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SECURITIES AND EXCHANGE COMMISSION

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, 2005                  
| | [ ]   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

|Delaware                                 | 22-3282985          
|---------------------------------------- | --------------------
|(State
    or Other Jurisdiction of      | (I.R.S.
    Employer
|Incorporation or Organization)           | Identification No.) 
|                                         |                     
|4055 Ste-Catherine St. West, Suite 151   |                     
|Montreal (Westmount), Quebec             | H3Z
    3J8         
|(Address of Principal Executive Offices) | (Zip
    Code)      

(514) 935-2525(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 [X]        
No [ ]

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]

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

$zero (as of June 30, 2005) 
-----------------------------------
(Aggregate market value of the voting stock held by non-affiliates of the
Issuer)

249,895,892 (as of September 30, 2005) 
-------------------------------------------------- 
(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

> Annual Report of the Company on Form 10-KSB for the year ended June 30,
>   2005
>   Quarterly Reports of the Company on Form 10-QSB for the quarters ended
>   September 30, 2004, December 31, 2004, and March 31, 2005
>   Current Reports on Forms 8-K of the Company (none)

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ITEM 1. DESCRIPTION OF BUSINESS

The Company

The Tirex Corporation (hereinafter
referred to as "we", "us" or the "Company") is engaged in the business of
developing for sale, license or lease an environmentally safe patented "turn
key" cryogenic tire recycling system, known as the "TCS System" The TCS System
was designed and developed by us and separates tires into clean and saleable
rubber crumb, steel wire, and fiber. The Company was incorporated in Delaware on
August 19, 1987 under the name "Concord Enterprises, Inc." The Company's name
was changed to "Stopwatch Inc." on June 20, 1989 and to "Tirex America Inc." on
March 10, 1993. On July 11, 1997, the Company's name was changed to "The Tirex
Corporation". Since 1993, our core business has been to develop and to initiate
marketing efforts by sale or license of an environmentally friendly cryogenic
tire recycling system, which we intend to sell to recycling companies and
governmental agencies to enable them to recycle tires. We have devoted the bulk
of our efforts to completing the design and development of our first production
model and raising the financing required to do so. The Company has generated
only very limited revenues from operations and is still in the development
stage.

The TCS-System

Our TCS-System comprises a
complete, turn-key, environmentally safe, semi-cryogenic tire recycling system
designed to: (i) disintegrate scrap tires, using 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 through the use of liquid nitrogen), and (ii)
produce commercially exploitable, high quality, clean rubber crumb and
unshredded steel and fiber. Disregarding configuration variations related to
tire feedstock preparation and possible auxiliary grinding after processing
through the System to obtain higher proportions of fine mesh rubber, these
variations not forming part of our technology in any event, the TCS System is
offered in two basic versions, these being the TCS-1 and the TCS-2. These two
versions have an annual throughput capacity of approximately one million tires
and two million tires respectively, these numbers based on average automobile
tires having a scrap weight of approximately nineteen pounds.

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The freezing chamber of the TCS-1
Production Model previously located in Montreal was a large tank through which
the tire parts were circulated having temperatures of approximately 170 degrees
below zero, Fahrenheit. The second version of the TCS has been designed to run
approximately 20 degrees colder to ensure that no pieces of rubber can warm up
to the "glass point" before being entirely processed by our patented fracturing
mill. Frozen tire parts are passed through another chamber that separates the
component parts of all tires, including rubber, wire and twine. This chamber
contains crushing mechanisms and other proprietary parts and processes that
transform the rubber into very small particles (mesh). The mesh is then
physically separated from the metal and twine and is finally subjected to other
steps to achieve the desired mesh size.
The functions and mechanisms of
the TCS-System have been designed for the exclusive purpose of disintegrating
automobile tires, although relatively minor modifications could be introduced to
accept other kinds of tires as well. The components of a typical tire, which the
TCS System is designed to cleanly separate, basically consist of the following
elements:
1. Two
  types of rubber. The sidewalls of automobile tires are constructed of material
  containing a higher percentage of natural, as opposed to synthetic, rubber
  which is used in the treads. One of the several possible configurations of the
  front-end tire preparation section of the TCS-System has been designed to
  allow the entrepreneur to take advantage of these differences to produce
  separate rubber powders from sidewalls and treads, should the market for his
  output show such separation to be advantageous;

2.

3.

The TCS System has been designed
to operate continuously (with minimum amounts of scheduled downtime for
maintenance) and to require less energy than is used, to the best of the
Company's knowledge, by other presently existing tire recycling equipment.

Step-by-Step Operations

The step-by step operations of the
TCS-System comprise the following:

Tire Feedstock Preparation

The TCS System is not designed to
accept whole tires; whole tires must undergo preliminary preparation to produce
pieces of tire having a dimension which permits their introduction into the
patented fracturing mill. Feedstock preparation can be accomplished in a number
of ways including chipping, shredding and removal of sidewalls followed by
diecutting. None of these techniques form part of the TCS System technology and
the technique ultimately chosen by the tire recycling entrepreneur will revolve
around issues of capital and operating costs as well as possible issues of
transportation costs respecting whole tires.

Freezing the Tire Pieces

The prepared tire pieces are
deposited on a conveyor belt which brings a continuous stream of tire pieces to
a freezing chamber. Supercooled air, produced on-site by an Air Plant, is
continuously blown into the freezing chamber, and this cold air freezes the tire
pieces moving through the chamber to the point where these pieces can be made to
shatter like glass when subjected to forces such as pressure and
bending. After approximately thirty minutes in
the Freezing Chamber the frozen pieces exit the Freezing Chamber and enter our
patented disintegrators ("Fracturing Mills").

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Size Reduction and Materials Separation in the Fracturing Mill

The frozen tire pieces pass
through our patented disintegrators ("Fracturing Mills") where the pieces are
reduced to three separate output materials, these being rubber crumb of varying
degrees of fineness, intact pieces of steel and intact pieces of fiber. This
operation does not involve any chopping, shredding, or hammer-milling.
Therefore, the steel wires are neither cut nor broken. The fiber threads retain
their basic shapes and characteristics. No steel powder or fiber fluff is
produced.

Elimination of the Steel from the Fracturing Mill Output

Upon completion of processing in
the Fracturing Mill, the output is conveyed to a magnetic separation system
where the intact steel wires are magnetically removed from the remaining output
of the Fracturing Mill, this being the rubber crumb and the fiber. The steel can
then be baled for either disposal or sale.

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Fiber Removal

The fiber and rubber crumb is then
passed through screens to separate the crumb from the fiber threads. The fiber
threads are then conveyed out of the machine. The fiber can then be baled or put
into a container for either disposal or sale.

Rubber Crumb Finishing

Rubber crumb finishing operations
are dictated by the output requirements of the entrepreneur and his or her
customers. The TCS System has been configured to produce rubber crumb in mesh
sizes ranging from 10 mesh to 30 mesh at the option of the entrepreneur, and in
such proportions of mesh sizes as the entrepreneur decides, according to his
market requirements. Market considerations might incite the recycling
entrepreneur to request even finer mesh sizes of rubber crumb than a TCS System
is designed to produce. This requires auxiliary grinding, which takes place
after the steel and fiber have been removed, and would affect the configuration
of the post Fracturing Mill operations. Auxiliary processing equipment does not
form part of the TCS System technology.

It is possible that some very
small pieces of steel and fiber can be trapped in the larger pieces of rubber
coming out of the Fracturing Mill. These small amounts of steel and fiber are
released during auxiliary processing and can be separated during the auxiliary
processing operation, magnetically for the steel and by an air separation system
for the residual fiber. The rubber crumb is then passed through a series of
screens to sort the rubber crumb by mesh size, which is thence packaged for
customer requirements.

Research and Development Activities

The Company's technical expertise
and that of its consultants have been an important factor in the development of
the TCS technology, and thus the market potential and positioning of the
Company. Since its inception, the Company has devoted substantial resources to
the design and development of the TCS technology as well as to raising the
financing necessary for such activities. The unavailability of financial
resources forced the Company to suspend significant research and development
activities prior to the beginning of the 2004 fiscal year. This suspension of
activities continued throughout Fiscal 2005. During Fiscal 2003 , the Company
expended approximately $450,000 on research and development activities applied
to the design and development of the TCS-2 model, the successor to the original
TCS-1 First Production Model, as well as to product development involving rubber
crumb. In collaboration with our Licensee, Simpro S.p.A. of Turin, Italy, we
continue to refine and enhance our tire disintegration technology to comply with
emerging regulatory or industry standards or the requirements of any potential
customer.

Our current rate of recovery of
saleable rubber per tire is approximately 94% of the total approximate amount of
rubber (14.5 lbs.) in a 19 lb. (average weight) used auto tire. To the best of
our knowledge, the recycling industry currently recovers only 70-80% of the
rubber.

Manufacturing

Our activities to date focused
primarily on the design and development of the original TCS-1 First Production
Model, and, more recently, on the design of a second generation version of this
technology. In connection with these activities, we have been dependent upon
arrangements with subcontractors for the manufacture and assembly of the
principal components incorporated into a TCS System Plant. Pursuant to our
signing of the exclusive manufacturing license agreement with Simpro, S.p.A.,
with the exception of those systems which Simpro might choose to refuse to
accept a contract from any particular potential customer, all manufacturing
activities of our company will now be undertaken by this Italian company. In the
seemingly unlikely scenario where Simpro would refuse a contract which we
believe should be accepted, we would have the right to go to alternate sources
to have such systems manufactured and installed. . Management believes that
numerous alternative sources of supply for all such systems are readily
available.

---

We have licensed the manufacturing
respecting our technology to our Manufacturing Partner, Simpro S.p.A. of Turin,
Italy. Simpro is a designer and manufacturer of high-technology production
systems, historically primarily for the automobile industry, and is active
internationally. Simpro has its ISO 9001, ISO 14001 and EMAS certifications.
Operations

Until near the end of Fiscal 2002,
we had one Production Model TCS-1 Plant which was composed of various
proprietary and non-proprietary parts and technology. During Calendar 2001 we
converted the Production Model into a full-scale commercial recycling center,
with only two pieces of equipment required to be added such that we would be
able to produce the quantities of fine mesh rubber crumb demanded by our
identified customers. The lack of financial resources forced Management to
suspend crumb rubber operations at the time of the calendar 2001 Christmas
season. The continued lack of financial resources in early calendar 2002 forced
Management to prolong the shutdown indefinitely. Near the end of Fiscal 2002,
the Air Plant was returned to the lessor, and, subsequently, the remaining
components of the system were dismantled. In order to satisfy the consulting
fees and out-of-pocket costs associated with the dismantling, relocation and
storage of the First Production Model, most of these components were assigned to
the consultant for sale. The Fracturing Mill was sent to the Simpro facility in
Italy, where it remains, to facilitate its redesign into a more compact unit.
On May 29, 1997, we 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.
Pursuant to the OTRP L&P Agreement, OTRP was to purchase the first production
model TCS-1 Plant with an anticipated delivery date of September 15, 1997.
However, while construction of the first full-scale Production Model 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 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 us; and (ii)
leased such equipment back to OTRP pursuant to its arrangements with OTRP and/or
the OTRP principals. We sold, pursuant to a lease purchase arrangement, the
Front-End for a total purchase price of $300,000, with irrevocable acceptance
and final payment being obtained in December of 1997. The designated portions of
the Air Plant were sold/leased to a financing company for a total purchase price
of $580,000, with irrevocable acceptance and final payment being obtained in
April of 1998.
In July 2000, we entered onto a
new agreement with OTRP/its principals (the "New Agreement") modifying and
clarifying provisions of the prior agreement between the parties regarding
certain rights to the Production Model. Pursuant to the terms of the New
Agreement, we issued 4,553,102 shares of its Common Stock to OTRP's principal
officer and stockholder in exchange for forgiveness of approximately $938,000 in
advances to us or paid on its behalf through June 30, 2000. The New Agreement
confirmed OTRP's assignment to us of all its rights to the Production Model and
related technology, including all intellectual property rights and any and all
rights accruing to OTRP upon termination of the financing lease/purchase
arrangements. In addition, OTRP and its principal agreed to make all lease
payments to the financing companies in the event we failed to do so and to
convert all advances into our Common Stock at 50% of the market value on the
date of conversion. During fiscal year ended June 30, 2001 OTRP advanced
$256,857 toward our lease payments, and continued to make lease payments in
Fiscal 2002 at the rate of $29,280 per month, until the expiration of the lease
in mid-April 2002. Insofar as the equipment was not being used after the expiry
of the lease, no further lease payments were made. As indicated previously, the
lessor requested the return of the equipment, which was accomplished when the
lessor provided us with an appropriate destination. In April of 2002, 2,250,000
shares were issued in partial payment against the lease payments made.

