and on behalf of the  Company,  during the  six-month  period  which
commenced  on July 1, 1997 and ended on December 31,  1997,  the Company  issued
597,966  shares of its Common Stock to Alan  Crossley,  the  Company's  Managing
Director of European  Market  Development.  For purposes of such  issuance,  the
shares  were  


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valued at $0.1475 per share,  which value was equal to 50% of the average of the
bid and ask price for the common stock during the period when such unpaid salary
and expenses were earned and incurred, as traded in the over-the-counter  market
and quoted in the OTC Bulletin  Board.  On May 29, 1997, Mr.  Crossley,  through
GAPCO, Inc., a corporation under his control, also accepted an additional 84,658
shares of the  Company's  common  stock as part of the  compensation  due to him
under  his  consulting  agreement.   (See  "Certain  Relationships  and  Related
Transactions - Consulting and Employment  Agreements  with Alan  Crossley").  In
consideration of executive  services  rendered under the terms of his employment
agreement and unreimbursed expenses paid by him for the account and on behalf of
the Company during the six-month  period which  commenced on January 1, 1998 and
ended on June 30, 1998, the Company paid Mr. Crossley in cash. The  unreimbursed
expenses  incurred by Mr.  Crossley for the account and on behalf of the Company
during the twelve  month  period  ended  June 30,  1998 which were  subsequently
repaid  to Mr.  Crossley  in  connection  with his  employment  agreement,  in a
combination of cash and stock, aggregated to Cdn$115,000.

Subsequent Period

      For the three month period  ended  September  30,  1998,  Mr. Byrne waived
payment of $28,486;  Ms. Levine waived  payment of  $41,492.23;  Mr. Muro waived
payment of $14,763;  Mr.  Threshie  waived  payment of $325;  Ms.  Kachru waived
payment of $337.65;  and Mr. Sanzaro waived payment of $43,750. In December 1998
the Company  authorized  the issuance of 269,589  shares to Mr.  Byrne,  392,679
shares to Ms. Levine;  139,716 shares to Mr. Muro; 3,076 shares to Mr. Threshie;
3,195 shares to Ms.  Kachru;  and 414,046 shares to Mr.  Sanzaro.  The number of
shares issued at such time was  calculated on the basis of 50% of the average of
the bid and ask  price for the  Company's  common  stock  (50% of  $.2113293  or
approximately $.1056646 per share) during the three month period ended September
30, 1998.

Loan Transactions with Terence C. Byrne and Affiliated Entity

      On several occasions during the fiscal year ended June 30, 1998 and in the
period subsequent thereto, the Company required immediate cash infusions to meet
its financial obligations.  To assist the Company on such occasions,  Terence C.
Byrne,  or an entity  with  which Mr.  Byrne is  affiliated,  made  loans to the
Company, as follows:

      January 23, 1998 Loan to Company.  On January 23,  1998,  Mr. Byrne made a
loan to the  Company  in the  amount  of  $102,000,  pursuant  to the  Company's
promissory  note,  of even date  therewith.  The terms of the note  provided for
repayment on the first to occur of: (i) thirty days from January 23, 1998;  (ii)
the  Company's  receipt  from  either  or both of the Type A and Type B  Private
Placements, which the Company was then effecting through H.J. Meyers & Co., Inc.
(the  "Private  Placements"),  proceeds in the amount of $100,000 over and above
the first  $401,000  in proceeds  therefrom;  or (iii)  proceeds  from any other
equity  financing  provided  that the total amount of proceeds  from the Private
Placements and such other equity financing exceeded,  in the aggregate,  the sum
of $500,000 (US). The note bore interest on the unpaid principal  balance at the
annual rate of 7%. This note was repaid on May 15, 1998.

      October 27, and November  30, 1998 Loans to Company.  On October 27, 1998,
at the behest of Terence C. Byrne, Bartholomew International Investments Limited
("Bartholomew"), a corporation owned by The Bartholomew Trust, the beneficiaries
of which are Mr. Byrne and his spouse and  children,  made a loan to the Company
in the  amount  of  $150,000.  The  loan  was  made  pursuant  to the  Company's
promissory  note which bore  interest  at an annual  rate of 2% over the Bank of
Montreal's  Prime  Rate and which was due and  payable on July 26,  1999.  On or
about  November 30, 1998,  Mr. Byrne  personally  lent the Company an additional
$14,000  on  identical  terms.  On or about  


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December 2, 1998,  as part of the  Company's  negotiations  to obtain short term
bank debt financing, Bartholomew agreed to forego any interest on, and repayment
in cash of, the $150,000  loan,  and Mr. Byrne agreed to forego any interest on,
and  repayment in cash of, the $14,000  loan and both  parties  accepted in full
satisfaction  of such loan,  unregistered  shares of the Company's  common stock
valued at fifty  percent (50%) of the average of the high ask and low bid prices
of such stock,  as traded in the  over-the-counter  market and quoted in the OTC
Electronic  Bulletin  Board on December 1, 1998.  In  connection  therewith,  on
December 2, 1998,  the Company  authorized  the issuance of a total of 2,523,077
shares of this corporation's unregistered common stock to Bartholomew.

      Loans To Mr. Byrne From time to time, during the course of the fiscal
year ended June 30,  1998,  as was  practical  and  expedient,  the Company paid
certain  expenses for and on behalf Mr. Byrne. All of such payments were treated
as loans made by the Company to Mr. Byrne.  The  aggregate  amount of such loans
outstanding as at June 30, 1998,  was $121,564.  On December 15, 1998, Mr. Byrne
repaid $100,000 of such loans and has advised the Company that he will repay the
balance as promptly as possible.Such loans are recorded on the books and records
of the Company and do not bear interest or state any required maturity date.

Consulting and Executive Agreements with Louis Sanzaro

      On January 28, 1998, the Company entered into a consulting  agreement with
Louis  Sanzaro  (the  "Consulting  Agreement"),  who is currently an officer and
director of the  Company.  The  Consulting  Agreement  was made  effective as of
January 1, 1997. Mr. Sanzaro had actually been providing  consulting services to
the Company  prior to January 1, 1997,  but the  parties had not yet agreed,  at
that time,  to enter into a formal  consulting  agreement  with  respect to such
services. The Consulting Agreement was for a three-year term ending December 31,
1999 and  provided  for Mr.  Sanzaro  to  render  advice,  opinions,  "hands-on"
assistance  with  respect to, and, in some cases,  effectuation  of, among other
things, the following: (i) developing pro-forma financial projections respecting
the operations of a TCS-1 Plant and marketing of rubber crumb generated thereby;
(ii)  designing  and  developing  a complete  maintenance  program for the TCS-1
Plant;  (iii)  developing  specialized  accounting  software to be used with all
TCS-1  Plants;  (iv)  designing  and  developing   logistics   respecting  Plant
configuration;  (v) testing new  equipment at  construction  and assembly  site,
adjusting, and designing modifications,  as required; and (vi) site-planning and
Plant  installation.  Compensation for all consulting  services  rendered by Mr.
Sanzaro under the terms of the Consulting  Agreement,  consisted of the issuance
to Mr. Sanzaro of one million shares of the Company's  Common Stock,  600,000 of
which were  issued to Mr.  Sanzaro on January 30, 1998 and 400,000 of which were
issued on or about April 30,  1998.  The bulk of the  services  performed by Mr.
Sanzaro in connection with the foregoing were rendered after July 1, 1997.

      The  Sanzaro  Consulting  Agreement  was  cancelled  and  replaced  by  an
employment  agreement between the parties (the "Sanzaro  Executive  Agreement"),
pursuant to which,  Mr. Sanzaro was appointed as the Company's Vice President of
Operations and Chief Operating Officer Mr Sanzaro.  Since February 11, 1999, Mr.
Sanzaro has served  under the Sanzaro  Executive  Agreement  as President of the
Company.  For a  discussion  in  detail of the  terms of the  Sanzaro  Executive
Agreement, reference is made to the discussion included above, under "Management
- Employment  Contracts  and  Termination  of Employment  and  Change-in-Control
Arrangements" - "Executive Agreements And Special Compensation Agreements").

