SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

[X]      Annual report under Section 13 or 15(d) of the Securities  Exchange Act
         of 1934

         For the fiscal year ended June 30, 1999

[ ]      Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934

         For the transition period from          to
                                       ----------  ----------

                       COMMISSION FILE NUMBER 33-17598-NY

                              THE TIREX CORPORATION
                 (Name of Small Business Issuer in Its Charter)

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

           3828 ST. PATRICK
           MONTREAL, QUEBEC                                H4E 1A4
(Address of Principal Executive Offices)                  (Zip Code)

                                 (514) 933-2518
                (Issuer's Telephone Number, Including Area Code)

         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

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

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                                      NONE

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

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

                                       1

<PAGE>

                                    $390,848
               (Issuer's revenues for its most recent fiscal year)

                      $11,828,153 (as of November 15, 1999)
                  (Aggregate market value of the voting stock
                     held by non-affiliates of the Issuer)

                      118,481,528 (as of November 18, 1999)
 (Number of shares outstanding of each of the Issuer's classes of common stock,

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


                       DOCUMENTS INCORPORATED BY REFERENCE
                                   INTO PART I

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

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

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

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

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

                 Annual Report of Form 10-KSB of the Company
                 for the years ended June 30, 1995, 1996, 1997,
                                    and 1998

                                       2
<PAGE>


                 Quarterly  Reports on Form 10-QSB of the Company
          for the quarters ended September 30, 1998, December 31, 1998
                               and March 31, 1999

                 Current  Reports on Form 8-K of the  Company
           Dated September 14, 1998, March 17, 1999, May 18, 1999 and
                                  May 24, 1999

                                       3
<PAGE>


ITEM 1.  DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT

         The Tirex  Corporation  (hereinafter,  the  "Company"  or  "Tirex")  is
engaged in the early  stages of the  business  of  manufacturing,  selling,  and
leasing a patented  "turn key"  cryogenic  tire  recycling  system  (the  "TCS-1
Plant")  designed  and  developed  by Tirex,  which  breaks down used tires into
cleanly  separated  and  re-saleable  rubber crumb,  steel wire,  and fiber (see
"Existing and Proposed Businesses - Equipment  Manufacturing").  The Company was
incorporated in Delaware on August 19, 1987 under the name "Concord Enterprises,
Inc." Its name was changed to  "Stopwatch  Inc." on June 20, 19891 and to "Tirex
America  Inc." on March 10, 1993.  On July 11, 1997,  in order to encompass  the
current and projected international scope of its operations,  the Company's name
was changed to "The Tirex Corporation". The Company, does business directly, and
indirectly through its Canadian subsidiaries,  The Tirex Corporation Canada Inc.
and Tirex Canada R&D, Inc. (formerly, 3143619 Canada Inc., and formerly known as
"Tirex Canada Inc.").

         Since the  beginning  of 1993,  the Company has devoted the bulk of its
efforts  to  completing   the  design  and   development,   and  commencing  the
manufacture,  of the TCS-1  Plant and raising the  financing  required  for such
project.  All major components of the TCS-1 Plant were  successfully  tested and
were  operational  on  a   non-continuous   running  basis  by  May  1998,  with
approximately  85%  of  the  TCS-1  Plant  components  meeting  all  of  Tirex's
specifications.  In December 1998, the Company began successfully  operating the
first fully integrated TCS-1 Plant on a  continuous-running  basis for scheduled
periods of up to four  hours,  at 50% of capacity  with one of its two  freezing
towers and  fracturing  mills.  This allows the TCS-1 Plant to process  only the
tread  portion of the tires.  In the fourth  quarter of fiscal  1999 the Company
started  the   construction   of  the  second  freezing  tower  and  the  second
disintegrator unit. However, problems were identified in the course of long-term
testing of the first  freezing  tower with  respect  to its  internal  materials
conveying  system,  and  construction  of the second  tower was  halted  pending
resolution of the identified  problems.  The Company  believes that it has found
appropriate  solutions  to  the  identified  problems  and  construction  of the
redesigned freezing tower is expected to commence in October of 1999.

         At the beginning of 1999, the Company began the process of putting into
place the production  capacity for producing  welcome mats using recycled rubber
crumb of the kind which the TCS-1  would  produce.  Entering  this new  business
segment was  expected to be  profitable  based on the  estimated  costing of the
rubber crumb.  In addition,  entering this segment was considered  strategically
useful to demonstrate  to possible  buyers of TCS-1 systems that there was a use
and  market for the rubber  crumb.  The  Company's  initial  operations  in this
segment were conducted pursuant to an agreement (the "IM2/Tirex Agreement") with
IM2 Merchandising and Manufacturing,  Inc. ("IM2"),  in Quebec.  Pursuant to the
IM2/Tirex  Agreement,  the Company acted as IM2's  exclusive  supplier of rubber
welcome mats and related  products molded out of rubber crumb ("IM2  Products").
Shipments of limited  quantities  of mats  commenced  at the  beginning of April
1999.  These mats were produced using recycled rubber crumb purchased from other
companies  because  the  TCS-1  could  not,  at that  time,  produce  sufficient
quantities  of  rubber  crumb to meet the  requirement.  Furthermore,  technical
difficulties in the freezing tower section of the TCS-1 were  identified  during
the fourth  quarter of fiscal 1999 which  further  reduced the  availability  of
TCS-1 rubber crumb. The price  difference  between  externally  purchased rubber
crumb and the forecast cost to the Company of TCS-1 produced crumb,  taking into
account tire recycling  subsidies  available from the Government of Quebec,  was
and remains very substantial,  and makes the difference between being profitable
and  unprofitable on mat production at the prices the Company was able to obtain
for such mats.  In  addition,  it became  apparent in June and July of 1999 that

---------------------
     1 FOR A DISCUSSION OF THE MERGER WITH  STOPWATCH,  THE HEALTHCARE  BUSINESS
WHICH WAS INTENDED, BUT WHICH NEVER COMMENCED BY STOPWATCH,  AND THE REASONS FOR
THE TERMINATION OF THE STOPWATCH  BUSINESS PLAN,  REFERENCE IS MADE TO ITEM 1 OF
REGISTRANT'S  ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED  DECEMBER 31,
1988,  ITS TRANSITION  REPORT ON FORM 10-K FOR THE TRANSITION  PERIOD ENDED JUNE
30,  1989,  AND ITS ANNUAL  REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE
30, 1995.

                                       4
<PAGE>


capital asset  requirements and the financial and human resources being consumed
by the mat production  operation were impeding progress on the completion of the
TCS-1 which was and remains the primary  focus of the  Company.  In August 1999,
the Company began negotiations for the sale of the mat production assets and the
majority of the inventory to IM2. This divestiture was announced on September 7,
1999.  As of November  15,  1999,  the sale of these  assets to IM2 had not been
completed and the Company  cannot  provide any  assurances at this time that the
sale will, in fact, be completed. Pursuant to this divestiture, the Company will
continue with its primary points of focus,  these being the manufacture and sale
of TCS-1 tire Disintegration Systems and the development of rubber-thermoplastic
compounds.

         The Company's  wholly-owned  subsidiary,  The Tirex Corporation  Canada
Inc.  ("TCCI") was formed on June 1, 1998,  and on June 3, 1998,  3143619 Canada
Inc.'s name was changed to Tirex Canada R & D Inc.  (hereinafter  referred to as
"Tirex  R&D").  The  purpose  of these  changes  was to  transfer  all  business
activities,  except those which constitute  research and development  activities
exclusively,  from  Tirex R&D to TCCI.  On April  22,  1998 the  Company  formed
another  wholly owned Canadian  subsidiary now known as Tirex Advanced  Products
Quebec, Inc. ("TAP"). This subsidiary is presently dormant. However, the Company
may, in the future,  transact finished product manufacturing  activities through
TAP. The Company also has another dormant, wholly owned subsidiary, formed under
the laws of the State of Delaware,  Tirex Acquisition Corp.  ("TAC"),  for which
the Company has no present plans.2 The Company's principal executive offices are
located at 3828 St. Patrick Street,  Montreal,  Quebec H4E 1A4, Canada,  and its
telephone   number   is   (514)   933-2518   and   its   Internet   address   is
tirexcorp@aol.com.

         Although the Company has generated limited revenues from operations, it
is still in the  development  stage.  The Company  began taking orders for TCS-1
Plants in October of 1995 and, to date,  has taken  orders on a total of fifteen
Plants  from five  customers,  two of which have given  refundable  deposits  of
$25,000  on one Plant  each and one of which has given  refundable  deposits  of
$25,000 on each of five Plants. Parts of one of the foregoing Plants (the "First
Production  Model") have been  delivered and the Company has received a total of
$880,000 in payment thereof. In December 1998, the Company entered into sale and
lease-back  arrangements  for  other  portions  of the First  Production  Model,
pursuant  to which it  received  a total of  $300,000  (see,  below,  "Sale  and
Lease-Back  Transactions").  All  undelivered  orders  are  subject to change by
reason of several factors, including possible cancellation of orders, changes in
terms of the  contracts,  and other  factors  beyond the  Company's  control and
should  not be relied  upon as being  necessarily  indicative  of the  Company's
future revenues or profits. The ultimate  consummation of each sale contemplated
by such  orders  will be  entirely  dependent  upon the  TCS-1  Plant's  meeting
performance  expectations,  each customer's  obtaining lease, or other financing
for the purchased  portions of the TCS-1 Plant (as well as all required  permits
and  licenses  to  operate  a system)  and the  Company's  obtaining  sufficient
production  financing  and capacity to meet delivery  requirements.  The Company
intends  to retain  ownership  rights to the  portions  of the First  Production
Model,  not included in the portions sold for the $880,000  noted above,  and to
use the entire First Production Model in the first Tirex Advanced Product Plant,
to be located in the Company's  Montreal  facility  (see  "Existing and Proposed
Business - Proposed TCS-1 Plant Operations:  Sales of Rubber Crumb"), "Sales and
Marketing - Agreements with Oceans Tire Recycling and Processing Co., Inc.", and
"Backlog").  With respect to the  commercial  manufacture  of TCS-1 Plants,  the
Company has located and entered  into written and oral  agreements  with various
engineering and  manufacturing  subcontractors  and component  suppliers,  which
Management believes will give the Company sufficient production capacity to meet
all current and projected orders for TCS-1 Plants, as required, commencing in or
about  November  1999.  At present,  the Company has no scheduled  delivery date
obligations in connection with any orders it has received to date.

---------------------
     2 UNLESS THE CONTEXT  REQUIRES  OTHERWISE,  REFERENCES  HEREINAFTER  TO THE
"COMPANY" INCLUDE THE TIREX  CORPORATION AND ITS SUBSIDIARIES,  TCCI, TIREX R&D,
TAP AND TAC, COLLECTIVELY.

                                       5
<PAGE>


         Absent  any  reference  to  "Canadian",  "Cdn",  or any  other  variant
thereof,  all dollar amounts shown  throughout  this Report are in United States
dollars.  Whenever any dollar amount has been translated  from Canadian  dollars
into  United  States  dollars  or  vice-versa,  the  exchange  rate used was one
Canadian  dollar (Cdn $1.00) for every United States  seventy  cents  (US$0.70).
This was the  approximate  average  exchange rate in effect during the course of
the  fiscal  year  ended  June  30,  1999.  As of noon on  October  1,  1999 the
applicable  international  currency  market  the  quoted  exchange  rate was one
Canadian   dollar   (Cdn$1.00)   for  every  United   States   sixty-seven   and
ninety-two-six one hundredths cents (US$0.6792)


SALE AND LEASE-BACK TRANSACTIONS

         On December 16, 1998, the Company  entered into two sale and lease-back
transactions  by and  among the  Company,  Northshore  Leasing  &  Funding  Inc.
("NLFI"),  and Ocean  Utility  Contracting,  Inc.  ("OUCI").  Such  transactions
consisted of the Company's  sales to NLFI of the single  fracturing mill and the
single freezing tower,  which are components of the TCS-1 Plant installed at the
Company's  Montreal  facility and the lease back of such components to OUCI. The
Company  received an aggregate of $300,000 by way of the purchase  price for the
two components. The Company and OUCI have agreed that all of OUCI's rights under
the leases will be  assigned  to the Company and the Company  will assume all of
OUCI's  liabilities  thereunder.  Both  leases  are  for  a  sixty-month  period
commencing  on December  15,  1998,  with  monthly  lease  payments of $3,499.20
required under each of the two leases.  Both leases also provide that at the end
of the  lease  term,  the  lessee  will have the right to  purchase  the  leased
equipment  for  $1.00.  Such  right  to  purchase  will be  included  in  OUCI's
assignment to the Company of its rights under the leases.

MATERIAL FINANCING ACTIVITIES

THE TYPE A PRIVATE PLACEMENT

         Between  November 5, 1997 and May 11, 1998, the Company offered to sell
(the "Type A Private  Placement")  through H.J. Meyers & Co., Inc., as placement
agent  (the  "Placement  Agent"),  28 Units,  (the "Type A Units") at a price of
$25,000  per  Unit,   each  Type  A  Unit  consisting  of  one  10%  Convertible
Subordinated  Debenture  in  the  principal  amount  of  $25,000  (the  "Type  A
Debentures")  and 100,000  warrants  (the "Type A Warrants")  to purchase a like
number  of  shares  of the  common  stock of the  Company  (the  "Type A Warrant
Shares").  The Type A Private  Placement  was  terminated by the Company and the
Placement  Agent on May 11, 1998  following  the sale on April 9, 1998 of twenty
Type A Units to two  purchasers,  yielding  gross  proceeds of $500,000  and net
proceeds of $433,500 after payment of the Placement Agent's $10% commission,  3%
nonaccountable expense allowance,  and an escrow agent's fee of $1,500. The Type
A Private  Placement  was  effected  in  reliance  upon the  availability  of an
exemption  from the  registration  provisions of the Securities Act by virtue of
compliance  with the  provisions  of Section 4(2) of the Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D thereof ("Rule 506").  The Type A Units
were offered and sold to a limited  number of  sophisticated  investors who, the
Company  believed,  understood  and were  economically  capable of accepting the
risks associated with a speculative  investment,  including the complete loss of
such  investment,   and  who  are  "Accredited  Investors"  within  the  meaning
prescribed by Regulation D and Rule 501 of the Act.

         The  1,000,000  outstanding  Type A Warrants (as of September 17, 1999)
are  exercisable  at a price of $.001 per share.  Through  March 10,  1999,  the
principal  amount of the Type A  Debentures  and all  interest  due thereon were
convertible  into common stock at a conversion ratio of 67.5% of the closing bid
price of the Company's common stock, as traded in the  over-the-counter  ("OTC")
market  and  quoted in the OTC  Electronic  Bulletin  Board of the NASD,  on the
trading date immediately preceding the date of the Company's receipt of a notice
of conversion from a holder of the Type A Debentures (the "Market Price"). As of
June 11, 1999, the conversion  rate will decrease,  on a monthly basis at a rate
of 1.5% per  month,  until  such date,  when it will  stabilize  at 61.5% of the
Market Price.  There is no minimum  conversion price. The Type A Debentures,  as
amended,  are due and payable on December 31, 1999 (the "Maturity Date") and are
redeemable  upon the request of a holder at any time after the Maturity  Date at
125% of the principal amount plus all accrued,  unpaid interest on the principal
amount.

                                       6
<PAGE>


         The resale of the 2,000,000 shares issuable pursuant to the exercise of
the Type A  Warrants  and the  resale of the  shares  issuable  pursuant  to the
conversion of the Type A Debentures are being  registered by way of inclusion in
the Company's  registration statement on Form SB-2 filed with the Securities and
Exchange Commission on May 21, 1998 (Registration No. 333-53255),  which has yet
to be declared effective (the "Registration Statement"). Following the effective
date of the  Registration  Statement,  to the extent that they are acquired from
the Company, the shares underlying the Type A Warrants and Type A Debentures may
be  offered  and resold by the  holders  thereof,  from time to time,  as market
conditions permit in transactions in the over-the-counter  market, in negotiated
transactions,  or a  combination  of such methods of sale, at fixed prices which
may be  changed,  at market  prices  prevailing  at the time of sale,  at prices
relating to prevailing market prices or at negotiated prices.

MERGER WITH RPM INCORPORATED AND THE TYPE B PRIVATE PLACEMENT

         On January 7, 1998, The Company  issued a total of 3,305,000  shares of
its common stock to thirty-six  persons,  none of whom had any prior affiliation
with the Company.  These  issuances  were made pursuant to the terms of a merger
agreement by and among the Company, the Company's wholly-owned  subsidiary Tirex
Acquisition Corp. ("TAC"), and RPM Incorporated ("RPM") respecting the merger of
RPM with and into TAC (the "RPM Merger"). The RPM Merger Agreement was effective
on January 7, 1998,  concurrent with the closing of a private placement of RPM's
securities (the "RPM Private Placement"), in which RPM had offered to sell, on a
best efforts 30 Units-or-none  basis, up to 85 units of its securities (the "RPM
Units"),  each  such RPM Unit  consisting  of one 10%  Convertible  Subordinated
Debenture in the principal  amount of $10,000 (the "RPM  Debentures") and 10,000
shares of the Common  Stock of RPM. The closing took place upon the sale of 30.5
RPM Units.  All of the net proceeds  from the RPM Private  Placement  ($276,085)
remained in RPM when it was merged  into TAC,  which was the  surviving  entity.
Such proceeds thereby inured to the benefit of the Company. In effecting the RPM
Merger, the Company:

         (i)      exchanged one share of its common stock ("Merger  Shares") for
                  every issued and outstanding  share of RPM common stock (which
                  included 305,000 shares sold in the RPM Private  Placement and
                  3,000,000  shares which had been issued and outstanding  prior
                  to the commencement of the RPM Merger); and

         (ii)     assumed  RPM's  liabilities  and  obligations  under  30.5 RPM
                  Debentures in the aggregate principal amount of $305,000 which
                  RPM had theretofore sold in the RPM Private Placement;

         After the Merger, the Company commenced the "Type B Private Placement",
in which it offered  and sold the same type of  securities,  as were sold in the
RPM  Private  Placements,  i.e.,  the  securities  offered in the Type B Private
Placement  consisted of "Type B Units" each  consisting  of 10,000 shares of the
Company's common stock and one convertible Subordinated Debenture of the Company
in the principal amount of $10,000 (the "Type B Debenture").  The number of Type
B Units offered (54.5) was equal to the number of RPM Units remaining  unsold as
at the time of the Merger.

         Prior to the  Merger,  RPM and the  Company  were  completely  separate
entities.  However,  the RPM Private Placement,  the merger, the exchange of RPM
common  stock  for  Company  common  stock,  and the  subsequent  Type B Private
Placement by Tirex were at all times contemplated as interdependent transactions
and  described  in the RPM  Private  Placement  Memorandum  as  such.  Thus  the
contemplated  post-merger  Type B  Private  Placement  was  viewed  as  being  a
"continuance"  of the  RPM  Private  Placement.  The  Type B  Private  Placement
differed from the RPM Private  Placement only insofar as: (i) in the RPM Private
Placement,  RPM offered and sold  shares of RPM common  stock,  which were to be
exchanged for Company common stock in the merger,  while in the post-merger Type
B Private  Placement,  the Company  offered  and sold  shares of Company  common
stock;  and  (ii) in the  RPM  Private  Placement,  RPM  offered  and  sold  RPM
debentures,  which were to be assumed by the Company in the Merger, while in the
Type  B  Private  Placement,  the  Company  offered  and  sold  Company  Type  B
Debentures.  Except for the above,  the terms of the securities  included in the
Type B Units were identical to those included in the RPM Units.

                                       7
<PAGE>


         Between  January 23, 1998 and May 11, 1998,  the Company sold 23 Type B
Units,  consisting  in the  aggregate of 230,000  shares of its common stock and
twenty-three  10%  convertible  Debentures,  each  in the  principal  amount  of
$10,000, to 21 private investors, who had no prior affiliation with the Company.

         All of the Type B  Debentures  and the RPM  Debentures,  which had been
issued by the Company  (referred  to  collectively,  hereinafter  as the "Type B
Debentures"),  provide  for:  (i) the  registration  of the shares  (the "Type B
Conversion  Shares") issuable upon the conversion of the Type B Debentures;  and
(ii)  restrictions  on the  transfer of the Type B  Conversion  Shares until the
first to occur of: (a) six months from the  effective  date of the  Registration
Statement,  or (b)  one  year  from  the  date  of the  issuance  of the  Type B
Debentures.  The Type B Debentures  are  convertible at a ratio of one share for
every  $0.20 of the  principal  amount of the  Debenture  plus  interest  earned
thereon  from  the  date  of  issuance.  The  principal  amounts  of the  Type B
Debentures  are due and payable on the first to occur of: (i) two years from the
issue  date or (ii) the  completion  and  closing  of a public  offering  of its
securities  by the Company.  The Type B Debentures  bear  interest at the annual
rate  of  10%  from  the  date  of  issuance  (the  "Issuance  Date"),   payable
semi-annually,  commencing  six months from the  Issuance  Date.  The company is
presently in default on interest  payments due on the Type B  Debentures.  As of
February  16,  1999,  the Company  had not  received  any  demands for  interest
payments from any of the holders of the Type B Debentures.  The Company  intends
to pay all interest  due and payable as soon as the funds  required to do so are
available.

         The shares of the  Company's  common  stock  issuable  pursuant  to the
conversion  of the Type B  Debentures,  are being  included in the  Registration
Statement.

PRE-PLACEMENT RPM SHARES

         3,000,000  shares (the  "Pre-Placement  RPM  Shares") of the  3,305,000
shares  of RPM  common  stock  for  which  the  Company  issued  Merger  Shares,
constituted  all of the  shares  of RPM  common  stock  which  were  issued  and
outstanding prior to the commencement of the RPM Private Placement. These shares
were exchanged for 3,000,000  Merger Shares in  consideration of RPM's waiver of
certain  consulting fees in the amount of $4,000 per month,  which accrued prior
and  subsequent  to the  Merger  pursuant  to the terms of a  certain  five-year
consulting agreement, dated June 9, 1997, among RPM, the Company, and Dr. Eugene
Stricker and Mr. Mark Schindler who were,  prior to the Merger,  RPM's principal
shareholders, officers, and directors (the "RPM Consulting Agreement"). Pursuant
to the RPM Consulting  Agreement,  Dr. Stricker and Mr. Schindler rendered,  and
continue to render,  consulting  services to the Company  concerning  matters in
connection with the operation of the business,  equipment  financing,  corporate
acquisitions,  mergers and other business  combinations,  as well as management,
corporate planning, marketing, organization and related matters. None of the RPM
Shareholders  had any prior  affiliation  with the Company prior to or after the
Merger  (except  insofar as they have  become  shareholders  of the Company as a
result of the said Merger).  Based upon  information  provided by the recipients
(the RPM Shareholders") of the above described  3,305,000 shares of common stock
and advice  from the  principals  of RPM and the opinion of RPM's  counsel,  all
3,000,000 of the  Pre-Placement RPM Shares were acquired by the RPM Shareholders
prior to March 31, 1997; all of the RPM Shareholders are "accredited  investors"
as that term is defined in Rule 501(a) of the  Securities  Act; all 3,305,000 of
the shares of RPM common stock (including the  Pre-Placement  RPM Shares as well
as the RPM Shares sold in the RPM Private  Placement)  which were  exchanged for
Merger  Shares  were  acquired  in  transactions  which  were  exempt  from  the
registration  requirements  of Section 5 of the Act available  under Rule 506 of
Regulation D thereof, which would not be integrated,  as such term is defined in
Section  502(a) of  Regulation  D under the Act,  with the  distribution  of the
Merger Shares to the RPM  Shareholders,  so as to render  unavailable,  for such
distribution,  the exemption from the  registration  provisions of the Act under
Rule 506 of Regulation D.

         Sales  made  in the  RPM  Private  Placement  and  the  Type B  Private
Placement  and the exchange of shares in the Merger were  effected in compliance
with Rule 506 to a limited number of sophisticated  investors who understood and
were  economically  capable of accepting the risks associated with a speculative
investment,  including  the  complete  loss of  such  investment,  and who  were
"Accredited  Investors"  within the meaning  prescribed by Regulation D and Rule
501 of the Securities Act.