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Subsidiaries
In May of 1995, in order to take
advantage of financial incentives in connection with the research and
development work on the first production model of the TCS-1 Plant, we formed a
Canadian corporation, 3143619 Canada Inc. On June 3, 1998, this entity's name
was changed to Tirex Canada R&D Inc. (hereinafter referred to as "Tirex R&D").
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 were John L.
Threshie, Jr. our President and Chairman of our Board of Directors and Louis V.
Muro, our Vice President of Engineering and a member of our Board of Directors,
both of whom are Canadian residents. John L. Threshie, Jr. also served as the
Chairman of the Board of Directors and the Chief Executive Officer of Tirex R&D
while Louis V. Muro also served as a vice president and a director of Tirex R&D.
Tirex was the record holder of the balance of 49% of the issued and outstanding
capital stock of Tirex R&D. Messrs. Threshie and Muro held their Tirex R&D
shares under the terms of a shareholders agreement, which we can require them to
transfer all such shares to us for no compensation. The Government of Canada
dissolved this corporation on April 15, 2005 because annual filings were not
maintained. Our Canadian legal counsel has advised us to reactivate this
company. Failure to do so would expose our shareholders to the devolved
liabilities of Tirex Canada R&D Inc. We intend to reactivate this company as
soon as possible.
On April 22, 1998, we formed a
second Canadian corporation, 3477584 Canada Inc., the name of which was changed
to Tirex Advanced Products Quebec Inc. on June 3, 1998 (hereinafter referred to
as "TAP"). The Government of Canada dissolved this corporation on June 10, 2004
because annual filings were not maintained. There were no activities or
liabilities related to this company. We have no intention of reviving this
company.
On June 1, 1998, we formed a third
Canadian corporation, The Tirex Corporation Canada Inc., referred to herein as "TCCI".
TCCI was also a wholly owned subsidiary of ours. TCCI had been established to
operate as our manufacturing arm, but is presently dormant. We do not have any
current plans to reactivate TCCI. The Government of Canada dissolved this
corporation on April 15, 2005 because annual filings were not maintained. As of
June 30, 2005, this company had accrued liabilities of CA$3,581. We are
currently evaluating the costs versus the benefits of reactivating this company.
We also have another dormant,
wholly owned subsidiary, formed under the laws of the State of Delaware, Tirex
Acquisition Corp. ("TAC"), for which we have no present plans.
Canadian Grants

The governments of Canada and of
Quebec, have officially acknowledged the pivotal role played by business
investment in research and development in ensuring 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, the Quebec
location has offered the most generous tax incentives for research and
development programs in North America of which we are 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, we formed
Tirex R&D. (See "Subsidiaries").
The Tirex R&D License

Tirex R&D holds an exclusive, ten
year license from the Company, which expired on July 2, 2005. This license,
which was modified in June of 2002, permitted Tirex R&D to design, develop, and
manufacture the TCS-Systems on a worldwide basis (the "Primary License"). To the
extent necessary to ensure that Tirex R&D's operations were focused on pure
research and development activities, Tirex R&D was able sublicense the Primary
License to TCCI or such other corporate entity as would be deemed appropriate
and beneficial. With the expiry of the license and the dissolution of Tirex Canada
R&D Inc., the unrestricted ownership of the intellectual property related to the
TCS Technology has reverted to The Tirex Corporation.

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Canadian Government and Government Sponsored Financial Assistance

Our May 1995 transfer of our
research and development and manufacturing activities to Tirex R&D (then
referred to as "Tirex Canada") made us 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.

Tax Incentives

Canadian and Quebec tax incentives
take the form of deductions and tax credits with respect to eligible research
and development expenditures previously incurred by Tirex R&D. Certain tax
credits are called "refundable" because, to the extent that the amount of the
tax credit exceeds the taxes otherwise payable, they are paid over or "refunded"
to the taxpayer. Thus, these 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 develop new
processes, materials, products or devices or to enhance existing processes,
materials, products, or devices. As previously reported, we have benefited
substantially for such research and development tax credits but the Company has
not produced any tax credit claims following its Fiscal 2002 year. In the event
that the Company would envision restarting its R&D efforts, it would either
re-activate Tirex Canada R&D Inc. or create a new Canadian subsidiary eligible
for such tax credits.

Canadian Government, and Government Sponsored Loans and Grants

We have in the past also received
financial assistance by way of loans and grants from Canadian and Quebec
governmental agencies for the design and development of the TCS-1 Plant and for
export market development. All of the activities for which these loans were
approved have been completed and we have received the funds approved.
Approximately 80% of the loans previously received have been repaid. Of the
remaining approximately CA$150,000 (approximately US$123,000 using a $0.82
exchange rate) US$66,500 will be forgiven if the Company does not realize any
sales in Spain and Portugal prior to June 30, 2004 and a further approximately
US$14,800 will also be forgiven if there are no sales in Spain and / or Portugal
prior to June 30, 2007.

Patent Protection

We were issued a United States
patent on our 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 September of 2005, an officer and a
director of the company were able to find the cash necessary to pay for payment
of US patent maintenance fees, thus continuing the protection of our technology.
In November 1998, we filed our patent, for review, with the Canadian Patent
Office. Canadian patent number 2193334 was granted on August 17, 2004. Canadian
patents have a duration of seventeen (17) years. Prior to the issuance of our US
patent, we relied solely on trade secrets, proprietary know-how and
technological innovation to develop our technology and the designs and
specifications for the TCS-1 demonstration unit. The Company's patents are free
of liens. We do not presently hold any patents for our products or systems
outside of the United States and Canada. We have lacked the financial resources
to apply for a process patent on an international basis, but the Company intends
to file for additional patent protection, in accordance with our Agreement with Simpro S.p.A. of Turin, Italy, once sufficient financial resources will become
available.

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We have entered into
confidentiality and invention assignment agreements with certain employees and
consultants, which limit access to, and disclosure or use of, our technology.
There can be no assurance, however, that the steps we have taken to deter
misappropriation of our intellectual property or

Competition

At present, there are various
methods available to recycle tires, either to produce rubber crumb or to extract
their energy value. We know of no devices, apparatus or equipment, utilizing
technology which is identical or comparable to the TCS-System technology, which
are presently being sold or used anywhere in the world, nor are we aware of any
competing patents relating to our disintegration technology. However, the TCS-System
technology may reasonably be expected to have to compete with related or similar
processes, machines, or devices for tire disintegration, cryogenic or otherwise.
There are presently many companies currently recycling tires which have
established business relationships. Moreover, prospective competitors which may
enter the field in the future may be considerably larger than us 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 we will be
able to apply to the TCS-System. Additionally, manufacturers of presently
available equipment and systems are in a position to operate research and
development departments dedicated to continuously improving conventional systems
and to developing new and improved systems. There can be no assurance that the
TCS-System will successfully compete with existing systems or with any improved
or new systems which may be developed in the future.

Employees

As of October 2005, we have four
persons employed either directly or under consulting contracts including its
three executive officers.. Three of the foregoing persons devote their full time
to our business and affairs, as required. At times, we also utilize the services
of part-time consultants to assist us with market research and development and
other matters. We intend to hire additional personnel, as needed, and as
financial resources permit.

Potential Markets

We believe that the potential
markets for our TCS System will be directly affected by the level of demand for
economical, high quality rubber crumb derived from the recycling of scrap tires.
The following discussion of the potential markets for rubber crumb assumes that
the TCS System will actually be capable of economically producing high quality
recycled rubber crumb and in a variety of sizes, and capable of being used in
wide range of products. It should be noted, however, that because of the limited
operating history of our heretofore TCS-1 Production Model Plant, we cannot,
give any assurance that our TCS Systems will in fact perform as expected under
continuous, commercial operating conditions. However, our Manufacturing
Licensee, Simpro S.p.A. of Turin, Italy, is prepared to offer limited
performance guarantees, backed by insurance policies. Moreover, even if the
demand for rubber crumb should increase in accordance with our expectations,
there can be no assurance that a demand for TCS Systems will likewise develop.

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Rubber is a valuable raw material
and we believe 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, absorbing shock and lessening the potential for injuries as a
ground cover for playgrounds and other recreational areas, and as a significant
component added to plastic resins for making extruded or injection molded
products. We are aware of significant recent developments in making finished
products from crumb rubber compounded with plastic resins, particularly
polypropylene. We believe that the potential for crumb rubber to substitute for
either virgin or recycled plastic resins is very significant, given the relative
market price for crumb rubber versus the commodity prices for such plastic
resins. We believe that TCS operators could realize very attractive profits at
prices even less than US$0.20 per pound. As of August 8, 2005, virgin general
purpose injection grade polypropylene was selling for approximately US$0.65 per
pound for high-volume users (20 million pounds per year or more). Recycled
polypropylene was selling for between US$0.27 (for clean regrind or flake)and
US$0.39 (for pellets) per pound, depending on its form.

Marketing Activities

To a large extent, we have, in the
past, concentrated our efforts on completing the design, development, and
construction of our heretofore TCS-First Production Model 1 and raising adequate
financing to support such efforts. Our long-term objective, however, is to
market TCS Systems worldwide, through national and international sales
representatives, licensees or strategic partners.. Pursuant to an extensive
technical audit, our heretofore First Production Model permitted our company to
be certified as an Accredited Tire Recycler by Recyc-Quebec, a
quasi-governmental agency of the Quebec Government. Users of the TCS technology
in Quebec could have access to tipping fees paid by Recycle Quebec, which
currently work out to approximately US$0.72 per tire. Management believes that
this accreditation will be beneficial to our marketing efforts respecting our
technology, not only in Quebec but elsewhere, given its independent status.

We can make no assurances with
respect to the success of our marketing and distribution strategy of our TCS
Systems. Furthermore, we have limited resources to achieve the distribution of
our TCS Systems and to date we have made no sales, leases or licenses. We
believe that we will need additional financing, which may not be available, to
achieve our long-term objectives.

Government Regulation

Insofar as the Company is not
actually a tire recycler, government regulations have little direct effect on
our activities. Of greater importance is the possible effect on our customers
for the TCS technology. The TCS-System 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. To the best of the
Company's knowledge, operation of a TCS-System will not result in the emission
of any pollutants, the disposal of combustion residues, the storage of hazardous
substances, or the production of any significant amounts of solid waste which
would have to be landfilled. Our Manufacturing Licensee, Simpro S.p.A., has
undertaken a formal environmental assessment of our technology, the results of
which confirm our assertions. However, the operation of a TCS System will
involve, to varying degrees and for varying periods of time, the storage of
scrap tires or tire pieces representing the feedstock to the System, and limited
storage of crumb rubber prior to shipment to customers. Rubber, regardless of
its physical dimensions or form, is widely defined as being a fire hazard by
fire protection services in most industrially-advanced countries. Whole tires,
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 constitute a particularly serious
environmental problem. Among the numerous problems relating to scrap tires, is
that when stockpiled above ground, tires create serious public health and
environmental hazards. These range from scrap tire fires, which generate large
and dense clouds of black smoke and cause serious soil pollution problems, and
which are extremely difficult to extinguish, to the creation of vast breeding
grounds for mosquitoes and vermin.

---



As a result, many US states and
Canadian provinces have either passed or have pending legislation regarding
discarded tires including legislation limiting the storage of used tires to
specifically designated areas. Operators of TCS Systems 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 System for tire
recycling will require numerous permits and compliance with environmental and
other government regulations, on the part of our 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 customers of our
TCS Systems. Moreover, regulatory approvals, if granted, may include significant
limitations on operations. The US-EPA and comparable US state and local
regulatory agencies, and similar government bodies in Canada and in other
jurisdictions where TCS Systems will be marketed 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, suspension of approvals,
seizure or recall of products, operating restrictions, and criminal
prosecutions.

We believe that existing
government regulations, while extensive, will not result in the disenabling of
its TCS System customers to operate profitably and in compliance with such
regulations. While these regulations are usually stringent, the huge scrap tire
problem must also be dealt with on a daily basis and the need for economic and
environmentally friendly recycling operations is critical. The burden of
compliance with laws and regulations governing the installation and/or operation
of TCS Systems could, nonetheless, discourage potential customers from
purchasing a TCS System. This would adversely affect our business, prospects,
results, and financial condition. As a result, our business could be directly
and indirectly affected by government regulations.

ITEM 2. DESCRIPTION OF PROPERTY

Our corporate headquarters is
located at 4055 Ste-Catherine St. , Suite 151, Westmount, Quebec, Canada H3Z
3J8. We have occupied offices at this address since March 2003. The space has
been provided free of charge, and includes electricity, heating and local
telephone service. This was extended by mutual agreement for a period of four
months to the end of December 2003. Late in Fiscal 2004, new, but still
advantageous terms were negotiated ms with the landlord. The property is
occupied on a month-by-month basis with no written lease. Insignificant amounts
of cash are paid to cover items, such as long distance charges, when management
is able to obtain cash personally to cover such expenses. Prior to moving to
these premises, during Fiscal 2003, the Company occupied premises in an
industrial building on St. Patrick Street in Montreal, where our heretofore
First Production Model was located. After having accumulated very substantial
arrearages in rent and property taxes for which we were financially responsible,
our former landlord instructed us to vacate these premises such that he could
rent the space out to another company. As part of the settlement agreement with
this former landlord, we agreed to pay to this former landlord the sum of
US$540,000 out of the proceeds of the first four sales of TCS Systems, at the
rate of US$140,000 per system sold.

ITEM 3. LEGAL PROCEEDINGS We are presently a party in the following legal
proceedings: 
              
IM2 Merchandising and Manufacturing, Inc and David B. Sinclair v. 
              
The Tirex Corporation, Tirex Corporation Canada, Inc., et al.