Shares  Issued to Louis  Sanzaro in  Consideration  of  Terminating  Right to be
Appointed Exclusive Sales Representative in North America

      Prior to his being  appointed an officer of the Company,  Mr.  Sanzaro and
the Company had agreed,  in principal that Mr. Sanzaro would be appointed as the
Company's  exclusive  sales  distributor  


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<PAGE>

in the United States and Puerto Rico.  Under the terms of the Sanzaro  Executive
Agreement,  Mr. Sanzaro  released the Company from its obligation to appoint him
as its exclusive sales  distributor and to pay him commissions on sales of TCS-1
Plants made in the United  States and Puerto  Rico.  In  consideration  for such
release, the Company issued to Mr. Sanzaro 2,500,000 shares of its common stock.

Agreements with Customers Controlled by Louis Sanzaro

      On May 29, 1997, the Company  entered into an Equipment Lease and Purchase
Agreement (the "O/V III L&P Agreement") with Ocean/Ventures III, Inc.("O/V III")
of Toms River,  New Jersey ("O/V III") for the purchase and lease of the various
components  which will comprise eight TCS-1 Plants.  Also on that same date, the
Company  entered into an Equipment  Lease and Purchase  Agreement (the "OTRP L&P
Agreement")  with Oceans Tire Recycling & Processing Co., Inc.  ("OTRP") for the
purchase and lease of the various components which comprise the first production
model of the TCS-1 Plant. Louis Sanzaro,  an officer and director of the Company
is a controlling  person of both O/V III and Oceans Tire. For details respecting
Mr. Sanzaro's  relationship with the Company prior to January 1997, reference is
made to the discussion  included,  above,  in "Existing and Proposed  Business -
Equipment Manufacturing" under the subcaption, "Dependence on Major Customer."

      The O/V III L&P  Agreement  modified the terms of, and  replaced,  a prior
agreement   between  the  parties  dated  June  6,  1995  (the  "Prior  O/V  III
Agreement").  For  details  of the  terms  and  provisions  of the  O/V  III L&P
Agreement and the OTRP L&P Agreement,  as well as certain  ancillary  agreements
executed  or  agreed  to in  connection  therewith,  reference  is  made  to the
discussions  contained  above, in "Existing and Proposed  Businesses"  under the
subcaptions, "The O/V III Agreements" and "Agreements with Oceans Tire Recycling
& Processing Co., Inc".

      In  December  1997,  OTRP  and the  Company  agreed  that,  to the  extent
necessary  for OTRP to obtain sale and  lease-back  financing  for the front-end
module  ("Front-End")  and for  certain  parts of the Air Plant  portion  of the
Plant,  the said OTRP Agreement would be deemed to be modified,  as required for
such purpose. In connection  therewith OTRP arranged with an equipment financing
company  for sale and  lease-back  financing,  pursuant  to which:  (i) the said
financing company purchased the Front-End and certain designated portions of the
TCS-1  Plant's  Air  Plant  directly  from the  Company;  and (ii)  leased  such
equipment  back to OTRP pursuant to its  arrangements  with OTRP and/or the OTRP
principals.

      It is the  present  intention  of the  parties  to reform or  rescind  the
remaining  provisions  of the OTRP  Agreement  for the  purpose of  transferring
ownership of the entire First  Production  Model to the Company,  any one of its
existing  subsidiaries,  or to some other entity established jointly, or singly,
by the parties, or either one of them, for such purpose. The structure and terms
of the  ownership  of the First  Production  Model have not yet been  finalized.
However, in connection therewith, on December 16, 1998, the Company entered into
two sale and  lease-back  transactions  by and among the  Company,  North  Shore
Leasing &  Funding  Inc.  ("NLFI"),  and an  affiliate  of OTRP,  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 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 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 said leases (see this
Item 1.  "Existing and Proposed  Businesses - Proposed  TCS-1 Plant  Operations:
Sales of Rubber Crumb and Manufacture  and Sale of Finished  Products" under the
subcaption, "Proposed Ownership,  Establishment, and Operation of Tirex Advanced
Products Plant").


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<PAGE>

Loans to Louis Sanzaro and Affiliate

      On September 9, 1997,  the Company made an unsecured loan in the principal
amount  of  $30,000  to  Ocean  Utility  Contracting  Co.  Inc.,  a  New  Jersey
corporation  under the control of Louis  Sanzaro.  The loan bears interest at an
annual rate of 2% over the prime rate charged by Citibank,  NA and is payable on
demand.  To date,  none of the  principal or interest on this loan has been paid
and the  Company is unable to state at this time when it intends to make  demand
for payment.

      The  Company  made a loan in the  principal  amount  of  $70,405  to Louis
Sanzaro,  pursuant to Mr.  Sanzaro's  promissory  note,  dated April 8, 1998, as
amended and extended on September 5, 1998.  The loan bears interest at an annual
rate of 2% over the prime rate charged by Citibank,  NA (the "Prime  Rate") from
the date the  loan was made  through  the  maturity  date,  September  5,  1999.
Repayment of this loan is secured by a security and pledge agreement between the
parties,  pursuant  to which Mr.  Sanzaro  granted  to the  Company  a  security
interest in 400,000  shares of the Company's  common  stock,  which is presently
being held in escrow.

Extension of Exercise Period of Option Held by John G. Hartley

      On May 19, 1995,  the Company sold to John G.  Hartley,  a director of the
Company,  an option (the "Hartley  Option") to purchase twenty thousand (20,000)
shares of the Cumulative  Convertible Preferred Stock of the Company ("Preferred
Shares")  at an  exercise  price of $10 per share,  during a  two-year  exercise
period which commenced on May 19, 1995 and was scheduled to terminate on May 18,
1997.  Mr. Hartley paid the Company twenty  thousand  dollars  ($20,000) for the
said Hartley  Option.  On May 29, 1997,  the Company  amended the Hartley Option
(the  "Hartley  Amendment")  to  extend  the  exercise  and  conversion  periods
thereunder  to May 18,  1999.  For a  discussion  of the reasons for the Hartley
Amendment and  additional  details  respecting the original terms of the Hartley
Option,  reference  is made to Item 12 of the  Company's  annual  report of Form
10-KSB for the year ended June 30,  1997,  "Certain  Relationships  and  Related
Transactions" under the subcaption, "Extension of Exercise Period of Option Held
by John G. Hartley".

      To date, no part of the Hartley Option has been  exercised.  The date when
the Hartley  Option is  exercised,  if such event should  occur,  is referred to
herein as the "Exercise Date".  Pursuant to the terms of the Hartley  Amendment,
the  Preferred  Shares are  convertible  into common stock at a conversion  rate
equal to one Preferred Share (and each $10 of accumulated  and unpaid  dividends
thereon) for the number of shares of the Company's common stock  purchasable for
ten dollars at a per share price equal to 30% of the market price of such common
stock as at the date of conversion.  The number of Preferred Shares  purchasable
under the Hartley Option,  at a price of $10 per share,  can be increased if, at
the conversion rate in effect on the Exercise Date,  20,000 Preferred Shares are
convertible  into fewer than 2,000,000  shares of common stock.  Any increase in
the number of Preferred  Shares  purchasable  under the Hartley Option shall not
exceed  the amount  necessary  to allow the holder to  purchase,  in total,  the
number of Preferred Shares which, as at the Exercise Date, can be converted into
2,000,000 shares of common stock.

Transfer of 17% of Tirex R&D Shares From Kenneth J. Forbes to Terence C. Byrne.

      As discussed  above,  in "Existing  and  Proposed  Businesses",  under the
caption  "Canadian  Operations",  in May of 1995, in order to take  advantage of
such certain financial  incentives,  the Company formed a Canadian  corporation,
3143619  Canada  Inc.  (referred  to herein as "Tirex  R&D") in the  Province of
Quebec,  Canada, for the purpose of completing all research and development work
on the first production  model of the TCS-1 Plant and thereafter  serving as the
Company's 


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<PAGE>

manufacturing  arm.  There are a total of one hundred  shares of Tirex R&D stock
issued and outstanding.  These shares are held of record as follows:  (i) 49% by
the  company;  (ii) 34% by Terence  Byrne;  (iii) 17% by Louis V. Muro.  Messrs.
Byrne and Muro are Canadian residents and, therefore,  Tirex R&D has been deemed
to be eligible for Canadian government sponsored financial incentives.