                                       8
<PAGE>


THE TYPE C PRIVATE PLACEMENT

         On May 11, 1998, the Company completed a private placement (the "Type C
Private Placement") made directly by the Company, with all offers and sales made
by officers of the Company,  of a total of  11,760,000  shares of the  Company's
common  stock  (the  "Type C  Shares")  at a price of $.10 per  share,  yielding
proceeds of $1,176,000,  prior to deducting nominal incidental expenses incurred
in  connection  with the  offering.  As was the case  with the Type A and Type B
Private Placements, the Type C Private Placement was effected in compliance with
Rule 506 and the Type C Shares were offered and sold only to a limited number of
sophisticated   investors  who,  the  Company  believes,   understood  and  were
economically  capable  of  accepting  the risks  associated  with a  speculative
investment,  including  the  complete  loss of  such  investment,  and who  were
"Accredited  Investors"  within the meaning  prescribed by Regulation D and Rule
501 of the Act.

         The  11,760,000  Type C Shares  which  were  sold are  included  in the
Company's Registration Statement on Form SB-2. This Statement,  however, has not
yet been deemed effective.


REGISTRATION STATEMENT

         On May 21, 1998,  the Company  filed a  Registration  Statement on Form
SB-2  (Registration No. 333-53255) with the Securities and Exchange  Commission,
for the registration of the resale of certain  presently  outstanding  shares of
the Company's  common stock and an  undetermined  number of shares issuable upon
the conversion or exercise of certain presently outstanding debentures, options,
and  warrants.  None of the shares  included in the  Registration  Statement are
being offered for sale by the Company.  As of November 15, 1999,  however,  this
Statement, however, has not been deemed effective.


EXISTING AND PROPOSED BUSINESSES

CANADIAN OPERATIONS

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

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

         To qualify for Canadian Government grants and tax benefits,  the record
owners  of 51% of the  issued  and  outstanding  capital  stock of Tirex R&D are
Terence C. Byrne, chairman of the Board of Directors and Chief Executive Officer
of The Tirex  Corporation and Louis V. Muro, Vice President of engineering and a
member of the Board of  Directors  of The  Tirex  Corporation,  both of whom are
Canadian residents. Terence C. Byrne also serves as the Chairman of the Board of
Directors and the Chief Executive  Officer of Tirex R&D while Louis V. Muro also

                                       9
<PAGE>


serves as a vice president and a director of Tirex R&D. The Tirex Corporation is
the record  holder of the balance of 49% of the issued and  outstanding  capital
stock of Tirex R&D. Messrs. Byrne and Muro hold their Tirex R&D shares under the
terms of the shareholders agreement,  dated July 3, 1995, as amended February 2,
1996 and August 27,  1997 (The  "Tirex R&D  Shareholder  Agreement")  which will
require them to transfer all such shares to the Company for no  compensation  in
2001 or earlier under certain circumstances.


THE TIREX R&D LICENSE

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

CANADIAN GOVERNMENT AND GOVERNMENT SPONSORED FINANCIAL ASSISTANCE

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

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


TAX INCENTIVES

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


CANADIAN GOVERNMENT, AND GOVERNMENT SPONSORED LOANS AND GRANTS

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

                                       10
<PAGE>


         $500,000  (CANADIAN)  REGIONAL  DEVELOPMENT  LOAN FROM CANADIAN FEDERAL
GOVERNMENT.  In March of  1996,  the  Company  qualified  for an  interest-free,
unsecured  loan (the "FORDQ Loan") in the amount of CA $500,000,  (approximately
US $350,000)  from the  Canadian  federal  government  agency,  Canada  Economic
Development for Quebec Regions  ("CEDQR"),  formerly known as The Federal Office
for Regional Development-Quebec  (sometimes referred to herein as "FORDQ") under
its Industrial Recovery Program for Southwest Montreal, which is administered by
CEDQR. The purpose of the government program, under which this loan was made, is
to encourage industrial  development in Southwest Montreal,  where the Company's
corporate  headquarters and its manufacturing facility are located. In September
of 1999, following the period covered by this Report, CEDQR informed the Company
that the first Cdn$50,000 loan repayment which had been due as of March 31, 1999
(approximately  US$35,000) would be deducted from an additional tax credit claim
which the Company had made with  respect to the fiscal year which ended June 30,
1998.  The  outstanding  balance  of  this  loan  is  now  thus  Cdn$450,000  or
approximately US$315,000.


         $75,000  (CANADIAN)  GRANT  FROM LA  SOCIETE  RECYCLAGE  QUEBECOISE  DE
RECUPERATION  ET DE RECYCLAGE  ("RECYC  QUEBEC").  In April of 1997, the Company
qualified for a grant from Societe  Quebecoise de  Recuperation  et de Recyclage
("Recyc-Quebec"),  a  self-financed  State  owned  corporation  which  promotes,
develops,  and  supports  the  reduction,  reuse,  recovery,  and  recycling  of
containers,  packaging materials or products,  as well as their  transformation,
from a resource conservation perspective.  Under its mandate,  Recyc-Quebec will
provide financial aid for tire recycling projects.  The purpose of this grant to
the  Company was to support the design,  development,  and  construction  of the
first TCS-1  Plant.  As of June 30,  1999,  the Company had  received the entire
amount of the grant.


         LOANS FROM THE CANADIAN FEDERAL OFFICE OF REGIONAL DEVELOPMENT - QUEBEC
("FORDQ"). FORDQ's Program for the Development of Quebec's IDEA Program provides
loans in amounts of up to 50% of approved  expenditures made by the borrower for
the purpose of identifying and developing export markets for Canadian  products.
Under  this  program,  the  Company  has had its  application  approved,  and or
obtained, a total of five loans under this program, as follows:


         (a)      On January 16, 1997,  the Company  qualified for a loan, in an
                  amount equal to 50% of approved expenditures,  up to a maximum
                  loan amount of Cdn$20,000  (approximately  $14,000 U.S.) for a
                  Market Study  respecting the  feasibility  of marketing  TCS-1
                  Plants in the  Iberian  Peninsula.  Such study  (the  "Iberian
                  Report") was done by Gapco, Inc., a corporation  controlled by
                  Alan Crossley, who thereafter became the Company's Director of
                  European  Marketing.  As  compensation  therefor Mr.  Crossley
                  received an  aggregate  of $40,000  Canadian  consisting  of a
                  combination  of cash and  stock.  The  stock  portion  of such
                  compensation  was paid on May 29,  1997 with the  issuance  of
                  84,658 shares of the Company's  common stock. Mr. Crossley was
                  until  February 11,  1999, a director of the Company.  In July
                  1997,  Mr.  Crossley was appointed as the  Company's  Managing
                  Director of European  Market  Development  (see  "Existing and
                  Proposed  Businesses").  The Iberian Report is discussed below
                  in  the  subtopic   "Marketing  and  Distribution  -  Combined
                  Segments"  under  the  caption,  "Marketing  Activities".  The
                  Company has received the entire amount of this loan. Repayment
                  of this loan is to be  effected  as a  percentage  of sales of
                  TCS-1's  in  the  Iberian   peninsula   up  to  a  maximum  of
                  Cdn$20,000. No repayments have been made to date.

         (b)      On April 1, 1997,  the  Company  qualified  for a loan,  in an
                  amount equal to 50% of approved expenditures,  up to a maximum
                  loan amount of $20,000 Canadian  (approximately  $14,000 U.S.)
                  for a Market Study  respecting  the  feasibility  of marketing
                  TCS-1 Plants in India.  Such study (the  "Indian  Report") was
                  done  by  Gapco,  Inc.,  a  corporation   controlled  by  Alan
                  Crossley.  As  compensation  therefor,  the Company,  paid Mr.
                  Crossley  Cdn$40,000.  The  Company  has  received  the entire
                  amount of this loan.  Repayment of this loan is to be effected
                  as a  percentage  of sales of TCS-1's in India up to a maximum
                  of Cdn$20,000. No repayments have been made to date.

                                       11
<PAGE>


         (c)      On July 7,  1997,  the  Company  qualified  for a loan,  in an
                  amount equal to 50% of approved expenditures,  up to a maximum
                  loan amount of $95,000 Canadian  (approximately  $66,500 U.S.)
                  for market development activities in the United States markets
                  for rubber  crumb.  The proceeds of this loan were used to pay
                  for research activities respecting the potential market in the
                  United  States for TCS-1  Plants and for the rubber crumb that
                  is expected to be produced thereby ("Tirex Rubber Crumb"). The
                  nature and results of these  activities are discussed below in
                  the subtopic  "Marketing and Distribution - Combined Segments"
                  under the subcaption,  "Marketing Activities". The Company has
                  received  the entire  amount of this loan.  Repayment  of this
                  loan is to  start  on June  30,  2001  with a first  repayment
                  amount  of  Cdn$6,333.  Subsequent  repayments  are at  annual
                  intervals  and in  increasing  amounts with the final  payment
                  scheduled for June 30, 2005 in an amount of Cdn$31,667.

         (d)      On June 10,  1997,  the Company  qualified  for a loan,  in an
                  amount equal to 50% of approved expenditures,  up to a maximum
                  loan amount of $95,000 Canadian  (approximately  $66,500 U.S.)
                  for  Iberian   market   development   activities   related  to
                  positioning the company to market TCS-1 Plants,  rubber crumb,
                  and related products in the Iberian Peninsula.  The activities
                  conducted in this regard are  discussed  below in the subtopic
                  "Marketing  and  Distribution - Combined  Segments"  under the
                  subcaption,  "Marketing Activities".  The Company has received
                  the entire  amount of this loan.  Repayment of this loan is to
                  be effected as a percentage  (1.5%) of sales of TCS-1's in the
                  Iberian peninsula up to a maximum of Cdn$95,000. No repayments
                  have been made to date.

         (e)      On March 11, 1998,  the Company  qualified  for a loan,  in an
                  amount equal to 50% of approved expenditures,  up to a maximum
                  loan amount of  Cdn$98,000  (approximately  $68,600  U.S.) for
                  international market development activities, which the Company
                  used to  explore  the  feasibility  of using  rubber  crumb in
                  thermoplastic  elastomer  compounds  in the United  States and
                  Canada. The activities  conducted in this regard are discussed
                  below in the subtopic  "Marketing and  Distribution - Combined
                  Segments" under the subcaption,  "Marketing  Activities".  The
                  Company has received the entire amount of this loan. Repayment
                  of  this  loan  is to  start  on June  30,  2001  with a first
                  repayment  amount of Cdn$6,533.  Subsequent  repayments are at
                  annual  intervals  and in  increasing  amounts  with the final
                  payment   scheduled   for  June  30,  2005  in  an  amount  of
                  Cdn$32,667.

         All of the activities for which the above loans were approved have been
completed and the Company has received the funds approved.

TIREX ADVANCED PRODUCTS MANUFACTURING ACTIVITIES

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




EQUIPMENT MANUFACTURING

PRODUCT:  THE TCS-1 PLANT

                                       12
<PAGE>


         The TCS-1 Plant comprises a complete,  turn-key,  environmentally safe,
cryogenic tire recycling plant system designed to: (i) disintegrate scrap tires,
using  substantially  less energy than is required by existing  ambient  methods
(WHICH  SHRED AND/OR CHOP TIRES AT  "AMBIENT"  OR NORMAL ROOM  TEMPERATURES)  or
other currently available cryogenic methods (WHICH REDUCE THE TEMPERATURE OF THE
MATERIALS  FOR AT LEAST A  PORTION  OF THE  PROCESS,  BUT  WHICH  STILL  RELY ON
CHOPPING AND/OR SHREDDING THE TIRE), and (ii) produce commercially  exploitable,
high  quality,  clean rubber  crumb and  unshredded  steel and fiber.  All major
components of the first  full-scale TCS-1 Plant (the "First  Production  Model")
were successfully tested and were operational on a non-continuous  running basis
by May 1998.  In  mid-June  1998,  the  Company  initiated  the second  stage of
testing,  which  consisted of testing all major  components and all functions of
the First Production Model, individually, on a continuous running basis. Results
of second stage tests, as at September, 1998 indicated that approximately 85% of
the TCS-1 Plant  components  met all of the  Company's  specifications  and that
modifications  were  required in certain  components  in order for the  complete
Plant  to  operate  fully  in  accordance  with  the  Company's  specifications.
Continuous  testing  of the Plant  components  also  enabled  Tirex to  identify
opportunities to increase the TCS-1 Plant's cost and operating  efficiency.  The
initial  modifications  were completed  subsequent to the period covered by this
Report in December  of 1998 on a single  fracturing  mill and a single  freezing
tower in the First Production  Model.  Long-term testing of the system commenced
during the late third quarter of fiscal 1999 using  two-shift  operations as the
test  basis.  These  long-term  tests  provided  evidence  of  further  required
modifications in the freezing tower to ensure  problem-free  materials  movement
within the tower.  These  changes  were  designed  during the summer of 1999 and
construction  of the second  freezing tower,  incorporating  these changes,  was
initiated  at the  beginning  of  October  1999.  Scheduled  completion  for the
modified  freezing tower is December 1999.  These changes are based on known and
proven technologies adapted for the very specific requirements of the TCS-1. For
a discussion of the  associated  costs and financing of the above,  reference is
made to Item 6 of this Report, "Management's Discussion and Analysis

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

         *        TWO TYPES OF RUBBER. The sidewalls of tires are constructed of
                  material containing a higher percentage of natural, as opposed
                  to  synthetic,  rubber which is used in the treads.  The TCS-1
                  Plant has been designed to take advantage of these differences
                  to produce a separate rubber powder reclaimed exclusively from
                  the  sidewalls.  * Steel beads,  which  consist of steel wires
                  tightly wound together to a diameter of  approximately  3/8 of
                  an inch.  These beads are imbedded around the rims of the tire
                  treads.
         *        Steel belting,  which incorporates a thin layer of steel wires
                  laid out in a "herring  bone" pattern and which  underlies the
                  entire surface of the tread area, and
         *        Fiber  threads  which are  incorporated  into the rubber  used
                  throughout the tire.

                                       13
<PAGE>


ECONOMY, FUNCTIONS, OPERATIONS, AND CAPABILITIES

         The TCS-1 Plant has been designed to operate continuously (with minimum
amounts of downtime for maintenance), to consume approximately 6.50 kilowatts of
power, and is designed to require substantially less energy than is used, to the
best of the Company's  knowledge,  by other  presently  existing tire  recycling
equipment. The TCS-1 Plant is expected to be able to process both automobile and
truck  tires  at a  rate  equivalent  to  180  passenger  tires  per  hour  on a
continuous,  commercial  operations basis. To date, the Company has succeeded in
operating the TCS-1 Plant for scheduled  periods of up to four hours,  at 50% of
capacity with one of its two freezing towers and fracturing  mills.  This allows
the TCS-1 Plant to process only the tread portion of the tires.  The addition of
the second freezing tower and fracturing mill will allow for the processing also
of the sidewall portion of the tire. Results of operations to date indicate that
the TCS-1 Plant is presently capable of processing passenger car tires at a rate
of three per minute.

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


STEP-BY-STEP OPERATIONS

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

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

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

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

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

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

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

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

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

                                       14
<PAGE>


COMPARISON  OF THE PROJECTED TCS-1 PLANT
WITH OTHER, EXISTING TIRE RECYCLING EQUIPMENT

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

                                       15
<PAGE>


                              EXISTING CONVENTIONAL
                              CRYOGENIC AND AMBIENT
                                     SYSTEMS


METHODS

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

EQUIPMENT, ENERGY AND
  MAINTENANCE REQUIREMENTS

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

COOLING TECHNIQUES

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

COSTS AND EXPENSES

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

                                       16
<PAGE>


PROBLEMS ASSOCIATED WITH TIRE DISINTEGRATION METHODS IN CURRENT USE.

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

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

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

In using a hammer or  knife-mill  for this  operation,  however,  the  following
problems  arise:  (i) running at an efficient  speed,  the fiber fluff (which is
contained in the rubber  crumb) may clog the  mechanism;  and (ii) the action of
the hammer or knife-mill  will heat the rubber to the point where it will become
so soft  that  instead  of being  pulverized  into a powder,  it will  simply be
softened and mashed and thereby will further clog the mechanism.

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

                                       17
<PAGE>


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

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

RECOVERY RATIO

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

                                       18
<PAGE>


                                   PROJECTED
                                      TCS-1
                                     SYSTEM

METHODS

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

EQUIPMENT, ENERGY AND
  MAINTENANCE REQUIREMENTS

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

COOLING TECHNIQUES

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


COSTS AND EXPENSES

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

                                       19
<PAGE>


AVOIDANCE OF PROBLEMS  ASSOCIATED  WITH TIRE  DISINTEGRATION  METHODS IN CURRENT
USE.

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

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

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

RECOVERY RATIO

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

                                       20
<PAGE>


PRODUCTION AND SUPPLY

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

         The Company has effected,  and intends to continue to effect, all TCS-1
Plant manufacturing operations through its subcontractors.  It will therefore be
substantially  dependent  on the  ability  of  such  subcontractors  to  satisfy
performance and quality  specifications  and to dedicate  sufficient  production
capacity for all TCS-1 Plant scheduled delivery dates. The Company believes that
all of its subcontractors have the requisite manufacturing  capabilities and the
willingness to dedicate  sufficient amounts of their  manufacturing  capacity to
the Company to meet all TCS-1  Plant  delivery  dates,  currently  scheduled  or
expected  to be  scheduled  for not less than the next two  years.  However,  no
assurance  can be given  that this will in fact be the case and  failure  on the
part of the Company's subcontractors in these regards would adversely affect the
Company's  ability  to  manufacture  and  deliver  TCS-1  Plants on a timely and
competitive basis. In such event the Company would have to replace or supplement
its  present  subcontractors.  There  can  be no  assurance  that  should  it be
necessary to do so, the Company would be able to find capable  replacements  for
its subcontractors on a timely basis and on terms beneficial to the Company,  if
at all; the Company's inability to do so would have a material adverse effect on
its business.  Components of the TCS-1 Plants, which are not manufactured by the
Company's  subcontractors  specifically for the TCS-1 Plant,  will be purchased,
either  directly by the Company or indirectly  through its  subcontractors  from
third-party  manufacturers.  The  Company  believes  that  numerous  alternative
sources of supply for all such components are readily available.


SUBCONTRACTORS

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

         BEAUDOIN,  HURENS AND  ASSOCIATES,  INC. On  September  21,  1998,  the
Company accepted the proposal of Beaudoin,  Hurens and Associates,  Inc. to: (i)
prepare  and/or  finalize all design and  engineering  drawings,  operation  and
technical manuals, and other documentation  respecting the TCS-1 Plant; and (ii)
make an independent  engineering  assessment of Tirex's  findings from its first
and second  stage  testing of the TCS-1  Plant to verify  and  authenticate  the
requirements  for the  modifications  which the Company believes are required to
bring the Plant into full compliance with specifications.  BHA was to assist the
Company and its  subcontractors  in effecting the required  modifications and to
work with the Company on fine tuning and  enhancing  the operation of the Plant.
BHA was also to serve as engineering  project manager during what Tirex believed
was final stage of preparation  for  full-scale  commercial  operations.  In the
third quarter of fiscal 1999 it became  apparent that BHA did not, in fact, have
the required  engineering  resources  to complete the mandate it had  contracted
for.  Faced with the Company's  refusal to pay invoices  until BHA would deliver
the services required by the mandate,  BHA withdrew from the Company's premises,
effectively terminating the contract. The Company has officially opposed through
established legal channels the invoices issued by BHA and is of the opinion that
no payments will be made to BHA.

                                       21
<PAGE>

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

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


         AGREEMENTS   WITH   PLASTI-SYSTEMES,    INC.   Plasti-Systemes,    Inc.
("Plasti-Systemes") of Ville D'Anjou Quebec was contracted to design, construct,
and install the first  fully-automated  front-end  sidewall  cutter and debeader
module  "front-end"  of the TCS-1 Plant which consists of a series of mechanisms
which automatically: (i) clean and debead the tires; (ii) separate the sidewalls
from the treads;  (iii) cut both  sidewalls and treads into  sections  ready for
processing;  and (iv)  transport the beads and tire sections into separate areas
for  disposal  or  processing   has  been   completed.   On  January  17,  1997,
Plasti-Systemes  accepted  payment of 26% of its total  price for the  foregoing
services  by way of  255,010  unregistered  shares  of the  common  stock of the
Company.   By  February  of  1999,  it  became  apparent  to  the  Company  that
Plastisystemes  had  encountered  difficulties  in delivering on the commitments
they made in their  Agreements  with the  Company.  The Company  terminated  its
arrangements   with   Plastisystemes   and   launched   legal   action   against
Plastisystemes  to recover monies paid. On the advice of Montreal legal counsel,
this legal action was settled out of court in June of 1998,  the result of which
was that Plastisystemes paid the Company Cdn$40,000 (approximately US$28,000).

                                       22
<PAGE>


FORMERLY PROPOSED SERVICES

         In the past, the Company had intended to require all of its TCS-1 Plant
purchasers to agree to enter into a maintenance and technical and market support
agreement.  In connection with which the Company had intended to provide timely,
high  quality  technical  support to insure that the TCS-1 Plant will perform in
conformance with its specifications. However, as of the date hereof, the Company
has been unable to determine what the maintenance  requirements or costs will be
under commercial operating conditions.  Therefore,  the Company is not presently
offering any maintenance or technical and market support agreements and does not
intend  to do so until it is able to  establish  the level of  maintenance  fees
which it would have to charge in order to make the  provision  of such  services
economically viable.


SALES AND MARKETING

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


TCS-1 PLANT SALES

SALES

         The Company's  present and projected  marketing plans  respecting TCS-1
Plants  are   discussed   below  under  the  caption   "Company   Marketing  and
Distribution".  The Company has entered into  agreements for the following sales
of TCS-1  Plants,  but the ultimate  consummation  of each of such sales will be
entirely dependent upon the TCS-1 Plant's meeting performance expectations, each
customer's obtaining lease, or other financing for the purchased portions of the
System (as well as all required  permits and licenses to operate a System),  and
the Company's  obtaining  sufficient  production  financing and capacity to meet
delivery requirements.


THE O/V III AGREEMENTS

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

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

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

                                       23
<PAGE>


         The O/V III L&P Agreement called for the delivery of the first Plant by
October 1998, with seven  additional  Plants  scheduled for delivery every three
months  thereafter,  through July 2000.  Construction  of the  components of the
first full scale  prototype  of the TCS-1  began in  February  of 1997,  and was
completed in May of 1998.  Because  completion of the first  production model of
the TCS-1 Plant was delayed,  OV III waived the  originally  scheduled  delivery
dates and agreed with the  Company  that they would  reschedule  delivery of the
first of these  Plants for an as yet  undetermined  date.  In May 1997,  O/V III
waived its right to purchase the first complete,  fully  operational TCS-1 Plant
(the "First Production  Model") in favor of its affiliated  corporation,  Oceans
Tire ("OTRP"),  which had contracted  separately  with the Company for the lease
and purchase of one additional  Plant (see below,  "Agreements  with Oceans Tire
Recycling & Processing Co., Inc." and "Proposed Product Manufacturing).

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

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

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

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


AGREEMENTS WITH OCEANS TIRE RECYCLING & PROCESSING CO., INC.

         On May 29,  1997,  the  Company  entered  into an  Equipment  Lease and
Purchase  Agreement  (the "OTRP L&P  Agreement")  with Oceans  Tire  Recycling &
Processing Co., Inc.  ("OTRP"),  a New Jersey  corporation  under common control
with O/V III. Pursuant to the OTRP L&P Agreement, OTRP was to purchase the first
production  model TCS-1 Plant.  Under the terms of the OTRP L&P  Agreement,  the
anticipated delivery date for this Plant was September 15, 1997. However,  while
construction  of the first  full scale  prototype  of the TCS-1  Plant  began in
February  of 1997,  its  completion  was delayed  because of the  limited  funds
available  for such  purpose.  As a result,  OTRP waived the  delivery  date and
agreed to reschedule  delivery.  In December  1997,  OTRP and the Company agreed
that, to the extent  necessary for OTRP to obtain sale and lease-back  financing
for the front-end  module  ("Front-End")  and for certain parts of the Air Plant
portion of the Plant, the said OTRP Agreement would be deemed to be modified, as
required  for such  purpose.  In  connection  therewith  OTRP  arranged  with an
equipment  financing  company  for sale and  lease-back  financing,  pursuant to
which:  (i) the said  financing  company  purchased  the  Front-End  and certain
designated  portions of the TCS-1  Plant's Air Plant  directly from the Company;
and (ii) leased such  equipment back to OTRP pursuant to its  arrangements  with
OTRP and/or the OTRP  principals.  The Front-End was delivered to OTRP's site in
New Jersey in January of 1998.  The parties  rescheduled a new delivery date for
the Air  Plant,  which  occurred  during  the first  week of May 1998.  Upon the
Company's  entering into a lease for its Research and Manufacturing  facility in

                                       24
<PAGE>


Montreal (the  "Company  Facility"),  OTRP shipped the  Front-End  Module of the
Plant, which had originally been delivered to OTRP in New Jersey, to the Company
Facility and OTRP's equipment financing provider took delivery of the balance of
the Plant at the Company  Facility.  This  allowed for the assembly of the First
Production  Model of the TCS-1  Plant,  and the  initial  test phase  operations
thereof to be conducted under supervision of both the Company and OTRP, jointly.
The Company sold the  Front-End  for a total  purchase  price of $300,000,  with
irrevocable  acceptance  and final payment  therefor  obtained by the Company in
December of 1997. The designated portions of the Air Plant were sold for a total
purchase  price of  $580,000,  with  irrevocable  acceptance  and final  payment
therefor obtained by the Company in April of 1998.