The Plaintiffs, a Canadian
resident and a Canadian corporation sued in the Delaware, U.S. Federal District
Court claiming fraud, breach of contract, unjust enrichment and other
allegations, that the alleged Defendants, which include Tirex Corporation Canada
and The Tirex Corporation, jointly conspired to profit from their failure to
comply with terms of a manufacturing agreement. The monetary demand of this
complaint was unspecified. We were prepared to move to dismiss Plaintiffs'
Complaint, but after consultations with the Plaintiffs' Attorneys, the
Plaintiffs' withdrew this complaint voluntarily. Plaintiffs later filed a second
action in the Chancery Court of Delaware alleging certain of the same
allegations; fraud, breach of contract, unjust enrichment, breach of fiduciary
duty and misrepresentation, but eliminated other counts including the securities
fraud allegations. The Defendants in the State Court action are the same named
in the Federal Court action, and again the monetary damages are unspecified. We
moved to dismiss the State Court Chancery case alleging defective service of
process and asserting that the Court had no jurisdiction over the Defendants in
Delaware and for removal of the case to Canada based on forum non convenience
and other considerations. Our motion was granted and the case dismissed.

---



Subsequently, on or about April
25, 2001, the Plaintiffs instituted a lawsuit in Superior Court, judicial
district of Montreal alleging breach of contract and claims damages of
Canadian$794,690 (approximately US$508,600) representing expenses and an
additional Canadian$5,411,158 (approximately US$1,874,000) in loss of profits.
Unlike the suit filed in the US Federal District Court in Delaware, there was no
accusation of fraud. We have filed a detailed answer denying all liability,
stating further that Plaintiffs failed to comply with their obligations. We
believe we have meritorious defenses to all of the Plaintiffs' claims. The
action is still pending.

Surgent v. The Tirex Corporation

An action was brought by the
Plaintiff against us, alleging that we had agreed to issue 1,000,000 shares of
our Common Stock to the Plaintiff in consideration for expenses allegedly paid
by the Plaintiff on our behalf in the amount of approximately $150,000. These
expenses allegedly were incurred in relation to the rental of certain office
space and performance of administrative services. The Plaintiff's complaint
sought to impose an equitable trust or lien on 1,000,000 of our unissued common
shares, demanded the issuance of the 1,000,000 shares and alleged breach of
contract and claimed damages of $1,400,000.

We moved to dismiss the case on
various procedural grounds and in September 2000 the Court granted our motion
based upon the lack of venue in Union County, New Jersey. A new action was
instituted by Plaintiff in the Superior Court of New Jersey, Bergen County in
April 2001 alleging similar claims as set forth in the previous action (Docket
L-08060-00). We denied all of plaintiff's allegations. On July 24, 2002, The
Superior Court of New Jersey, Bergen County, dismissed, with prejudice, the
plaintiff,s complaint for "Lack of Prosecution". Plaintiff was granted right to
appeal, which was undertaken. However, Plaintiff's appeal was rejected by the
Appellate Court.

Lefebvre Freres Limited v. The Tirex Corporation

Lefebvre Freres Limited instituted
an action against us on August 13, 2001 in the Superior Court, judicial district
of Montreal claiming Canadian $98,513 (approximately US$63,000) is due and owing
for the manufacture and delivery of car tire disintegrators. We are preparing a
defense and cross claim against Plaintiff as the product delivered was defective
and we believe we are entitled to a reimbursement of sums paid. The action is
still pending.

Tri-Steel Industries Inc. v. The Tirex Corporation

Our landlord Tri-Steel Industries
Inc. instituted an action against us, and our subsidiaries Tirex Canada and
Tirex Canada R & D Inc., on or about June 22, 2001 for arrears of rent in the
amount of Canadian $177,973.62 Subsequent to the Plaintiff's instituting this
action, we continued to accumulate very substantial arrearages for rent and
property taxes for which we were financially responsible. Subsequent to our
vacating the premises which had been the object of the lease, we settled with
our former landlord for a total amount of US$560,000, to be paid at the rate of
$140,000 from each of our first four TCS System sales.

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 us.

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

During the fiscal year ended June
30, 2005, 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, since January
2003, has been listed on the "Gray Sheets". We are currently awaiting the
completion of our first unconditional sales contract before attempting to have
our stock re-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.
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 Ending June 30, 2002 | High               | Low   
|September 29, 2001               | $ 0.08             | $ 0.02
|December 29, 2001                | 0.03               | 0.01  
|March 30, 2002                   | 0.02               | 0.01  
|June 29, 2002                    | 0.03               | 0.01  
|                                 |                    |       
|Fiscal Year Ending June 30, 2002 | High               | Low   
|September 30, 2002               | $ 0.01             | $ 0.01
|December 30, 2002                | 0.01               | 0.01  
|March 31, 2003                   | See note following
|June 30, 2003                    | See note following
|                                 |                    |       
|Fiscal Year 2004                 | See note following
|                                 |                    |       
|Fiscal Year 2005                 | See note following

Since being relegated to the Gray Sheets, bid prices are not posted.

Shareholders

As of October 13, 2005, the number
of holders of record of the Company's common stock, $.001 par value, was less
than 500, which does not include shares held by persons or companies in street
or nominee name.

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.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion of our
financial condition and results of operations should be read in conjunction with
the financial statements and notes thereto included elsewhere in this Report.
This document contains certain forward-looking statements including, among
others, anticipated trends in our financial condition and results of operations
and our business strategy. These forward-looking statements are based largely on
our current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking statements.
Important factors to consider in evaluating such forward-looking statements
include (i) changes in external competitive market factors or in our internal
budgeting process which might impact trends in the our results of operations;
(ii) unanticipated working capital or other cash requirements; (iii) changes in
the our business strategy or an inability to execute its strategy due to
unanticipated changes in the industries in which we operates; and (iv) various
competitive factors that may prevent the us from competing successfully in the
marketplace.

---



In March 2000, we announced that
our tire recycling technology was ready for replication and commercialization.
Since Fiscal 2001, we have demonstrated our technology to numerous groups from
Asia, Europe, North and South and America and the Caribbean, as well as to some
shareholders and potential strategic alliance partners. While numerous Letters
of Intent were signed during the early marketing stage, none materialized into
firm purchase contracts. Management attributed these failures to proceed to firm
contracts to the lack of a track record for the TCS technology, or
alternatively, to the Company's inability to provide performance guarantees. The
Company signed its License Agreement with Simpro S.p.A. of Italy in January of
2003, and thus created the potential that performance guarantees could be
offered. As of June 30, 2005, no purchase/sale contracts had been written.

Marketing Structure

We entered into a conditional
agreement with Tirex-Europe in April 2001 respecting market development
activities to be undertaken in most of Europe, the Middle East and those North
African countries bordering on the Mediterranean Sea. This agreement originated
from a previous letter of intent we entered into with European Transformation
Resources (ETR), a company to be incorporated under the laws of the Grand Duchy
of Luxembourg, for the marketing of TCS Systems in these same regions. Under the
terms of the conditional agreement with Tirex-Europe, the Gross Revenue and Cost
of Systems Sold numbers resulting from the sales of TCS Systems by Tirex Europe
would be recorded on their books rather than on ours. Revenue would thus be
attributed to us on the basis of a gross profit sharing proportion applied to
such sales concluded by Tirex-Europe. These gross profit sharing proportions are
variable as a function of whether or not the sale is being made to a new
customer or an existing customer and how many sales are being made to the same
customers. The variable scale is not country-specific. Also under the terms of
the Tirex-Europe Agreement, Tirex-Europe will pay to us the sum of $500,000,
payable over the sale of the first ten TCS Systems but with an overall deadline
of twelve months. The contract with Tirex-Europe does not come into effect until
Tirex-Europe delivers to us a first firm purchase order for a TCS System. To
date, Tirex Europe has not delivered any firm purchase orders and thus the Tirex
Europe Agreement remains ineffective. The Agreement has not, however, been
cancelled. In the interim, we are completely at liberty to undertake any
marketing activities we feel appropriate in those countries and regions where
Tirex Europe was to be active.

In January 2000, we signed a
License Agreement with Ocean Equipment Manufacturing and Sales Co. ("OEMS") of
New Jersey, a company owned by Louis A. Sanzaro who is also a director and a
significant shareholder of Tirex, for the marketing and for the manufacturing,
installation and service of our tire recycling systems in the U.S. market. Under
the terms of the Agreement, we would receive a royalty for each system sold,
subject to adjustments respecting actual manufacturing costs. As of June 30,
2003, OEMS had not yet concluded any sales of TCS Systems to independent
parties. As reported in a previous 10-KSB, Mr. Sanzaro had accepted to
relinquish his exclusivity with respect to the US market. We are now dealing
with potential US customers directly or through go-betweens on a case-by-case
basis, and, as such, the Company has not had to pay any up-front fees or
commissions or assume any marketing expenses incurred by such independent
persons.

On January 31, 2001, we entered
into an Agreement with James Conway, an Australian national, under which he was
named Business Development Manager Asia. Under this Agreement, Mr. Conway was
directed to find a Japanese licensee to produce and sell TCS Systems. The
Japanese company eventually selected would have exclusive rights to the Japanese
market and non-exclusive rights in other Asian markets. This five-year agreement
with Mr. Conway provides for the payment of 10% of the License Fee paid by the
Japanese company plus a 1% commission on sales made within five years on all
sales made by the licensed Japanese manufacturer. On August 10, 2001, we further
appointed Mr. Conway as a Sales Representative in Asian markets which would be
outside of Japan, the territory which would be attributed to an eventual
Japanese licensee. Under the terms of this three-year agreement, Mr. Conway
would receive a commission equal to 5% of the selling price, before any sales or
value-added taxes, customs and excise taxes and similar levies which might be
imposed by a government. This Agreement expired on August 8, 2004.

---



In January 2003, the Company
entered into a License Agreement with Simpro S.p.A. for exclusive manufacturing
rights and for non-exclusive marketing rights with respect to TCS Systems.
Simpro is currently in discussions with the Italian government respecting
financing of the construction of a new demonstration model in Italy, which it
plans to use to support their marketing efforts. To date, Simpro has not sold
any systems.

Since Fiscal 2002
and to date, the Company received several expressions of interest to market our
systems in worldwide markets but the Company is unwilling to give market
exclusivity to anybody except on a customer-by-customer basis.

The lack of a significant track
record relative to the operation and output of the TCS System has proven to be
difficult hurdle to overcome in making TCS System sales. The installed cost of a
TCS-1 System to an entrepreneur, depending on the system configuration, the
condition of the feedstock and the output requirements and excluding building
and infrastructure costs, is in the vicinity of Euros4,300,000 (approximately
US$5.25 million at prevailing exchange rates). For a TCS-2, the comparable cost
to the entrepreneur is in the vicinity of Euros5,500,000 (approximately US$6.7
million at prevailing exchange rates). This represents a substantial investment
for an entrepreneur and, without performance guarantees to substitute for the
lack of a significant operating history, entrepreneurs or their financial
backers have heretofore been unwilling to accept the risk of purchasing a new
technology. Simpro has been able to obtain insurance backing to support their
offer of limited performance guarantees, and such potential is expected to
assist the marketing effort. Simpro is now offering limited Performance
Guarantees.

Potential System Sales Initiated Prior to Fiscal 2005

Puerto Rico

Recycletron Inc.

---



Marketing Efforts Initiated or Pursued During Fiscal 2005

During Fiscal 2005, the Company
and Simpro have responded to numerous requests for information. Out of these
requests, several opportunities have presented themselves which merited the
expenditure of considerable effort to close a Purchase and Sales Agreement. In
addition to the Puerto Rican project, Tirex and Simpro are actively pursuing
opportunities In Mexico, Australia, Morocco, Malaysia, and the Middle East, and
Simpro is continuing to work with the potential Botswana customer. With respect
to the Moroccan and Middle Eastern opportunities, Tirex and Simpro have been
working with TPG Group, based in Virginia, the senior management of which has
represented to us as having extensive high-level contacts both in government and
in financial circles. All of these opportunities are well advanced. Simpro is
also pursuing interesting opportunities in the UK, France and Italy, while Tirex
is also pursuing an opportunity in Eastern Canada. However, regardless of
Management's optimism as the various opportunities enunciated above, there can
be no assurance that these opportunities will actually result in unconditional
sales contracts.

The finalizing of the License
Agreement with Simpro means that the gross revenues from these sales will be
recorded on Simpro's books, not in the books of Tirex. The amount remitted back
to Tirex will take the form of a royalty and will be accounted for as such. Even
if these sales would have been set up in such a way as to be recordable on the
books of Tirex, generally accepted accounting principles in effect in the USA
would have prevented the Company from recognizing the revenue as such until the
systems would have been accepted by the customers. Given the time line required
to manufacture, install and have accepted these systems, it is quite unlikely
that these revenues would become recognizable during our fiscal year which will
end June 30, 2005. By extension, the same principles would apply to the royalty
to be received by Tirex. While the Company will benefit from the periodic cash
inflows resulting from progress payments during the next approximately ten
months, the royalty will, in fact, not have been earned until the systems are
accepted by the customers.