      All of the Tirex R&D Shareholders  hold their shares pursuant to the terms
and  provisions  of a  Shareholders  Agreement,  dated July 3, 1995,  as amended
February 8, 1996 and August 21, 1997 (the  "Tirex R&D  Shareholders  Agreement")
which provides, among other things, for: (i) each Shareholder to retain complete
voting  control over all shares held of record by such  Shareholder;  (ii) Tirex
R&D's right to redeem the shares held by Mr. Byrne or Mr. Muro in amounts  equal
to any number of shares of Tirex R&D which may be sold to private  investors who
are also Canadian residents; (iii) the Company's right to direct the transfer of
all or any  part of such  shares  to  other  individuals  who are  officers  and
directors of the Company,  so long as such other  individuals  are also Canadian
Residents  who will hold such shares in  accordance  with the terms of the Tirex
Shareholders Agreement;  (iv) the return of all Tirex R&D shares held by Messrs.
Byrne and Muro upon the expiration of the  Shareholders  Agreement (May 2, 2001)
unless such  agreement is  unilaterally  extended by the Company.  On August 21,
1997, pursuant to the request of the Company 17 shares of Tirex R&D common stock
were  transferred  by Kenneth J.  Forbes,  a former  Tirex R&D  shareholder,  to
Terence C. Byrne. The Company does not intend to become the record holder of the
shares held by Messrs. Byrne and Muro until such time as its record ownership of
such shares will not contravene any Canadian  regulations  respecting  financial
aid and assistance to Tirex R&D.

Employment Agreement With Ms. Levine

      From January 18, 1995  through and  including  December 21, 1996,  Frances
Katz Levine was  employed by the Company as its  Secretary  and General  Counsel
under the terms of an  employment  agreement  dated January 18, 1995 (the "First
Levine  Employment  Agreement").  On December 22, 1996, Ms. Levine  resigned her
positions as Secretary,  General Counsel,  and as a Director of the Company. Her
resignation  was not caused by any  disagreement  with the Company on any matter
relating to the Company's  operations,  policies,  or  practices.  Following her
resignation  from the  foregoing  positions,  Ms.  Levine  has  continued  to be
employed by the Company as its in-house  Corporate and United States  Securities
Counsel  pursuant to the terms of her employment  agreement,  dated December 22,
1996  (the  "Second  Levine  Employment  Agreement").  The  Principal  terms and
conditions of the First and the Second Levine Employment Agreements,  other than
the  commencement  and  termination  dates and the positions and exact nature of
duties and responsibilities,  are essentially  identical,  except also for terms
which were added in order to insure that  benefits  and rights  earned under the
First  Employment  Agreement  would not be lost to Ms.  Levine  perforce  of the
foregoing  changes.  On May 1, 1997, the Second Levine Employment  Agreement was
amended to explicitly  state the original  intent of the parties that Ms. Levine
would remain eligible to receive a discretionary bonus for each year (or portion
thereof)  during which Ms.  Levine had served as Secretary  and General  Counsel
under the First Levine  Employment  Agreement.  Both the First and Second Levine
Employment  Agreements  provide  for  an  annual  salary  of  $150,000  and  the
reimbursement  of  business  related  expenses.  The  Second  Levine  Employment
Agreement,  which is currently in effect,  has a term which  expires on December
21,  2000.  Such  agreement  provides  for the  payment  of  bonuses at the sole
discretion of the Board of Directors  based upon a performance  evaluation.  The
Second Levine Employment Agreement also contains severance provisions similar to
those  contained  in the  Executive  Agreements  between the Company and each of
Terry  Byrne,  Lou  Muro  and Lou  Sanzaro.  It also  provides,  in light of the
Company's  cash  position,  that the Company  may, in lieu of payment in cash of
salary and reimbursable  expenses,  issue to Ms. Levine,  unregistered shares of
the  Company's  common  stock,  valued at 50% of the  average of the bid and ask
prices of such stock, as traded in the over-the-counter market and quoted in the
OTC Bulletin  Board,  during part or all of the period  during which such salary
was earned or such expenses were incurred.


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<PAGE>

Extension of Employment Agreements With Mr. Byrne and Mr. Muro

      The Company is a party to  employment  agreements  with  Terence C. Byrne,
chairman of the board of  directors  and CEO of the  Company,  and with Louis V.
Muro, the Company's vice president in charge of engineering. On May 1, 1997, the
parties  amended  these  employment  agreements  so as to extend the term of Mr.
Byrne's  agreement  until  December  31,  2003 and Mr.  Muro's  agreement  until
December 31, 2000. No other changes were made pursuant to these amendments.  For
a  discussion  in more  detail  of the  terms and  conditions  of the  Company's
employment  agreements  with Mr.  Byrne and Mr.  Muro,  reference is made to the
information  contained above in "Executive  Compensation - Employment  Contracts
and Termination of Employment and Change-in-Control Arrangements."

Executive Agreement With Louis Sanzaro.

      On July 23, 1998 the Company  entered into an  employment  agreement  with
Louis Sanzaro  pursuant to which Mr.  Sanzaro was employed as the Company's vice
president of  operations  until  February 11, 1999,  and since such date, as the
Company's  president.  The agreement was made effective as of June 15, 1998, the
date when Mr.  Sanzaro  began serving in such  capacity.  The agreement is for a
term of four years ending June 14, 2002 and provides for salary  compensation at
the annual rate of $175,000.  It also  included a signing  bonus  consisting  of
500,000 shares of the Company's common stock. In consideration for the Company's
entering into such employment agreement and issuing to Mr. Sanzaro an additional
2,500,000  shares of its common stock, Mr. Sanzaro released the Company from any
obligations  arising  out of or being  connected  with or  related to serve as a
distributor of TCS-1 Plants in North America or to receive  renumeration  of any
kind in connection with sales of TCS-1 Plants  theretofore or thereafter made by
the Company in North  America.  For a  discussion  in more detail of the Sanzaro
Executive  Agreement,  reference is made to the  information  contained above in
"Executive Compensation - Employment Contracts and Termination of Employment and
Change-in-Control Arrangements".

Executive Agreement With Jean Frechette.

      On July 24,  1998 the  Company  and The  Tirex  Corporation  Canada,  Inc.
("Tirex  Canada")  entered into an employment  agreement  with Jean  Frechette ,
pursuant to which Mr.  Frechette  has been  employed as the  president and chief
operating  officer of Tirex Canada  effective  August 17, 1998. The agreement is
for a five year term ending August 16, 2003 and provides for salary compensation
at the annual rate of $150,000  along with a car  allowance of $500 Canadian per
month.  The  employment  agreement  also  included a signing  bonus of 1,000,000
shares of the  Company's  common  stock.  For a discussion in more detail of the
Frechette Executive  Agreement,  reference is made to the infirmation  contained
above in  "Executive  Compensation  - Employment  Contracts and  Termination  of
Employment and Change-in-Control Arrangements".

Executive Agreement With John L. Threshie, Jr.

      On February 20, 1997,  the Company  entered into an  employment  agreement
with John L. Threshie, Jr., pursuant to which Mr. Threshie is currently employed
as a vice president and as assistant  secretary of the Company.  Mr.  Threshie's
employment  agreement with the Company was made effective as of January 1, 1996,
the date when Mr.  Threshie  began  receiving  a salary  for  serving  as a vice
president.  The agreement was for a three-year term ending December 31, 1998 and
provided for compensation at the annual rate of $50,000.  Effective July 1, 1998
the salary  provisions  of the  agreement  were amended to provide for an annual
salary of $62,500 and as of December 31, 


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<PAGE>

1998, it was further amended to extend the term of the agreement to December 31,
1999.  From December 22, 1996 until February 11, 1999, Mr.  Threshie also served
as secretary of the Company.  For a discussion  in more detail of the  Executive
Agreements,  reference is made to the information  contained above in "Executive
Compensation   -  Employment   Contracts  and   Termination  of  Employment  and
Change-in-Control Arrangements".

Issuance of Stock to Mr. Muro as Compensation for Past Services

      Mr. Muro served as Secretary  of the Company from  December 29, 1992 until
March 1994 and as the  Company's  president  from March 1994 until  January  18,
1995. Mr. Muro received no compensation for any of the foregoing  services,  but
served on the basis of an  understanding  that he would be fairly and  equitably
compensated.  However,  former  management  failed to arrange  for, or pay,  any
compensation  to Mr. Muro for his  services as an officer of the Company  during
such periods.  In order to assure  itself of the continued  services of Mr. Muro
and to compensate him on a fair and equitable basis for the aforesaid  executive
services, on January 17, 1997, the Board of Directors authorized the issuance of
a total of 1,113,636  shares of common stock.  At that time,  Mr. Muro agreed to
accept such shares as  compensation  for all services  rendered prior to January
18, 1995 at the same rate as he has been  entitled  to receive for his  services
since such date.  Based upon the foregoing,  Mr. Muro was entitled to payment of
three hundred and six thousand,  two hundred fifty dollars ($306,250) in respect
of his pre-1995  services.  The number of shares so issued was calculated on the
basis of one hundred and fifty percent  (150%) of the average of the bid and ask
prices of the Company's common stock, as traded in the  over-the-counter  market
and reported in the electronic  bulletin board of the NASD,  during the calendar
years of 1993 and 1994. The Company's stock was traded only sporadically  during
such time.  Therefore,  calculations  were based upon the fifteen  months during
1993 and 1994 when actual  trading  took place and for which it was  possible to
obtain information. The average of the high and low closing prices of the common
stock of this corporation,  as traded in the over-the-counter market during such
fifteen month period,  which the Company was able to obtain,  was  approximately
$.18333 per share.