         It is the  present  intention  of the  parties to reform or rescind the
remaining  provisions  of the OTRP  Agreement  for the  purpose of  transferring
ownership of the entire First  Production  Model to the Company,  any one of its
existing  subsidiaries,  or to some other entity established jointly, or singly,
by the parties, or either one of them, for such purpose. The structure and terms
of the  ownership  of the First  Production  Model have not yet been  finalized.
However, in connection therewith, on December 16, 1998, the Company entered into
two sale and  leaseback  transactions  by and among  the  Company,  North  Shore
Leasing &  Funding  Inc.  ("NLFI"),  and an  affiliate  of OTRP,  Ocean  Utility
Contracting,  Inc. ("OUCI").  Such transactions consisted of the Company's sales
to NLFI of the single  fracturing mill and the single freezing tower,  which are
components of the TCS-1 Plant installed at the Company's  Montreal  facility and
the lease back of such components to OUCI. The Company and OUCI have agreed that
all of OUCI's  rights  under the leases  will be assigned to the Company and the
Company will assume all of OUCI's  liabilities  thereunder.  Both leases provide
that at the end of the lease  term,  the lessee  will have the right to purchase
the leased  equipment  for $1.00.  Such right to  purchase  will be  included in
OUCI's  assignment  to the Company of its rights under the said leases (see this
Item 1.  "Existing and Proposed  Businesses - Proposed  TCS-1 Plant  Operations:
Sales of Rubber  Crumb and  Manufacture  and Sale of Finished  Products  Product
Manufacturing").  The principal owner is, as of October 13, 1999, an officer and
director of the Company.


THE RECYCLETRON INC. AGREEMENTS

         On July 8,  1997,  the  Company  entered  into an  Equipment  Lease and
Purchase  Agreement (the  "Recycletron  L&P Agreement")  with  Recycletron  Inc.
("Recycletron") of Montreal,  Quebec. Pursuant to the Recycletron L&P Agreement,
Recycletron  will purchase one TCS-1 Plant.  The Agreement  calls for a delivery
date at the end of the second  quarter of 1998 or such other date as the parties
shall mutually  agree. To date, the Company has not been able to deliver a TCS-1
Plant to Recycletron  and does not expect to be able to do so until after fiscal
year 2000. To the best of the  Company's  knowledge,  Recycletron  is willing to
schedule a delivery  date within such time frame.  The terms of the  Recycletron
L&P Agreement,  pursuant to which the constituent  components of the TCS-1 Plant
will be leased and or purchased, are substantially identical to those of the O/V
III L&P Agreement,  as described above. The only significant  differences are in
the purchase  price and payment terms.  The purchase  price for the  Purchasable
Equipment is $2,000,000 and the terms of the 60-month  operating  lease call for
monthly   lease   payments  of  $12,500   each.   Accordingly,   the   aggregate
lease/purchase  price under the  Recycletron  L&P Agreement is $2,750,000.  Upon
execution  of the  Agreement,  Recycletron  paid a $25,000 down  payment.  Other
payment  terms require  additional  payments of $100,000 six months prior to the
anticipated  delivery date, $125,000 prior to the anticipated delivery date, and
$1,750,000 upon Recycletron's acceptance of the Plant.

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

                                       25

<PAGE>


AGREEMENTS WITH 750824 ALBERTA LTD.

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

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


THE ENERCON AGREEMENTS

         On each of August 19, 1998 and October 13,  1998,  the Company  entered
into two Equipment Lease and Purchase  Agreements (the "Enercon L&P Agreements")
with ENERCON America  Distribution  Limited  ("Enercon") of  Westerville,  Ohio.
Pursuant to each of the Enercon L&P  Agreements,  Enercon has agreed to purchase
one  TCS-1  Plant  configured  to  process  car  tires  only and a second  Plant
specially  configured to process truck tires only.  The terms of the Enercon L&P
Agreements, pursuant to which the constituent components of the TCS-1 Plant will
be leased and or purchased,  are substantially identical to those of the O/V III
L&P Agreement,  as described above. The only significant  differences are in the
payment terms.  The purchase price for the Purchasable  Equipment in each of the
Enercon Plants is $2,250,000.  As with all other Plants  contracted for to date,
the monthly payments under the 60-month operating lease for the Leased Equipment
will be $12,500 for each Plant. Accordingly,  the aggregate lease/purchase price
under the four Enercon L&P Agreements  aggregates to  $12,000,000.  Although the
Enercon L&P Agreements called for an initial payment of $337,500 for each of the
two Enercon Plants upon execution of the Agreements, as of October 13, 1999, the
Company had not yet received such payments because, as of such date, Enercon had
not yet received  custody of funds which it expects to use toward such payments.
Enercon  has  advised  the  Company  that  it  expects  to  receive  such  funds
imminently,  but, as of November 15,  1999,  the Company was not able to predict
with certainty when or if Enercon would in fact receive such funds.  All four of
these sales are completely  dependent upon Enercon raising sufficient  financing
to meet its obligations under the respective Enercon L&P Agreements. In addition
to the initial payments,  terms under each of the Enercon L&P Agreements require
additional payments on each of the four Enercon Plants, as follows:

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

                                       26
<PAGE>


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

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

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

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


         Pursuant  to the terms of the Enercon L&P  Agreements,  upon  execution
thereof, the parties also entered into the same types of ancillary agreements as
are described  above with respect to the O/V III L&P Agreement,  i.e., a royalty
agreement and a rubber crumb purchase option agreement. The terms of all of such
ancillary  agreements are identical to those  described above in connection with
the O/V III Agreements.  The Enercon L&P Agreements  provide for the preparation
of an agreement for the maintenance of the TCS-1 Plant to be done jointly by the
Company and Enercon,  on mutually agreeable terms.  Enercon verbally  reiterated
its  commitment to the Company in September  1999, and stated that their funding
was in place.


BACKLOG

         The Company  includes in its  "backlog,"  orders for TCS-1 Plants under
executed  Equipment  Purchase and Lease Agreements.  Although the stated backlog
may be used as a  guideline  in  determining  the  value  of  orders  which  are
presently  scheduled for delivery during the period indicated,  it is subject to
change by reason of several factors including  possible  cancellation of orders,
change in the terms of the  contracts,  and other  factors  beyond the Company's
control and should not be relied  upon as being  necessarily  indicative  of the
Company's  revenues or of the profits  which the Company  might realize when the
results of such contracts are reported.  The ultimate  consummation of each sale
included  in the  backlog  will be  entirely  dependent  upon the TCS-1  Plant's
meeting  performance  expectations,  each customer's  obtaining  lease, or other
financing  for the  purchased  portions  of the System (as well as all  required
permits  and  licenses  to  operate  a  System),  and  the  Company's  obtaining
sufficient production financing and capacity to meet delivery requirements.

         Based on the foregoing,  as of October 1, 1999,  the Company's  backlog
amounted to $41,750,000.  This includes, for fourteen TCS-1 Plants: (i) the full
purchase price for the Purchasable  Equipment which will be sold by the Company,
and (ii) total  lease  payments  for the Leased  Equipment  under the  five-year
operating lease.  Together,  the Purchasable  Equipment and the Leased Equipment
constitute a complete  TCS-1  Plant.  However,  there is no  assurance  that any
amount of this backlog will be converted into sales.

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

         The Company is unable to state when,  if ever, it will make delivery of
the four Plants ordered by Enercon.  In this regard, it should be noted that, as
of November  15,  1999,  the  Company had not yet  received  any  payments  from
Enercon.  Despite  Enercon's  having informed the Company  verbally in September
1999 that their funding was in place and that they would be able to proceed with
the  contracts  in October  1999,  to the extent that  receipt of payments  from
Enercon  might be  materially  delayed,  construction  and delivery of the TCS-1

                                       27
<PAGE>


Plants ordered by Enercon will also be delayed. Delivery dates for the remaining
ten Plants  included in the backlog are  anticipated to be scheduled  throughout
the year 2000.  Management  believes that all operating problems  respecting the
TCS-1 Plant have been identified during continuous  testing during the third and
fourth  quarters of fiscal  1999.  It should be noted,  however,  that the TCS-1
Plant has not yet  functioned  under  commercial  operating  conditions  over an
extended  period of time.  Therefore,  delivery  dates  for all  Plants on order
remain subject to delay principally because of presently  unforeseeable problems
which may become manifest under long-term, commercial use.

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


DEPENDENCE ON MAJOR CUSTOMERS

         To date the Company has received orders for fifteen TCS-1 Plants, eight
of which were  ordered by O/V III and parts of one of which have been  purchased
by OTRP, an affiliate of O/V III. Proceeds from the sale to OTRP constituted one
hundred percent (100%) of the Company's  revenues from operations  during fiscal
1998 and the eight Plants ordered by O/V III constitute  approximately fifty-six
percent (56%) of the Company's present backlog. The loss of O/V III would have a
material  adverse  effect on the Company.  O/V III is under the control of Louis
Sanzaro,  who,  until  November 23, 1999 had been an officer and director of the
Company.  For  purposes  of this  discussion,  O/V III and  OTRP  are  sometimes
referred to herein,  collectively,  as the "Sanzaro  Entities".  The Company has
also received orders for four TCS-1 Plants from Enercon. These orders constitute
approximately twenty-eight percent (28%) of the Company's present backlog. As is
the case with O/V III,  the loss of this  customer  would  have a major  adverse
effect on the Company.  Notwithstanding the foregoing, the Company also believes
that while Mr. Sanzaro's  companies and Enercon comprise the initial TCS-1 Plant
purchasers,  future sales efforts will be widespread and, as the Company matures
and its business develops,  it will not be dependent upon the business of one or
more major customers.

         Mr. Sanzaro's  initial contacts with the Company occurred in the summer
of 1995.  On October 5, 1995,  Mr.  Sanzaro,  through O/V III,  entered into the
initial  agreement to purchase and lease eight TCS-1 Plants. At that time, three
associates  and/or  employees  of  O/V  III  were  retained  by the  Company  as
consultants respecting various aspects of the Company's plans to design, develop
and manufacture the TCS-1 Plant. Following his initial contacts with the Company
in October 1995, Mr. Sanzaro also worked  actively with the Company to assist it
in these  efforts.  On or about  January 1, 1997,  the Company  and Mr.  Sanzaro
agreed that he should be fairly  compensated  for his consulting  services.  The
Company did not formalize its  arrangements  with Mr.  Sanzaro or compensate him
for his  services  until  January  28,  1998,  when it  entered  into a two year
consulting agreement with him, retroactively effective to January 1, 1997. Total
compensation under the Sanzaro consulting  agreement was 1,000,000  unregistered
shares of the  Company's  common  stock.  On January  17,  1997 Mr.  Sanzaro was
appointed as a Director of the  Company.  In October  1995,  the Company and Mr.
Sanzaro had agreed that Mr. Sanzaro would be the sole and exclusive  distributor
of TCS-1  Plants in North  America and that he would be entitled to a commission
of 10% of the total  lease and  purchase  price on all sales of TCS-1  Plants in
North  America.  In July 1998,  Mr.  Sanzaro  and the  Company  entered  into an
employment agreement pursuant to which Mr. Sanzaro was retained as the Company's
Vice  President  in  charge  of  operations,  to serve in such  position  as the
Company's Chief Operating Officer ("COO"). In connection with his appointment to
such position, Mr. Sanzaro agreed to give up all rights which he theretofore had
with respect to his serving as exclusive distributor. Mr. Sanzaro also agreed to
serve full time in his position as the Company's COO and in connection therewith
to terminate  virtually all of his  activities  connected with his own recycling
businesses  in New  Jersey.  In  consideration  of Mr.  Sanzaro's  agreement  to
discontinue  his other business  activities in order to enter into the Company's
employ,  the  Company  issued  500,000  shares of its  common  stock to him as a
signing  bonus.  In  addition,  for  agreeing to release  the  Company  from its
obligation  to  appoint  him as  exclusive  distributor  of the  TCS-1  in North
America, the Company issued to Mr. Sanzaro an additional 2,500,000 shares of its
common stock.  As of November 23, 1999, and in order to avoid a future  conflict

                                       28
<PAGE>


of interest which could arise from his accepting on behalf of companies which he
controls,  a licencing  agreement for the marketing and  manufacturing  of TCS-1
systems,  Mr.  Sanzaro  resigned  as an officer of the  Company and is no longer
performing  any  duties as COO.  (see  ""Management  -  Executive  Officers  and
Directors" and Certain Relationships and Related Transactions" ).


RESEARCH AND DEVELOPMENT - TCS-1 PLANT MANUFACTURING SEGMENT

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


EMPLOYEES - TCS-1 PLANT MANUFACTURING SEGMENT

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


PATENT PROTECTION

         The Company was issued a United  States  patent on its  Cryogenic  Tire
Disintegration  Process and  Apparatus on April 7, 1998 (Patent No.  5,735,471).
The  duration of the patent is 20 years from the date the  original  application
was filed. In November 1998, the Company filed its patent, for review,  with the
Canadian Patent Office. The Company is unable to state at this time how long the
Canadian  review process will take and is unable to give any assurances that the
Canadian  Patent will be granted.  Prior to the  issuance  of such  patent,  the
Company relied solely on trade secrets,  proprietary  know-how and technological
innovation to develop its technology and the designs and  specifications for the
TCS-1 Plant.  In  connection  with a loan made by the Bank of Nova Scotia to the
Company, a lien on this patent was granted to the said bank (see below in Item I
of this Report  "Management's  Discussion  and Analysis - Liquidity  and Capital
Resources").

         The Company has entered into  confidentiality and invention  assignment
agreements  with certain  employees and  consultants  which limit access to, and
disclosure  or use of,  the  Company's  technology.  There can be no  assurance,
however, that the steps taken by the Company to deter  misappropriation or third
party  development of its  technology  and/or  processes will be adequate,  that
others will not independently  develop similar  technologies and/or processes or
that secrecy will not be breached.  In addition,  although the Company  believes
that its  technology has been  independently  developed and does not infringe on
the proprietary  rights of others,  there can be no assurance that the Company's
technology  does not and will not so  infringe  or that third  parties  will not
assert  infringement  claims  against  the  Company in the  future.  The Company
believes  that the  steps it has  taken to date  will  provide  some  degree  of
protection, however, no assurance can be given that this will be the case.

                                       29
<PAGE>


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


COMPETITION - EQUIPMENT MANUFACTURING SEGMENT

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


PROPOSED TCS-1 PLANT OPERATIONS:  SALES OF RUBBER CRUMB
  AND MANUFACTURE AND SALE OF FINISHED PRODUCTS

PROPOSED OWNERSHIP, ESTABLISHMENT, AND
  OPERATION OF TIREX ADVANCED PRODUCTS PLANT

         The Company is presently in the process of making  arrangements  to own
and operate the First  Production Model of the TCS Plant, on either an exclusive
or joint basis (see the discussion  below) and to operate it as a Tirex Advanced
Products  Plant for the purpose of selling rubber crumb produced by operation of
the TCS-1 Plant.

         The First  Production  Model is presently  installed  at the  Company's
Montreal  manufacturing  facility.  This  Plant was the  subject  of a Lease and
Purchase  Agreement (the "OTRP  Agreement")  between the Company and Oceans Tire
Recycling  &  Processing  Co.,  Inc.  ("OTRP"),  a company  controlled  by Louis
Sanzaro, the Company's Chief Operating Officer until November 23, 1999. The OTRP
Agreement  provided  for certain  sections of the First  Production  Model to be
purchased by OTRP for a purchase  price of $1,225,000 and for the balance of the
Plant to be leased  under a five  year  operating  lease at a monthly  rental of
$12,500 (see "Existing and Proposed Businesses - Equipment Manufacturing - Sales
and Marketing - Agreements with Oceans Tire Recycling & Processing Co.,  Inc.").
In December 1997, OTRP and the Company agreed that, to the extent  necessary for
OTRP  to  obtain  sale  and  lease-back   financing  for  the  front-end  module

                                       30
<PAGE>


("Front-End")  and for certain parts of the Air Plant portion of the Plant,  the
said OTRP  Agreement  would be  deemed  to be  modified,  as  required  for such
purpose.  In connection  therewith  OTRP  arranged  with an equipment  financing
company for sale and lease financing,  pursuant to which: (i) the said financing
company  purchased the Front-End  and certain  designated  portions of the TCS-1
Plant's Air Plant directly from the Company; and (ii) leased such equipment back
to OTRP pursuant to its arrangements  with OTRP and/or the OTRP principals.  The
Company  sold  the  Front-End  for a total  purchase  price  of  $300,000,  with
irrevocable  acceptance  and final payment  therefor  obtained by the Company in
December of 1997. The designated portions of the Air Plant were sold for a total
purchase  price of  $580,000,  with  irrevocable  acceptance  and final  payment
therefor  obtained by the Company in April of 1998. It is the present  intention
of the  parties  to reform  or  rescind  the  remaining  provisions  of the OTRP
Agreement  for  the  purpose  of  transferring  ownership  of the  entire  First
Production  Model to the Company,  any one of its existing  subsidiaries,  or to
some other entity established  jointly, or singly, by the parties, or either one
of them, for such purpose. The structure and terms of the ownership of the First
Production Model have not yet been finalized (see the discussion, above, in this
Item  1,  under  the  subcaption,  "Agreements  with  Oceans  Tire  Recycling  &
Processing Co., Inc.").

         In order to  establish  and  operate the  Montreal  T.A.P.  Plant,  the
Company will be required to make  modifications and improvements to its Montreal
facility to accommodate  such operations and to meet local fire,  environmental,
and other applicable  regulations.  Renovations and improvements to the Montreal
facility required to be made, or already made, in order to establish and operate
the Montreal  T.A.P.  Plant  include the  installation  or  renovation  of:; (i)
lighting;  (ii) a heating system;  (iii) a new floor in the manufacturing  area;
and (iv) a new  sprinkling  system  throughout  the building.  In addition,  the
Company  will have to  construct:  (i) a  loading  dock  area;  and (ii) a storm
drainage  system.  The  Company  estimates  that such  plant  modifications  and
improvements will cost approximately Cdn$70,000 or approximately US$50,000.

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


PROPOSED PRODUCTS

         The Company intends to target the following  markets:  specialty molded
construction  products,  industrial and athletic surfaces.  The Company believes
that crumb rubber modified (CRM) asphalt also shows strong market  potential and
that new tire  manufacturing and thermoplastic  compounds,  particularly for the
automotive sector constitute promising potential markets for rubber crumb in the
future (See,  below,  "Existing and Proposed  Businesses - Company Marketing and
Distribution - Potential Markets").


RAW MATERIALS

         The Government of Quebec passed a law which came into effect October 1,
1999 which provides for a Cdn$3.00 tax to be imposed on the sale of new tires so
as to provide  funds for the recycling of used tires.  The  Government of Quebec
further  announced  that 40% of this tax (thus  Cdn$1.20)  would be passed on to
those companies or persons recycling the tires.  Based on obtaining fifteen (15)
pounds of rubber out of an average  scrap  passenger  car tire,  the subsidy per
pound of rubber becomes Cdn$0.08 or approximately  US$0.054 per pound.  Supplies
of recyclable  scrap tires, as well as subsidies are expected for no cost to it,
from,  through, or under the auspices of,  Recyc-Quebec.  As at the date hereof,
however,  the Company has not  entered  into any formal or written  arrangements
with Recyc-Quebec or with any other potential supplier of recyclable scrap tires
for feedstock to be used in its proposed operations. Moreover, the Company could
encounter  legal  barriers  should it  attempt to import  tires from  outside of
Quebec. Notwithstanding the foregoing, the Company is confident that it will, at
least in the foreseeable  future,  be able to obtain adequate  feedstock for its
tire recycling operations, on a subsidized basis, or otherwise.

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<PAGE>


PROPOSED RUBBER CRUMB AND FINISHED PRODUCT MARKETING ACTIVITIES

         The  price  for  rubber  crumb is  determined  by its  quality  and its
particle size.  Rubber crumb, of a quality which the Company  believes the TCS-1
Plant will be able to produce at the outset,  currently sells for  approximately
$0.15 US per pound.  Revenues  from  projected  sales of rubber crumb will be in
addition to the government  subsidies noted above and are therefore  expected to
be approximately  $0.205 US per pound. The Company believes that it will be able
to produce and sell  between  20,000 and 50,000  pounds of rubber  crumb per day
commencing about the end of November 1999.

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


RESEARCH AND DEVELOPMENT - PROPOSED TCS-1 PLANT OPERATIONS AND TAP SEGMENT

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


EMPLOYEES - PROPOSED TCS-1 PLANT OPERATIONS AND TAP SEGMENT

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


COMPETITION - PROPOSED TCS-1 PLANT OPERATIONS AND TAP SEGMENT

         The Company intends to market rubber crumb produced at the Montreal TAP
Plant  throughout  the  province  of Quebec.  The Company is aware of four crumb
rubber  producers in Quebec which,  to the best  knowledge of the Company,  have
been producing an aggregate of  approximately  27 million pounds of rubber crumb
per year from both scrap tires and "buffings"  (rubber removed from tires in the
re-treading  process).  Such  product is  utilized  by Quebec  manufacturers  of
outdoor mats,  construction  related  products,  parking  curbs,  manhole seals,
acoustic panels, and mud flaps for the automotive industry. The Company believes
that  there  presently  exists in Quebec  demand  for  approximately  23 million
additional pounds of rubber crumb per year which,  because of insufficient local
product,  is now being  filled by rubber  crumb  imported  from  elsewhere.  The
Company believes it will be able to compete successfully in the local area based
on price and quality.

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

                                       32
<PAGE>


lowering of prices for goods made from recycled  rubber,  which would  adversely
affect the Company's  ability to compete.  The Company intends to compete on the
basis of quality and  production  economies  which can be realized from vertical
integration, whereby the Company will produce the raw material (rubber crumb) to
be utilized in the manufacture of its finished products.


RESEARCH AND DEVELOPMENT ACTIVITIES - COMBINED SEGMENTS

         The Company's  technical  expertise has been an important factor in its
development  and is  expected to serve as a basis for future  growth.  Since its
inception,  the  Company  has devoted  substantial  resources  to the design and
development of the TCS-1 Plant as well as to raising the financing necessary for
such  activities.  During the last two completed  fiscal years, the Company also
conducted research and development activities in the area of product development
focusing on  potential  commercial  applications  for the rubber  crumb which is
expected to be produced by operation of the TCS-1 Plant. During the fiscal years
ended  June  30,  1997,  1998  and  1999,  respectively,  the  Company  expended
approximately  $806,982,  $1,064,205 and $1,449,550 on research and  development
activities  applied to the design,  development,  and  construction of the first
TCS-1 production model and product  development.  The basic design,  development
and  construction of the first complete  production model of the TCS-1 Plant was
completed in May of 1998. Thereafter, continuous testing procedures revealed the
need for certain  modifications,  which were  completed in December of 1998 on a
single  fracturing  mill and a single  freezing  tower in the  First  Production
Model.  Subsequent  long-term  testing  was  conducted  in the third and  fourth
quarters of fiscal 1999,  which testing  revealed design problems  involving the
conveying system within the freezing tower.  The Company halted  construction of
the second freezing tower pending resolution of the design problem.  The Company
has identified an adaptable,  known  technology which it believes will solve the
technical  problems  associated  with the first design of the  conveying  system
within the freezing tower and will proceed with the reconstruction  according to
the new design in October and November of 1999. While  Management  believes that
this new design will resolve the identified  problem,  Management cannot provide
any  assurances  that the new  design  will,  in fact,  resolve  the  identified
problems.  (see "Existing and Proposed  Businesses - Equipment  Manufacturing  -
Products and Services - The TCS-1 Plant").  Thereafter,  the Company  intends to
continue to seek to refine and enhance its tire disintegration technology and to
enhance it to comply  with  emerging  regulatory  or industry  standards  or the
requirements of a particular  customer.  The Company also intends to continue to
endeavor to develop new products  and uses for the crumb rubber  produced by the
operation of the TCS-1 Plant.