In February of 2001, we concluded
a private financing with an investor group. Under the terms of the Agreement, we
had the contractual right to require the Investor to purchase up to US$5,000,000
of put notes. We drew down US$750,000 of this amount and used the proceeds of
this financing toward legal and consulting fees due, normal operating expenses
such as payroll, rent and taxes and the acquisition of equipment for our
prototype TCS-1 Plant. In July of 2001, the Company entered into a technical
default with respect to the Agreement by not having an SB-2 Registration
Statement declared effective by the SEC. After several months of negotiations,
the Company entered into a Settlement Agreement with the Investor Group which
provided for a cash paydown of the amount owed, including interest and penalties
over a period of approximately two years starting with the date the Settlement
Agreement was signed, the right of the Investor Group to continue to be able to
sell up to 600,000 collateral and Rule 144 shares per month and the issuance of
three series of warrants, 500,000 each, exercisable at prices of one cent, five
cents and ten cents over a three year period. This Settlement Agreement was
announced in April of 2002, and details of the terms of the Agreement are filed
as an Exhibit to this Report. The Company, in the absence of having completed
its first sales of TCS Systems according to our expectations, was unable to
generate the cash flow necessary to pay down the Convertible Note in accordance
with the terms of the Settlement Agreement. Thus, the Company once again finds
itself in a position of default. Numerous recourses are available to the holders
of the Convertible Notes, but to date, these recourses have not been exercised.
Such recourses can be exercised at any time and the fact that they have not been
exercised so far does not preclude their being exercised now or in the future.
The Company has kept the Convertible Note holders apprised of its efforts to
sell TCS Systems and thus restart the repayments on the Convertible Notes.

Because of the lengthy delay
preceding the commencement of commercial operations, we have historically had to
cover our overhead costs from sources other than from commercial revenues. We
expect that some portion of our future overhead costs, which may be quite
significant, will continue to be covered from sources other than commercial
revenues. Until December of 2001, our monthly operating costs were about
US$100,000 per month. With the cessation of production activities and the
scaling back of research and development expenditures starting in January of
2002, our monthly costs were reduced to approximately US$35,000 per month. Since
March of 2003, our monthly our-of-pocket cash costs have
been reduced to negligible amounts. Our cash flow
deficit condition will continue until such time as the Company will start
generating revenues from the sale of TCS Systems.

---

While we have initiated marketing
of TCS Systems and have in place a License Agreement, as of September 30, 2005,
no unconditional sales orders for TCS Systems had been received and
manufacturing of TCS Systems has not been initiated. We do anticipate that we
will begin selling or licensing out the sale of TCS Systems and thus initiating
the manufacturing of these systems on a commercial basis in the near future. We
did not generate any gross sales during either Fiscal 2004 or Fiscal 2005.
Unless and until we successfully develop and commence TCS System manufacturing
and sales operations on a full-scale commercial level, we will not generate
significant revenues from operations. Accordingly, we would be obligated to
attempt to seek non-commercial sources of revenues to support operations until
TCS Systems sales and manufacturing operations would become a reality. In the
event of such a circumstance, there can further be no assurance that such
non-commercial revenue funding would be available at all or on terms acceptable
to management. Except for the foregoing, we have never engaged in any
significant business activities.
Liquidity and Capital Resources
As of June 30,
2005, the Company had total assets of $233,297 as compared to $233,297 at June
30, 2004 reflecting no change, and also no change versus total assets at June
30, 2003. had reflected a previous decrease of $1,069,657 over $1,302,955 at
June 30, 2002. There were no changes in the value of individual assets,
representing Notes Receivable, Inventory, Property and Equipment and an
Investment, from June 30, 2004 to June 30, 2005.
As of June 30,
2005, the Company had total liabilities of $5,034,195 as compared to $4,327,710
at June 30, 2004, reflecting an increase in liabilities of $706,485. Total
liabilities at June 30, 2004 had reflected a previous increase of $578,829 over
$3,748,881 in total liabilities at June 30, 2003. The increase in total
liabilities from June 30, 2004 to June 30, 2005 is primarily attributable to: (i)
an increase in Accounts Payable and Accrued Liabilities and Current Portion of
Long-Term Debt in the amount of $263,985 from $2,167,130 as of June 30, 2004 to
$2,431,115 as of June 30, 2005, (ii) an increase in Convertible Loans in the
amount of $629,467 from $1,171,168 as of June 30, 2004 to $1,800,635 as of June
30, 2005, and (iii) a decrease in Convertible Notes in the amount of $186,967
from $586,356 as of June 30, 2004 to $399,389 as of June 30, 2005.
Reflecting the
foregoing, the financial statements indicate that as at June 30, 2005, the
Company had a working capital deficit (current assets minus current liabilities)
of $2,337,318 and that as at June 30, 2004, the Company had a working capital
deficit of $2,073,333, a working capital deficit increase of $263,985. There
were no changes in current assets, as noted above, while there were additions to
current liabilities due to third parties represented by Accounts Payable and
Accrued Liabilities.

Results of Operations

The financial statements which are
included in this report reflect total operations and other expenses of $576,766
for the year ended June 30, 2005, which reflects an increase of $16,532 over the
year ended June 30, 2004 when total operations and other expenses were $560,234.
The Company has ceased Research and Development activities thereby resulting in
a significant decrease in personnel expenses and other Research and Development
expenses compared with prior periods.

The success of the
tire recycling manufacturing business and the ability to continue as a going
concern will be dependent upon the ability of the Company to obtain adequate
financing to commence profitable, commercial manufacturing and sales activities
and the TCS Systems' ability to meet anticipated performance specifications on a
continuous, long term commercial basis.

The Company
believes that the amounts accrued to date in respect of the shares issued to
compensate the executive officers and consultants reflect the fair value of the
services rendered, and that the recipients of such shares received such shares
at an appropriate and reasonable discount from the then current public
market price. The
Company believes that the discount is warranted due to the fact that there are
often restrictions on the transfer of said shares arising out of the absence of
registration, and the uncertainty respecting our ability to continue as a going
concern.

---

From inception
(July 15, 1987) through June 30, 2005, the Company has incurred a cumulative net
loss of $29,742,164. 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 the proposed
health care operations and therefore, generated no revenues therefrom.
ITEM 7. FINANCIAL STATEMENTS
Our financial statements required
to be included in this Report pursuant to Item 310(a) of Regulation S-B, are set
forth below.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Following the end of Fiscal 2004,
our independent certifying accountant informed us that he was abandoning all
SEC-oriented work. Thus, we have no choice but to change our certifying
accountant effective with the annual financial statements for the year ended
June 30, 2004. The resignation of our former certifying accountant was not
related in any way to any disputes respecting the Company's accounting or its
financial disclosures to shareholders or other interested parties. We have been
attempting to engage new certifying accountants but our financial condition has
not permitted us to find one as of yet. Once our financial condition will have
improved, we will engage independent certifying accountants and will file
amended reports with their certifications.
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
June 30, 2005 the names and ages of all directors, executive officers, and other
significant employees of the Company; and all positions and offices in the
Company held by each, and the terms of said offices. Each director will hold
office until the next annual meeting of shareholders and until his or her
successor has been elected and qualified:

|                      |     | Offices                      | Term of        
|--------------------- | --- | ---------------------------- | ---------------
|Name                  | Age | Held                         | Office         
|John L. Threshie, Jr. | 51  | Chairman of the Board        | November 1999 -
|                      |     | of Directors, President, and | present        
|                      |     | Chief Executive Officer      |                
|                      |     | Director                     | June 1995 -    
|                      |     |                              | February 1999  
|                      |     | Vice President               | June 1995-     
|                      |     |                              | November 1999  
|                      |     |                              | Secretary      
|                      |     |                              | December 1996  
|                      |     |                              | February 1999  

---



|Louis V. Muro    | 73 | Vice President         | January 1996 -            
|---------------- | -- | ---------------------- | --------------------------
|                 |    | of Engineering         | present                   
|                 |    | and Director           |                           
|                 |    | President              | March 1994 -              
|                 |    |                        | January 1995              
|                 |    | Director               | December 1992 -           
|                 |    |                        | January 1995              
|                 |    | Secretary              | December 1992 - March 1994
|                 |    |                        |                           
|Louis Sanzaro    | 56 | Director               | January 1997 - present    
|                 |    | President              | February 1999 -           
|                 |    |                        | November 1999             
|                 |    | Vice President         | January 1998 -            
|                 |    | of Operations          | February 1999             
|                 |    |                        |                           
|Michael D.A. Ash | 56 | Secretary, Treasurer,  | February 1999-            
|                 |    | and Chief Financial    | present                   
|                 |    | and Accounting Officer |                           

The Board of Directors has no standing committees.

Family Relationships

No family relationships exist
between any director or 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.

JOHN L. THRESHIE, JR. Mr. Threshie has served as President and Chief
Executive Officer of the Company since November of 1999. Prior to that time he
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's
Degree in Political Science from the University of North Carolina. He was
employed as an insurance and 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 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.

---



LOUIS SANZARO

MICHAEL D.A. ASH

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

None of the 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

The following
table sets forth information concerning the annual compensation received or
accrued for services provided in all capacities for the fiscal years ended June
30, 2003, 2004 and 2005 by our chief executive and all our executive officers
serving as such as at June 30, 2005 or at any time during the year ended June
30, 2005. Common stock issued in lieu of cash salary payments was valued at a
30-50% discount from 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. With
respect to the issuance of shares during the fourth quarter of Fiscal 2003, this
issuance representing but partial compensation to those directors and officers
to whom sums were due, the period involved was prior to the company's stock
being demoted to the gray sheets, and thus reference to the Bulletin Board
prices still applied. The discount from the market price was determined
arbitrarily, by negotiation between the Company and our executive officers and
did not bear any relationship to any established valuation criteria such as
assets, book value, or prospective earnings. The market prices of our common
stock and the liquidity of such market has historically been volatile. Future
announcements concerning us, our competitors, results of testing, technological
innovations or new commercial products may have a significant impact on the
market price of our common stock. We believe that, as of the dates when such
shares were issued, the actual market value of such shares was, and as of the
date hereof remains, highly contingent upon, and subject to, extremely high
risks.

---



SUMMARY COMPENSATION TABLE:

|ANNUAL COMPENSATION         
|----------------------------
|                            
|Name and Principal Position 
|                            
|John L. Threshie Jr.        
|President                   
|                            
|                            
|Louis V. Muro               
|Vice President - Engineering
|                            
|                            
|Michael D.A. Ash            
|Secretary-Treasurer & CFO   
|                            

In 1999, Mr. Ash abrogated his then existing Employment Agreement. This was
replaced by a Consulting Agreement for a period of sixteen (16) months to the
end of Calendar 2000. Under this consulting agreement, Mr. Ash received
2,000,000 shares of the common stock of the Company. A new employment Agreement
with an effective date of January 2001 was put into effect and the prior
Consulting Agreement was allowed to lapse. Under that Employment Agreement, Mr.
Ash earned a salary of $100,000 and Mr. Ash also had options to purchase stock
of the company at the lesser of 20(cent) for the first year option, 40(cent) for
the second year option and 50(cent) for the third year option, or 50% of market
applicable to each series. The options were exercisable on a cashless basis..
Prorating the stock issuance over the sixteen month term of the prior Consulting
Agreement, in Fiscal 2000, Mr. Ash was entitled to 1,250,000 shares of stock.
There was no cash salary in Fiscal 2000 for Mr. Ash. For Fiscal 2001, Mr. Ash
received the balance of his stock entitlement, i.e. 750,000 shares, and was
entitled to receive $50,000 in cash. For Fiscal 2002 and 2003, Mr. Ash was
entitled to receive $100,000 annually. Mr. Ash exercised the stock options
available to him under the Employment Agreement which terminated December 31,
2003. Mr. Ash's Employment Agreement was renewed for a three-year period
starting January 1, 2004. Until this renewed agreement, Mr. Ash will continue to
be entitled to receive an annual salary of $100,000, and Mr. Ash will be granted
a new set of options identical, other than for dates, to the options granted in
the preceding agreement.

> (1) No compensation was paid either in cash or in
>   shares to Messrs. Threshie, Muro and Ash during Fiscal 2004 and 2005. The
>   amounts due have been recorded as liabilities of the Company.