Amendment of Stock Option held by CG TIRE, Inc.

      On April 24, 1997, the Company granted to CG TIRE, Inc. (CGT) an option
to purchase at a per share price 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 date of a
notice of  exercise  given by the CG TIRE,  all,  or any part of,  the number of
shares of the common  stock of the Company  which would  constitute,  upon their
issuance,  ten  percent  (10%) of the common  stock of the  Company,  issued and
outstanding, on a fully diluted basis (the "CGT Option"). As of August 13, 1997,
the Company  agreed to amend the CGT Option with respect to the  purchase  price
for a certain  portion of the CGT Option.  On February 18,  1997,  CGT agreed to
further amend its Option to make it unexercisable prior to the effective date of
the registration  statement.  For a discussion in detail of the terms of the CGT
Option and the consideration  received by the Company therefor, see footnote (4)
to the Principal Shareholders Table,  included,  above in "Security Ownership of
Certain Beneficial Owners and Management".

Consulting and Employment Agreements with Alan Crossley

      On July 1, 1997,  the Company  entered into an employment  agreement  with
Alan Crossley (the "Crossley  Employment  Agreement"),  a former director of the
Company, pursuant to which, Mr. Crossley was appointed as the Company's Managing
Director of European Market Development.  This Agreement replaced and superseded
a  consulting  agreement  between the Company and Mr.  Crossley  


                                      135
<PAGE>

(the "Crossley  Consulting  Agreement").  The said Consulting Agreement had been
entered  into on May 29,  1997  and had been  made  retroactively  effective  to
January 15,  1997.  Such  retroactive  effectiveness  reflected  the time period
during which Mr.  Crossley,  directly  and through  GAPCO,  Inc., a  corporation
controlled by Mr. Crossley had actually rendered services to the Company, as its
European  Market  Development  Consultant.  The  Crossley  Consulting  Agreement
provided  for  consulting  services  consisting  of advice and  opinions  to the
Company  concerning,   and  the  undertaking  and  effectuation  of,  activities
necessary to establish and develop in Europe and in India, markets for the TCS-1
Plant and for rubber crumb and the preparation of market development studies for
the Iberian  Peninsula and India.  The Crossley  Consulting  Agreement was for a
two-year term and provided for the following  compensation:  (i) upon completion
of the  Iberian  Peninsula  Market  Study  conducted  by  GAPCO,  Inc.,  $40,000
(Canadian)  to be paid in either,  or a  combination  of,  cash or  unregistered
shares  of the  Company's  common  stock,  valued at $.17 per  share;  (ii) upon
completion  of the  Indian  Market  Study  conducted  by  GAPCO,  Inc.,  $40,000
(Canadian)  to be paid in either,  or a  combination  of,  cash or  unregistered
shares of the  Company's  common  stock,  valued at $.17 per share,  and (ii) an
expense  allowance of up to $115,000  (Canadian)  or  approximately  US $80,500.
Although the Crossley Consulting Agreement also provided for an annual salary of
$75,000 (Canadian),  such salary was not to commence until July 1, 1997. Because
the  Consulting  Agreement  was  replaced by the Crossley  Employment  Agreement
effective as of January 15, 1997, no salary payments were ever due or paid under
the said Consulting  Agreement.  However,  pursuant to the terms of the Crossley
Consulting  Agreement,  payments of an aggregate of $80,000 (Canadian) were paid
to Mr.  Crossley,  in a  combination  of cash and  common  stock,  in respect of
certain market studies for the Iberian  Peninsula and India  conducted by GAPCO,
Inc. The stock  portion of such  compensation  was paid on May 29, 1997 with the
issuance of 84,658 shares of the Company's common stock.

      Pursuant  to  the  agreement  of  the  parties,  the  Crossley  Employment
Agreement  was made  effective as of June 15,  1997.  It provides for a one-year
term,  automatically  renewable for two successive  one-year periods.  Under the
terms of the Employment  Agreement,  Mr. Crossley is responsible for undertaking
and  effecting  activities  necessary to establish  and develop  markets for the
TCS-1 Plant and for the crumb rubber which will be produced by the  operation of
the TCS-1 Plant  throughout the European  Economic  Union,  India,  Pakistan and
Saudi Arabia (collectively the "Territory"), and such other areas as the parties
may, from time to time, mutually agree. In connection therewith, Mr. Crossley is
responsible  for,  among  other  things,  setting up the  appropriate  corporate
structure and organization for importing and distributing TCS-1 Plants and crumb
rubber into and throughout  Europe. The Crossley  Employment  Agreement provides
for  compensation  by way of an annual salary of $75,000  (Canadian) and a sales
commission  of eight  percent (8%) of the  purchase  price of all sales of TCS-1
Plants sold within the Territory,  provided  however that,  all salary  payments
made or payable under the Crossley  Employment  Agreement  will be deducted from
the  amount of any such sales  commissions.  The  Agreement  also  provides  for
reimbursement of documented  expenses for specified purposes in an amount not to
exceed $115,000 (Canadian) per year.

Bonuses and Additional Compensation to Employees

      On May 30,  1997,  the Company  authorized  the  issuance of shares of its
Common Stock pursuant to the exercise of options (the "Bonus Options") which had
been  granted to Terence C. Byrne,  Louis V. Muro,  and  Frances  Katz Levine as
bonuses for the fiscal years ended June 30, 1995 and 1996  pursuant to the terms
of their  respective  employment  agreements.  The Bonus Options  permitted such
persons to purchase  shares of common stock,  at a per share  exercise  price of
$.001 per share, as follows:  Terence C. Byrne - 1,413,382 shares, Louis V. Muro
- 1,115,093  shares,  and Frances Katz Levine - 811,684  shares.  The respective
employment agreements,  pursuant to which such options were granted, provide for
discretionary bonuses for each year (or portion thereof) during the term of such
agreements,  with the actual  amount of any such bonus to be  determined  in the
sole  discretion  of the Board of  Directors  based upon its  evaluation  of the
Executive's performance during 


                                      136
<PAGE>

uch year. Such bonuses were unanimously approved by the Company's full board of
directors, which, at that time, consisted of six members including Mr. Byrne and
Mr.  Muro.  All of the  said  Options  were  exercised  by  the  option  holders
immediately upon the grants thereof.

      On January 28, 1998,  the Company  authorized the issuance of an aggregate
of  4,000,000  shares  to two of its  executive  officers  and to its  corporate
attorney,  at a price of  $.001  per  share,  as  follows:  Terence  C.  Byrne -
2,000,000 shares,  Louis V. Muro - 1,000,000  shares,  and Frances Katz Levine -
1,000,000  shares.  Such sales were made  pursuant  to the  exercise  of options
granted to such persons and subsequently  amended,  as follows:  On September 3,
1997, the Company granted to the foregoing  individuals  options to purchase the
respective  number of shares set forth above at an  exercise  price equal to the
full market price of the Common Stock at such date, as follows: Terence C. Byrne
- 2,000,000, Louis V. Muro - 1,000,000, and Frances Katz Levine - 1,000,000 (the
"1997  Options").  Such  bonuses were granted for the fiscal year ended June 30,
1997 pursuant to the terms of their  respective  employment  agreements with the
Company,  which  provide  for  discretionary  bonuses  for each year (or portion
thereof) during the term of such agreements,  with the actual amount of any such
bonus to be  determined in the sole  discretion of the Board of Directors  based
upon its evaluation of the Executive's  performance during such year. On January
13,  1998,  the  Company  granted  to each of these  persons a bonus  (the "1998
Bonus"),  under the terms of their  respective  employment  agreements,  for the
fiscal year which ended on June 30, 1998 (the "1998 Bonuses").  The 1998 Bonuses
consisted of  amendments  to the terms of the 1997  Options,  which  reduced the
option  exercise  price to $.001 per share.  Both the 1997 and the 1998  bonuses
were  unanimously  approved by the Company's full board of directors  which,  at
that time, consisted of six members including Mr. Byrne and Mr. Muro.