         During  the  fiscal  years  ended  June 30,  1997,  1998 and 1999,  all
research and development  activities respecting the TCS-1 Plant were carried out
by the Company's  engineering and technical staff,  consisting of Louis V. Muro,
Vice  President  in  Charge  of  Engineering,  and one  other  Company  employed
engineer, who devoted 100% of their time to such projects.  Such activities were
conducted in conjunction  with an outside  consultant and the Company's  outside
subcontractors.

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


EMPLOYEES - COMBINED SEGMENTS

         As of November 1999, the Company had sixteen  persons  employed  either
directly or under consulting  contracts  including its five executive  officers,
its technical program director,  two  secretary-receptionists,  and its managing
director of European market  development,  with a balance of the Company's staff
comprised  of  mechanical  and other  support  personnel.  All of the  foregoing
persons  devote  their full time to the business and affairs of the existing and
proposed  businesses  of the Company,  as required.  At times,  the Company also
utilizes  the  services  of several  part-time  consultants  to assist them with
market research and  development and other matters.  The Company intends to hire
additional personnel, as needed.

                                       33
<PAGE>


         The Company does not  presently  retain any  employees who devote their
full time to the Company's  proposed TCS-1 Plant  operations or finished product
manufacturing  businesses.  However,  the  Company  expects  to  hire  up  to 15
additional  employees during the 2000 calendar year, on an as needed basis, with
the bulk of such new employees expected to be utilized in the Company's proposed
TCS-1 Plant Operations.


POTENTIAL MARKETS

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

         The  following  discussion  of the  potential  markets for rubber crumb
assumes  that the TCS-1  Plant will be capable of  economically  producing  high
quality  recycled rubber crumb and in a variety of sizes,  capable of being used
in wide range of products.  The Company believes that the First Production Model
of the TCS-1 Plant will be ready for commercial operation by the end of November
1999, utilizing one of its two freezing towers and fracturing mills, and that it
will be fully  operational  by early in the year 2000 with both freezing  towers
and fracturing mills. It should be noted,  however,  that because of the lack of
an operating history,  the Company cannot, at this time, give any assurance with
respect  to whether  the TCS-1  Plant will in fact  perform  as  expected  under
continuous,  commercial operating conditions.  Moreover,  even if the demand for
rubber crumb should  increase in  accordance  with the  Company's  expectations,
there can be no assurance that a concomitant development of demand for the TCS-1
Plant will develop.

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

         Recycling tires into reusable crumb rubber (or "ground rubber") was, as
of 1996, the third largest use of scrap tires. "Crumb rubber" is the end product
of the tire disintegration  process.  The ideal crumb rubber is a powder,  which
can be produced in various particulate sizes,  ranging from relatively coarse to
very  fine,  and  which is not  significantly  contaminated  by fiber  and metal
particles. It is generally derived from used automobile tires or tire parts such
as treads.  The Scrap Tire Use Disposal  Study - 1996 Update (the "STMC Study"),
published  by the Scrap Tire  Management  Council (the "STMC") in April of 1997,
reported  that of the  approximately  266 million  scrap tires  generated in the
United States in 1996, market  applications were found for 76% (or 202 million).
The STMC Study  reported  further  that,  as of the  period  covered by the STMC
Study,  the largest use  presently  being made of scrap tires is burning them as
tire derived fuel (sometimes referred to as "TDF"),  which serves principally as
a low-cost  substitute  for,  or  supplement  to,  coal,  wood  chips,  or other
combustible  fuels.  In this  regard,  152 million or 76% of the tires for which
market  applications  had been found,  were burned as TDF.  Exporting used tires
(for  refitting and re-use as tires) was the second largest use for scrap tires.
While  utilizing  scrap  tires to  produce  crumb  rubber  still  constitutes  a
significantly  smaller market for used tires,  the STMC Study reported that this
usage  experienced  significant  growth  during  1995 and 1996,  increasing  two
hundred  and  seventy-seven  percent  (277%)  from  4,500,000  tires  in 1994 to
12,500,000 tires in 1996. Historically,  most crumb rubber available and sold in

                                       34
<PAGE>


the market was derived not from recycled scrap tires,  but from tire "buffings",
a by-product  of the tire  re-treading  process.3  Recently,  however,  this has
changed  significantly,  with tire buffings now representing 52% and scrap tires
representing 48% of source material for crumb rubber. According to the STMC, the
demand for crumb rubber for various uses could  experience  further  substantial
increases over the next two to five years, with expected overall growth in sales
of crumb rubber from 25% to 33%. The Company believes that because the supply of
buffings is limited, the main source of an increased supply of crumb rubber must
come from scrap tires.

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

         *        RUBBER  MODIFIED  ASPHALT  ("RMA",  168 MILLION  POUNDS IN THE
                  UNITED  STATES IN 1996):  Crumb  rubber  can be  blended  with
                  asphalt to modify the  properties  of asphalt  used in highway
                  construction.  Crumb  rubber can be used either as part of the
                  asphalt rubber binder,  seal coat,  cape seal spray,  or joint
                  and crack sealant (generally referred to as  "asphalt-rubber")
                  or as  an  aggregate  substitution  (rubber  modified  asphalt
                  concrete  or   "RUMAC").   At  present,   the  cost  of  using
                  asphalt-rubber  and RUMAC is somewhat higher than conventional
                  materials.  However,  the service  life of such  products  has
                  proved  in  some  cases  to be  two to  three  times  that  of
                  conventional asphalt pavements.  While the use of crumb rubber
                  in asphalt  pavement  has a large  potential  market,  certain
                  technical issues must be addressed before the potential can be
                  reached.  The ability to recycle asphalt  pavement  containing
                  crumb rubber and the  development  of standards,  particularly
                  for materials  testing and the  environment are the key issues
                  to be  addressed.  In  general,  asphalt-rubber,  or the  "wet
                  process",  has  proven  to be  the  most  successful  product,
                  representing  approximately  95% of the RMA  market  in  1996,
                  according  to the STMC.  Other key  issues  involve  potential
                  environmental and human health effects associated with the use
                  of crumb rubber  modified (CRM) asphalt.  In this regard,  the
                  National Institute for Occupational  Safety and Health (NIOSH)
                  performed a series of  exposure  and health  evaluations  from
                  1994 through  1997.  To date,  the NIOSH project has performed
                  site  evaluations at seven paving  projects around the country
                  (Michigan,   Indiana,  Florida,  Arizona,   Massachusetts  and
                  California).  A composite  report of the overall  findings and
                  conclusions  is currently  being prepared by NIOSH but has not
                  yet been issued.  This report will address  issues of sampling
                  methods, worker exposures,  and health effects associated with
                  conventional versus CRM asphalt paving.

         *        BOUND RUBBER PRODUCTS (134 MILLION POUNDS IN THE UNITED STATES
                  IN 1996):  Ground or powdered scrap tire rubber is formed into
                  a set shape,  usually  held  together by an adhesive  material
                  such as urethane or epoxy.  Examples of such  applications are
                  injection  molded products and extruded goods such as railroad
                  crossing  pads;  dock bumpers,  patio floor  blocks,  flooring
                  material, roof walkway pads, and carpet underlay.

         *        NEW TIRE MANUFACTURING (48 MILLION POUNDS IN THE UNITED STATES
                  IN 1996):  Fine crumb  rubber or powder  reclaimed  from scrap
                  tires can be used as a low volume filler  material in both the
                  tread  and the  sidewalls  of new  tires.  The  percentage  of
                  recycled  rubber  that can be used in new tires is somewhat in
                  excess of 1.5%.

         *        ATHLETIC AND  RECREATIONAL  APPLICATIONS (24 MILLION POUNDS IN
                  THE UNITED  STATES IN 1996) (US OR  WORLDWIDE):  Coarse  crumb
                  rubber can be used in several applications, such as in running
                  track  material,   grass  surfaced  playing  areas,  or  as  a
                  substitute  for playground  surfaces.  The use of crumb rubber
                  for these purposes will  generally  make playing  surfaces and
                  running tracks more  resilient and less rigid,  but capable of
                  maintaining traction and shape.

---------------------
    3  TIRE BUFFINGS  CONSIST OF RELATIVELY  SMALL PIECES OF RUBBER WHICH REMAIN
       ON THE TIRE SHELL DURING THE RE-TREADING PROCESS. AFTER THE USED TREAD IS
       REMOVED,  THESE SMALL  PIECES ARE  "BUFFED"  OFF THE SHELL BEFORE THE NEW
       TREAD IS ATTACHED.

                                       35
<PAGE>


         *        MOLDED AND EXTRUDED  PLASTICS AND RUBBER (18 MILLION POUNDS IN
                  THE UNITED  STATES IN 1996):  Finely  ground scrap tire rubber
                  can be placed into  production  molds to form products for the
                  automotive  industry,  such as sound  insulation,  step  pads,
                  truck and trailer liners,  matting and drip irrigation  pipes.
                  Management  believes  that  there  are  significant  potential
                  markets   for  these   applications   which  may  result  from
                  continuing  research  and  development  of  products  using  a
                  surface  modified  rubber.  There  has  also  been  increasing
                  interest  on  the  part  of  automotive  manufacturers  in the
                  purchase of products which contain recycled rubber.

         *        FRICTION  MATERIAL (8 MILLION  POUNDS IN THE UNITED  STATES IN
                  1996): Coarse crumb rubber is used in friction brake materials
                  for brake pads and brake shoes.


MARKETING ACTIVITIES

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

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

                  The Company also retained a special consultant, with expertise
                  in the  area of  government  assistance  programs  related  to
                  recycling, who investigated public sector incentives by region
                  for any activities related to tire recycling business in forms

                                       36
<PAGE>


                  of grants, subsidies,  tipping fees and legislation related to
                  tires. Based upon the foregoing,  the Company believes that in
                  order  to  properly   identify  the  best   potential   market
                  opportunities and price structures for Tirex Rubber Crumb, its
                  present  market  research and  development  priorities  should
                  focus, in the following sequence, on: (i) producing sufficient
                  quantities of Tirex Rubber Crumb (which is dependent  upon the
                  TCS-1  Plant's  being able to operate in  accordance  with its
                  specifications;  (ii) developing  appropriate  test protocols;
                  (iii)  analyzing  the Tirex Rubber Crumb for its technical and
                  materials  properties;  (iv) doing  competitive  testing  with
                  other products  currently  available in the market place;  and
                  (v)  working  with  potential  users,  focusing on using Tirex
                  Rubber Crumb to reduce their material costs.

         (b)      In January of 1997, the Company began  exploratory  activities
                  respecting  the  feasibility  of marketing  the TCS-1 Plant in
                  Europe  and  Asia.  In  connection  therewith,  the  Company's
                  European Market Development  Consultant,  through Gapco, Inc.,
                  conducted   market  studies   respecting  the  feasibility  of
                  marketing TCS-1 Plants in the Iberian  Peninsula and in India.
                  The Iberian study indicated that Spain  constitutes a sizeable
                  market both in terms of scrap tires  requiring  elimination or
                  disposal and in terms of rubber crumb  utilization.  According
                  to the study,  Spain's  tire  disposal  industry is  presently
                  dominated by  landfilling  practices  due to the  abundance of
                  land useable as landfill  sites and the  relatively  low short
                  term  costs  associated  with this  method  of tire  disposal.
                  Another   popular   method  of  tire   disposal  in  Spain  is
                  incineration  although  this method has been  associated  with
                  problems  ranging  from  cost   inefficiency  to  causing  air
                  pollution.  Generally,  the  present  circumstances  in  Spain
                  regarding   tire  disposal  have  been   acknowledged   to  be
                  environmentally   unsatisfactory   resulting  in  pressure  to
                  develop alternative disposal methods. The study concludes that
                  none of the methods of tire disposal presently in use in Spain
                  are technically  satisfactory or cost efficient.  It indicates
                  that several  alternative  solutions to Spain's tire  disposal
                  problems are under  development and that although there exists
                  the potential for substantial competition in the tire disposal
                  industry  in the future  there is no such  competition  at the
                  present  time.  At  present,  the  Company is not aware of any
                  potential  competitor in Spain having a tire  disposal  system
                  comparable  to the TCS-1 Plant,  although no assurance  can be
                  given that this is in fact the case. A substantial  portion of
                  the study was also  devoted to  assessing  the market in Spain
                  for rubber in general and recycled rubber crumb in particular.
                  Spain  is a net  importer  of all  the  types  of  rubber  raw
                  material it uses and  consequently,  the study  concluded that
                  Spain's rubber industry  should be  particularly  receptive to
                  new sources of cheaper raw materials. The study indicated that
                  marketing efforts in Spain for rubber crumb should be directed
                  at tire  manufacturers,  users of rubber  crumb and other tire
                  by-products,  waste  processors and  government  organizations
                  responsible  for waste  disposal.  It concluded that any entry
                  strategy  for a TCS-1 Plant in Spain would be  dependent  upon
                  identifying  potential  purchasers of Tirex rubber crumb,  but
                  that this could be done only after the TCS-1  Plant is capable
                  of producing a reliable supply of homogeneous product.

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

                                       37
<PAGE>


         (c)      Since  April,  1998,  the Company  has been  engaged in market
                  research activities respecting the feasibility of using rubber
                  crumb  in  thermoplastic  elastomer  compounds  in the  United
                  States  and  Canada.  Such  activities  included  retaining  a
                  consulting firm  specializing in rubber industry,  to identify
                  thermoplastic  applications  that can incorporate Tirex Rubber
                  Crumb in  significant  (30 to 60 percent)  quantities as a raw
                  material.   The  Company  has  also  retained  a  Quebec-based
                  research and  development  laboratory with expertise in rubber
                  and plastics formulations, to develop formulations for the low
                  end thermoplastics products such as flooring, construction and
                  road and athletic surface applications.

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

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


GOVERNMENT REGULATION

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

         The  TCS-1  Plant is a  "closed  loop"  system  which  does not use any
chemicals,  solvents,  gases or other substances which could result in emissions
of any kind from the  operation  of the Plant.  Furthermore,  to the best of the
Company's  knowledge,  operation  of the  TCS-1  Plant  will not  result  in the
emission of air pollutants,  the disposal of combustion residues, the storage of
hazardous substances (as is the case with other tire recycling processes such as
pyrolysis),  or the production of any  significant  amounts of solid waste which
would  have to be  landfilled.  However,  the  operation  of a TCS-1  Plant will
involve,  to varying  degrees  and for varying  periods of time,  the storage of
scrap tires which, with their size, volume and composition, can pose potentially
serious  environmental  problems.  While the Company  does not believe that such

                                       38
<PAGE>


storage will normally involve quantities of tires so large or storage periods so
extensive as to constitute the  "stockpiling" of scrap tires, it should be noted
that  stockpiling,  should it occur,  could  constitute a  particularly  serious
environmental  problem.  Among the numerous problems relating to scrap tires, is
that when stockpiled above ground, tires create serious fire, public health, and
environmental  hazards ranging from fires, which generate large and dense clouds
of black smoke and are  extremely  difficult to  extinguish,  to the creation of
vast breeding grounds for mosquitoes and vermin.

         As a result,  many 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. The Company
and other  operators of TCS-1 Plants will therefore be subject to various local,
state,  and  federal  laws  and  regulations   including,   without  limitation,
regulations  promulgated by federal and state  environmental,  health, and labor
agencies.  Establishing  and  operating  a TCS-1 Plant for tire  recycling  will
require numerous permits and compliance with  environmental and other government
regulations,  on the part of the Company's customers,  both in the United States
and  Canada and in most  other  foreign  countries.  The  process  of  obtaining
required regulatory  approvals may be lengthy and expensive for both the Company
and for its TCS-1 Plant customers.  Moreover,  regulatory approvals, if granted,
may include  significant  limitations  on either the Company's or its customer's
operations.  The US-EPA and comparable US state and local  regulatory  agencies,
and  similar   government  bodies  in  Canada  actively  enforce   environmental
regulations  and conduct  periodic  inspections  to  determine  compliance  with
government   regulations.   Failure  to  comply   with   applicable   regulatory
requirements can result in, among other things, fines, suspensions of approvals,
seizure  or  recall  of   products,   operating   restrictions,   and   criminal
prosecutions.

         Compliance with applicable environmental and other laws and regulations
governing  the business of the Company,  and of all TCS-1 Plant  Operators,  may
impose  financial  burdens that could adversely  affect the business,  financial
condition,  prospects,  and results of operations,  of the Company. Such adverse
affects could include,  but may not be limited to, the burden of compliance with
laws and regulations governing the installation and/or operation of TCS-1 Plants
discouraging  potential  customers  from  purchasing a TCS-1  Plant.  Actions by
federal, state, and local governments concerning  environmental or other matters
could  result in  regulations  that could  increase  the cost of  producing  the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such  by-products less profitable or even impossible
to sell at an economically feasible price level.

         The  Company  believes  that  existing  government  regulations,  while
extensive,  will not result in the disability of either the Company or its TCS-1
Plant customers to operate  profitably and in compliance with such  regulations.
However,  since  all  government  regulations  are  subject  to  change  and  to
interpretation  by local  administrations,  the effect of government  regulation
could  conceivably  prevent,  or delay for a  considerable  period of time,  the
development  of the Company's  business  and/or impose costly new procedures for
compliance, or prevent the Company or its TCS-1 customers from obtaining, or may
affect the timing of, regulatory approvals. Actions by federal, state, and local
governments   concerning   environmental   or  other  matters  could  result  in
regulations  that could therefore  increase the cost of producing the recyclable
rubber,  steel,  and fiber which are the  by-products  from the operation of the
TCS-1 Plant and make such by-products less profitable or even impossible to sell
at an economically  feasible price level, which could result in the Company's or
its TCS-1  customers'  businesses being less  profitable,  or  unprofitable,  to
operate.  Continually  changing government  compliance standards and technology,
could also affect the Company's future capital expenditure requirements relating
to environmental  compliance.  Likewise,  the burden of compliance with laws and
regulations  governing the  installation  and/or operation of TCS-1 Plants could
discourage  potential  customers  from  purchasing  a TCS-1  Plant  which  would
adversely  affect the  Company's  business,  prospects,  results,  and financial
condition.  As a result,  the  business  of the Company  could be  directly  and
indirectly affected by government regulations.

           The Company  believes  that it will be able to operate in  compliance
with such regulations. In this regard it has retained environmental attorneys to
advise it with respect to compliance with local  environmental  regulations.  It
has also  engaged a  consultant  to advise  purchasers  of its TCS-1 Plants with
respect to compliance  with local  environmental  regulations  applicable to the
installation  and operation of the TCS-1 Plant.  Even prior to the initiation of
operations at the Montreal T.A.P. Plant, the Company has made, and will continue

                                       39
<PAGE>


to make  expenditures  relating to environmental  compliance  because at least a
limited  amount of storing and processing of tires has been required for testing
of the first TCS-1 Plant at the Montreal facility.

         Specifically,   with  respect  to  the  Montreal  T.A.P.  Plant,  local
ordinances require that scrap tires be stored indoors,  under certain conditions
including  proper  segregation  of tires and adequacy of  sprinkler  systems and
other fire code  requirements.  In order to comply  with such  regulations,  the
Company has installed  sprinkler  systemsin those areas of the building which it
occupies,  and has dedicated  segregated  areas of its Montreal  facility to the
storage of tires in manageable piles.  However,  should the Company or any other
company engaged in the fabrication of products using rubber occur in those areas
of the building not occupied by the Company,  as prime space tenant, the Company
would be  obliged  to ensure  that the  entire  building  would be  fitted  with
sprinklers,  even if such other  product  manufacturing  were  carried out by an
independent  company.  The proposed sale of the mat  production  business to IM2
invokes  this  condition  and  IM2 has  included  the  cost  of  such  leasehold
improvements  in its budget  forecasts in their  business  plan.  In  connection
therewith,  the Company's  revised plans  respecting the use of the building for
the storage of tires will be submitted to the Montreal Building  Department (the
"Building  Department")  in the near future.  To date,  the Company has expended
approximately  Cdn$40,000  or  US$28,000  on capital  expenditures  relating  to
environmental compliance. However, in addition to the above noted possibility of
mandated changes to the building in order to bring it into conformance with fire
regulations,   the  inception  of  equipment   manufacturing   and  TCS-1  Plant
operations,   together  with  continually   changing  compliance  standards  and
technology,  may affect the Company's  future capital  expenditure  requirements
relating to environmental compliance.


ITEM 2.  DESCRIPTION OF PROPERTY

CORPORATE HEADQUARTERS

         The Company's  corporate  headquarters are located at 3828 St. Patrick,
Montreal, Quebec, H4E 1A4.

RESEARCH AND MANUFACTURING FACILITY

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

         (a)      a  40,000  square  foot  reinforced  concrete  and  galvanized
                  structural steel, area, with a reinforced concrete floor and a
                  mezzanine,  which was constructed in 1941.  Approximately  800
                  square feet will be dedicated  to  administrative  offices,  a
                  reception  area,  and a conference  room.  The balance of this
                  structure  will be used for  fabrication  of TCS-1  Plants and
                  ancillary equipment;

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

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

         When the Company entered into the Tri-Steel  Lease, the facility was in
excellent  repair and was well suited to the requirements of the Company for the
purpose of manufacturing  TCS-1 Plants.  The only  improvement  required at that
time,  was an  updated  fire  suppression  system in  compliance  with the local
Montreal  fire code  respecting  the  storage of rubber  product.  However,  the
planned  expansion of the  Company's  activities to encompass the operation of a
TCS-1 Plant and the  manufacture  of finished  products  out of the rubber crumb
produced thereby, has necessitated  additional  modifications and renovations to

                                       40
<PAGE>


the building.  These have included the  installation of the new fire suppression
system noted above and new lighting, heating, electric, and ventilation systems,
as well as the  construction of new concrete and asphalt  floors,  garage doors,
and  loading  docks.  The  aggregate  cost  of  the  foregoing  improvements  is
approximately  US$300,000,  US$100,000 of which  improvements  have already been
paid for by the Company.  The Company  expects all of the foregoing  renovations
and improvements to be completed in or before December 1999.

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

         In September of 1999, Tri-Steel verbally agreed that, in the event that
the mat  production  assets are sold and if IM2 assumes  responsibility  for the
space  occupied  by the mat  production  business,  TriSteel  would  agree  to a
reduction  of  space  to  approximately  half of the  building,  reflecting  the
Company's  current  requirements  and  those  which  will  be  required  for the
manufacturing  of TCS-1 systems,  that IM2 could pay for their space directly to
TriSteel  (but without  alleviating  Tirex of primary  financial  responsibility
under the  lease)  and that  there  would be a  commensurate  reduction  in rent
expense for the Company.  Insofar as the sale of the mat  production  assets has
not been  completed and that  management  cannot  provide any assurances at this
time that such sale will, in fact, be completed,  the possible reduction in rent
might not  materialize and the Company would be required to pay the rents as set
out in the lease and which are summarized in the next paragraph.

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


ITEM 3.  LEGAL PROCEEDINGS

SETTLEMENT OF GREAT AMERICAN MATTER

         On November 12, 1998, the Company  entered into a settlement  agreement
by and among Great  American  Commercial  Funding Corp ("Great  American"),  the
Company,  and a third party  unrelated  to the  Company,  who also had  business
dealings with Great American. The matter between Great American and the Company,
to which the said  settlement  agreement  pertains,  is an action which had been
commenced by Great American on June 18, 1997 in the United States District Court
for the District of New Jersey, entitled Great American Commercial Funding Corp.
vs. Tirex America Inc. The action arose out of a certain placement fee agreement
(the  "Placement Fee  Agreement"),  executed by the Company in February of 1996,
under which the Company, among other things, undertook to pay the Great American
a  placement  fee in the amount of  $250,000  and to grant to the  plaintiff  an
option to acquire  400,000 shares of the company's  common stock,  at a price of
$0.01 per share,  in the  event,  and only in the  event,  that  Great  American
succeeded in obtaining financing acceptable to the Company.