---



> (2) During Fiscal 2003, Mr. Threshie received
>   2,500,000 commons shares of the stock of our Company in partial compensation
>   for salary and expenses, issued at a 35% discount to market.
>   (3) In lieu of cash payment of salary,
>   reimbursable expenses and other benefits, Mr. Threshie was issued shares of
>   our Common Stock and was permitted to purchase shares during FY 2002 at a
>   discount of 35% currently in effect versus 50% in prior years, of the then
>   current market price. The number of shares issued to Mr. Threshie pursuant
>   thereto during fiscal 2002 aggregated 6,555,709 shares. It is our intention
>   and that of Mr. Threshie to continue to enter into similar transactions during
>   fiscal year 2003 for all or part of his salary and for reimbursement of
>   expenses.
>   (4) During Fiscal 2003, Mr. Muro received
>   2,000,000 common shares of the stock of our Company in partial compensation
>   for salary and expenses, issued at a 35% discount to market.
>   (5) In lieu of cash payment of salary,
>   reimbursable expenses and other benefits, Mr. Muro, from time to time, was
>   issued shares of our Common Stock and purchased shares during FY 2002 at a
>   discount of 35% currently in effect, versus 50% in prior years, of the then
>   current market price. The number of shares issued to Mr. Muro pursuant thereto
>   during fiscal 2002 aggregated 2,250,000 shares.
>   (6) In lieu of cash payment of salary,
>   reimbursable expenses and other benefits, Mr. Ash received 2,100,000 common
>   shares of our Company, as partial compensation, during Fiscal 2003, issued at
>   a 35% discount to market. During Fiscal 2003, Mr. Ash notified the Company of
>   his desire to exercise his first option under his Employment Agreement. The
>   Company has not yet issued the 500,000 shares necessary to satisfy this
>   exercise on a cashless basis, as provided for in the Employment Agreement.
>   (7) In lieu of cash payment of salary,
>   reimbursable expenses and other benefits, Mr. Ash received 3,468,603 common
>   shares of our Company during Fiscal 2002, issued at a 35% discount to market,
>   (8) We believe that it is impossible to determine
>   the actual current or potential value of such shares in light of the fact
>   that, as of the dates when such shares were issued to the executive officers,
>   the actual potential market value of such shares were 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 our business;
>   (ii) our lack of sufficient funds to implement our 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; and (iv) the uncertainty respecting our ability to continue as a
>   going concern.

The Tirex Corporation Stock Plan

On June 23, 2000 we adopted the
Tirex Corporation Stock Plan (the "Plan") to advance our interests and those of
our shareholders by affording to our key personnel, consultants and other
persons who have made substantial contributions to us an opportunity to acquire
or increase their proprietary interest in the Company by the issuance to such
individuals of Awards, Options or Grants under the terms set forth in the Plan.
By thus encouraging such individuals to become owners of our common stock we
seek to motivate, retain, and attract those highly competent individuals upon
whose judgment, initiative, leadership, and continued efforts our success in
large part depends.

The Plan originally provided that
up to 21,000,000 shares could be issued for this purpose, 7 million shares to be
given as awards, 7 million shares to underlie options to purchase common stock,
and 7 million shares to be given as grants. Awards and Options can only be given
to individuals who have been either in our employ, an officer, director or
consultant for the preceding 6 months. Awards are not fully vested until the end
of three years with the 1/12th of the aggregate award vesting at the end of each
quarter. If the Awardee is terminated for cause or resigns the unvested portion
of the award is forfeited. Options can be exercised at any time and upon
exercise the underlying stock is fully vested with the purchaser. The Options
are not transferable and are exerciseable for two (2) years after which time
they expire. If the Optionee is terminated for cause or resigns all unexercised
options are forfeited. A Grant of Stock pursuant to the terms of the Plan can
only be given to persons who have made a substantial contribution to us and the
shares are not forfeitable. Subsequent to the Plan's adoption an additional
5,000,000 shares of common stock were added to it and up to the 26,000,000
shares were made eligible to be given as either Awards, Grants or Options.

---



As discussed elsewhere in this Report, the following is a summary of those
options and warrants outstanding with respect to the purchase of the common
stock of the Company:

|Beneficiary           | Issuable                 | Exercise Window            | Price                     
|--------------------- | ------------------------ | -------------------------- | --------------------------
|John L. Threshie Jr.  | 1,000,000 share options  | Two (2) years from date    | Series 1: lesser of 20    
|                      | at the beginning of each | of issue                   | cents or 50% of market    
|                      | of Calendar Years        |                            | Series 2: lesser of 40    
|                      | 2002, 2003 and 2004      |                            | cents or 50% of market    
|                      |                          |                            | Series 3: lesser of 50    
|                      |                          |                            | cents or 50% of market    
|Michael Ash           | 1,000,000 share options  | Two (2) years from date    | Series 1: lesser of 20    
|                      | at the beginning of each | of issue                   | cents or 50% of market    
|                      | of Calendar Years        |                            | Series 2: lesser of 40    
|                      | 2004, 2005 and 2006      |                            | cents or 50% of market    
|                      |                          |                            | Series 3: lesser of 50    
|                      |                          |                            | cents or 50% of market    
|Convertible Debenture | 1,500,000 in three       | Series 1: At any time      | Series 1 at one (1) cent  
|                      | series of 500,000 each   | during the 3-year period   | each                      
|                      |                          | following the date of the  | Series 2 at five (5) cents
|                      |                          | Settlement Agreement,      | each                      
|                      |                          | to wit, April 26, 2002     | Series 3 at ten (10)      
|                      |                          | Series 2: During the       | cents each                
|                      |                          | second and third years     |                           
|                      |                          | following April 26, 2002   |                           
|                      |                          | Series 3: During the       |                           
|                      |                          | third year following April |                           
|                      |                          | 26, 2002                   |                           

Mr. Ash has exercised the options
which had been granted to him with respect to the options granted under the
Employment Agreement which terminated December 31, 2003. This was done on a
cashless basis, resulting in 1,500,000 shares being issuable to Mr. Ash. These
shares will be issued, subject to adjustments for stock splits and stock
dividends, if any, occurring prior to the issuance to Mr. Ash, at such time when
the Company will have an adequate number of shares available for issue.

Compensation of Directors

The Directors of the Company were
not compensated for their services as such in fiscal 2005.

Employment Agreements

We seek to maintain employment
agreements with all of our executive officers (the "Executive Agreements"). We
currently have an employment agreement with Mr. Threshie that provides for an
annual salary of $125,000 and is in effect until December 31, 2003. Mr. Threshie
also has options , as noted above, to purchase shares of the Company. Mr.
Threshie is granted options to purchase 1,000,000 shares at each anniversary
date of his Employment Agreement for the next three years, and, for each series
of options, has a two-year period to exercise that option. The options are
exercisable at the lesser of 50% of market and 20(cent) for the first series,
40(cent) for the second series and 50(cent) for the third series. We currently
employ Mr. Muro on a month-to-month basis, based on an annual salary projection
of $150,000. During fiscal 2000 Mr. Ash voluntarily abrogated his Executive
Agreement with us and entered into a new agreement under which his compensation
is in the form of shares. Under this new agreement, Mr. Ash continued to act as
Secretary-Treasurer and Chief Financial Officer on a consulting basis. Under the
terms of the original Executive Agreement, Mr. Ash's annual compensation was
US$125,000. The consulting agreement extended to December 31, 2000 and was
renewable by mutual consent of the Company and Mr. Ash. Mr. Ash's compensation
for the sixteen-month period ended December 31, 2000 was 2,000,000 common
shares, subject to prorated adjustment in the event of a stock split. At the
beginning of Calendar 2001, Mr. Ash's consulting agreement was converted back to
an Employment Agreement under which Mr. Ash earns an annual salary of $100,000
and has options, as noted above, to purchase company stock on terms identical to
the options granted to Mr. Threshie. As of the date of this Report, Mr. Ash had
exercised all of his options on a cashless basis, thus resulting in 1,500,000
shares being issuable to Mr. Ash. The Company currently has less than 105,000
shares available for issue. Thus, the shares issuable to Mr. Ash will remain as
such until the Company does have adequate shares to satisfy this transaction.
Any shares ultimately issuable to Mr. Ash will be automatically adjusted for
stock splits and stock dividends, if any, occurring prior to the issuance of
shares to Mr. Ash.

---



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. 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 us, reimbursement of business related
expenses, the nondisclosure of information which we deem to be confidential to
it, non-competition by the executive with us for the one-year period following
termination of employment with us and for various other terms and conditions of
employment.

The Executive Agreements with
Messrs. Threshie, Muro 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 us other than for cause, or by the 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:

In the case of Messrs. Threshie
and Muro, 200% of the amount of the base salary for a period of twelve months;
In the case of Mr. Ash, the amount of severance compensation for termination
other than for cause, or by the executive for "good reason", as that term is
defined in the Executive Agreements, or pursuant to a change in control of the
Company, amounts to twice his annual base salary plus four months of base salary
for each year of service following February 11, 1999.

Because of the early stage of our
development, our lack of operations and insignificant cash flow, since January
18, 1995, we have not had the resources to meet fully our financial obligations
under the Executive Agreements. As a result, the major portion of compensation
which has been available to our executive officers has consisted of shares of
our common stock, which such individuals accepted, in lieu of cash compensation,
for a substantial portion of salary and/or consulting fees due to them.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth
information as of October 1, 2004, 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 and of all Officers and Directors of the Company
as that term is defined in Item 402(a)(2) of Regulation S-B. Neither the Company
nor Tirex R&D have any shares of any other class issued or outstanding.

---



|            | Name and                           | Amount and      |             
|----------- | ---------------------------------- | --------------- | ------------
|Title       | Address of                         | Nature of       |             
|of          | Beneficial                         | Percent         | Percent     
|Class       | Owner                              | Ownership       | of Class (1)
|            |                                    |                 |             
|Common      | John L. Threshie, Jr.              | 2,000,000(2)    | 0.8%        
|The Tirex   | 4055 Ste-Catherine Street
    West |                 |             
|Corporation | Suite 151                          |                 |             
|            | Westmount), Quebec                 |                 |             
|            | Canada, H3Z 3J8                    |                 |             
|            |                                    |                 |             
|Class A     |                                    |                 |             
|Common      |                                    | 34 (5)          | 34%         
|Tirex       |                                    |                 |             
|R&D         |                                    |                 |             
|            |                                    |                 |             
|Common      | Louis V. Muro                      | 5,978,957(2)(3) | 2.39%       
|The Tirex   | 374 Oliver Avenue                  |                 |             
|Corporation | Westmount, Quebec                  |                 |             
|            | Canada H3Z 3C9                     |                 |             
|            |                                    |                 |             
|Class A     |                                    |                 |             
|Common      |                                    | 17(5)           | 17%         
|Tirex       |                                    |                 |             
|R&D         |                                    |                 |             
|            |                                    |                 |             
|Common      | Louis V. Sanzaro                   | 16,281,088(2)   | 6.52%       
|The Tirex   | 1497 Lakewood Road                 |                 |             
|Corporation | Toms River, NJ 08755               |                 |             
|            |                                    |                 |             
|Common      | Michael Ash                        | 2,980,000 (4)   | 1.19%       
|The Tirex   | 310 Montée Sabourin                |                 |             
|Corporation | St. Bruno, Quebec                  |                 |             
|            | Canada, J3V 4P6                    |                 |             
|            |                                    |                 |             
|Common      | All directors and                  | 27,239,945      | 10.90%      
|The Tirex   | officers as a group                |                 |             
|Corporation | (4 persons)                        |                 |             
|            |                                    |                 |             
|Class A     | All directors and                  | 51              | 51.0%       
|Common      | officers as a group                |                 |             
|            |                                    |                 |             
|Tirex       | (2 persons)                        |                 |             
|R&D         |                                    |                 |             

(1) The percentages listed in the table is calculated on the basis of
249,895,892 shares of the common stock, $.001 par value, of the Company
outstanding as at October 1, 2004.

---



(2) Our executive officers, directors and principal shareholders pledged an
aggregate of 11,986,315 (approximately 6% of our then outstanding shares) of
their personal shareholdings in the Company as a security interest for our
issuance of $750,000 of 8% convertible notes, pursuant to a Subscription
Agreement and Security Agreement dated February 26, 2001. Specifically, John L.
Threshie, Jr. pledged 1,891,204 shares, Louis Muro pledged 1,723,514 shares and
Louis Sanzaro pledged 8,371597 shares of our common stock. The Company was
unable to respect its financial obligations under the terms of a Settlement
Agreement and negotiations with respect to a new settlement have not been
started. Under the terms of the first settlement agreement, the investors
acquired a right to dispose of the collateral shares in their possession.
According to a confirmation received from the investors with respect to the
convertible note, as of June 30, 2005, they were in possession of 4,000,000
conversion shares, issued in 2003, but the collateral shares have been sold.
Thus, the shares pledged by Messrs. Threshie, Muro and Sanzaro now represent a
liability of the Corporation. These shares will be replaced once the Corporation
will have enough shares available for issuance, subject to adjustments for stock
splits, reverse splits and stock dividends, if any, which occur prior to any
such issuance. These 4 million conversion shares represent approximately 1.6% of
our current outstanding stock.

(3) Includes: (i) 5,244,957 shares held of record by Mr. Muro as of October
1, 2004; and (ii) 734,000 shares held of record by Mr. Muro's wife, Nina Aviles
Muro.

(4) Includes: (i) 2,750,000 shares held of record by Mr. Ash as of September
30, 2004; and (ii) 230,000 shares held of record in the name of Loryta
Investments Limited an entity beneficially owned by the family of Mr. Ash. Does
not include the 1,500,000 shares issuable to Mr. Ash as a result of his having
exercised stock options, and for which an inadequate number of issuable shares
exist to satisfy this option.

(5) Messrs. Threshie 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 Company is in the process of preparing appropriate
documentation the effect of which would be to extend the duration of the
Agreement.