      On June 23, 1998,  the Company's  board of directors by unanimous  written
consent,  recognized that since January of 1995, on behalf, and for the benefit,
of the Company and without any cash compensation therefor, Terence C. Byrne, the
chairman of the board of  directors  and CEO of the  Company  and  Frances  Katz
Levine,  formerly the secretary and a director,  and presently  corporate and US
securities counsel of the Company, had made substantial financial accommodations
and had put themselves at significant financial risk, including, but not limited
to the following:  Mr.  Byrne's;  (i) having made personal loans to the Company,
including a loan in the amount of $102,000 made in January of 1998;  (ii) having
been personally  responsible  for all credit card debt of the Company,  covering
all travel, entertainment,  and significant day-to-day operating expenses of the
Company;  (iii) being the  co-guarantor  of all bank debt of the Company and its
subsidiaries;  and (iv) being the  co-guarantor  on all equipment  leases of the
Company;  and Ms.  Levine  having for a continuous  period of three and one-half
years,  provided,  rent-free  and with no charge for the costs of  utilities,  a
fully-equipped law office,  dedicated solely and exclusively to the requirements
of the  Company  and  throughout  such  period,  having  paid,  without any cash
reimbursement  ever having been made to her, all costs and expenses  incurred by
the Company in connection with its legal service requirements, including but not
limited to: (i)  telephone  charges  (ii)  office  furnishings,  equipment,  and
supplies;  (iii) Federal  Express and other postage;  and (iv)  secretarial  and
clerical staff. The board further stated its belief that the significant  growth
and development  demonstrated by the Company,  from January 1995 to the present,
could  not  have  been   possible   without   the  above   described   financial
accommodations  made  by Mr.  Byrne  and Ms.  Levine  and  that,  in view of the
significant  contributions  made,  and the financial  risks  incurred,  by these
persons,  it would be fair and  equitable to  compensate  them for the foregoing
financial  accommodations made, and risks incurred,  by them. In effectuation of
the foregoing,  on or about July 9, 1998, the Company authorized the issuance of
4,000,000  shares of its common stock to Mr. Byrne and  2,000,000  shares of its
common stock to Ms. Levine.


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<PAGE>

ITEM 13.  EXHIBITS

FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K

Financial Statements

     The financial statements filed as a part of this report are as follows:

     Consolidated Balance Sheet - June 30, 1998

     Consolidated Statements of Operations for the years ended June 30, 1997 and
       1998, and  cumulative  for the period from  inception  (July 15, 1987) to
       June 30, 1998

     Consolidated Statements of Owners' Equity (Deficit) as at
       July 15, 1987 and June 30, 1988 - 1998

     Consolidated Statements of Cash Flows for the years ended June 30, 1997 and
       1998 and cumulative for the period from inception  (July 15,1987) to June
       30, 1998

Financial Statement Schedules

      Financial statements schedules have been omitted for the reason that they
are not required or are not applicable,  or the required information is shown in
the financial statements or notes thereto.

Exhibits

      The  exhibits  filed as a part of this  Report or  incorporated  herein by
reference are as follows:
                                                              
Exhibits Incorporated
                                                            Herein By Reference,
                                                            Exhibit No. As Filed
                                                            With Document
                                                            Indicated
                                                            --------------------

2.   (a) Agreement and Plan of Merger and
           Reorganization, dated May 9, 1989 (1)                     2
     (b) Certificate of Merger, filed with the
           Secretary of State of Delaware on June 8, 1989 (5)        2(b)
     (c) Certificate of Merger, filed with the
           Secretary of State of New Jersey on June 8, 1989 (5)      2(c)
     (d) Acquisition Agreement among the Company,
           Patrick McLaren, Louis V. Muro and George
           Fattell, dated March 26, 1993 (8)                         2
     (e) Certificate of Merger, of Tirex Acquisition Corp and
           RPM Incorporated filed with the Secretary of State
           of Delaware on January 20, 1998 (20)


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<PAGE>

     (f) Agreement and Plan of Merger
           (Tirex Acquisition Corp. and RPM Incorporated)

3.   (a) Certificate of Incorporation filed August 19, 1987 (2)       3(a)
     (b) Certificate of Amendment filed June 20, 1989 (5)             3(b)
     (c) Certificate of Amendment filed March 10, 1993 (8)            3
     (d) Certificate of Amendment filed December 5, 1995 (9)          3(e)
     (e) By-Laws (2)                                                  3(b)
     (f) Certificate of Amendment filed August 11, 1997
     (g) Certificate of Amendment filed February 3, 1998 (21)         3
     (h) Certificate of Incorporation of Tirex Acquisition Corp.,
           filed with the Secretary of State of Delaware on
           December 15, 1997 (20)                                     3(h)
     (k) Certificate of Amendment to the Certificate of 
           Incorporation, filed with the Secretary of State of 
           Delaware on July 10, 1998 (19)                             3

4.   (a) Form of Option to John Hartley for the purchase
           of 20,000 shares of Preferred Stock (9)                    4(g)
     (b) Form of Exchangeable Option, Dated October 5,
           1995, to Sharon Sanzaro for the purchase of 560,000
           shares of common stock (9)                                 4(h)
     (c) Form of Exchangeable Option, Dated October 5,
           1995, to Raymond Pirraglia for the purchase of 
           140,000 shares of common stock (9)                         4(i)
     (d) Form of Exchangeable Option, Dated October 5,
           1995, to Terry Bentley for the purchase of 100,000
           shares of common stock (9)                                 4(j)
     (e) Form of Exchangeable Option, Dated January 1,
           1996, to Raymond Pirraglia for the purchase of 43,750
           shares of common stock(9)                                  4(k)
     (f) Form of Exchangeable Option, Dated January 1,
           1996, to Terry Bentley for the purchase of 31,250
           shares of common stock (9)                                 4(l)
     (g) Form of Exchangeable Option, Dated January 1,
           1996, to Sharon Sanzaro for the purchase of 175,000
           shares of common stock (9)                                 4(m)
     (h) Specimen Preferred Stock Certificate (9)                     4(f)
     (i) Form of Exchangeable Option, Dated as of March 31,
           1996, to Raymond Pirraglia for the purchase of 43,750
           shares of common stock (12)                                4(n)
     (j) Form of Exchangeable Option, Dated as of March 31, 1996,
           to Terry Bentley for the purchase of 31,250
           shares of common stock (12)                                4(o)
     (k) Form of Exchangeable Option, Dated as of March 31,
           1996, to Sharon Sanzaro for the purchase of 175,000
           shares of common stock (12)                                4(p)
     (l) Form of Exchangeable Option, Dated July 1,
           1996, to Raymond Pirraglia for the purchase of 43,750
           shares of common stock (12)                                4(q)
     (m) Form of Exchangeable  Option,  Dated July 1, 1996, to 
           Terry Bentley for the purchase of 31,250 shares of 
           common stock (12)                                          4(r)


                                      139
<PAGE>

     (n) Form of Exchangeable Option, Dated July 1,
           1996, to Sharon Sanzaro for the purchase of 175,000
           shares of common stock (12)                                4(s)
     (o) Form of Option, Dated April 24, 1997 to CG TIRE, Inc.
           for the purchase of up to 10% of the common stock
           of the Company (17)                                        4(t)
     (p) Amendment, Dated September 30, 1997, to GC TIRE,  Inc.(20)
     (q) Amendment,  Dated February 16, 1998, to CG TIRE, Inc.(20)
     (r) Form of "Type A" Subordinated,
           Convertible Debenture
     (s) Form of "Type B" Subordinated
           Convertible Debenture (20)                                 4(t)
     (t) Form of "Type A" Warrant
     (u) Stock Purchase Warrant
           Issued To Security Capital Trading, Inc.
     (v) Form of Amendment to "Type B" Debenture (20)                 4(w)
     (w) Amendment to CGT Option (20)                                 4(x)
     (x) Form of "Type A" Securities
           Purchase Agreement
     (y) Form of "Type B" Securities Purchase Agreement (20)          4(y)
     (z) Form of "Type C" Subscription and Registration
           Rights Agreement (20)                                      4(aa)
     (aa)Option To Purchase Common Stock, Issued to
           Alan Epstein, dated April 13, 1998 (18)                    4.2
     (bb)Form of Amendment to "Type A" Subordinated,
                  Convertible Debenture