                                       41
<PAGE>


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


SETTLEMENT OF NAIS CORPORATION MATTER

         Effective,  December  18,  1998,  the Company and the Nais  Corporation
("NAIS") settled an action (the "NAIS Settlement  Agreement") brought by NAIS on
May 27, 1998  against the Company in the U.S.  District  Court for the  Southern
District  of New  York.  This  action  was  based  upon a  financial  consulting
agreement  (the  "NAIS  Agreement"),  dated May 3,  1997,  between  NAIS and the
Company.  The Complaint  alleged that the Company  failed to comply with certain
compensatory arrangements contained in the said NAIS Agreement and sought relief
by way of immediate  registration  of 5,231,092  shares of the Company's  common
stock  issued to NAIS as  compensation  (the "NAIS  Shares")  and damages in the
amount of $630,000.  The Company  filed an Answer and  Counterclaim  denying any
liability to NAIS.

         In fulfillment of the Settlement Agreement,  NAIS returned 500,000 NAIS
Shares to the  Company,  issued to the  Chairman of the Board of  Directors  and
Chief Executive Officer of the Company,  a voting proxy respecting the remaining
4,731,092 NAIS Shares, NAIS's right to have any of the NAIS Shares registered by
the Company was rescinded, and certain other terms respecting sales of shares.


THREATENED LITIGATION WITH DR. LAURA GABIGER

         On November  18, 1998,  attorneys  for Dr.  Laura  Gabiger  advised the
Company that they had been  authorized  by Dr.  Gabiger to file suit against the
Company for breach of contract. It is the position of the Company that it has no
obligations  whatsoever to Dr.  Gabiger and,  moreover,  that Dr. Gabiger should
return compensation paid to her in stock and in cash, for services which she was
either unwilling or unable to render to the Company. This matter arises out of a
consulting  agreement,  dated June 18,  1997,  between the Company and Dr. Laura
Gabiger (the "Gabiger Agreement").

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


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

         During the fourth  quarter  of the fiscal  year ended June 30,  1999 no
matters were submitted to a vote of the shareholders of the Company.

                                       42
<PAGE>


                                     PART II

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

         The  Company's  common  stock,  is  traded  on a  limited  basis in the
over-the-counter  market  and  quoted  on  the  OTC  Electronic  Bulletin  Board
maintained by the National  Association  of Securities  Dealers,  Inc. (the "OTC
Bulletin Board"). The following table sets forth representative high and low bid
prices by calendar  quarters as reported in the OTC  Bulletin  Board  during the
last three 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 ENDED JUNE 30, 1997                LOW            HIGH
                                                       -----          -------

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


         FISCAL YEAR ENDING JUNE 30, 1998

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


         FISCAL YEAR ENDING JUNE 30, 1999

                  September 30, 1998                   $0.12          $  0.30
                  December 31, 1998                     0.10             0.28
                  March 31, 1999                        0.15             0.25
                  June 30, 1999                         0.09             0.28


SHAREHOLDERS

         As of  September  17,  1999,  the  number of  holders  of record of the
Company's common stock,  $.001 par value, was approximately  470, which does not
include shares held by persons or companies in street or nominee name.

                                       43
<PAGE>


DIVIDENDS

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


SALES OF UNREGISTERED SECURITIES

         The following sets forth information respecting the dates,  purchasers,
and  consideration  respecting  sales of  common  stock by the  Company  without
registration under the Securities Act of 1933, as amended (the "Securities Act")
during the fiscal year ended June 30,  1999,  and not  previously  reported in a
quarterly report on Form 10-Q.4


SALES TO EXECUTIVE OFFICERS IN RESPECT OF SERVICES RENDERED

         As  discussed  extensively,  below,  in the  footnotes  to the  Summary
Compensation  Table,  which  appears  in  Item  10 of  this  Report,  "Executive
Compensation  - Current  Remuneration"  and in Item 12 of this Report,  "Certain
Relationships  and Related  Transactions - Issuance of Stock in Lieu of Salaries
and  Consulting  Fees",  during the fiscal year ended June 30, 1999, the Company
had available financial resources to meet only part of its salary obligations to
its  executive  officers  and  its  corporate  and  securities  counsel,  and to
reimburse  such  persons for  out-of-pocket  disbursements  and other  financial
accommodations  made by them for the account, or on behalf, of the Company. As a
result, such persons accepted unregistered shares of the Company's common stock,
valued,  for this purpose  only,  at fifty percent of the average of the bid and
ask prices for of stock as traded in the over-the-counter market and reported in
the electronic bulletin board of the NASD, as follows:

         On July 10, 1998, in  consideration  of unpaid  executive  services and
unreimbursed  expenses  rendered under the terms of their respective  employment
agreements and paid by such persons for the account and on behalf of the Company
and for other  financial  accommodations  provided  to the  Company,  during the
four-month  period  which  commenced  on December 1, 1997 and ended on March 31,
1998, Tirex issued shares of its common stock to its four executive officers and
its corporate  counsel.  These issuances were valued at $0.1399 per share, which
value was equal to 50% of the  average  of the bid and ask price for the  common
stock during the period when such unpaid  salaries and expenses  were earned and
incurred,  as  traded  in the  over-the-counter  market  and  quoted  in the OTC
Bulletin Board, as follows:

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

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

----------------------
   4   FOR INFORMATION  RESPECTING  SALES OF  UNREGISTERED  SHARES OF ITS COMMON
STOCK  MADE BY THE  COMPANY  DURING THE FIRST  THREE  QUARTERS  OF FISCAL  1998,
REFERENCE  IS MADE TO THE  DISCLOSURE  THEREOF  CONTAINED  IN PART  II,  ITEM 2.
"CHANGES IN SECURITIES"  CONTAINED IN THE COMPANY'S  QUARTERLY  REPORTS ON FORMS
10-QSB FOR THE QUARTERS ENDED  SEPTEMBER 30, 1997,  DECEMBER 31, 1997, AND MARCH
31, 1998.

                                       44
<PAGE>


         SECURITIES ISSUED AS COMPENSATION UNDER WRITTEN EMPLOYMENT AGREEMENTS

         On or about July 28, 1998 the Company  issued an aggregate of 4,095,057
shares of its common stock to Louis  Sanzaro,  Jean Frechette and Scott Rapfogel
pursuant  to  their  respective  employment  agreements  with the  Company.  The
foregoing issuances comprised 3,000,000 shares to Mr. Sanzaro,  1,000,000 shares
to Mr.  Frechette  and  95,057  shares to Mr.  Rapfogel.  In April of 1999,  the
Company  issued  1,000,000  shares to Mr. Ash which  constituted a signing bonus
which was issued in  consideration  for Mr. Ash's  agreeing to  discontinue  his
other  business  activities in order to enter into an employment  agreement with
the Company whereby Mr.Ash agreed to serve as the  Secretary-Treasurer and Chief
Financial Officer of the Company.

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

         ISSUANCE OF STOCK IN CONSIDERATION FOR FINANCIAL ACCOMMODATIONS

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

                                       45
<PAGE>


         SECURITIES ISSUED AS COMPENSATION UNDER WRITTEN CONSULTING AGREEMENTS

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

         On April 1, 1998, the Company entered into a consulting  agreement (the
"SCT  Agreement")  with Security  Capital  Trading,  Inc.  ("SCT"),  a financial
consulting firm, and pursuant thereto: (i) issued to SCT stock purchase warrants
(the "SCT  Warrants")  to purchase a total of 2,000,000  shares of the Company's
common stock at exercise  prices of $.25 per share for the first 666,666 shares,
$.40 per share for the next 666,666 shares, and $.50 per share for the remaining
666,667 shares. The Company has the shares issuable upon the exercise of the SCT
Warrants  in a  registration  statement  on Form SB-2  which was filed  with the
Securities  and  Exchange  Commission  on May 21, 1998.  This SB-2  Registration
Statement has not been deemed effective.

         On January 28, 1998,  the Company  entered into a consulting  agreement
with Louis Sanzaro (the  "Consulting  Agreement"),  who, until November 23, 1999
was an officer of the Company. Compensation for all consulting services rendered
by Mr.  Sanzaro under the terms of the  Consulting  Agreement,  consisted of the
issuance  to Mr.  Sanzaro of one  million  (1,000,000)  shares of the  Company's
common  stock,  600,000 of which were issued to Mr.  Sanzaro on January 30, 1998
and 400,000 of which were issued on or about April 30, 1998.

SECURITIES ISSUED AS COMPENSATION UNDER SEVERANCE AGREEMENTS

         In July of 1999,  the Company  issued  3,485,714  shares and  2,022,857
shares to Frances Levine and Scott  Rapfogel,  the Company's  previous  in-house
Corporate Counsel,  under the terms of a severance  agreement.  Also provided in
this  severance  agreement was the issuance of 2,000,000  shares under option to
each of Frances Levine and Scott Rapfogel.

SECURITIES ISSUED AS COMPENSATION FOR GOODS AND SERVICES RENDERED

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

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

SECURITIES ISSUED FOR WAIVER OF ADVANCE PAYMENT ON LEASE

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

                                       46
<PAGE>


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


BASIS FOR SECTION 4(2) CLAIMED

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

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

         (b)      The  persons  who  acquired  these  securities  are current or
                  former  executive  officers  and  directors  of  the  Company,
                  consultants to the Company,  and providers of  professional or
                  other significant service;  Such persons had continuing direct
                  access to all  relevant  information  concerning  the  Company
                  and/or have such  knowledge  and  experience  in financial and
                  business  matters  that they are  capable  of  evaluating  the
                  merits and risks of such  investment  and are able to bear the
                  economic risk thereof.

         (c)      The persons who acquired these securities  advised the Company
                  that the shares were  purchased for  investment  and without a
                  view to  their  resale  or  distribution  unless  subsequently
                  registered  and  acknowledged  that  they  were  aware  of the
                  restrictions  on  resale  of  the  shares  absent   subsequent
                  registration and that an appropriate legend would be placed on
                  the certificates evidencing the shares reciting the absence of
                  their  registration  under the Securities Act and referring to
                  the restrictions on their transferability and resale.

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


SALES MADE PURSUANT TO EXEMPTION FROM  REGISTRATION  AVAILABLE UNDER RULE 506 OF
THE ACT.

         On April 9, 1998, the Company sold twenty 10%  convertible  Debentures,
each in the principal  amount of $25,000 and two million stock purchase  options
to  purchase  a like  number of  shares of common  stock at a price of $.001 per
share, to two private investors,  who had no affiliation with the Company. These
securities were sold as twenty units (the "Type A Units") in a private placement
(the "Type A Private  Placement",  made by the Company between  November 5, 1997
and May 11,  1998,  through H.J.  Meyers & Co.,  Inc.,  as placement  agent (the
"Placement  Agent"),  at a price of $25,000 per Unit. Each Type A Unit consisted
of one 10% Convertible Subordinated Debenture in the principal amount of $25,000
(the "Type A  Debentures")  and  100,000  warrants  (the "Type A  Warrants")  to
purchase a like number of shares of the common stock of the Company (the "Type A
Warrant Shares").

         The  Type A  Private  Placement  was  effected  in  reliance  upon  the
availability of an exemption from the registration  provisions of the Securities
Act by  virtue  of  compliance  with  the  provisions  of  Section  4(2)  of the
Securities  Act and Rule 506 of Regulation D thereof  ("Rule  506").  The Type A
Units were offered and sold to a limited number of sophisticated  investors who,
the Company believed,  understood and were economically capable of accepting the
risks associated with a speculative  investment,  including the complete loss of
such  investment,   and  who  are  "Accredited  Investors"  within  the  meaning
prescribed by Regulation D and Rule 501 of the Securities Act.

         The 1,000,000 outstanding Type A Warrants are exercisable at a price of
$.001 per share.  The Type A Debentures  are  convertible  commencing on the day
following  the  effective  date of the  Company's  Registration  Statement  at a
conversion  ratio  equal to a maximum  of 67.5%  and a  minimum  of 61.5% of the

                                       47
<PAGE>


closing bid price of the Company's  common stock on the trading date immediately
preceding  the date of the  Company's  receipt  of a notice of  conversion.  The
factors which affect the  conversion  ratio are discussed,  above,  in Item 1 of
this Report  under the  caption,  "Material  Financing  Activities  - The Type A
Private  Placement".  After  December  31, 1999,  the Type A Debentures  will be
redeemable,  at the request of the holder,  at 125% of the principal amount plus
all accrued  unpaid  interest  on the  principal  amount.  During  fiscal  1999,
1,000,000 warrants were exercised, leaving 1,000,000 warrants still outstanding.

         The  remaining  1,000,000  Type A Warrant  Shares and the shares of the
Company's  common  stock  issuable  pursuant  to the  conversion  of the  Type A
Debentures  (the "Type A  Debenture  Shares"),  are  included  in the  Company's
Registration Statement on Form SB-2 which has not been deemed effective.

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

                                                NO. OF              NO. OF
                    CLOSING DATE              UNITS SOLD           PURCHASERS
                    ------------              ----------           ----------

                  January 23, 1998             8.5 Units               8
                  February 19, 1998            5.5 Units               6
                  May 11, 1998                 9   Units               7

         The Type B Private  Placement was effected in compliance  with Rule 506
and the  Type B  Units  were  offered  and  sold  only to a  limited  number  of
sophisticated   investors  who,  the  Company  believed,   understood  and  were
economically  capable  of  accepting  the risks  associated  with a  speculative
investment,  including  the  complete  loss of  such  investment,  and who  were
"Accredited  Investors"  within the meaning  prescribed by Regulation D and Rule
501 of the Securities Act.

         All of the Type B Debentures  were  amended  prior to the filing of the
Registration  Statement to provide for: (i) the  registration of the shares (the
"Type B Conversion Shares") issuable upon the conversion of the Debentures; (ii)
the  termination  of the  holder's  right  to  convert  the  Type B  Debentures,
effective the day immediately prior to the filing of the Registration Statement,
and the  commencement  of a new  conversion  period as of the date following the
effective date of the said Registration Statement; and (iii) restrictions on the
transfer of the Type B  Conversion  Shares  until the first to occur of: (a) six
months from the effective date of the  Registration  Statement,  or (b) one year
from the date of the  issuance  of the  Debentures.  The Type B  Debentures  are
convertible  at a ratio of one share for every $0.20 of the principal  amount of
the Debenture plus interest earned thereon from the date of issuance. The Type B
Debentures are  redeemable at face value plus all earned  interest from the date
of  issuance on the first to occur of: (i) two years from the issue date or (ii)
the  completion  and  closing  of a public  offering  of its  securities  by the
Company.

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

                                       48
<PAGE>


         The 11,760,000  Type C Shares which were sold are being  registered for
resale to the public by the  holders  thereof by way of their  inclusion  in the
Registration Statement on Form SB-2 which has not been deemed effective.

         On September 15, 1999,  the Company issued  2,654,731  Shares of Common
Stock to Terence C. Byrne and Vijay  Kachru,  officers  of the  Company and John
B.M.  Frohling,   its  U.S.  Securities  Counsel,   which  were  included  on  a
Registration Statement on Form S-8, Registration No. 333-87155.


BASIS FOR SECTION RULE 506 EXEMPTION CLAIMED

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

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

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

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

         (d) Each of the Purchasers is an accredited  investor,  as that term is
defined in Rule 501(a) of the Act,  and has such  knowledge  and  experience  in
financial  and  business  matters  that he or she is capable of  evaluating  the
merits  and  risks of such  investments  and is able to bear the  economic  risk
thereof.

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


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

         The following is  Management's  discussion  and analysis of significant
factors  which have  affected the Company's  financial  position and  operations
during the fiscal years ended June 30, 1998 ("Fiscal  1998"),  and June 30, 1999
("Fiscal 1999").  This discussion also includes events which occurred subsequent
to the end of Fiscal 1999 and contains  both  historical  and  forward-  looking
statements.   When   used   in   this   discussion,   the   words   "expect(s)",
"feel(s)","believe(s)",  "will", "may",  "anticipate(s)" "intend(s)" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to  differ  materially  from  those  projected.  Factors  that  might  cause  or
contribute to such differences  include, but are not limited to, those discussed
in "Risk  Factors".  Readers are cautioned not to place undue  reliance on these
forward-looking statements,  which speak only as of the date hereof. Readers are
also urged to carefully review and consider the various disclosures elsewhere in
this Report which discuss factors which affect the Company's business, including
the discussion at the end of this  Management's  Discussion and Analysis,  under
the subcaption  "Risk Factors".  This  discussion  should be read in conjunction
with the  Company's  Consolidated  Financial  Statements,  respective  notes and
Selected Consolidated Financial Data included elsewhere in this Report.

                                       49
<PAGE>


         The  Company  is  in  the  very  early   stages  of  the   business  of
manufacturing its patented cryogenic scrap tire recycling  equipment (the "TCS-1
Plant").  It is also  currently in the process of  establishing  and  initiating
operations in a second business segment which will involve owning and operating,
directly or  indirectly,  on  exclusive  or joint  venture  bases,  rubber crumb
production operations.

         In January 1998, the fully automated front-end tire preparation module,
and in March 1998, the cryogenic tire freezing  section of the first  full-scale
TCS-1 Plant (the "First Production Model") were completed and delivered to OTRP.
As discussed in more detail,  below, the Company received a total of $880,000 in
payment  therefor and this Plant is presently  installed at the Company's 90,000
square  foot  Montreal  manufacturing  facility  (see also Item 1 of this Report
"Existing and Proposed Businesses - Sales and Marketing - Agreements with Oceans
Tire  Recycling  &  Processing  Co.,   Inc.["OTRP"]  and  Proposed  TCS-1  Plant
Operations:  Sales  of  Rubber  Crumb  and  Manufacture  and  Sale  of  Finished
Products"). All major components of the First Production Model were successfully
tested and were  operational on a  non-continuous  running basis by May 1998. In
mid-June  1998,  the  Company  initiated  the  second  stage of  testing,  which
consisted  of  testing  all  major  components  and all  functions  of the First
Production  Model,  individually,  on a continuous  running basis.  By September
1998,  results of second stage tests  indicated  that  approximately  85% of the
TCS-1 Plant  components  met all of the Company's  specifications.  In addition,
under continuous testing conditions, certain unanticipated design anomalies were
discovered,  which required  modification.  The Company also identified  several
opportunities for improvements in the original design of the TCS-1 Plant,  which
the Company believes will increase  economy and efficiency of its operation.  In
September 1998, the Company  retained an engineering firm to: (i) prepare and/or
finalize all design and engineering  drawings,  operation and technical manuals,
and other documentation respecting the TCS-1 Plant; and (ii) make an independent
engineering  assessment of the Company's  findings from its second stage testing
of the TCS-1  Plant to verify  and  authenticate  the  modifications  which were
required to assure the Plant's  conformity with targeted  performance  criteria.
The Company also retained a mechanical  fabrication company to do all mechanical
fabrications  required  during the final stage of the project.  However,  in the
third  quarter  of  fiscal  1999  it  became   apparent  that  neither  BHA  nor
Plasti-Systemes had, in fact, the required engineering resources to complete the
mandates  they had  contracted  for.  Faced  with the  Company's  refusal to pay
invoices  until BHA would  deliver the  services  required by the  mandate,  BHA
withdrew  from the Company's  premises,  effectively  terminating  the contract.
These difficulties with BHA and  Plasti-Systemes  caused a delay of at least six
months relative to the Company's goal of having the system  fully-operational by
the fourth  quarter of Fiscal 1999. The Company has since reverted to an earlier
design concept for the freezing tower,  based on a known  technology and expects
to have the freezing tower operational by November of 1999.

         During the last half of Fiscal 1999, the Company engaged the process of
establishing manufacturing capacity for the production of rubber welcome mats to
be sold to IM2. Entering this new business segment was expected to be profitable
based on the  estimated  costing  of the  rubber  crumb  which the  TCS-1  would
produce.  In  addition,  entering  this  segment  was  strategically  useful  to
demonstrate  to possible  buyers of TCS-1  systems that there was a real use and
market for the rubber crumb.  The Company's  initial  operations in this segment
were conducted  pursuant to an agreement (the  "IM2/Tirex  Agreement")  with IM2
Merchandising  and  Manufacturing,  Inc.  ("IM2"),  in Quebec.  Pursuant  to the
IM2/Tirex  Agreement,  the Company acted as IM2's  exclusive  supplier of rubber
welcome mats and related  products molded out of rubber crumb ("IM2  Products").
Shipments of limited  quantities  of mats  commenced  at the  beginning of April
1999.  These mats were produced using recycled rubber crumb purchased from other
companies  because  the  TCS-1  could  not,  at that  time,  produce  sufficient
quantities  of  rubber  crumb to meet the  requirement.  Furthermore,  technical
difficulties in the freezing tower section of the TCS-1 were  identified  during
the fourth quarter which further reduced the availability of TCS-1 rubber crumb.
The price difference between externally  purchased rubber crumb and the forecast
cost to the Company of TCS-1 produced crumb,  taking into account tire recycling
subsidies  available  from  the  Government  of  Quebec,  was and  remains  very
substantial,  and makes the difference between being profitable and unprofitable
on mat production at the prices the Company was able to obtain for such mats. In
addition,  it  became  apparent  in June and  July of 1999  that  capital  asset
requirements  and the financial and human  resources  being  consumed by the mat

                                       50
<PAGE>


production operation were impeding progress on the completion of the TCS-1 which
was and remains the primary  focus of the Company.  In August 1999,  the Company
began negotiations for the sale of the mat production assets and the majority of
the inventory to IM2. This divestiture was announced on September 7, 1999. As of
November 23, 1999,  the sale of these assets to IM2 had not been  completed  and
the Company  cannot  provide any  assurances at this time that the sale will, in
fact, be completed. Pursuant to this divestiture, the Company will continue with
its primary points of focus,  these being the manufacture and sale of TCS-1 tire
Disintegration Systems and the development of rubber-thermoplastic compounds.

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

         On December 16, 1998, the Company  entered into two sale and lease-back
transactions respecting the single fracturing mill and the single freezing tower
contained in the First Production  Model. Such transactions were effected by and
among the  Company,  North  Shore  Leasing & Funding  Inc.  ("NLFI"),  and Ocean
Utility  Contracting,  Inc.  ("OUCI"),  a company  affiliated  with OTRP through
common ownership and control.  Pursuant thereto,  the Company sold the foregoing
components  to NLFI and NLFI leased them back to OUCI.  The Company  received an
aggregate of $300,000 by way of the purchase prices for the two components.  The
Company  and OUCI have  agreed that all of OUCI's  rights  under the  respective
leases will be assigned to the Company and the Company will assume all of OUCI's
liabilities  thereunder  (see  Item 1 of  this  Report  "Existing  and  Proposed
Businesses Sale and Lease-back Transactions"). The Company and OTRP have not yet
finalized the structure and ownership of the First  Production  Model, but it is
anticipated that they will each contribute,  among other things,  the respective
portions of the Plant which they own (or lease) and that profits and liabilities
from  operation of the First  Production  Model will be divided in proportion to
their respective contributions.

         Because  of the  lengthy  delays  in  the  commencement  of  commercial
operations, the Company has also had to, and may in the near future be forced to
continue to, cover its overhead  costs from  sources  other than  revenues  from
operations.  As of September 1, 1999, the Company  estimates that overhead costs
from July 1, 1999 until the date that  adequate  revenues  will be  generated to
cover it overhead costs, will amount to approximately $250,000.