Changes in Control

On February 26, 2001 we issued
$750,000 worth of convertible notes at an annual rate of eight percent (8%) to
certain investors. Interest payable on these notes is payable quarterly
commencing June 30, 2001. In addition, all principal and unpaid interest due on
the outstanding notes is immediately due and payable on February 26, 2003, or
earlier in the event of a default. One of the conditions of this transaction was
that we would file with the Securities and Exchange Commission a Registration
Statement on Form SB-2 to register various securities issuable upon the
conversion of notes by a date certain and that the Registration Statement would
be effective by August 15, 2001. We failed to meet these deadlines and the
investors served a notice of default on us on July 19, 2001. Negotiations were
undertaken throughout the remainder of Calendar 2001 and into 2002 until a
Settlement Agreement was reached on April 26, 2002. Under the terms of the
Agreement, a copy of which was previously filed, the Company is obligated to pay
down the amount owed to the Investor Group, including interest and penalties,
over a period of approximately two years. During the time when an amount
continues to be owed to the Investor Group, the Investor Group had the right to
sell up to 600,000 collateral or Rule 144 shares per month and apply the
proceeds to interest due, fees and finally to reduction of the principle amount
outstanding. As of June 30, 2005, all of the collateral shares had been sold.
The Investor Group was also given three series of warrants for 500,000 shares
each, exercisable at prices of $0.01, $0.05 and $0.10 respectively and
exercisable within pre-defined time windows over a three year period starting
with the date of signature of the Settlement Agreement. . As of June 30, 2005,
the Investor Group had 4,000,000 conversion shares, issued in 2003, in their
possession.

---



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following is a description of
transactions during the last two fiscal years 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 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.

Pursuant to a Subscription
Agreement dated February 26, 2001 we issued $750,000 of 8% convertible notes,
due February 26, 2003 to three investors. Under the Subscription Agreement, we
had the option, subject to conditions, to require the investors to purchase
additional convertible put notes up to $4,250,000. Interest only payments were
due quarterly commencing June 30, 2001, and the principal was due in one lump
sum on February 26, 2003, or upon certain events of default. The number of
shares of common stock issuable upon conversion of the convertible notes is
15,000,000, based on a conversion price of $0.05 per share. One of the
conditions of this transaction was that we would file with the Securities and
Exchange Commission a Registration Statement on Form SB-2 to register various
securities issuable upon the conversion of the notes by a date certain and that
the Registration Statement would be effective by August 15, 2001. We failed to
meet these deadlines and the investors served a notice of default on us on July
19, 2001. The conversion price for the convertible notes is the lesser of (i)
80% of the average of the three lowest closing bid prices of the common stock
for the twenty-two (22) trading days prior to the closing date, or (ii) 80% of
the average of the five lowest closing bid prices of the common stock for the
sixty (60) trading days prior to the conversion date, as defined in the
convertible note. The maximum number of shares of common stock that any
subscriber or group of affiliated subscribers may own after conversion at any
given time is 4.99%.

During the years ended June 30,
2004 and 2005, the Company's executive officers and certain consultants to the
Company have waived cash payment of all of their salaries, fees and/or
unreimbursed expenses made by them on behalf of, and for the account of, the
Company, and, in 2003, have accepted shares of the Company's common stock in
partial payment in lieu thereof, with the remaining amounts payable still being
listed as liabilities of the Company. No cash payments nor payments in common
stock were made to such persons during Fiscal 2004 and 2005. In connection
therewith shares have been issued as follows:

During Fiscal 2004 and 2005, no
shares were issued. During fiscal 2003 various officers and former officers
received Common Stock in partial compensation with respect to salaries and
expense reimbursements and purchased shares of Common Stock totaling 6,600,000
shares. The shares issued or sold to officers were valued at thirty-five per
cent (35%) of the then current market price.

During fiscal 2000 the Company
modified its agreement with Oceans Tire Recycling & Processing Co., Inc. ("OTRP")
to clarify various terms of the parties prior agreements and to obtain a
commitment by OTRP to pay future lease payments on the Production Model system,
if necessary. The Company also exchanged its debt obligation to OTRP for
4,553,102 shares of its Common Stock, which was issued, pursuant to OTRP's
request, to its principal shareholder and President.

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, 2005
>   Consolidated Statements of Operations for the years ended June
>   30, 2004 and 2005, and cumulative for the period from inception (July 15,
>   1987) to June 30, 2005

---



> Consolidated Statements of Owners' Equity (Deficit) as at July 15, 1987 and
>   June 30, 2001 - 2005
>   Consolidated Statements of Cash Flows for the years ended June 30, 2004 and
>   2005 and cumulative for the period from inception (July 15,1987) to June 30,
>   2005

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

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

Reports on 8-K

No reports were filed on Form 8-K during
the fiscal year ended June 30, 2005

---



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/ JOHN L. THRESHIE,
    JR.      
|Date: October 13, 2005 | John L. Threshie, Jr.                 
|                       | 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.

|                                                | TITLE                   | SIGNATURES                | DATE            
|----------------------------------------------- | ----------------------- | ------------------------- | ----------------
|Principal Executive Officer:                    |                         |                           |                 
|John L. Threshie, Jr                            | Chairman of the Board   | /s/ JOHN L. THRESHIE, JR  | October 13, 2005
|                                                | of Directors and Chief  |                           |                 
|                                                | Executive Officer       |                           |                 
|                                                |                         |                           |                 
|Principal Financial and
    Accounting Officer: |                         |                           |                 
|Michael D.A. Ash                                | Secretary, Treasurer,   | /s/ MICHAEL D.A. ASH      | October 13, 2005
|                                                | and Chief Financial and |                           |                 
|                                                | Accounting Officer      |                           |                 
|                                                |                         |                           |                 
|A Majority of the Board of
    Directors:       |                         |                           |                 
|                                                |                         |                           |                 
|John L. Threshie, Jr.                           | Chairman of the Board   | /s/ JOHN L. THRESHIE, JR. | October 13, 2005
|                                                | of Directors            |                           |                 
|                                                |                         |                           |                 
|Louis Sanzaro                                   | Director                | /s/ LOUIS SANZARO         | October 13, 2005
|                                                |                         |                           |                 
|Louis V. Muro                                   | Director                | /s/ LOUIS V. MURO         | October 13, 2005

---



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, 2005 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.





---





THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005



---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEET
AS AT JUNE 30, 2005
UnauditedJune 30,2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    -Accounts receivable
    
    
    -Notes receivable
    
    
    20,475Inventory
    
    
    73,322Research and
    Experimental Development tax credits receivable
    
    -93,797Property and equipment,salvage value
    
    
    50,000Other assetsInvestment, at cost
    
    
    89,50089,500$
    233,297LIABILITIES AND STOCKHOLDERS'
    EQUITY (DEFICIT)Current LiabilitiesAccounts
    payable and accrued liabilties
    $
    2,353,024Current
    portion of long-term debt
    
    78,0912,431,115Other liabilitiesLong-term deposits and
    notes
    
    
    217,500Government
    loans (net of current)
    
    -Capital lease
    obligations (net of current)
    
    -Convertible notes
    
    
    399,389Convertible note
    
    
    185,556Convertible loans
    
    
    1,800,6352,603,0805,034,195Stockholders' Equity (Deficit)Common stock,
    $.001 par value, authorized250,000,000 shares, issued and outstanding249,895,892 shares (June 30, 2003 - 249,895,892 shares)
    
    249,896Additional paid-in capital
    
    
    25,222,219Deficit
    accumulated during the development stage
    
    (29,742,164)Unrealized
    gain (loss) on foreign exchange
    
    (530,849)(4,800,898)$
    233,297

---



|                                             | Twelve months
    ended |             | Cumulative from
|-------------------------------------------- | ----------------------- | ----------- | ---------------
|                                             |                         | June 30     |                
|                                             |                         | 2005        |                
|                                             |                         |             |                
|Revenues                                     | $                       | -           | $              
|                                             |                         |             |                
|Cost of Sales                                |                         | -           |                
|                                             |                         |             |                
|                                             |                         |             |                
|Gross profit                                 |                         | -           |                
|                                             |                         |             |                
|Operations                                   |                         |             |                
|General and administrative                   |                         | 524,146     |                
|Depreciat                                    |                         | -           |                
|Research and development                     |                         | -           |                
|                                             |                         |             |                
|Total Expense                                |                         | 524,146     |                
|                                             |                         |             |                
|Loss before other expenses (income)          |                         | (524,146)   |                
|                                             |                         |             |                
|Other expenses (income)                      |                         |             |                
|Interest expense                             |                         | 52,620      |                
|Interest income                              |                         | -           |                
|Income from stock options                    |                         | -           |                
|Loss on disposal of
    equipment            |                         | -           |                
|                                             |                         |             |                
|                                             |                         | 52,620      |                
|                                             |                         |             |                
|Net loss                                     |                         | (576,766)   |                
|                                             |                         |             |                
|Other comprehensive loss                     |                         |             |                
|Loss (gain) on foreign
    exchange          |                         | -           |                
|                                             |                         |             |                
|                                             |                         |             |                
|Net loss and comprehensive loss              | $                       | (576,766)   | $              
|                                             |                         |             |                
|Basic and Diluted net loss and comprehensive |                         |             |                
|loss per common share                        | $                       | (0.00)      | $              
|                                             |                         |             |                
|Weighted average shares of common            |                         |             |                
|stock outstanding                            |                         | 249,895,892 |                

---

Consolidated Statements of Stockholders' Equity (Deficit)

|                                                  |              |            |               | Deficit       |          |            
|------------------------------------------------- | ------------ | ---------- | ------------- | ------------- | -------- | -----------
|                                                  |              |            | Accumulated   |               |         
|                                                  |              | Additional | During        | Unrealized    |         
|                                                  | Common Stock | Paid-in    | Developmental | Foreign       |         
|                                                  | Shares       | Amount     | Capital       | Stage         | Exchange | Total      
|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 and comprehensive 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 and comprehensive loss
    for the 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 and comprehensive loss
    for the year  | -            | -          | -             | (575,771)     | -        | (575,771)  
|                                                  |              |            |               |               |          |            
|Balance at June 30, 1995                          | 16,794,390   | $16,792    | $1,957,315    | $ (1,977,719) | $ -      | $ (3,612)  

See Notes to Consolidated Financial Statements

---



Consolidated Statements of Stockholders' Equity (Deficit)

| |              |            |               | Deficit    |          |      
| | ------------ | ---------- | ------------- | ---------- | -------- | -----
| |              |            | Accumulated   |            |         
| |              | Additional | During        | Unrealized |         
| | Common Stock | Paid-in    | Developmental | Foreign    |         
| | Shares       | Amount     | Capital       | Stage      | Exchange | Total

|Balance at June 30, 1995                     | 16,794,390 | $ 16,792 | $ 1,957,315 | $ (1,977,719) | $ -       | $ (3,612)  
|-------------------------------------------- | ---------- | -------- | ----------- | ------------- | --------- | -----------
|                                             |            |          |             |               |           |            
|Stock issued fo                              | 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 and comprehensive lossfor the 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 and comprehensive loss for the 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   | 183,785    
|Stock options issued and outstanding         | -          | -        | 1,236,913   | -             | -         | 1,236,913  
|Grants issued                                | -          | -        | 669,906     | -             | -         | 669,906    
|Net loss and comprehensive loss for the 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  

See Notes to Consolidated Financial Statements

---

Consolidated Statements of Stockholders' Equity (Deficit)
DeficitAccumulatedAdditional
    During
    UnrealizedCommon Stock
    Paid-in
    Developmental
    ForeignShares
    Amount
    Capital
    Stage
    Exchange
    Total

|Balance at June 30, 1998                     | 63,641,438  | $ 63,642 | $10,258,116 | $(10,051,483) | $ 183,785 | $ 454,060  
|-------------------------------------------- | ----------- | -------- | ----------- | ------------- | --------- | -----------
|                                             |             |          |             |               |           |            
|Stock issued for services                    | 24,200,439  | 24,200   | 2,735,544   | -             | -         | 2,759,744  
|Stock issued for options                     | 2,234,567   | 2,235    | 38,765      | -             | -         | 41,000     
|Shares issued in exchange for debt           | 3,787,947   | 3,788    | 340,164     | -             | -         | 343,952    
|Conversion of debentures                     | 2,816,966   | 2,817    | 290,102     | -             | -         | 292,919    
|Issuance of common stock                     | 677,966     | 678      | 49,322      | -             | -         | 50,000     
|Unrealized foreign exchange                  | -           | -        | -           | -             | (29,142)  | (29,142)   
|Stock options issued and outstanding         | -           | -        | 385,600     | -             | -         | 385,600    
|Grants issued                                | -           | -        | 1,057,742   | -             | -         | 1,057,742  
|Net loss and comprehensive loss for the year | -           | -        | -           | (4,909,879)   | -         | (4,909,879)
|                                             |             |          |             |               |           |            
|Balance at June 30, 1999                     | 97,359,353  | 97,360   | 15,155,355  | (14,961,362)  | 154,643   | 445,996    
|                                             |             |          |             |               |           |            
|                                             |             |          |             |               |           |            
|Stock issued for services                    | 28,873,210  | 28,873   | 2,217,758   | -             | -         | 2,246,631  
|Stock issued for options                     | 5,327,486   | 5,327    | 381,600     | -             | -         | 386,927    
|Shares issued in exchange for debt           | 7,342,055   | 7,342    | 382,556     | -             | -         | 389,898    
|Conversion of debentures                     | 12,010,073  | 12,010   | 815,796     | -             | -         | 827,806    
|Issuance of common stock                     | 221,000     | 221      | 16,039      | -             | -         | 16,260     
|Unrealized foreign exchange                  | -           | -        | -           | -             | 5,789     | 5,789      
|Grants issued                                | -           | -        | 395,683     | -             | -         | 395,683    
|Net loss and comprehensive loss for the year | -           | -        | -           | (5,548,829)   | -         | (5,548,829)
|                                             |             |          |             |               |           |            
|Balance at June 30, 2000                     | 151,133,177 | 151,133  | 19,364,787  | (20,510,191)  | 160,432   | (833,839)  
|                                             |             |          |             |               |           |            
|Stock issued for services                    | 7,375,483   | 7,375    | 864,840     | -             | -         | 872,215    
|Stock issued for options                     | 5,378,507   | 5,379    | 506,998     | -             | -         | 512,377    
|Shares issued in exchange for debt           | 11,646,312  | 11,646   | 1,547,455   | -             | -         | 1,559,101  
|Conversion of debentures                     | 100,000     | 100      | 19,900      | -             | -         | 20,000     
|Issuance of common stock                     | 732,929     | 733      | 39,427      | -             | -         | 40,160     

|Unrealized foreign exchange                      | -           | -         | -           | -             | (340,661)   | (340,661)   
|------------------------------------------------ | ----------- | --------- | ----------- | ------------- | ----------- | ------------
|Grants issued                                    | -           | -         | 249,294     | -             | -           | 249,294     
|Net loss and comprehensive
    loss for the year | -           | -         | -           | (3,112,138)   | -           | (3,112,138) 
|                                                 |             |           |             |               |             |             
|Balance at June 30, 2001                         | 176,366,408 | $ 176,366 | $22,592,701 | $(23,622,329) | $ (180,229) | $(1,033,491)