10.  (a) Executive Agreement, dated Jan 18, 1995,
           between the Company and Terence C. Byrne (9)               10(rr)
     (b) Stock Restriction Agreements, dated Jan 18, 1995,
           June 1, 1995, and July 31, 1995 between the Company
           and Terence C. Byrne (9)                                   10(tt)
     (c) Stock Restriction Agreements, dated Jan 18, 1995,
           June 1, 1995, July 31, 1995 between the Company
           and Frances Katz Levine (9)                                10(uu)
     (d) License Agreement , dated as of July 3, 1995 between
           the Company and Tirex Canada (9)                           10(ggg)
     (e) Shareholders Agreement, dated as of July 3, 1995, as
           amended February 8, 1996 among the Company,
         Tirex Canada, Kenneth J. Forbes, Terence C. Byrne,
              and Louis V. Muro (9)                                   10(hhh)
     (f) Amendment, dated August 27, 1997 to Shareholders Agreement,
           dated as of July 3, 1995, as amended
           February 8, 1996 among the Company,
           Tirex Canada, Kenneth J. Forbes,
           Terence C. Byrne, and Louis V. Muro(20)                    10(f)
     (g) Special Compensation Agreement, dated April 1, 1996,
           between the Company and Frances Katz Levine (11)           4.6
     (h) Amendment No. 1 dated May 30, 1996, to Executive
           Agreement, dated Jan. 18, 1995, between the Company
           and Terence C. Byrne (11)                                  4.7
     (i) Amendment No. 1 dated May 30, 1996, to Stock Restriction
           Agreement, dated June 1, 1995, between the Company
           and Terence C. Byrne (11)                                  4.9


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<PAGE>

     (j) Amendment No. 1 dated May 30, 1996, to Stock Restriction
           Agreement, dated June 1, 1995, between the Company
           and Frances Katz Levine (11)                               4.9
     (k) Special Compensation Agreements, dated June 1, 1995,
           July 25, 1995, November 15, 1995, and March 18, 1996
           between the Company and Terence C. Byrne (12)              10(rrr)
     (l) Special  Compensation  Agreements,  dated November 15, 1995
           and March 18, 1996, and April 1, 1996
           between the Company and Louis V. Muro (12)                 10(ttt)
     (m) English translation of Agreement for Financial Assistance
           for Technology Development between La Societe Quebecoise
           de Recuperation et de Recyclage and
           Tirex Canada Inc. (12)                                     10(vvv)
     (n) Commitment,  dated  April  11,  1996,  from the  Industrial
           Recovery Program for Southwest Montreal,
           for a loan of up to $500,000 (Canadian) (12)               10(www)
     (o) Amendment No. 1 to Stock Restriction Agreement
           of January 18, 1995, dated May 30, 1996, between
           the Company and Terence C. Byrne. (12)                     10(xxx)
     (p) Amendment No 1. to Stock Restriction Agreement
           of January 18, 1995, dated May 30, 1996,
           between the Company and Frances Katz Levine. (12)          10(yyy)
     (q) Financial Consulting Agreement, dated May 3, 1997,
           between the Company and The Nais Corp. (15)                10
           between the Company and the Nais Corp.
     (r) Employment Agreement, effective as of January 1, 1996,
           between the Company and John L. Threshie, Jr. (13)         4.4
     (s) Employment Agreement, dated April 29, 1997,
           between the Company and Vijay Kachru (17)                  10(cccc)
     (t) Amendment No.2, dated May 1, 1997, to Stock Restriction
           Agreement of April 1, 1996, between the Company
           and Louis V. Muro (17)                                     10(dddd)
     (u) Amendment No. 2, dated May 1, 1997, to Stock Restriction
           Agreement of June 1, 1995 between the Company
           and Terence C. Byrne (17)                                  10(eeee)
     (v) Amendment No. 2, dated May 1, 1997, to Stock Restriction
           Agreement of June 1, 1995 between the Company
           and Frances Katz Levine (17)                               10(ffff)
     (w) Employment Agreement, dated December 22, 1997, between
           the Company and Frances Katz Levine (17)                   10(gggg)
     (x) Amendment, dated May 1, 1997, to Employment Agreement
           of December 22, 1996, between the Company and
           Frances Katz Levine (17)                                   10(hhhh)
     (y) Amendment, dated May 1, 1997, to Employment Agreement
           of January 18, 1995, between the Company and
           Terence C. Byrne (17)                                      10(iiii)
     (z) Amendment, dated May 1, 1997 to Employment Agreement
           of January 1, 1996, between the Company and
           Louis V. Muro (17)                                         10(jjjj)
     (aa) Equipment Lease & Purchase Agreement, dated May 29, 1997,
           between the Company and Oceans Tire Recycling &
           Processing Co., Inc., including Royalty Agreement


                                      141
<PAGE>

           and Crumb rubber Brokerage Agreement, of even date
           therewith, as Exhibits thereto (17)                        10(kkkk)
     (bb)Equipment Lease & Purchase  Agreement,  dated May 29, 
           1997, between the Company and Ocean Ventures III, 
           Inc., including Royalty Agreement and Crumb rubber 
           Brokerage Agreement, of even date therewith, as 
           Exhibits thereto (17)                                     10(llll)
     (cc)Equipment Lease & Purchase Agreement, dated July 8, 1997,
           between the Company and Recycletron Inc., including Royalty
           Agreement  and Crumb rubber  Brokerage  Agreement,  of even
           date therewith,
           as Exhibits thereto (17)                                  10(mmmm
     (dd)Consulting Agreement, dated April 18, 1998, between the 
           Company and Alan Epstein(18)                              4.1
     (ee)Consulting Agreement, dated January 28, 1998, between 
           the Company and Louis Sanzaro (20)                        10(gg)
     (ff)Executive Agreement made as of July 23, 1998 between the
           Company and Louis Sanzaro (19)                            10.1
     (gg)Executive Agreement made as of July 24, 1998  among the
           Company, The Tirex Corporation Canada Inc. and 
           Jean Frechette (19)                                       10.2
     (hh)Employment Agreement made as of June 22, 1998 between
           the Company and Scott Rapfogel (19)                       10.3
     (ii)Agreement, dated December 11, 1998, between the Company
           and IM2 Merchandising and Manufacturing, Inc.
     (jj)Consulting Agreement, dated April 1, 1998, between 
           the Company and Security Capital Trading, Inc.
     (kk)Offer of Federal Office of Regional Development (Quebec), dated
           July 4, 1997, of repayable contribution of CA$95,000 for market
           development studies and activities in the United States
           (Project No. 0762)
     (ll)Offer of Federal Office of Regional Development (Quebec), dated
           March 9, 1998, of repayable contribution of CA$98,000 for
           international market development activities
           (Project No. 1158)
     (mm)Offer of Federal Office of Regional Development (Quebec), dated
           March 26, 1997, of repayable contribution of CA$20,000 for
           preparation of market development studies for India
           (Project No. 0635)
     (nn)Passenger  Car  Equipment  Lease & Purchase  Agreement,  dated
           August 19,  1998,  between the  Company  and ENERCON  American
           Distribution Ltd.
     (oo)Truck Tire Equipment Lease & Purchase Agreement,  dated August
           19,   1998,   between  the   Company   and  ENERCON   American
           Distribution Ltd.
     (pp)Royalty Agreement, dated August 19, 1998,
           between the Company and ENERCON American Distribution Ltd.
     (qq)Rubber Crumb Purchase Option Agreement, dated August 19, 1998,
           between Registrant and ENERCON American Distribution Ltd.
     (rr)Purchase Rights Agreement, dated August 19, 1998,
           between the Company and ENERCON American Distribution Ltd.
     (ss)Passenger Car Equipment Lease & Purchase Agreement, dated October 9, 
           1998, between the Company and ENERCON American Distribution Ltd.
     (tt)Truck Tire Equipment Lease & Purchase Agreement, dated October 9, 1998,
           between the Company and ENERCON American Distribution Ltd.
     (uu)Royalty Agreement, dated October 9, 1998,