                                       51
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         The  activities  of the  Company  since its  formation  in 1987 and the
inception of its current  business in 1993 have been  financed by sources  other
than  operations.  Such  financing  was  principally  provided  by the  sale  of
securities in private transactions the most important of which yielded aggregate
net proceeds in fiscal 1998 of $2,063,795 (see "The Company - Material Financing
Activities").  In total,  funds raised by the Company from private  sales of its
securities are as follows:

         -----------------------------------------------------------------
         Year Ended June 30th           Proceeds From Sales of Securities
         --------------------           ---------------------------------
         -----------------------------------------------------------------
                1999                               $  286,500
         -----------------------------------------------------------------
                1998                                2,063,795
         -----------------------------------------------------------------
                1997                                  345,391
         -----------------------------------------------------------------
                1996                                   80,872
         -----------------------------------------------------------------
                1995                                   22,316
         -----------------------------------------------------------------
                1994                                  237,430
         -----------------------------------------------------------------
                1993                                   76,055
         -----------------------------------------------------------------
                1990                                   80,812
         -----------------------------------------------------------------
                1989                                   77,000
         -----------------------------------------------------------------

         During the fiscal  years ended June 30, 1997 and June 30, 1998 and June
30,  1999,  the Company  received  additional  funding  from Quebec and Canadian
government  grants,  loans,  loan  guarantees  and  refundable  tax  credits for
purposes  of  completing  the  development  of  the  TCS-1  Plant  and  for  the
international  marketing of such plants (see Item 1. of this  Report,  "Existing
and Proposed Businesses - Canadian Operations - Canadian Financial  Assistance -
Grants,  Loans, and Commitments").  Canadian and Quebec government  research and
development  tax incentives  take the form of both tax deductions from otherwise
taxable income and tax credits  respecting the eligible research and development
expenditures  of the Company (see  "Existing and Proposed  Businesses - Canadian
Operations").  Insofar as tax credits for scientific  research and  experimental
development  are concerned,  such credits are offered by both the governments of
Canada and of Quebec. The tax credits are calculated as a percentage of research
and development  expenditures deemed eligible by the Revenue Departments of each
government.  The percentages  vary according to the size of the company (defined
according  to the  asset  base  and  revenues  generated  by the  company),  the
residency of the majority of the voting control and other  factors.  In the case
of both the provincial and the federal governments,  where the amount of the tax
credit  exceeds other tax  liabilities,  such as taxes on income and on capital,
and subject to certain other conditions which a company meets, the amount of any
difference is paid to the company, thus the term,  "Refundable Tax Credits". The
effective rate of the credit varies from one company to another as a function of
a number of factors,  not least of which are:  (i) the nature of the costs being
claimed such as labor costs versus  non-labor  costs (the credit for labor costs
is higher than for non-labor  costs);  and (ii) the  proportion of  expenditures
which can be  attributed  to research and  development  but which are not deemed
eligible  for the tax  credits  by  their  nature.  Insofar  as the  Company  is
concerned,  the tax credits have varied from  approximately  25% to 30% of total
research and development  expenditures,  including certain types of expenditures
deemed ineligible for tax credits. During the last three fiscal years, virtually
all of the activities  connected with the  development  and  construction of the
First  Production  Model of the TCS-1 Plant have qualified as expenses  eligible
for refundable tax credits.

                                       52
<PAGE>


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

         In connection with the Refundable Tax Credits, during the first quarter
of 1998,  the Bank of Montreal  ("BOM")  approved a loan to the Company of up to
Cdn$937,000,  or approximately US$655,900 ("the BOM Tax Credit Loan") to be used
to pay expenses which would then be eligible for  refundable  tax credits.  This
entire  credit  facility was used by the Company and was repaid in full by March
24, 1999.

         In connection  with  Refundable  Tax Credits for the fiscal year ending
June 30,  1999,  the  Company  received  on May 9,  1999 an offer of tax  credit
financing to a maximum amount of Cdn$750,000 (approximately US$525,000) from the
Bank of Nova Scotia ("ScotiaBank"), subject to the provision of a loan guarantee
by GQ,  which  guarantee  was  issued  on June 6,  1999.  As of June  30,  1999,
Cdn.$600,000 (approximately US$420,000) had been lent to the Company pursuant to
the ScotiaBank  Tax Credit Loan and was still  outstanding as a liability on the
Balance   Sheet.   The  ScotiaBank  Tax  Credit  Loan  was  secured  by:  (i)  a
first-ranking  lien on all of the assets,  tangible and intangible,  present and
future of the  Company's  Canadian  subsidiary,  Tirex  R&D;  (ii) a lien on the
Company's patent for the cryogenic tire disintegration  process and apparatus of
the TCS-1 Plant; and (iii) personal  guarantees of two officers and directors of
the Company.

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

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

                                       53
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                     AMOUNT                               CUMULATIVE
                                   AMOUNT OF R&D  AMOUNT OF TAX     BORROWED                              OUTSTANDING
    PERIOD         AMOUNT OF R&D   EXPENDITURES     CREDITS          AGAINST                            BALANCE OF LOAN
 R&D EXPENSES      EXPENDITURES    ELIGIBLE FOR   ESTIMATED BY      ESTIMATED          AMOUNT OF TAX      AS AT END OF
 WERE INCURRED       INCURRED       TAX CREDITS   BANKS AND SDI    TAX CREDITS        CREDIT RECEIVED        PERIOD
-------------------------------------------------------------------------------------------------------------------------
<S>                      <C>             <C>           <C>             <C>                 <C>                  <C>
RE: BOM                 -0-             -0-           -0-             -0-                 -0-                  -0-
July 1, 1995 to
June 30, 1996
-------------------------------------------------------------------------------------------------------------------------
July 1, 1996 to    Cdn$1,576,761   Cdn$1,576,761   Cdn$579,305        -0-(1)              -0-(2)               -0-
June 30, 1997
-------------------------------------------------------------------------------------------------------------------------
July 1, 1997 to    Cdn$2,723,443   Cdn$2,723,443   Cdn$982,113     Cdn$828,230(1)     Cdn$307,208(2)      Cdn$597,820
June 30, 1998
-------------------------------------------------------------------------------------------------------------------------
July 1, 1998 to    Cdn$1,167,892        (3)            (4)         Cdn$108,770(1)     Cdn$245,517(5)(6)   BOM Loan = zero
June 30, 1999
-------------------------------------------------------------------------------------------------------------------------
RE: SCOTIABANK     Cdn$2,512,604   Cdn$2,163,508   Cdn$1,000,000   Cdn$600,000              n/a           ScotiaBank Loan
July 1, 1998 to                                                                                             Cdn$600,000
June 30, 1999
-------------------------------------------------------------------------------------------------------------------------
Subsequent to           n/a             n/a             n/a        Cdn$150,000              n/a           ScotiaBank Loan
June 30, 1999                                                                                             Cdn$750,000 (7)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to this table appear on the following page.

                                                            54
<PAGE>


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

         (2)      All funds by way of Tax credits received by the Company during
                  fiscal  1998 were  attributable  to research  and  development
                  expenditures  made by the Company  during  fiscal 1997 and Tax
                  Credits  received  during  fiscal  1999 were  attributable  to
                  research  and  development  expenditures  made by the  Company
                  during fiscal 1998.

         (3)      On or about October 20, 1999,  and in accordance  with the tax
                  laws  and  procedures  of  the  Revenue   Departments  of  the
                  governments of Canada and of Quebec,  the Company  submitted a
                  claim for tax credits based upon any research and  development
                  expenditures made during fiscal 1999. The Company expects that
                  a portion of such expenditures will be eligible for Refundable
                  Tax Credits.  In connection  therewith,  the Company  obtained
                  credit  facilities  from  ScotiaBank,  similar  to the BOM Tax
                  Credit Loan, based upon estimated tax credit receivables.

         (4)      The Company made research and development  expenditures in the
                  amount of  Cdn$2,163,508  during fiscal 1999,  and the Company
                  believes that a portion of such  expenditures will be eligible
                  for  Refundable  Tax Credits.  It should be noted further that
                  the  entire   amount   available  to  the  Company  under  the
                  ScotiaBank  Tax Credit Loan has already  been  borrowed by the
                  Company  in   connection   with   research   and   development
                  expenditures  made by the  Company  during the year ended June
                  30, 1999.

         (5)      Tax credits  received by the Company  during fiscal 1999,  are
                  attributable to research and development  expenditures made by
                  the  Company  during the fiscal  year ended June 30,  1997 and
                  1998.

         (6)      The  annual  Canadian  federal  government  audit of  eligible
                  research  and  development  expenditures  for the fiscal  year
                  ending June 30, 1998 took place in January  1999.  As a result
                  of the audit, the Company received approval for tax credits in
                  the amount of  Cdn$637,033  from the  Government of Canada and
                  Cdn$490,927  from the  Government  of Quebec.  The tax credits
                  received  were used to reduce the BOM Tax Credit Loan  balance
                  to zero in March of 1999.

         (7)      On November 5, 1999,  the Company  received and cashed a check
                  from the Revenue  Department  of the  Government  of Quebec in
                  respect of research and development tax credits for the fiscal
                  year ended June 30, 1999.  This check  amounted to Cdn$606,948
                  (approximately    US$413,000).    In   accordance   with   the
                  requirements    of   the   loan    guarantee    provided    by
                  Garantie-Quebec,   an  amount  of  Cdn$400,000  (approximately
                  US$272,000)  was given that same day to  ScotiaBank  to reduce
                  the loan  balance.  As of November 23, 1999,  the loan balance
                  due  to   ScotiaBank   is  thus   Cdn$350,000   (approximately
                  US$238,000).   As  of  November  23,  1999,  no  research  and
                  development  tax credit  checks had yet been received from the
                  Revenue Department of the Government of Canada.

                                       55
<PAGE>


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

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

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

                          Canadian Dollars            US Dollar Approximation
                          ----------------            -----------------------

Fiscal 1997                   $246,752                        $172,725
Fiscal 1998                   $253,248                        $177,275

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


                          Canadian Dollars            US Dollar Approximation
                          ----------------            -----------------------

March 31, 1999                $ 50,000                        $ 35,000
March 31, 2000                $100,000                        $ 70,000
March 31, 2001                $150,000                        $105,000
March 31, 2002                $200,000                        $140,000

         In lieu of  receiving  from the Company a check in March of 1999 in the
amount of Cdn$50,000,  CEDQR  indicated that it would have Revenue Canada reduce
the  amount  of the tax  credit  check  now  due to the  company  by  this  same
Cdn$50,000,  this offset thus satisfying the Company's responsibility respecting
the March 31,  1999  payment.  As of  November  23,  1999,  the  Company had not
received  any checks from the  Government  of Canada  from which the  Cdn$50,000
would have been deducted.

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

         2. In April of 1996,  the Company  qualified  for a grant from  Societe
Quebecoise de Recuperation et de Recyclage  ("Recyc-Quebec"),  a  self-financed,
Quebec  Government-owned  corporation  established  to  facilitate  and  promote
materials recovery and recycling.  The amount of such grant was $75,000 Canadian
(approximately  $52,500  U.S.).  Of this amount,  the Company  received  $50,000
Canadian  (approximately $35,000 US) during the fiscal year ended June 30, 1997.
The terms of the grant  provided  that the Company  would receive the balance of
$25,000  Canadian  (approximately  $17,500  U.S.) when the Company filed a final
report on the completion of the project.  Such a report was be filed in or about

                                       56
<PAGE>


February 1999 and the balance was received. The terms and purposes of this grant
are  discussed  in more detail in "Existing  and Proposed  Businesses - Canadian
Operations - Canadian Financial Assistance - Grants, Loans, and Commitments".

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

                                       57
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
                                                     AMOUNT OF
                                                       FUNDS
                                                    RECEIVED BY
                                                   COMPANY AS OF                       REPAYMENT TERMS
                                     MAXIMUM         DECEMBER 31, ========================================================   RATE OF
     NATURE OF PROJECT            AMOUNT OF LOAN        1998                 DATE DUE                  AMOUNT OF PAYMENT    INTEREST
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>              <C>          <C>                                  <C>                    <C>
Market Research Feasibility         Cdn $20,000      Cdn $20,000  At the end of any fiscal year        1% of gross annual     None
Study for Iberian Peninsula                                       in which the Company has revenues    revenue from sales
                                                                  from sales of TCS-1 Plants in the    in Iberia
                                                                  Iberian Peninsula
------------------------------------------------------------------------------------------------------------------------------------
Market Research Feasibility         Cdn $20,000      Cdn $20,000  At the end of any fiscal year        1% of gross annual     None
Study for India                                                   in which the Company has revenues    revenue from sales
                                                                  from sales of TCS-1 Plants in India  in India
------------------------------------------------------------------------------------------------------------------------------------
Market Research Respecting          Cdn $95,000      Cdn $95,000           June 30, 2001                  Cdn $ 6,333         None
Potential United States Markets                                            June 30, 2002                  Cdn $12,666
for Rubber Crumb                                                           June 30, 2003                  Cdn $18,999
                                                                           June 30, 2004                  Cdn $25,333
                                                                           June 30, 2005                  Cdn $31,666
------------------------------------------------------------------------------------------------------------------------------------
Iberian Market Development          Cdn $95,000      Cdn $95,000  At the end of any fiscal year        1.5% of gross annual   None
Activities Related to Positioning                                 in which the Company has revenues    revenue from sales
the Company to Market TCS-1 Plants,                               from  sales of TCS-1 Plants          in Iberia
Rubber Crumb, and Related Products                                in Iberia
in Iberia
------------------------------------------------------------------------------------------------------------------------------------
Market Research Activities          Cdn $98,000      Cdn $98,000           June 30, 2001                  Cdn $ 6,533.33      None
Respecting the Feasibility of using                                        June 30, 2002                  Cdn $13,066.66
Rubber Crumb in Thermoplastic                                              June 30, 2003                  Cdn $19,600.00
Elastomer Compounds in the United                                          June 30, 2004                  Cdn $26,133.33
States and Canada.                                                         June 30, 2005                  Cdn $32,666.66
====================================================================================================================================
</TABLE>
                                                                 58
<PAGE>


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

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

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

         Any failure or delay in the Company's receipt of the required financing
would  be  directly  reflected  in  a  commensurate  delay  or  failure  in  the
commencement  of: (i) full scale  manufacturing  of TCS-1  Plants;  and (ii) the
commercial operation of the First Production Model. It should be noted also that
the period of time  during  which any funds  raised will be  available  to cover
normal overhead costs could be significantly  reduced if the Company is required
to make  substantial,  presently  unanticipated,  expenditures  to  correct  any
further flaws or defects in the design or construction  of the First  Production
Model, which may become apparent when it is subjected to continuous operation on
a long term, commercial basis. Moreover, given the early stage of development of
the Company,  it is  impossible  at this time to estimate with any certainty the
amount of income from operations, if any, during the next twelve months.

         There  can be no  assurance  that the  Company  will be able to  obtain
outside financing on a debt or equity basis on terms favorable to it, if at all.
In the event that there is a failure in any of the finance-related contingencies
described  above,  the funds  available to the Company may not be  sufficient to
cover the costs of its operations,  capital  expenditures and anticipated growth
during the next  twelve  months.  In such case,  it would be  necessary  for the
Company to raise additional equity capital.  During Fiscal 1998, in an effort to
put such funding into place,  the Company  entered into a non-binding  letter of
intent with H.J. Meyers & Co., Inc.  ("Meyers"),  for a proposed public offering
of its  securities  in an  amount  of not  less  than  $8,000,000.  On or  about
September 16, 1998, however,  Meyers abruptly ceased doing business.  Therefore,
if the Company should wish to raise funds through a public offering,  it will be
required to locate another broker-dealer, ready, willing, and able to underwrite
a public offering of the Company's securities.  At this time, the Company is not
able to give any  assurances  that,  in such  event,  it will be  successful  in
locating an underwriter or that its efforts will  ultimately  result in a public
offering.  If the proceeds from the above described potential sources of funding
should be  insufficient  for the  Company's  requirements  and it is not able to

                                       59
<PAGE>


effect a public  offering of its securities  within the next twelve  months,  or
find other sources of outside funding,  the Company's financial position and its
prospects for beginning and developing  profitable  business operations could be
materially adversely affected.

         As of June 30,  1999,  the Company had total  assets of  $4,398,004  as
compared  to$3,814,648  at June 30, 1998  reflecting  an  increase of  $583,356.
Fiscal year-end total assets at June 30, 1998 had reflected a previous  increase
of  $2,259,028  over  $1,555,620  at June 30, 1997.  Management  attributes  the
increase  in total  assets at June 30,  1998  principally  to (i) an increase of
$1,305,007 in Property, Plant and Equipment from $977,288 as of June 30, 1998 to
$2,282,295 as of June 30, 1999,  and (ii) an increase of $96,886 in Research and
development tax credits receivable from $855,818 as of June 30, 1998 to $952,704
as of June 30, 1999.  These increases were partially  offset by (i) decreases in
cash and cash  equivalents  which  went  from  $398,971  as of June 30,  1998 to
$177,256 as of June 30, 1999, a decease of $221,715, (ii) a decrease of $204,500
in current  prepaid  expenses and deposits  from $618,226 as of June 30, 1998 to
$413,766  as of June 30,  1999,  resulting  from  amortization  of such  prepaid
expenses,  and  similarly in  long-term  prepaid  expenses  and  deposits  which
decreased by $261,757  from  $445,677 as of June 30, 1999 to $183,920 as of June
30, 1999.

         As of June 30, 1999, the Company had total liabilities of $3,952,008 as
compared to $3,360,588 at June 30, 1998,  reflecting an increase in  liabilities
of  $591,420.  Total  liabilities  at June 30,  1998 had  reflected  a  previous
increase of $1,665,238  over  $1,695,350 in total  liabilities at June 30, 1997.
Management  attributes  such  increases  in total  liabilities  at June 30, 1999
primarily  to: (i)  increases in accrued  salaries in an amount fo $605,877 from
$17,076 as of June 30,  1998 when such amount was  included  in general  accrued
liabilities  to  $622,953  as of June 30,  1999  which  amount is shown  under a
separate caption on the Balance Sheet, and (ii) an increase in obligations under
capital  lease in a total amount of $113,655,  which amount was split $25,147 to
current liabilities and $88,508 to long-term  liabilities;  there was no balance
as of June 30, 1998.  These increases were partially  offset by (i) decreases of
$268,400 in convertible  subordinated  debentures from $1,035,000 as of June 30,
1998 to $766,600 as of June 30,  1999,  reflecting  conversions  into equity and
(ii) a decrease of $71,190 in accrued liabilities from $1,274,150 as of June 30,
1998 to $1,202,960 as of June 30, 1999.

         Reflecting the foregoing,  the financial statements indicate that as at
June 30, 1999, the Company had a working capital  deficit  (current assets minus
current liabilities) of $704,376 and that as at June 30, 1998, the Company had a
working capital  surplus of $373,198.  The primary cause of this net decrease in
net  working  capital  was:  (i) an increase  in accrued  salaries of  $605,877,
primarily due to senior  management  and key  employees.  By virtue of agreement
with  the  various  persons  involved,  virtually  all of  this  amount  will be
compensated  by  issuance  of  stock  in  accordance  with  established  company
practice.

         The Company  currently has limited  material assets (see,  below,  Risk
Factor No. 3. "History of Losses and Accumulated  Deficit").  The success of the
Company's tire recycling equipment  manufacturing  business, its proposed rubber
mat molding  business,  and its ability to continue as a going  concern  will be
dependent upon the Company's  ability to obtain  adequate  financing to commence
profitable,  commercial manufacturing and sales activities and the TCS-1 Plant's
ability to meet anticipated  performance  specifications  on a continuous,  long
term, commercial basis.

                                       60
<PAGE>


RESULTS OF OPERATIONS

           As noted above,  the Company is presently in the very early stages of
the business of  manufacturing  and selling  TCS-1 Plants and is also  currently
engaged in establishing a complete  rubber mat molding and flocking  facility in
which it intends to utilize the First  Production  Model of the TCS-1 Plant. The
Company intends to begin manufacturing TCS-1 Plants and operating its rubber mat
molding facility on commercial bases by March of 1999. The Company had no income
from  operations  during Fiscal 1997; It generated  $880,000 in revenues  during
fiscal  1998  from  the  sale of the  single  front-end  module  and the  single
fracturing  mill of the  First  Production  Model of the TCS-1  Plant.  However,
unless and until the Company  successfully  develops and  commences  TCS-1 Plant
manufacturing   and  sales  operations  and/or  profitable  rubber  mat  molding
operations on a full-scale  commercial level, it will continue to generate no or
only limited revenues from operations. Except for the foregoing, the Company has
never engaged in any significant business activities.

         The  financial  statements  which are  included in this Report  reflect
total general and  administrative  expenses of $3,229,332  for Fiscal 1999 which
reflects an increase of  $1,259,055  over Fiscal 1998,  during which general and
administrative expenses were $1,970,277. During fiscal 1999, the Company's total
operating  costs  increased  by  $336,324,  from  $4,475,181  for fiscal 1998 to
$4,811,505  for fiscal  1999.  The  majority  of such  increase is the result of
various factors, including: (i) an increase of $500,000 in respect of employment
termination benefits for two employees, which benefits were paid in stock of the
Company and (ii),  the issuance of stock as signing  bonuses for two  employees,
which stock was recorded at an aggregate value of $201,250.

         Management  believes that the amounts  accrued in respect of the shares
issued to compensate the executive  officers and corporate  counsel  reflect the
fair value of the  services  rendered,  and that the  recipients  of such shares
accepted  such  numbers  of  shares  as a  function  of a  combination  of their
perceived  valuation of both  present and  possible  future value of the shares,
rather than the actual value of the stock at the time it was issued.  Management
believes  that,  as of the  dates  such  shares  were  issued  in  lieu  of cash
compensation, their actual and potential value, if any, could not be determined,
and  that any  attempt  to  specify  a  current  valuation  with any  reasonable
assurance,  would be flawed, without substance,  and highly contingent upon, and
subject to,  extremely  high risks  including  but not limited to the  following
factors:  (i) the absence of a reliable,  stable, or substantial  trading market
for the Company's  common stock,  the possibility that such a market might never
be developed,  and the resultant minimal,  or total absence of, market value for
any  substantial  block of  common  stock;  (ii) the very high  intrinsic  risks
associated with early development stage businesses, such as the Company's; (iii)
the Company's lack of sufficient  funds, as at such issuance dates, to implement
its  business  plan and the  absence of any  commitments,  at such  times,  from
potential  investors to provide such funds;  (iv) the  restrictions  on transfer
arising  out of the  absence  of  registration  of  such  shares;  and  (v)  the
uncertainty  respecting  the Company's  ability to continue as a going  concern,
(See "Existing and Proposed Businesses", "Market for the Company's Common Equity
and Related Stockholder  Matters",  and "Management - Certain  Relationships and
Related  Transactions  - Issuance  of Stock in Lieu of Salaries  and  Consulting
Fees").

         From  inception  (July 15, 1987) through June 30, 1999, the Company has
incurred a cumulative net loss of $14,961,362.  Approximately $1,057,356 of such
cumulative  net  loss was  incurred,  prior to the  inception  of the  Company's
present  business plan, in connection with the Company's  discontinued  proposed
health care business and was due primarily to the expending of costs  associated
with the  unsuccessful  attempt to  establish  such  health care  business.  The
Company  never  commenced its proposed  health care  operations  and  therefore,
generated no revenues therefrom.

                                       61
<PAGE>


RISK FACTORS

         The Company's liquidity,  capital resources,  and results of operations
indicate that an investment in the Company remains speculative,  involves a high
degree of risk,  and should not be made by persons who cannot afford the loss of
their entire investment.  Prospective  investors in the Company should carefully
consider all of the information contained in this Report before deciding whether
to purchase securities of the Company, and, in particular, the factors set forth
below.

         Information   contained  in  this  Report   contains   "forward-looking
statements"  which can be identified by the use of  forward-looking  terminology
such as "believes",  "expects", "may", "should" or "anticipates" or the negative
thereof or other variations thereon or comparable  terminology or by discussions
of strategy.  No assurance can be given that the future  results  covered by the
forward-looking statements will be achieved. The following Risk Factors include,
among   other   things,   cautionary   statements   with   respect   to  certain
forward-looking   statements,   including   statements   of  certain  risks  and
uncertainties that could cause actual results to vary materially from the future
results referred to in such forward-looking statements.



         1.  DEVELOPMENT  STAGE  COMPANY:  NO ASSURANCE AS TO FUTURE  PROFITABLE
OPERATIONS.  Because it is in the  development  stage and has had no significant
operations  to date,  the Company  cannot  predict with any certainty the future
success or failure of its  operations.  The  Company's  existing  business  (the
design and  manufacture of tire recycling  equipment) and its proposed  business
(the  operation  of tire  recycling  equipment),  are both subject to all of the
risks inherent in the  establishment of new businesses and there is no assurance
that the Company will generate net income or successfully  expand its operations
in the future. Moreover, as a new enterprise,  it is likely to remain subject to
risks and occurrences  which  management is unable to predict with any degree of
certainty,  and for which it is unable to fully  prepare.  The likelihood of the
success of the Company in either business segment must be considered in light of
the  problems,  expenses,  difficulties,  complications  and  delays  frequently
encountered  in  connection  with  the  formation  of a  new  business  and  the
competitive  environment  in which the  Company  will  operate.  Because  of the
Company's very limited business history,  there is little evidence for investors
to  analyze  in  order  to make an  informed  judgment  as to the  merits  of an
investment in the Company.  Any such investment should therefore be considered a
high risk investment in an unseasoned  start-up  company with the possibility of
the loss of the entire investment.