See Notes to Consolidated Financial Statements

---



Consolidated Statements of Stockholders' Equity (Deficit)

| |              |            |               | Deficit    |          |      
| | ------------ | ---------- | ------------- | ---------- | -------- | -----
| |              |            | Accumulated   |            |         
| |              | Additional | During        | Unrealized |         
| | Common Stock | Paid-in    | Developmental | Foreign    |         
| | Shares       | Amount     | Capital       | Stage      | Exchange | Total

|Balance at June 30, 2001                     | 176,366,408 | $ 176,366 | $ 22,592,701 | $ (23,622,329) | $ (180,229) | $ (1,033,491)
|-------------------------------------------- | ----------- | --------- | ------------ | -------------- | ----------- | -------------
|                                             |             |           |              |                |             |              
|Stock issued for services                    | 18,466,162  | 18,466    | 314,859      | -              | -           | 333,325      
|Stock issued in exchange for debt            | 24,075,502  | 24,076    | 1,145,090    | -              | -           | 1,169,166    
|Issuance of common stock                     | 5,849,487   | 5,850     | 61,897       | -              | -           | 67,747       
|Unrealized foreign exchange                  | -           | -         | -            | -              | (19,940)    | (19,940)     
|Grants issued                                | -           | -         | 504,352      | -              | -           | 504,352      
|Net loss and comprehensive loss for the year | -           | -         | -            | (3,421,460)    | -           | (3,421,460)  
|                                             |             |           |              |                |             |              
|Balance at June 30, 2002                     | 224,757,559 | $ 224,758 | $ 24,618,899 | $ (27,043,789) | $ (200,169) | $ (2,400,301)
|                                             |             |           |              |                |             |              
|Stock issued for services                    | 5,455,000   | 5,455     | 130,920      | -              | -           | 136,375      
|Stock issued in exchange for debt            | 15,400,000  | 15,400    | 441,183      | -              | -           | 456,583      
|Issuance of common stock                     | 4,283,333   | 4,283     | 31,217       | -              | -           | 35,500       
|Unrealized foreign exchange                  | -           | -         | -            | -              | (182,365)   | (182,365)    
|Grants issued                                | -           | -         | -            | -              | -           | -            
|Net loss and comprehensive loss for the year | -           | -         | -            | (1,561,375)    | -           | (1,561,375)  
|                                             |             |           |              |                |             |              
|Balance at June 30, 2003                     | 249,895,892 | $ 249,896 | $ 25,222,219 | $ (28,605,164) | $ (382,534) | $ (3,515,583)

See Notes to Consolidated Financial Statements

---



Consolidated Statements of Stockholders' Equity (Deficit)

| |              |            |               | Deficit    |          |      
| | ------------ | ---------- | ------------- | ---------- | -------- | -----
| |              |            | Accumulated   |            |         
| |              | Additional | During        | Unrealized |         
| | Common Stock | Paid-in    | Developmental | Foreign    |         
| | Shares       | Amount     | Capital       | Stage      | Exchange | Total

|Balance at June 30, 2003                     | 249,895,892 | $ 249,896 | $ 25,222,219 | $ (28,605,164) | $ (382,534) | $ (3,515,583)
|-------------------------------------------- | ----------- | --------- | ------------ | -------------- | ----------- | -------------
|Unrealized foreign exchange                  |             |           |              |                | (18,597)    |              
|Net loss and comprehensive loss for the year |             |           |              | (560,234)      |             |              
|                                             |             |           |              |                |             |              
|Balance at June 30, 2004                     | 249,895,892 | $ 249,896 | $ 25,222,219 | $ (29,165,398) | $ (401,131) | $ (4,094,414)
|                                             |             |           |              |                |             |              
|Unrealized foreign exchange                  |             |           |              |                | (129,718)   | (129,718)    
|Net loss and comprehensive loss for the year |             |           |              | (576,766)      |             | (576,766)    
|                                             |             |           |              |                |             |              
|Balance at June 30, 2005                     | 249,895,892 | $ 249,896 | $ 25,222,219 | $ (29,742,164) | $ (530,849) | $ (4,800,898)

See Notes to Consolidated Financial Statements

---



THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                                  |   | Twelve months
    ended |   | Cumulative from      
|----------------------------------------------------------------- | - | ----------------------- | - | ---------------------
|                                                                  |   | June 30                 |   | March 26, 1993
    to
|                                                                  |   | 2005                    |   | 2004                 
|                                                                  |   |                         |   |                      
|Cash flows from operating activities:                             |   |                         |   |                      
|                                                                  |   |                         |   |                      
|Net loss                                                          | $ | (576,766)               | $ | (560,234)            
|                                                                  |   |                         |   |                      
|Adjustments to reconcile
    net loss to net cash                 |   |                         |   |                      
|used in operating activities:                                     |   |                         |   |                      
|Depreciation and
    amortization                                 |   | -                       |   | -                    
|(Gain) loss on disposal
    and abandonment of assets             |   | -                       |   | -                    
|Stock issued in exchange
    for interest                         |   | -                       |   | -                    
|Stock issued in exchange
    for services and expenses            |   | -                       |   | -                    
|Stock options issued in
    exchange for services                 |   | -                       |   | -                    
|Unrealized (loss) gain on
    foreign exchange                    |   | (129,718)               |   | (18,597)             
|Other non-cash items                                              |   | 442,500                 |   | 282,188              
|                                                                  |   |                         |   |                      
|Changes in assets and liabilities:                                |   |                         |   |                      
|(Increase) decrease in:                                           |   |                         |   |                      
|Account receivable                                                |   | -                       |   | -                    
|Inventory                                                         |   | -                       |   | -                    
|Sales tax receivable                                              |   | -                       |   | -                    
|Research and experimental
    development tax credits receivable  |   | -                       |   | -                    
|Other assets                                                      |   | -                       |   | -                    
|(Decrease) increase in :                                          |   |                         |   |                      
|Accounts payables and
    accrued liabilities                     |   | 51,484                  |   | 121,643              
|Accrued salaries                                                  |   | 212,500                 |   | 175,000              
|Due to stockholders                                               |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Net cash used in operating activities                             |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Cash flow from investing activities:                              |   |                         |   |                      
|Increase in notes
    receivable                                  |   | -                       |   | -                    
|Reduction in notes
    receivable                                 |   | -                       |   | -                    
|Investment                                                        |   | -                       |   | -                    
|Equipment                                                         |   | -                       |   | -                    
|Equipment assembly costs                                          |   | -                       |   | -                    
|Organization cost                                                 |   | -                       |   | -                    
|Reduction in security
    deposit                                 |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Net cash used in investing activities                             |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Cash flow from financing activities:                              |   |                         |   |                      
|Loans from related parties                                        |   |                         |   |                      
|Deferred financing costs                                          |   | -                       |   | -                    
|Proceeds from deposits                                            |   | -                       |   | -                    
|Payments on notes payable                                         |   | -                       |   | -                    
|Proceeds from convertible
    notes                               |   | -                       |   | -                    
|Proceeds from notes
    payable                                   |   | -                       |   | -                    
|Payments on lease
    obligations                                 |   | -                       |   | -                    
|Proceeds from issuance of
    convertible subordinated debentures |   | -                       |   | -                    
|Proceeds from loan payable                                        |   | -                       |   | -                    
|Payments on loan payable                                          |   | -                       |   | -                    
|Proceeds from issuance of
    stock options                       |   | -                       |   | -                    
|Proceeds from grants                                              |   | -                       |   | -                    
|Proceeds from issuance of
    common stock                        |   | -                       |   | -                    
|Proceeds from additional
    paid-in capital                      |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Net cash provided by financing activities                         |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Net (decrease) increase in cash and cash
    equivalents          |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Cash and cash equivalents - beginning of
    period               |   | -                       |   | -                    
|                                                                  |   |                         |   |                      
|Cash and cash equivalents - end of period                         | $ | -                       | $ | -                    

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve months
    ended
    
    Cumulative fromJune 30
    
    March 26, 1993
    to2005
    
    2004
    
    June 30, 2005Supplemental Disclosure of
    Non-Cash Activities:During the
    year ended June 30, 2004, the Company did not issue common stock in
    recognotion ofthe payment of
    debt. During the year ended June 30, 2005, the Company did not issue commonstock in
    recognition of the payment of debt.During the
    year ended June 30, 2004, the Company did not issue common stock in exchangefor services
    performed and expenses. During the year ended June 30, 2005, the Company did
    notissue common
    stock in exchange for services performed and expenses.Supplemental Disclosure of Cash
    Flow Information:Interest
    paid
    $
    -
    $
    -
    $
    -
    $
    -
    
    $
    232,748Income
    taxes paid
    $
    -
    $
    -
    $
    -
    $
    -
    
    $
    -

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 SUMMARY OF ACCOUNTING POLICIES

CHANGE OF NAME

On July 11, 1997, 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 was originally
organized to provide comprehensive health care services, but due to its
inability to raise sufficient capital, was unable to implement its business
plan. The Company became inactive in November 1990.

REORGANIZATION

On March 26, 1993, the Company entered into an acquisition
agreement (the "Acquisition Agreement") with Louis V. Muro, currently an officer
and a director of the Company, and former Officers and Directors of the Company
(collectively the "Seller"), for the purchase of certain technology owned and
developed by the Seller (the "Technology") to be used to design, develop and
construct a prototype machine and thereafter a production quality machine for
the cryogenic disintegration of used tires. The Technology was conceptually
developed by the Seller prior to their affiliation or association with the
Company.

DEVELOPMENTAL STAGE

At June 30, 2005, 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, Tirex Canada R&D Inc., The Tirex
Corporation Canada Inc., Tirex Advanced Products Quebec Inc. and Tirex
Acquisition Corp. Tirex Canada R&D Inc. is held 51% by certain shareholders of
the Company. The shares owned by these shareholders are held in escrow by the
Company's attorney and are restricted from transfer thereby allowing for a full
consolidation of this Company. The Tirex Corporation Canada Inc., Tirex Advanced
Products Quebec Inc. and Tirex Acquisition Corp. are 100% held by the Company.
All subsidiary companies except Tirex Canada R&D Inc. are dormant. All
inter-company transactions and accounts have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less, were deemed to be
cash equivalents.

INVENTORY

The Company values inventory, which consists of finished goods and equipment
held for resale, at the lower of cost (first-in, first-out method) or market.

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost less accumulated
depreciation and provisions for write-downs. Depreciation is computed using the
straight-line method over the estimated useful lives of five years. No
depreciation is recorded for equipment written down to salvage value.

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
gains or losses are reflected in earnings.

INVESTMENT

An investment made by the Company, in which the Company owns less than a 20%
interest, is stated at cost value. The cost value approximates the fair market
value of the investment.

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 at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.

ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 123

In 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.
SFAS 123 encourages, but does not require, companies to record stock-based
Compensation and other costs paid by the issuance of stock at fair value. The
Company has chosen to account for stock-based compensation, stock issued for
non-employee services and stock issued to obtain assets or in exchange for
liabilities using the fair value method prescribed in SFAS 123. 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.

ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 128

In 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings per Share. 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 and
replaces the presentation of Fully Diluted EPS with a presentation of Diluted
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. SFAS 128 also requires restatement
of all prior-period EPS data presented.

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As it relates to the Company, the principal differences
between the provisions of SFAS 128 and previous authoritative pronouncements are
the exclusion of common stock equivalents in the determination of Basic Earnings
Per Share and the market price at which common stock equivalents are calculated
in the Determination of Diluted Earnings Per Share.