                                      142
<PAGE>

           between the Company and ENERCON American Distribution Ltd.
     (vv) Rubber Crumb Purchase Option Agreement, dated October 9, 1998,
           between Registrant and ENERCON American Distribution Ltd.
     (ww) Purchase Rights Agreement, dated October 9, 1998,
           between the Company and ENERCON American Distribution Ltd.
     (xx) Equipment Lease & Purchase Agreement, dated December 12, 1997,
           between the Company and 750824 Alberta Ltd.
     (yy) European Market Development Consulting Agreement, dated May 29, 1997,
           with Alan Crossley
     (zz) Employment Agreement, dated July 1, 1997, with Alan Crossley (aaa)
           Promissory Note, dated January 23, 1998, from the Company to
           Terence C. Byrne in the amount of $102,000
     (bbb) Promissory Note, dated October 27, 1998, from the Company to
           Bartholomew International Investments Ltd. in the amount of
           $150,000
     (ccc) Release,  dated December 2, 1998, to Promissory  Notes,  dated
             October 27, 1998 and November  30,  1998,  from the Company to
             Bartholomew  International  Investments  Ltd.  and  Terence C.
             Byrne, respectively.
     (ddd) Promissory Note, dated November 30, 1998, from the Company to
             Terence C. Byrne in the amount of $14,000
     (eee) Promissory Note, dated April 8, 1998, from Louis V. Sanzaro to
             the Company in the amount of $70,405.31
     (fff) Security and Pledge Agreement, dated April 8, 1998, between
             Louis V. Sanzaro and the Company
     (ggg) Amendment, dated September 5, 1998, to Promissory Note,
             dated April 8, 1998, from Louis V. Sanzaro to the Company
     (hhh) Promissory Note, dated September 9, 1997, from Ocean Utility
             Contracting Co., Inc. to the Company in the amount of $30,000
     (iii) Management  translation  of  Offer of Loan  Guarantee,  dated
             January  16,  1998,   from  the  Societe'  de   Developpement
           Industrial du Quebec (original in French)
     (jjj)   Loan  Agreement,  dated  February 21,  1996,  between Bank of
             Montreal the Company's  subsidiary 3143619 Canada Inc.("Tirex
             R&D)
     (kkk) Offer of Federal Office of Regional Development (Quebec),
             of repayable contribution of CA$20,000 for market
             development studies for the Iberian peninsula
             (Project No. 0526)
     (lll) Offer of Federal Office of Regional Development (Quebec),
             of repayable contribution of CA$95,000 for
             market development activities for the Iberian peninsula
             (Project No. 0761)

17.  (a) Release and Resignation of J. Richard Goldstein,
           dated November 5, 1992 (7)                                  17(a)
     (b) Release and Resignation of Robert Kopsack,
           dated November 5, 1992 (7)                                  17(b)
     (c) Release and Resignation of Peter Stratton,
           dated November 5, 1992 (7)                                  17(c)
     (d) Release and Resignation of George Fattell,
           dated March 24, 1994 (9)                                    17(d)
     (e) Notice and Release of Escrow Agent by Patrick McLaren
           and Louis V. Muro, dated January 18, 1995 (9)               17(e)


                                      143
<PAGE>

20.  (a) "Type A" Private Placement Memorandum, dated
           November 5, 1997, as amended February 26, 1998 (20)          20(a)
     (b) "Type B" Private Placement Memorandum, dated
           November 28, 1997, as amended March 6, 1998 (20)             20(b)
     (c) "Type C" Private Placement Memorandum, dated
           March 19, 1998 (20)                                          20(c)

21.  Subsidiaries of the Company

22.  (a) Notice to Shareholders,  dated July 21, 1997,  Pursuant 
           to Delaware  General  Corporation Law Section 228(d),
           respecting the amendment of the Certificate of 
           Incorporation, changing the Company's name to 
           "The Tirex Corporation" (16)                                 20
     (b) Notice to Shareholders, dated February 4, 1998,
           Pursuant to Delaware General Corporation
           Law Section 228(d), respecting the amendment
           of the Certificate of Incorporation, increasing
           the Company's Capital Stock to 70,000,000 shares (21)        20
     (c) Notice to Shareholders, dated July 13, 1998,
           Pursuant to Delaware General Corporation
           Law Section 228(d), respecting the amendment
           of the Certificate of Incorporation, increasing
           the Company's Capital Stock to 120,000,000 shares (19)       20

99.  (a) Feasibility Study by Techtran:
           Technology Transfer Institute (12)

---------
Notes

      (1) Filed with the Securities and Exchange Commission on June 21, 1989, as
an exhibit, numbered as indicated above, to the Company's current report on Form
8-K dated June 1, 1989, which exhibits are incorporated herein by reference.

      (2) Filed with the  Securities  and  Exchange  Commission  as an  exhibit,
numbered as indicated  above,  to the  registration  statement of the Company on
Form S-18,  File No.  33-17598-NY,  which  exhibits are  incorporated  herein by
reference.

      (3) Filed with the  Securities  and  Exchange  Commission  as an  exhibit,
numbered as indicated above, to the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1988, which exhibits are  incorporated  herein by
reference.

      (4) Filed with the Securities and Exchange Commission on December 13, 1988
and incorporated herein by reference.

      (5) Filed with the Securities and Exchange  Commission on August 10, 1989,
as an exhibit, numbered as indicated above, to post-effective amendment no. 1 to
the  registration  statement of the Company on Form S-18, File No.  33-17598-NY,
which exhibits are incorporated herein by reference.


                                      144
<PAGE>

      (6) Filed with the  Securities  and  Exchange  Commission  as an  exhibit,
numbered as indicated above, to the Company's transition report on Form 10-K for
the  transition  period  December 31, 1988 to June 30, 1989,  which exhibits are
incorporated herein by reference.

      (7) Filed with the Securities and Exchange Commission on February 1, 1993,
as an exhibit,  numbered as indicated above, to the Company's  current report on
Form 8-K dated  November 5, 1992,  which  exhibits  are  incorporated  herein by
reference.

      (8) Filed with the Securities  and Exchange  Commission on April 15, 1993,
as an exhibit,  numbered as indicated above, to the Company's  current report on
Form 8-K  dated  March 10,  1993,  which  exhibits  are  incorporated  herein by
reference.

      (9) Filed with the  Securities  and  Exchange  Commission  as an  exhibit,
numbered as indicated  above, to the Company's  annual report on Form 10-KSB for
the fiscal year ended June 30, 1995, which exhibits are  incorporated  herein by
reference.

      (10) Filed with the Securities and Exchange Commission on June 20, 1996 as
an exhibit,  numbered as indicated above, to the  registration  statement of the
Company on Form S-8, File No. 333-5090,  which exhibits are incorporated  herein
by reference.

      (11) Filed with the Securities and Exchange Commission on June 22, 1996
as an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-5310,  which exhibits are incorporated
herein by reference.

      (12) Filed with the  Securities  and  Exchange  Commission  as an exhibit,
numbered as indicated  above, to the Company's  annual report on Form 10-KSB for
the fiscal year ended June 30, 1996, which exhibits are  incorporated  herein by
reference.

      (13) Filed with the Securities  and Exchange  Commission on March 21, 1997
as an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-23759, which exhibits are incorporated
herein by reference.

      (14) Filed with the Securities and Exchange  Commission on August 27, 1997
as an exhibit, numbered as indicated above, to the registration statement of the
Company on Form S-8, Registration No. 333-34369, which exhibits are incorporated
herein by reference.

      (15) Filed with the Securities  and Exchange  Commission on July 14, as an
exhibit,  numbered as indicated  above, to the Company's  current report on Form
8-K dated June 24, 1997, which exhibits are incorporated herein by reference.

      (16) Filed with the Securities and Exchange Commission on August 14, 1997,
as an exhibit,  numbered as indicated above, to the Company's  current report on
Form 8-K  dated  July 11,  1997,  which  exhibits  are  incorporated  herein  by
reference.

      (17) Filed with the  Securities  and  Exchange  Commission  as an exhibit,
numbered as indicated  above, to the Company's  annual report on Form 10-KSB for
the fiscal year ended June 30, 1997, which exhibits are  incorporated  herein by
reference.

      (18) Filed with the Securities and Exchange Commission on April 14,
1998 as an exhibit,  numbered as indicated above, to the registration  statement
of the Company on Form S-8, File No. 333-50071,  which exhibits are incorporated
herein by reference.


                                      145
<PAGE>

      (19) Filed with the Securities  and Exchange  Commission on July 30, 1998,
as an exhibit,  numbered as indicated above, to the Company's  current report on
Form  8-K  dated  May 27,  1998,  which  exhibits  are  incorporated  herein  by
reference.