         2.  NEED FOR SUBSTANTIAL  ADDITIONAL  CAPITAL.  During fiscal 1999, the
Company  completed  and  closed  certain  financing   activities  which  yielded
aggregate  net  proceeds  to the  Company in the amount of  $286,500  Management
believed that the proceeds realized therefrom (together with Canadian and Quebec
government and  governmental  agency grants and loans,  in various forms) should
provide the Company with  adequate  funding to  accomplish  the  following:  (i)
complete and cover all of the Company's  costs  related to the first  production
model of the TCS-1 Plant (the "Production  Model");  (ii) renovate the Company's
new  manufacturing  and assembly  facility to bring it into full compliance with
all  applicable  provincial  and  municipal  regulations  (see  "Description  of
Property");  and (iii) cover the Company's  overhead costs and expenses  through
the end of calendar 1999. The Company has, however,  had to revise its estimates
regarding  the adequacy of such funding for several  reasons,  including but not
limited to the necessity for certain  unanticipated  modifications  to the TCS-1
Plant design and the Company's  entry into a second business  segment  involving
the operation of a TCS-1 Plant.

         During  the  "Stage 2" test phase of the First  Production  Model,  the
Company  encountered  certain  unanticipated  design  flaws in the  TCS-1  which
required   modification  and  it  also  identified  several   opportunities  for
improvements  in the  original  design of the  TCS-1  Plant,  which the  Company
believes will increase  economy and  efficiency of its  operation.  The required
modifications  were  completed  in  December  1998  with  respect  to  a  single
fracturing  mill and a single  freezing  tower in the  First  Production  Model.
However,  longer-term testing revealed additional problems in the freezing tower
involving  the  conveying  system  within the tower.  The  Company is  currently
modifying  the  conveying  system and  anticipates  such work to be completed in
November of 1999.  The cost of the redesigned  conveying  system is estimated at
Cdn$70,000 (approximately US$50,000), including installation.

                                       62
<PAGE>


         The  Company  has also had to, and may, in the near future be forced to
continue  to, cover its  overhead  costs from sources  other than cash flow from
operations  because of the  unanticipated and lengthy delays in the commencement
of commercial operations.

         The Company  believes  that it will be  possible to meet its  immediate
goals of: (a) commencing full scale commercial  production of TCS-1 Plants;  and
(b) covering its overhead  expenses until  sufficient  cash flow is generated by
operations,  out of a combination of some or all of the following  sources:  (i)
funds on hand;  (ii)  expected  cash flow  from  sales of four  TCS-1  Plants to
ENERCON America  Distribution  Limited  ("Enercon") of  Westerville,  Ohio. (see
"Existing  and  Proposed   Businesses  -  Sales  and  Marketing  -  The  Enercon
Agreements");  (iii)  Canadian and Quebec  government  and  governmental  agency
grants, loans, and refundable tax credits; (iv) sale and lease back financing on
inventory and equipment owned by the Company;  (v) conventional asset based debt
financing against receivables and inventory; (vi) refund of all of the 15% sales
tax paid by the Company on all goods, and services  purchased in connection with
the Company's manufacturing activities;  (vii) subcontractor financing; (viii) a
research  and  development  tax credit  facility  from  ScotiaBank  for the 1999
calendar year;  and/or (ix) vendor financing by way of installment  purchases of
equipment.  However,  the sufficiency of such funds, if the Company does receive
them,  will be  completely  dependent  upon the TCS-1  Plant's  as yet  unproven
ability to operate without  significant  problems,  on a long-term,  continuous,
commercial basis.

         Assuming  the Company is able to cover the costs  necessary to complete
the  reconstruction  of the conveying system within the freezing tower; from the
sources  described above,  full scale commercial  manufacture of TCS-1 Plants is
presently expected to occur during December 1999. However,  any failure or delay
in the Company's receipt of the required  financing would be directly  reflected
in a commensurate delay or failure in the commencement of commercial  operations
(see  "Existing and Proposed  Businesses - Equipment  Manufacturing  - The TCS-1
Plant", and "Existing and Proposed Businesses - Equipment  Manufacturing - Sales
and Marketing - The Enercon Contracts" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations").

                                       63
<PAGE>


         The Company's  more long term future capital  requirements  will depend
upon  numerous  factors,   including  the  amount  of  revenues  generated  from
operations  (if any), the cost of the Company's  sales and marketing  activities
and the progress of the Company's research and development  activities,  none of
which can be predicted  with  certainty.  Receipt of any  projected  revenues is
entirely dependent upon the TCS-1's meeting performance expectations,  Enercon's
ability to meet its payment  obligations  under its agreements with the Company,
Enercon  obtaining  all required  permits and  licenses to operate a Plant,  the
Company's  obtaining  sufficient  production,  financing  and  capacity  to meet
delivery  requirements,  and the  rubber  crumb  produced  by the TCS-1  meeting
customer  requirements.  The  Company  believes  that  if all  of the  foregoing
contingencies  are met, it will have sufficient cash flow to fund its operations
for at least the next twelve months. If revenues from operations within the next
twelve months should fail to meet current  projections,  the Company may attempt
to make an  underwritten  public  offering of its  securities in order to insure
that it will have sufficient  working capital.  The Company notes that on August
13, 1997, it received a Letter of Intent from H.J. Meyers,  Inc.  ("Meyers"),  a
broker-dealer  registered with the National  Association of Securities  Dealers,
Inc., for the  underwriting  of such a proposed  public  offering (the "Proposed
Public  Offering")  in an  amount  of not  less  than  $8,000,000.  On or  about
September 16, 1998,  however,  Meyers  abruptly  ceased doing  business.  If the
Company  should  determine  that it is necessary or desirable to effect a public
offering, it will have to locate another broker-dealer, ready, willing, and able
to  underwrite a public  offering of the Company's  securities.  There can be no
assurance  that the Company  will  succeed in finding an  underwriter  or that a
public  offering  will in fact be  completed  or that the Company  will  receive
adequate  financing  from  any  such  public  offering.  In the  event  that the
projected revenues are not generated and a public offering does not occur within
twelve  months,  the Company  intends to endeavor to obtain sale and  lease-back
financing  on  equipment  owned by the  Company,  conventional  asset based debt
financing  against  receivables  and inventory,  and/or to seek other avenues of
financing  through  private  offerings  of its debt or  equity  securities.  The
Company  believes that at least one, or a  combination  of more than one, of the
foregoing  avenues of financing will enable it to commence full scale production
of the TCS-1 Plant and its proposed product manufacturing and rubber crumb sales
operations  on a level  sufficient  to sustain the Company for at least the next
twelve months.  However, given the early stage of development of the Company, it
should  be  noted  that it is  impossible  at this  time to  estimate  with  any
certainty  what the  Company's  income from  operations  will be during the next
twelve  months and that there can be no assurance  that the Company will be able
to obtain outside  financing on a debt or equity basis on terms favorable to it,
if at all.  While  management  does  not  believe  that  it  will  be the  case,
prospective  investors  in the  Company  should  note  that if all of the  above
described  internal  and  external  sources  for  financing  should  fail  to be
sufficient,  the Company  could be required  to reduce its  operations,  seek an
acquisition  partner or sell  securities on terms that may be highly dilutive or
otherwise disadvantageous.

         In the past, the Company has experienced  operational  difficulties and
delays of more than six years, four of which years occurred during the tenure of
the  current  management.  All such  difficulties  and delays were the result of
working  capital  constraints  and the Company may continue to  experience  such
problems in the future.  Should such problems continue or reoccur in the future,
they could have a material adverse effect on the Company's  business,  financial
condition and results of operations.  The working capital  constraints which the
Company  experienced  were the  result  of its being  undercapitalized  from the
outset and therefore without sufficient  resources to hire required personnel or
pay  vendors  of  products   and   services,   including   but  not  limited  to
subcontractors  needed to design  and  build the First  Production  Model of the
TCS-1 Plant.

         3.  HISTORY  OF  LOSSES  AND  ACCUMULATED   DEFICIT.  The  Company  has
experienced  operating losses in each fiscal period since its formation in 1987,
including  the period since the 1993  inception of its tire  recycling  business
plan. As of June 30, 1999, the Company had a deficit accumulated since formation
in the aggregate approximate amount of $14,961,362, approximately $13,904,006 of
which was accumulated since the 1993 inception of the Company's present business
plan. The Company expects to incur additional  operating losses through at least
the end of the fiscal year ending June 30, 2000 and  possibly  thereafter  (see,
above, Risk Factor No. 1 "Development  Stage Company:  No Assurance as to Future
Profitable  Operations").   Since  its  inception,  the  Company  has  generated
extremely  limited  revenues from operations (see  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations").

                                       64
<PAGE>


         4.  GOING  CONCERN  ASSUMPTION.  The  Company's  independent  auditors'
report on the Company's  financial  statements for the years ended June 30, 1998
and 1999, contains an explanatory  paragraph indicating that: (i) the Company is
still in the development  stage;  (ii) it cannot be determined at this time that
the Company's tire  disintegration  technology will be developed to a productive
stage;  and (iii)  the  Company's  uncertainty  as to its  productivity  and its
ability to raise sufficient capital raise substantial doubt about its ability to
continue as a going concern. In addition, the Company had an accumulated deficit
of  $14,961,362  as at June 30,  1999.  The  Company  will  require  substantial
additional  funds  in the  future,  and  there  can  be no  assurance  that  any
independent  auditors' report on the Company's future financial  statements will
not include a similar  explanatory  paragraph  if the Company is unable to raise
sufficient  funds or generate  sufficient cash from operations to cover the cost
of its  operations.  The existence of the  explanatory  paragraph may materially
adversely  affect the  Company's  relationship  with  prospective  customers and
suppliers,  and therefore could have a material  adverse effect on the Company's
business, financial condition and results of operations.


         5.  NO GUARANTEE OF PRODUCT  ACCEPTANCE IN MARKET. The first production
model of the TCS-1  Plant was  completed  in May of 1998 and is  expected  to be
ready for commercial  production,  on a complete  "turn-key"  basis, in November
1999. Consequently, there is not yet any history of commercial operations of the
TCS-1 Plant.  There can be no assurance that the TCS-1 Plant will be accepted in
the market for tire  disintegration  equipment.  Moreover,  the Company's market
research has focused on the potential demand for the TCS-1 Plant, and the rubber
crumb it is  designed  to  produce,  to the  exclusion  of  other  types of tire
disintegration  equipment.  Therefore,  the Company is not able to estimate with
any assurance the potential  demand for the TCS-1 Plant, if any. There can be no
assurance that sufficient  market  penetration can be achieved so that projected
production  levels  of the TCS-1  Plant  will be  absorbed  by the  market  (see
"EXISTING AND PROPOSED BUSINESSES-SALES AND MARKETING").


         6.  DILUTIVE  AND  OTHER  ADVERSE  EFFECTS  OF  PRESENTLY   OUTSTANDING
DEBENTURES,  WARRANTS,  AND  OPTIONS.  As of  September  17,  1999,  there  were
outstanding  options and warrants  pursuant to which the Company is obligated to
sell common stock, as follows:

         (a)      1,000,000   common  stock  purchase   warrants  (the  "Type  A
                  Warrants")  to  purchase  a  like  number  of  shares  of  the
                  Company's  common  stock at an  exercise  price  of $.001  per
                  share,  the resale of all of which  shares are included in the
                  Registration Statement.

         (b)      10%  convertible  Type A  Debentures  in the  net  outstanding
                  aggregate  principal  amount of $161,100,  as of September 17,
                  1999, with principal and interest convertible,  in whole or in
                  part,  into  shares  of  the  Company's   common  stock  at  a
                  conversion  ratio equal to a percentage  ranging between 67.5%
                  and 61.5% of the  closing  bid price of the  Company's  common
                  stock on the trading date  immediately  preceding  the date of
                  the Company's  receipt of a notice of conversion from a holder
                  of the Type A  Debentures.  Accordingly,  if, on September 17,
                  1999, all of the principal  amount,  but none of the interest,
                  due on the Type A Debentures  had been  converted  into common
                  stock  (based on the market  price of the  common  stock as of
                  September  17,  1999),  a total of 5,821,138  shares of common
                  stock  would have been  issued in respect of such  conversion.
                  The resale of all of which  shares  would be  included  in the
                  Registration  Statement.  To  the  extent  that  the  interest
                  portion  of  the  Debenture  is  not  converted,  all  accrued
                  interest will be payable in cash.

         (c)      10%  convertible  Type B  Debentures  in the  net  outstanding
                  aggregate  principal  amount of $380,000,  as of September 17,
                  1999, with principal and interest convertible,  in whole or in
                  part,  into  shares  of  the  Company's   common  stock  at  a
                  conversion  ratio of one  share for  every  $.20 of  principal
                  amount and interest  earned thereon from the date of issuance.
                  If the principal  amount of all of the Type B Debentures,  but
                  not the interest,  were  converted,  the  aggregate  number of
                  shares  issuable  would be 1,900,000,  the resale of all which

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                  shares are  included  in the  Registration  Statement.  To the
                  extent that the  interest  portion of the Type B Debenture  is
                  not converted, all accrued interest will be payable in cash.

         (d)      an option to purchase 235,294 shares,  held by Lenford Robins,
                  an unaffiliated consultant, exercisable at a price of $.17 per
                  share.  Mr.  Robins is an  expert  in all  types of  equipment
                  financing  through  sale  and  leaseback   arrangements,   and
                  otherwise,   and  has  provided,  and  continues  to  provide,
                  consulting  services to the Company  with respect to locating,
                  structuring,  and arranging  such financing for purchasers and
                  potential  purchasers of TCS-1 Plants. From the Summer of 1996
                  through the Spring of 1997,  Mr. Robins  provided  substantial
                  consulting  services  in  connection  with sale and  leaseback
                  financing  for Ocean's Tire  Recycling & Processing  Co., Inc.
                  ("OTRP").

         (e)      the CGT  Option to  purchase  a number of shares  equal,  on a
                  fully  diluted   basis,   to  10%  of  the  total  issued  and
                  outstanding common stock of the Company,  at an exercise price
                  equal to $.1195 per share with  respect to 969,365  shares and
                  at an exercise price with respect to the balance of the shares
                  equal to fifty  percent  (50%) of the average of the final bid
                  and ask prices of the common stock of the  Company,  as quoted
                  in the  OTC  Bulletin  Board  during  the  ten  business  days
                  preceding  the exercise  date.  If all of the other  presently
                  outstanding debentures,  options, and warrants were exercised,
                  as described above, the total number of shares of common stock
                  of the Company issued and  outstanding  would be  124,043,468,
                  prior to the  exercise of the CGT Option,  in which case,  the
                  number  of  shares   subject  to  the  CGT  Option   would  be
                  13,804,830,  the  resale  of  all of  which  shares  would  be
                  included  in  the  Registration  Statement.  At  present,  the
                  authorized  share  issuance  of  the  Company  is  120,000,000
                  shares.   The  Company   has   obtained   authorization   from
                  shareholders representing in excess of 50% of the votes of the
                  common  shareholders to increase the authorized share issuance
                  to 165 million shares.

         The  holders  of the  convertible  debentures,  the  warrants,  and the
outstanding  options  have an  opportunity  to profit  from a rise in the market
price of the common stock, if such rise should occur, with a resulting  dilution
in the interests of the other  shareholders.  Moreover,  if the above  described
debentures,  warrants, and options (the "Convertible  Securities") are converted
or  exercised,  most of the shares of common stock issued upon such  exercise or
conversion (the  "Underlying  Shares") will be available for immediate sale into
the  public  market,  commencing  on the  effective  date  of  the  Registration
Statement.  The sale or availability  for sale of substantial  amounts of common
stock in the public market could adversely affect the prevailing market price of
the  Company's  common  stock and could  impair the  Company's  ability to raise
additional capital through the sale of its equity securities.  In addition, even
if the Convertible Securities are not converted or exercised, the terms on which
the Company may obtain  additional  financing  may be adversely  affected by the
existence  of such  securities.  For  example,  the  holders of the  Convertible
Securities  could  convert  or  exercise  them at a time  when  the  Company  is
attempting  to obtain  additional  capital  through a new offering of securities
which have terms more favorable (to the Company) than those provided by the then
outstanding Convertible Securities.


         7.  ADDITIONAL DILUTION FROM ISSUANCE OF SHARES FOR SERVICES.  To date,
the Company has had no significant operating revenues.  Accordingly, the bulk of
its cash  assets  have  been,  and may  continue  to be,  utilized  to cover the
expenses  associated  with  the  development  of  the  TCS-1  Plant.  Given  the
foregoing,  the Company  regularly pays certain of its financial  obligations by
issuing  restricted shares of its common stock, at a discount,  in lieu of cash.
The  discounts at which such shares were issued was  generally,  but not always,
set  at  50% of the  average  market  price  of  the  stock,  as  traded  in the
over-the-counter  market and quoted in the OTC Bulletin  Board.  Such  discounts
were  either  negotiated  at  arms  length  with  third  parties  or  determined
arbitrarily  by the  Company,  in which cases they bore no  relationship  to the
Company's  assets,  earnings,  book value or other such criteria of value.  Such
issuances  have,  and may continue  to,  result in  substantial  dilution to the
Company's existing shareholders.

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<PAGE>


         Since  January of 1995,  the Company  has issued a total of  53,496,331
shares,  constituting  50.5% of the issued and outstanding shares of the Company
in lieu of cash compensation due under employment and consulting agreements with
its  executive  officers,  employees,  and  corporate  counsel and in additional
compensation by way of directors shares and stock bonuses.  In addition,  during
that period,  the Company issued 13,953,726 shares,  constituting  approximately
13.2% of the issued and  outstanding  common stock of the Company to  affiliated
and non-affiliated  consultants and  subcontractors  for consulting  services of
various  types.  For as long as the Company has  insufficient  cash resources to
meet its obligations to its officers,  counsel, and outside vendors, the Company
will,  to the extent  possible,  continue to issue shares of its common stock at
negotiated or arbitrary discounts. In addition, the Company intends to submit to
its shareholders, proposals to adopt three stock option plans for the benefit of
its employees (See Risk Factor No. 9 "Possible  Voting Control by Management and
Corporate  Counsel"  and Risk Factor No. 27 "Adverse  Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions,  Limitations
on Shareholders  Voting Rights, and Stock Bonuses to Management",  "Management -
Executive Compensation",  "Management - Security Ownership of Certain Beneficial
Owners and Management", and "Certain Relationships and Related Transactions").


         8.  POSSIBLE  DEPRESSIVE  EFFECT ON PRICE OF SECURITIES OF FUTURE SALES
OF COMMON STOCK.  The resale of 11,952,857 of the  118,481,528  common shares of
the Company,  issued and  outstanding as of November 23, 1999, has been included
in the  Registration  Statement.  11,760,000  of  such  shares  will  be  freely
tradeable commencing on the effective date of the Registration  Statement or, if
the holders  thereof shall choose to withdraw the  registration  of such shares,
they will be tradeable  under Rule 144 commencing May 11, 1999. The resale of an
estimated  21,220,449  shares  issuable  upon  the  exercise  or  conversion  of
presently outstanding options,  warrants, and debentures have also been included
in the  Registration  Statement and will be freely  tradeable upon the later of:
(i) the effective date of the  Registration  Statement;  or (ii) their issuance.
Alternatively,  if the holders of the  convertible  debentures  and some of such
warrants  (but  not  the  options)  shall  choose  to  withdraw  them  from  the
Registration   Statement,   they  will  become   tradeable  under  Rule  144  on
commencement  dates  ranging from  January 7, 1999 to May 11, 1999.  The sale or
other disposition of much of the currently outstanding shares of common stock is
restricted by the Securities Act. Unless such sales are registered, these shares
may only be sold in compliance  with Rule 144  promulgated  under the Securities
Act or some other  exemption from  registration  thereunder.  Rule 144 provides,
among other matters,  that if certain  information  concerning the operating and
financial  affairs of the Company is publicly  available,  persons who have held
restricted  securities  for a period  of one year  may  thereafter  sell in each
subsequent  three month  period up to that  number of such  shares  equal to one
percent of the Company's total issued and outstanding  common stock. The sale or
availability  for sale of  substantial  amounts  of common  stock in the  public
market  after  the  offering  being  made by the  Registration  Statement  could
adversely affect the prevailing  market price for the Company's common stock and
could impair the Company's ability to raise additional  capital through the sale
of its equity securities.


         9.  POSSIBLE  VOTING  CONTROL  BY  MANAGEMENT  AND  CORPORATE  COUNSEL:
POSSIBLE  DEPRESSIVE  EFFECT ON MARKET  PRICES.  As of September  17, 1999,  the
Company's  officers and directors were the beneficial  owners of an aggregate of
30,550,835   shares,   constituting   approximately   28.86%  of  the  Company's
outstanding  common stock. (See Risk Factor No. 27 "ADVERSE EFFECTS OF PROPOSALS
OF THE BOARD OF DIRECTORS: ANTI-TAKEOVER PROVISIONS, LIMITATIONS ON SHAREHOLDERS
VOTING RIGHTS,  AND STOCK BONUSES TO MANAGEMENT").  In addition to the proposals
discussed  in Risk Factor No. 27, the Board of Directors  has proposed  that the
shareholders  approve the adoption of three stock option plans. If adopted,  two
of these plans will be for the benefit of all of the  Company's  employees,  but
management  and key  employees  are expected to be the  principal  beneficiaries
thereof.  The third of these proposed plans, is intended to be specifically  for
the purpose of awarding  options for the purchase of shares of common stock at a
nominal  exercise  price of $.001 per share,  to key  employees  and  members of
management in respect of certain specified performance  achievements attained or
to be attained by the Company due to their efforts.

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<PAGE>


         The other two stock option  plans to be presented to the  Shareholders,
consist of a  statutory  and a  non-statutory  plan.  Key  management  and other
employees  will also be eligible  to receive  option  grants  under each of such
plans.  The exercise  price of options  granted under the statutory plan must be
not less than 100% of the market  price on the day the option is granted  unless
the grantee owns 10% or more of the total issued and outstanding common stock of
the Company,  in which case the exercise price must be not less than 110% of the
market  price on the day the option is  granted.  The  non-statutory  plan to be
proposed to the shareholders calls for an exercise price of not less than 50% of
the market price on the date the option is granted.

         The concentration of ownership by the Company's  officers and directors
may,  along with other  "anti-takeover"  measures  which the Board of  Directors
plans to submit to the shareholders, discourage potential acquirors from seeking
control  of  the  Company  through  the  purchase  of  Common  Stock,  and  this
possibility  could  have a  depressive  effect  on the  price  of the  Company's
Securities.  (See  "Risk  Factor No. 25  "ADVERSE  EFFECTS  OF  PROPOSALS  TO BE
PRESENTED AT ANNUAL SHAREHOLDERS MEETING: ANTI-TAKEOVER PROVISIONS,  LIMITATIONS
ON SHAREHOLDERS  VOTING RIGHTS,  AND STOCK BONUSES TO MANAGEMENT" AND "Principal
Shareholders").


         10. DEPENDENCE  ON MAJOR  CUSTOMERS.  To date the Company has  received
orders for fifteen TCS-1 Plants,  eight of which were ordered by  Ocean/Ventures
III,  Inc.("O/V III") of Toms River,  New Jersey ("O/V III") and parts of one of
which have been  purchased  by Oceans Tire  Recycling  &  Processing  Co.,  Inc.
("OTRP"),  a company under common control with O/V III. The eight Plants ordered
by O/V III  constitute  approximately  fifty-six  percent (56%) of the Company's
present backlog. The Company has also received orders for four TCS-1 Plants from
ENERCON  America  Distribution  Limited  ("Enercon") of  Westerville,  Ohio. The
Enercon  orders  constitute  approximately  twenty-eight  percent  (28%)  of the
Company's present backlog.  The loss of either of these two customers would have
a major adverse effect on the Company.