A Basic Earnings per Share is computed using the weighted
average number of shares of common stock outstanding for the period. Diluted
Earnings per Share is computed using the weighted average number of shares of
common stock and dilutive common equivalent shares related to stock options and
warrants outstanding during the period.

The adoption of SFAS 128 had no effect on previously reported
loss per share amounts for the year ended June 30, 1997. For the years ended
June 30, 2004 and June 30, 2003, 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 2004 and 2003, and accordingly, in those
years, the denominator for the Basic EPS calculation was equal to the weighted
average of outstanding shares with no consideration for outstanding options and
warrants to purchase shares of the Company's common stock because to do so would
have been anti-dilutive.

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 values of the Company's debt instruments are based
on the amount of future cash flows associated with each instrument discounted
using the Company's borrowing rate. At June 30, 2005 and June 30, 2004,
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 $30.1 million as of June 30, 2005, expiring through 2025. However,
based upon present Internal Revenue Service regulations governing the
utilization of net operating loss carryovers where the corporation has issued
substantial additional stock and there has been a change in control as defined
by the Internal Revenue Service regulations, a substantial portion 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 does not currently have research and experimental
development tax credits receivable from the Canadian Federal government and the
Quebec Provincial government as at June 30, 2005.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of non-U.S. subsidiaries that operate
in a local currency environment are translated to U.S. dollars at exchange rates
in effect at the balance sheet date for monetary items and historical rates of
exchange for non-monetary items with the resulting translation adjustment
recorded directly to a separate component of shareholders' equity. Income and
expense accounts are translated at average exchange rates during the year.
Currency transaction gains or losses are recognized in current operations.

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE RECOGNITION

Revenue from the sale of TCS Systems will be recognized when
the installed product is accepted by the Customer. All other revenue from other
products will be recognized when shipped to the customer.

Note 2 GOING CONCERN

As reported in the accompanying financial statements, the
Company incurred a net loss of $576,766 for the year ended June 30, 2005 and a
net loss of $560,234 for the year ended June 30, 2004.

In March 1993, the Company had begun its developmental stage
with a new business plan. As of March 2000, the Company had developed a
production quality prototype of its patented system for the disintegration of
scrap tires, but nonetheless continued its research and development efforts to
improve the machine's performance and to permit greater flexibility in design
for specific customer applications. Due to the Company's lack of working capital
during the year ended June 30, 2002, all rubber crumb production was suspended
and research and development efforts have been hampered. Pending receipt of
funding from operations, government assistance, loans or equity financing, crumb
rubber production and previous research and development efforts will not be
resumed. While the Company has engaged the process of marketing the TCS System
to numerous potential clients since the beginning of the fiscal year commencing
July 1, 2000, as of June 30, 2005, the Company had not yet consummated an
unconditional purchase order for a TCS System.

The Company is dependent on the success of its marketing of
its TCS Systems, and/or raising funds through equity sales, bank or investor
loans, governmental grants or a combination of these, to continue as a going
concern. The Company's uncertainty as to its ability to generate revenue and its
ability to raise sufficient capital, raise substantial doubt about the entity's
ability to continue as a going concern. 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 PROPERTY AND EQUIPMENT

As at June 30, 2005, plant and equipment consisted of the following:

|Furniture, fixtures and
    equipment               | $149,516
|--------------------------------------------------- | --------
|Manufacturing equipment                             | 62,400  
|Subtotal                                            | 211,916 
|                                                    |         
|Less: Accumulated
    depreciation and amortization | 161,916 
|                                                    |         
|Total                                               | $ 50,000

Depreciation and amortization expense charged to operations
for the year ended June 30, 2004 was zero. Depreciation and amortization expense
charged to operations for the year ended June 30, 2005 was zero.

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 GOVERNMENT LOANS

Canada Economic Development

Loans payable under the Program for the Development of Quebec
SMEs 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 at the rate
of 8%).

|Loan repayable over five
    years commencing June 30, 2000 and ending June 30, 2004 | $ 34,300
|------------------------------------------------------------------------------------ | --------
|Loan repayable over five
    years commencing June 30, 2001 and ending June 30, 2005 | 43,791  
|                                                                                     | 78,091  
|Less: Current portion                                                                | 78,091  
|Long-term portion                                                                    | $ NIL   
|                                                                                     |         
|Principal repayments are as
    follows:                                             |         
|June 30                                                                              | Amount  
|                                                                                     |         
|2005                                                                                 | $78,091 

Note 5 CAPITAL LEASE OBLIGATIONS

The Company leases certain manufacturing equipment under
agreements classified as capital leases. The cost and the accumulated
amortization for such equipment as of June 30, 2005 and June 30, 2004 was
$62,400 and $62,400, respectively. The equipment under capital leases has been
included in property and equipment on the balance sheet. The Company is in
arrears on payment of these leases but default has not been declared. The lease
expired on June 30, 2004. The leased equipment is not part of the Company's TCS
System prototype.

Note 6 CONVERTIBLE SUBORDINATED DEBENTURES

The Company issued Type B Convertible Subordinated Debentures
between December 1997 and February 1998. These debentures bore interest at 10%
and were convertible into common shares of the Company at $0.20 per share. The
conversion privilege on the remaining $55,000 of these debentures expired and
the amount is now included on the Balance Sheet in Long term deposits and notes.

Note 7 CONVERTIBLE NOTES

The Convertible Notes appearing on the balance sheet
consisted of an investment arrangement with a group of institutional investors
involving a multi-stage financing under which the Company had access to, at its
option, up to $5,000,000. A first tranche of $750,000 was completed but no
further draw downs were made. The terms of the convertible note were:

|Balance at June 30, 2005 | $399,389                                           
|------------------------ | ---------------------------------------------------
|                         |                                                    
|Interest rate            | 8%, payable quarterly,
    commencing June 30, 2001
|                         |                                                    
|Issue date               | February 26, 2001                                  
|                         |                                                    
|Maturity date            | February 26, 2003                                  

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|Redemption rights     | If not converted, the holder
    may require the     
|--------------------- | -----------------------------------------------------
|                      | Company to redeem at any time
    after maturity     
|                      | for the principal amount pus
    interest.           
|                      |                                                      
|Conversion ratio      | Lower of (i) - 80% of the
    average of the three   
|                      | lowest closing bid prices for
    the thirty trading 
|                      | days prior to the issue date,
    which equals       
|                      | $.073, or (ii) - 80% of the
    average of the three 
|                      | lowest closing bid prices for
    the sixty trading  
|                      | days prior to the conversion
    date.               
|                      |                                                      
|Common stock warrants | The Convertible Notes carried
    an option to       
|                      | purchase Common stock
    warrants at the rate       
|                      | of one Warrant for each $1.25
    of purchase        
|                      | price. The exercise price on
    the first tranche of
|                      | $ 750,000 is $ .077 per
    share.                   

Certain Directors and Officers of the Company have pledged
approximately 12,000,000 of their personal shares of Common Stock of the Company
as security for the Convertible Notes until such time as the Company files with
the Securities and Exchange Commission a Registration Statement on Form SB-2, to
register common stock and warrants issuable upon the conversion of the notes, no
later than 150 days after the issue date of the Convertible Notes. This deadline
was not met and, as such, the investors served a notice of default to the
Company on July 19, 2001. The Registration Statement was never declared
effective by the Securities and Exchange Commission as of this date, and until
such occurs, the Convertible Notes cannot be converted to Common Stock nor may
the Common Stock warrants be exercised. On April 24, 2002 the Company entered
into a Settlement Agreement with the Note holders. In the event of a default
under the Settlement Agreement, the term of the Convertible Notes would become
effective once again. The Company defaulted on the terms of the Settlement
Agreement.

Note 8 CONVERTIBLE NOTE

A convertible note, under a private arrangement, consists of the following:

|Balance at June 30, 2005 | $ 185,556                                           
|------------------------ | ----------------------------------------------------
|                         |                                                     
|Interest rate            | 8%                                                  
|                         |                                                     
|Issue date               | July 19th, 2000                                     
|                         |                                                     
|Maturity date            | January 19th, 2002                                  
|                         |                                                     
|Redemption rights        | If not converted, the holder
    may require the    
|                         | Company to redeem at any time
    after maturity    
|                         | for the principal amount plus
    interest.         
|                         |                                                     
|Conversion ratio         | Not convertible prior to July
    19th, 2001, at 20%
|                         | discount to market between
    July 19th, 2001 and  
|                         | January 19th, 2002
    or at 25% to market if held  
|                         | to maturity, to a maximum of
    not more than      
|                         | 2,500,000 shares.                                   

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 RELATED PARTY TRANSACTIONS

Convertible loans include amounts primarily due to Directors,
Officers and employees. Historically, such amounts due have been repaid through
the issuance of stock. At June 30, 2005 and June 30, 2004, the balances owing to
Directors and Officers was $1,926,929 and $1,297,462, respectively. These
amounts are without interest or terms of repayment.

Long-term deposits and notes included an amount of $118,500
at June 30, 2005, which is payable to Ocean Tire Recycling & Processing Co.,
Inc., a company owned by a Director of the Company.

Note 10 COMMON STOCK

During the year ended June 30, 2005 and the year ended June
30, 2005, the Company did not issue any common stock in exchange for services
performed. The dollar amounts assigned to such transactions have been recorded
at the fair value of the services received.

During the year ended June 30, 2004, an Officer of the
Company exercised stock options pursuant to a services agreement. The exercise
of these stock options entitled the Officer to 1,500,000 common shares of the
Company on a cash-less basis. The Company does not have sufficient authorized
and unissued shares available at June 30, 2005 for issuance of this stock and as
such, the amount attributable to these shares has been recorded as part of the
balances owing to Directors and Officers included in Convertible loans.

On January 31, 2001, the Company's stockholders approved an
amendment to the Articles of Incorporation of the Company to increase the number
of authorized shares of common stock, par value $0.001, from 165,000,000 shares
to 250,000,000 shares.

As at June 30, 2005, the Company had 249,895,892 Common shares issued and
outstanding, versus its authorization of 250,000,000 shares.

Note 11 CONVERTIBLE DEBT

In the event that holders of convertible rights of option
exercise such rights of conversion, the Company does not have sufficient number
of authorized shares conversion stock to fulfill such obligations and a
shareholder meeting would be required to approve the additional authorized
number of shares. There is no assurance that the shareholders would approve the
increase to the number of authorized shares of stock to meet the conversion
obligations under the various conversion agreements or options.

Note 12 GOVERNMENT ASSISTANCE

The Company is eligible for and has made claims for tax
credits related to scientific research and experimental development expenditures
made in Canada. These amounts, under Canadian Federal and Provincial tax law in
conjunction with its annual tax return filings, need not be offset against taxes
otherwise payable to become refundable to the Company at the end of its fiscal
year. As such, during the year ended June 30, 2003, the Company received
approximately $246,970, which was recorded as an increase in stockholders'
equity paid-in capital. During the year ended June 30, 2004 and the year ended
June 30, 2005, the Company did not make any additional claims for tax credits as
it was not eligible to do so and, as such, the Company did not record any
additional tax credits receivable. The previous receivable balance in respect of
tax credits from these governments went from $246,970 as of June 30, 2002 to
zero as of June 30, 2003 and remained as such as of June 30, 2004 and June 30,
2005.

---

THE TIREX CORPORATIONA DEVELOPMENT STAGE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 COMMITMENTS

Rental expense for the year ended June 30, 2004 amounted to zero. Rental
expense for the year ended June 30, 2005 amounted to zero.

At June 30, 2005, the Company was in arrears of rent,
including interest and related charges, in the approximate amount of $560,000. A
settlement agreement with the former landlord is in place under the terms of
which the Company would pay to the former landlord the sum of $140,000 from the
proceeds to the Company of revenues from each of the first four sales of TCS
Systems.

Note 14 LITIGATION

An action was instituted by Plaintiffs, an individual and a
corporation, in a Canadian court alleging a breach of contract and claims
damages of approximately $508,600 representing expenses and an additional
approximate amount of $1,874,000 in loss of profits. The current action follows
two similar actions taken in United States courts, the first of which was
withdrawn and the second of which was dismissed based on forum non convenience
and other considerations. A detailed answer has been filed by the Company
denying all liability, stating further that Plaintiffs failed to comply with
their obligations. Counsel for the Company believes that the Company has
meritorious defenses to all of the Plaintiff's claims. The action is still
pending.

A Plaintiff instituted an action, a corporation, in August
2001 in a Canadian court claiming approximately US$63,000 is due and owing for
the manufacture and delivery of tire disintegrators. The Company has prepared
its defense and a cross claim against the Plaintiff as the product delivered was
defective and the Company believes it is entitled to a reimbursement of sums
paid. The action is still pending.

An action was instituted by a Plaintiff, the Company's
landlord, against the Company in June 2001 for arrears of rent in the amount of
approximately $113,900. Subsequent additions to arrearages with respect to rent
and property taxes raised the amount due to approximately $560,000. A settlement
agreement with the former landlord is in place, under the terms of which the
Company would pay to the former landlord the sum of $140,000 from the proceeds
to the Company of revenues from the first four sales of TCS Systems.

Note 15 ACCUMULATED OTHER COMPREHENSIVE INCOME

The deficit accumulated during the development stage included accumulated
comprehensive other income totaling $103,396.

---