      (20) Filed with the Securities and Exchange Commission on May 21, 1998, as
an exhibit, numbered as indicated above, to the Company's registration statement
on Form SB-2, which exhibits are incorporated herein by reference.

      (21) Filed with the  Securities  and Exchange  Commission  on February 16,
1998,  as an exhibit,  numbered as indicated  above,  to the  Company's  current
report on Form 8-K dated  February  3, 1998,  which  exhibits  are  incorporated
herein by reference.

Reports on 8-K

      The Company  did not file any current  reports on Form 8-K during the last
quarter of the period covered by this Report.


                                      146
<PAGE>

                                   SIGNATURES

      In accordance  with Section 15(d) of the Exchange Act of 1934, the Company
has caused this Report to be signed on its behalf by the  undersigned  thereunto
duly authorized.

                                            THE TIREX CORPORATION

                                     By /s/ Terence C. Byrne
                                        ----------------------------------------
Date: March 4, 1999                     Terence C. Byrne, Chairman of the Board
                                        of Directors and Chief Executive Officer

      In accordance  with Section 15(d) of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Company in the capacities and on the dates indicated.

      SIGNATURES                           TITLE                      Date

Principal Executive Officer:

/s/ Terence C. Byrne                                               March 4, 1999
-----------------------------------
    Terence C. Byrne                   Chairman of the Board
                                       of Directors and Chief
                                       Executive Officer

Principal Financial and Accounting Officer:

/s/ Michael D.A. Ash                                               March 4, 1999
-----------------------------------
    Michael D.A. Ash                   Secretary, Treasurer,
                                        and Chief Financial and
                                        Accounting Officer

A Majority of the Board of Directors:

/s/ Terence C. Byrne                                               March 4, 1999
-----------------------------------
    Terence C. Byrne                   Director

/s/ Louis Sanzaro                                                  March 4, 1999
-----------------------------------
     Louis Sanzaro                     Director

/s/ Louis V. Muro                                                  March 4, 1999
-----------------------------------
    Louis V. Muro                      Director

/s/ Henry Meier                                                    March 4, 1999
-----------------------------------
    Henry Meier                        Director


                                      147
<PAGE>

                  SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
                 REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
                      EXCHANGE ACT BY NON-REPORTING ISSUERS

      No annual  report or proxy  materials  have been sent to  security-holders
during the fiscal year ended June 30, 1998 or the subsequent  interim period. As
at the date hereof, the Company plans to furnish proxy materials relating to its
annual meeting, which is presently intended to be held during the current fiscal
year. All such materials will be furnished to the Commission at the same time as
they are sent to securities holders.


                                      148

<PAGE>

                                              Commission File Number 33-17598-NY

--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                                 Washington, DC

                                   ----------

                                   FORM 10-KSB

                                  Annual Report

                            For the Fiscal Year Ended

                                  June 30, 1998

                                   ----------

                              THE TIREX CORPORATION

               (Exact Name of the Company as specified in Charter)

                                    EXHIBITS


                                                                             149
<PAGE>

                     INDEX OF EXHIBITS BEING FILED HEREWITH

                                                                            Page
                                                                            ----

2.
      (f)   Agreement and Plan of Merger
              (Tirex Acquisition Corp. and RPM Incorporated).................153

4.
      (r)   Form of "Type A" Subordinated,
              Convertible Debenture..........................................174
      (t)   Form of "Type A" Warrant.........................................186
      (u)   Form of Stock Purchase Warrant
              Issued To Security Capital Trading, Inc........................200
      (x)   Form of "Type A" Securities
              Purchase Agreement.............................................213
      (bb)  Form of Amendment to "Type A" Subordinated,
              Convertible Debenture..........................................216

10.

      (ii)  Agreement, dated December 11, 1998, between
              the Company and IM2 Merchandising and
              Manufacturing, Inc.............................................224
      (jj)  Consulting Agreement, dated April 1, 1998, between
              the Company and Security Capital Trading, Inc..................240
      (kk)  Offer of Federal Office of Regional Development
              (Quebec), dated July 4, 1997, of repayable contribution of
              CA$95,000 for market development studies and activities
              in the United States (Project No. 0762)........................246
      (ll)  Offer of Federal Office of Regional Development
              (Quebec), dated March 9, 1998, of repayable contribution of
              CA$98,000 for international market development activities
              (Project No. 1158).............................................258
      (mm)  Offer of Federal Office of Regional Development (Quebec),
              dated March 26, 1997, of repayable contribution of CA$20,000
              for preparation of market development studies for India
              (Project No. 0635).............................................271
      (nn)  Passenger Car Equipment Lease & Purchase Agreement, dated
              August 19, 1998, between Registrant and ENERCON American
              Distribution Ltd...............................................282
      (oo)  Truck Tire Equipment Lease & Purchase Agreement, dated
              August 19, 1998, between Registrant and ENERCON American
              Distribution Ltd...............................................302


                                                                             150
<PAGE>

      (pp)  Royalty Agreement, dated August 19, 1998, between Registrant
              and ENERCON American Distribution Ltd..........................322
      (qq)  Rubber Crumb Purchase Option Agreement, dated August 19, 1998,
              between Registrant and ENERCON American Distribution Ltd.......328
      (rr)  Purchase Rights Agreement, dated August 19, 1998,
              between Registrant and ENERCON American Distribution Ltd.......334
      (ss)  Passenger Car Equipment Lease & Purchase Agreement, dated
              October 9, 1998, between Registrant and ENERCON American
              Distribution Ltd...............................................339
      (tt)  Truck Tire Equipment Lease & Purchase Agreement, dated
              October 9, 1998, between Registrant and ENERCON American
              Distribution Ltd...............................................364
      (uu)  Royalty Agreement, dated October 9, 1998, between Registrant
              and ENERCON American Distribution Ltd..........................390
      (vv)  Rubber Crumb Purchase Option Agreement, dated October 9, 1998,
              between Registrant and ENERCON American Distribution Ltd.......396
      (ww)  Purchase Rights Agreement, dated October 9, 1998, between
              Registrant and ENERCON American Distribution Ltd...............402
      (xx)  Equipment Lease & Purchase Agreement, dated December 12, 1997,
              between Registrant and 750824 Alberta Ltd. (with ancillary
              agreements attached as exhibits)...............................407
      (yy)  European Market Development Consulting Agreement,
              dated May 29, 1997, with Alan Crossley.........................436
      (zz)  Employment Agreement, dated July 1, 1997, 
              with Alan Crossley.............................................442
      (aaa) Promissory Note, dated January 23, 1998, from the Company to
              Terence C. Byrne in the amount of $102,000.....................451
      (bbb) Promissory Note, dated October 27, 1998, from the Company to
              Bartholomew International Investments Ltd. in the
              amount of $150,000.............................................454
      (ccc) Release, dated December 2, 1998, to Promissory Notes,
              dated October 27, 1998 and November 30, 1998, from the Company
              to Bartholomew International Investments Ltd.
              and Terence C. Byrne, respectively.............................457
      (ddd) Promissory Note, dated November 30, 1998, from the Company to
              Terence C. Byrne in the amount of $14,000......................461
      (eee) Promissory Note, dated April 8, 1998, from Louis V. Sanzaro to
              the Company in the amount of $70,405.31........................463
      (fff) Security and Pledge Agreement, dated April 8, 1998, between
              Louis V. Sanzaro and the Company...............................466
      (ggg) Amendment, dated September 5, 1998, to Promissory Note,
              dated April 8, 1998, from Louis V. Sanzaro to the Company......470
      (hhh) Promissory Note, dated September 9, 1997, from Ocean Utility
              Contracting Co., Inc. to the Company in the 
              amount of $30,000..............................................473


                                                                             151
<PAGE>

      (iii)   Management translation of Offer of Loan Guarantee, dated
              January 16, 1998, from the Societe' de Developpement
              Industrial du Quebec (original in French)......................475
      (jjj) Loan Agreement, dated December 17, 1997, between
              Bank of Montreal the Company's subsidiary
              3143619 Canada Inc.("Tirex R&D)................................491
      (kkk) Offer of Federal Office of Regional Development (Quebec),
              of repayable contribution of CA$20,000 for market
              development studies for the Iberian peninsula
              (Project No. 0526).............................................502
      (lll) Offer of Federal Office of Regional Development (Quebec),
              of repayable contribution of CA$95,000 for
              market development activities for the Iberian peninsula
              (Project No. 0761).............................................514

21.   Subsidiaries of the Company............................................526


                                      152