         Both O/V III and OTRP are  controlled by Louis A. Sanzaro,  a director,
and until November 23, 1999, an officer of the Company.  Mr.  Sanzaro's past and
present  relationships and transactions with the Company are discussed in detail
in "Existing and Proposed Businesses - Proposed TCS-1 Plant Operations: Sales of
Rubber Crumb and Manufacture and Sale of Finished Products."

         Completion and  consummation  of all currently  outstanding  orders for
TCS-1  Plants,  are  entirely  dependent  upon the TCS-1's  meeting  performance
expectations,  each  customer's  obtaining  lease  or  other  financing  for the
purchased portions of the Plant (as well as all required permits and licenses to
operate  a  Plant),  and  to  the  Company's  obtaining  sufficient  production,
financing and capacity to meet delivery requirements.  (See "Existing & Proposed
Businesses  -  "Equipment  Manufacturing  - Dependence  on Major  customer"  and
"Proposed TCS-1 Plant Operations: Sales of Rubber Crumb and Manufacture and Sale
of Finished Products."


         11. UNCERTAINTY  OF PRODUCT AND TECHNOLOGY  DEVELOPMENT:  TECHNOLOGICAL
FACTORS. The Company has completed initial development and construction,  of the
first  production  model of the TCS-1 Plant.  The Company's  success will depend
upon the TCS-1 Plant's meeting targeted  performance and cost objectives and its
timely introduction into the marketplace. Such an outcome will be subject to the
risks inherent in the development of a new product,  technology,  and, business,
including  unanticipated  delays,  expenses,  and  difficulties,  as well as the
possible insufficiency of funding to complete development (see Risk Factor No. 2
"Need for Substantial  Additional  Capital",  above).  There can be no assurance
that under  commercial  usage  conditions,  the TCS-1 Plant will  satisfactorily
perform the functions for which it has been  designed and  constructed,  that it
will meet  applicable  price or performance  objectives,  or that  unanticipated
technical or other problems will not occur which would result in increased costs
or material delays in establishing the Company's business at a profitable level.
There can be no assurance that,  despite  testing by the Company,  problems will
not be  encountered  in the TCS-1 Plant  after the  commencement  of  commercial
manufacture and sales, resulting in loss or delay in market acceptance.

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<PAGE>


         12. INTERNATIONAL SALES AND OPERATIONS. The Company plans to market the
TCS-1  Plant in Europe and India  during the 2000  calendar  year,  and in other
areas  throughout the world as  opportunities  arise.  There can however,  be no
assurances  that the  TCS-1  Plant  will be  marketed  successfully  or that any
anticipated  international  sales of TCS-1 Plants will take place.  In addition,
the Company may enter into joint  ventures  with  purchasers of TCS-1 Plants for
the purpose of engaging in the business of operating tire  recycling  businesses
equipped  with  TCS-1  Plants.  To  the  extent  that  the  Company  engages  in
international  sales  and/or  operations,  it will be subject  to various  risks
associated therewith, including but not limited to changes in tariff rates, lack
of reliability and availability of qualified labor, and instability of political
climate or economic environment. In addition, the value of any capital equipment
owned by such joint  ventures  and any  operating  lease or  equipment  purchase
financing payments received by the Company,  may, under certain  conditions,  be
valued  or paid  in  non-U.S.  currencies,  all of  which  will  be  subject  to
independent  fluctuating  exchange rates with the U.S.  dollar which may have an
adverse affect on the Company's revenues or asset values in terms of the U.S.
dollar.


         13. PROTECTION   OF  TIREX   PROPRIETARY   TECHNOLOGY   AND   POTENTIAL
INFRINGEMENT.  The success of the Company's  proposed  business  depends in part
upon its ability to protect its  proprietary  technology  and the proposed TCS-1
Plant which will  utilize  such  technology.  On April 7, 1998,  the Company was
issued a United States patent on its Cryogenic Tire  Disintegration  Process and
Apparatus (Patent No. 5,735,471).  This patent will expire on December 18, 2016.
In November 1998, the Company filed this patent with the Canadian Patent Office.
The Company is presently unable to state how long the Canadian review will take.
While the Company expects a Canadian patent to be granted,  it is unable to give
any  assurance  that this will in fact be the  case.  Except  where the terms of
their  employment  agreements would make it redundant or, in the sole discretion
of  management,  it is determined  that because of the  non-technical  nature of
their duties, such agreements are not necessary or appropriate, the Company has,
and will  continue  to,  enter into  confidentiality  and  invention  assignment
agreements  with all  employees  and  consultants  which  limit  access  to, and
disclosure  or use of, the  Company's  proprietary  technology.  There can be no
assurance,   however,   that  the   steps   taken  by  the   Company   to  deter
misappropriation  or third party  development of its technology and/or processes
will be adequate,  that others will not independently develop similar technology
and/or processes or that secrecy will not be breached. In addition, although the
Company believes that its technology has been  independently  developed and does
not infringe on the proprietary rights of others, there can be no assurance that
the Company's technology does not and will not so infringe or that third parties
will not assert infringement claims against the Company in the future. Moreover,
there can be no assurance that the Company will have the resources to defend its
Patent by bringing patent infringement or other proprietary rights actions.

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<PAGE>


         14. LIMITED  PUBLIC  MARKET:  COMPANY NOT  ELIGIBLE  FOR  INCLUSION  ON
NASDAQ. To date there has been only a limited and sporadic public market for the
Company's  common stock.  There can be no assurance  that an active and reliable
public market will develop or, if developed, that such market will be sustained.
Purchasers  of  shares of  common  stock of the  Company  may,  therefore,  have
difficulty  in  reselling  such  shares.  As a  result,  investors  may  find it
impossible to liquidate their investment in the Company should they desire to do
so. The  Company's  common  stock is  currently  traded in the  over-the-counter
market and quoted on the OTC  Bulletin  Board.  The Company  intends to apply to
have its common stock  approved for quotation on the Nasdaq  SmallCap  Market at
such time, in the future,  that it meets the requirements  for inclusion.  As of
the date hereof, however, the Company is not eligible for inclusion in NASDAQ or
for  listing  on  any  national  stock  exchange.  All  companies  applying  and
authorized  for  NASDAQ are  required  to have not less than  $4,000,000  in net
tangible  assets,  a public  float  with a market  value of not less  than  five
million  dollars,  and a minimum bid of price of $4.00 per share. At the present
time,  the  Company is unable to state  when,  if ever,  it will meet the Nasdaq
application standards.  Unless the Company is able to increase its net worth and
market valuation  substantially,  either through the accumulation of surplus out
of earned income or successful  capital raising  financing  activities,  it will
never be able to meet the eligibility requirements of NASDAQ. In addition, it is
likely that the Company,  which, as of October 19, 1999, had 118,481,528  shares
of common stock issued and  outstanding,  will have to effect a reverse split of
its  issued  and  outstanding  stock,  in order to meet the  minimum  bid  price
requirement (see, also, Risk Factor No. 6 "DILUTIVE AND OTHER ADVERSE EFFECTS OF
DEBENTURES AND WARRANTS AND PRESENTLY  OUTSTANDING OPTION").  Moreover,  even if
the Company meets the minimum  requirements to apply for inclusion in The Nasdaq
SmallCap Market,  there can be no assurance,  that approval will be received or,
if received,  that the Company will meet the requirements for continued  listing
on the Nasdaq SmallCap Market. Further, Nasdaq reserves the right to withdraw or
terminate a listing on the Nasdaq SmallCap Market at any time and for any reason
in its  discretion.  If the Company is unable to obtain or to maintain a listing
on the Nasdaq SmallCap Market,  quotations, if any, for "bid" and "asked" prices
of the common stock would be available  only on the OTC Bulletin Board where the
common  stock is  currently  quoted or in the  "pink  sheets"  published  by the
National Quotation Bureau, Inc. This can result in an investor's finding it more
difficult  to  dispose  of or to obtain  accurate  quotations  of prices for the
common  stock  than would be the case if the  common  stock  were  quoted on the
Nasdaq  SmallCap  Market.  Irrespective  of whether  or not the common  stock is
included in the Nasdaq  SmallCap  system,  there is no assurance that the public
market for the common stock will become more active or liquid in the future.  In
that regard,  prospective purchasers should consider that this offering is being
made without the underwriting  arrangements typically found in a public offering
of  securities.  Such  arrangements  generally  provide  for the  issuer  of the
securities to sell the securities to an underwriter  which,  in turn,  sells the
securities to its customers and other members of the public at a fixed  offering
price,  with the result that the  underwriter  has a continuing  interest in the
market for such  securities  following  the  offering.  In order to qualify  for
listing on a national stock exchange, similar minimum criteria respecting, among
other things, the Company's net worth and/or income from operation must be met.

         Accordingly,  market  transactions  in the  Company's  common stock are
subject to the "Penny Stock Rules" of the  Securities  and Exchange Act of 1934,
which  are  discussed  in  more  detail,  below,  under  "RISK  FACTOR  NO.  15.
APPLICABILITY  OF PENNY STOCK  RULES TO  BROKER-DEALER  SALES OF COMPANY  COMMON
STOCK".  These rules could make it  difficult  to trade the common  stock of the
Company because  compliance with them can delay and/or preclude  certain trading
transactions. This could have an adverse effect on the ability of an investor to
sell any shares of the Company's common stock.


         15. APPLICABILITY  OF "PENNY  STOCK  RULES" TO  BROKER-DEALER  SALES OF
COMPANY  COMMON STOCK.  As discussed  above,  at the present time, the Company's
common stock is not listed on The Nasdaq  SmallCap  Stock Market or on any stock
exchange.  Although  dealer prices for the Company's  common stock are listed on
the OTC  Bulletin  Board,  trading  has been  sporadic  and  limited  since such
quotations first appeared on April 4, 1994. See "Market Information".

         The Securities  Enforcement and Penny Stock Reform Act of 1990 requires
special  disclosure  relating to the market for penny stocks in connection  with
trades in any stock defined as a "penny stock". Commission regulations generally
define a penny stock to be an equity  security  that has a market  price of less
than $5.00 per share and is not listed on The Nasdaq  SmallCap Stock Market or a

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major stock exchange.  These regulations subject all broker-dealer  transactions
involving  such  securities to the special "Penny Stock Rules" set forth in Rule
15g-9 of the Securities Exchange Act of 1934 (the "34 Act"). It may be necessary
for the Selling  Shareholders and the Underlying  Share Selling  Shareholders to
utilize the services of broker-dealers  who are members of the NASD. The current
market price of the  Company's  common stock is  substantially  less than $5 per
share and such stock can, for at least for the foreseeable  future,  be expected
to continue to trade in the over-the-counter  market at a per share market price
of  substantially  less than $5 (see  "Market  Information").  Accordingly,  any
broker-dealer  sales of the Company's  shares will be subject to the Penny Stock
Rules.  These Rules affect the ability of  broker-dealers  to sell the Company's
securities and also may affect the ability of purchasers of the Company's common
stock to sell their shares in the secondary market, if such a market should ever
develop.

         The Penny Stock Rules also impose special sales  practice  requirements
on  broker-dealers  who  sell  such  securities  to  persons  other  than  their
established  customers or "Accredited  Investors." Among other things, the Penny
Stock  Rules   require  that  a   broker-dealer   make  a  special   suitability
determination  respecting  the  purchaser  and receive the  purchaser's  written
agreement to the  transaction  prior to the sale.  In addition,  the Penny Stock
Rules  require  that  a  broker-dealer  deliver,  prior  to any  transaction,  a
disclosure  schedule  prepared  in  accordance  with  the  requirements  of  the
Commission  relating to the penny stock market.  Disclosure  also has to be made
about  commissions   payable  to  both  the  broker-dealer  and  the  registered
representative and the current quotations for the securities.  Finally,  monthly
statements have to be sent to any holder of such penny stocks  disclosing recent
price information for the penny stock held in the account and information on the
limited  market in penny  stocks.  Accordingly,  for so long as the Penny  Stock
Rules are applicable to the Company's common stock, it may be difficult to trade
such stock because  compliance with such Rules can delay and/or preclude certain
trading transactions.  This could have an adverse effect on the liquidity and/or
price of the Company's common stock.


         16. MANAGEMENT'S LACK OF INDUSTRY  EXPERIENCE.  Although Management has
significant  general business and engineering  experience,  potential  investors
should be aware  that no member of  management  has been  directly  involved  in
administering a tire disintegration, recycling, or tire disintegration equipment
manufacturing, business (see "Management - Directors and Executive Officers").


         17. DEPENDENCE ON KEY PERSONNEL.  The Company believes that its success
depends to a  significant  extent on the efforts and abilities of certain of its
senior  management,  in  particular  those of Terence C. Byrne,  Chairman of the
Board of Directors and Chief Executive Officer and Louis V. Muro, Vice President
in charge of  engineering.  The loss of the services of either of these  persons
could have a  material  adverse  affect on the  Company's  business,  prospects,
operating  results,  and  financial  condition.  The Company  has  entered  into
employment  agreements with Messrs. Byrne and Muro (see "Management - Employment
Contracts  and   Termination   of   Employment   and  Changes  -  in  -  Control
Arrangements").  The  Company  does not  presently  have key man life  insurance
policies and does not intend to obtain any unless required to do so under future
financing arrangements.  Moreover,  there can be no assurance that such policies
will be available to the Company on  commercially  reasonable  terms, if at all.
Additionally,  the ability of the Company to realize its business  plan could be
jeopardized if any of its senior management  becomes incapable of fulfilling his
obligations  to the  Company  and a capable  successor  is not found on a timely
basis,  if at all.  There can however be no assurance  that, in such event,  the
Company  will be able to locate and retain a capable  successor to any member of
its senior management.

                                       71
<PAGE>


         18. REGULATORY AND ENVIRONMENTAL  CONSIDERATIONS.  The Company does not
expect  that its  equipment  manufacturing  operations  will be  subject  to any
unusual  or  burdensome  governmental  regulations.   However,  the  Company  is
presently  in the  process of making  arrangements  to own the First  Production
Model of the TCS Plant and to operate it as a "Tirex  Advanced  Products  Plant"
for the purpose of selling rubber crumb produced by operation of the TCS-1 Plant
and manufacturing  finished products,  made wholly or partially from such rubber
crumb (see "Existing and Proposed  Businesses - Proposed TCS-1 Plant Operations:
Sales of Rubber Crumb and Manufacture and Sale of Finished Products"). The TCS-1
Plant is a "closed  loop"  system  which does not use any  chemicals,  solvents,
gases or other substances,  which could result in emissions of any kind from the
operation  of the Plant  and to the best of the  Company's  knowledge,  will not
result in the emission of air  pollution,  the disposal of combustion  residues,
the storage of hazardous  substances  (as is the case with other tire  recycling
processes such as pyrolysis),  or the production of any  significant  amounts of
solid waste which would have to be landfilled. However, the operation of a TCS-1
Plant will  involve,  to varying  degrees and for varying  periods of time,  the
storage of scrap tires which, with their size, volume and composition,  can pose
serious  environmental  problems.  While the Company  does not believe that such
storage will normally involve quantities of tires so large or storage periods so
extensive as to constitute the  "stockpiling" of scrap tires, it should be noted
that  stockpiling,  should it occur,  could  constitute a  particularly  serious
environmental  problem.  Among the numerous problems relating to scrap tires, is
that when stockpiled above ground, tires create serious fire, public health, and
environmental  hazards ranging from fires, which generate large and dense clouds
of black smoke and are  extremely  difficult to  extinguish,  to the creation of
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. The Company
and other  operators of TCS-1 Plants will therefore be subject to various local,
state,  and  federal  laws  and  regulations   including,   without  limitation,
regulations  promulgated by federal and state  environmental,  health, and labor
agencies.  Establishing  and  operating  a TCS-1 Plant for tire  recycling  will
require numerous permits and compliance with  environmental and other government
regulations,  on the part of the Company's customers,  both in the United States
and  Canada and in most  other  foreign  countries.  The  process  of  obtaining
required regulatory  approvals may be lengthy and expensive for both the Company
and for its TCS-1 Plant customers.  Moreover,  regulatory approvals, if granted,
may include  significant  limitations  on either the Company's or its customer's
operations.  The EPA and comparable state and local regulatory agencies actively
enforce environmental  regulations and conduct periodic inspections to determine
compliance  with  government  regulations.  Failure  to comply  with  applicable
regulatory requirements can result in, among other things, fines, suspensions of
approvals, seizure or recall of products,  operating restrictions,  and criminal
prosecutions.

         Compliance with applicable environmental and other laws and regulations
governing  the business of the Company,  and of all TCS-1 Plant  Operators,  may
impose  financial  burdens that could adversely  affect the business,  financial
condition,  prospects,  and results of operations,  of the Company. Such adverse
affects could include,  but may not be limited to, the burden of compliance with
laws and regulations governing the installation and/or operation of TCS-1 Plants
discouraging  potential  customers  from  purchasing a TCS-1  Plant.  Actions by
federal, state, and local governments concerning  environmental or other matters
could  result in  regulations  that could  increase  the cost of  producing  the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such  by-products less profitable or even impossible
to sell at an economically feasible price level.

         The  Company  believes  that  existing  government  regulations,  while
extensive,  will not result in the disability of either the Company or its TCS-1
Plant customers to operate  profitably and in compliance with such  regulations.
However,  since  all  government  regulations  are  subject  to  change  and  to
interpretation  by local  administrations,  the effect of government  regulation
could  conceivably  prevent,  or delay for a  considerable  period of time,  the
development  of the  Company's  business  as planned  and/or  impose  costly new
procedures for  compliance,  or prevent the Company or its TCS-1  customers from
obtaining,  or affect the timing of, regulatory  approvals.  Actions by federal,
state,  and local  governments  concerning  environmental or other matters could
result in regulations  that could  therefore  increase the cost of producing the
recyclable rubber, steel, and fiber which are the by-products from the operation
of the TCS-1 Plant and make such  by-products less profitable or even impossible

                                       72
<PAGE>


to sell at an  economically  feasible  price  level,  which could  result in the
Company's  or  its  TCS-1  customers'  businesses  being  less  profitable,   or
unprofitable,  to operate.  Continually changing government compliance standards
and  technology,  could also affect the  Company's  future  capital  expenditure
requirements  relating  to  environmental  compliance.  Likewise,  the burden of
compliance with laws and regulations governing the installation and/or operation
of TCS-1 Plants could  discourage  potential  customers from  purchasing a TCS-1
Plant which would adversely affect the Company's business,  prospects,  results,
and  financial  condition.  As a result,  the  business of the Company  could be
directly and indirectly  affected by government  regulations  (See "Existing and
Proposed Businesses - Government Regulation").


         19. PRODUCTION AND SUPPLY.  The Company intends to begin  manufacturing
the TCS-1 Plant on a commercial basis in January 2000. In connection  therewith,
the Company will be dependent on arrangements  with its  subcontractors  for the
manufacture and assembly of the principal components incorporated into the TCS-1
Plant (see Existing & Proposed Businesses "AGREEMENTS WITH SUBCONTRACTORS").  It
will therefore be substantially  dependent on the ability of such subcontractors
to satisfy  performance and quality  specifications  and to dedicate  sufficient
production  capacity for all TCS-1 Plant scheduled  delivery dates.  The Company
believes  that  all of  its  subcontractors  have  the  requisite  manufacturing
capabilities  and the  willingness  to  dedicate  sufficient  amounts  of  their
manufacturing  capacity to the Company to meet all TCS-1 Plant  delivery  dates,
currently  scheduled  or  expected  to be  scheduled  within the next two years.
However,  no  assurance  can be  given  that  this  will in fact be the case and
failure  on the part of the  Company's  subcontractors  in these  regards  would
adversely  affect the Company's  ability to manufacture and deliver TCS-1 Plants
on a timely  and  competitive  basis.  In such event the  Company  would have to
replace or supplement its present subcontractors. There can be no assurance that
should it be  necessary  to do so,  the  Company  would be able to find  capable
replacements for its subcontractors on a timely basis and on terms beneficial to
the Company,  if at all; The Company's  inability to do so would have a material
adverse effect on its business (see Existing & Proposed Businesses:  "PRODUCTION
AND SUPPLY").

         Components  of the  TCS-1  Plants,  which are not  manufactured  by the
Company's  subcontractors  specifically for the TCS-1 Plant,  will be purchased,
either  directly by the Company or indirectly  through its  subcontractors  from
third-party  manufacturers.  The  Company  believes  that  numerous  alternative
sources of supply for all such components are readily available.


         20. TECHNOLOGICAL  CHANGES. To date, the market for tire disintegration
equipment has not, to the best of management's knowledge,  been characterized by
rapid  changes  in  technology.  However,  there  can be no  assurance  that new
products or  technologies,  presently  unknown to the Company,  will not, at any
time in the future and without warning, render the Company's tire disintegration
technology  less  competitive or even obsolete.  Moreover,  the technology  upon
which the Company's tire disintegration system is based, could be susceptible to
being  analyzed  and  reconstructed  by an  existing  or  potential  competitor.
Although  the Company  has been issued a United  States  patent  respecting  its
proprietary  disintegration  system,  the  Company  may not have  the  financial
resources to successfully defend such patent, were it is to become necessary, by
bringing  patent  infringement  suits  against  parties that have  substantially
greater  resources than are available to the Company.  The Company must continue
to create innovative new products  reflecting  technological  changes in design,
engineering, and development, not only of new tire disintegration machinery, but
of products, and machinery capable of producing products,  which incorporate and
recycle the rubber,  steel,  and/or fiber  by-products which will be produced by
the  operation  of the TCS-1 Plant.  Failure to do so, could  prevent to Company
from gaining and  maintaining  a significant  market for its products.  This may
require  a  continuing  high  level  of  product  development,  innovation,  and
expenditures. To the extent that the Company does not respond adequately to such
technological  advances,  its  products  may become  obsolete and its growth and
profitability may be adversely affected.


         21. COMPETITION. Although management believes that the Tirex Technology
has distinct  advantages over other existing tire  disintegration  methods,  the
Company will face competition from other equipment manufacturers,  virtually all

                                       73
<PAGE>


of whom will be larger than the Company, and will have substantially more assets
and resources than the Company.  Management  intends to meet such competition by
developing  technological  innovations  which  will  make the TCS-1  Plant  more
economical  and efficient  than other tire  disintegration  methods  although no
assurance can be given that this will prove to be the case.  (see  "Existing and
Proposed Businesses - Competition").


         22. LACK OF LIABILITY  INSURANCE.  The proposed  TCS-1 Plant may expose
the Company to possible  product  liability  claims if, among other things,  the
operation  of the TCS-1  Plant  results in  personal  injury,  death or property
damage.  There can be no assurance the Company will have sufficient resources to
satisfy any  liability  resulting  from such claims or will be able to cause its
component suppliers or customers to indemnify or insure the Company against such
claims.  The  Company  does not  presently  intend to obtain  product  liability
insurance prior to the commencement of commercial  operation of the TCS-1 Plant.
Should the Company  determine that such insurance is necessary,  there can be no
assurance  that  affordable  insurance  coverage  will be available in terms and
scope adequate to protect the Company  against  material  adverse effects in the
event of a successful claim.


         23. NO  DIVIDENDS  AND NONE  ANTICIPATED.  The Company has not paid any
cash dividends,  nor does it contemplate or anticipate paying any dividends upon
its common stock in the foreseeable future.


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


         25. PRIOR  NOTICE NOT  REQUIRED FOR  SHAREHOLDER  ACTIONS.  None of the
Company's  securities are registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "34 Act"). As a result,  the Company is not subject
to the Proxy Rules of Section 14 of the 34 Act. The Company is thus able to take
shareholder  actions in  conformance  with Section 228 of the  Delaware  General
Corporation  Act,  which  permits it to take any action which is required to, or
may, be taken at an annual or special meeting of the shareholders, without prior
notice and without a vote of the shareholders in certain circumstances.  Instead
of such vote,  the written  consent or consents  in writing,  setting  forth the
action so taken,  can be signed by the holders of  outstanding  stock having not
less than the minimum  number of votes that would be  necessary  to authorize or
take such action at a meeting at which all shares  entitled to vote thereon were
present and voted on such action.  The only notice which shareholders other than
those who  consented  to such  action,  are entitled to, is required to be given
promptly after the action has been taken.

                                       74
<PAGE>


         26. ADVERSE   EFFECTS  OF   PROPOSALS   OF  THE  BOARD  OF   DIRECTORS:
ANTI-TAKEOVER  PROVISIONS,  LIMITATIONS ON SHAREHOLDERS VOTING RIGHTS, AND STOCK
BONUSES TO MANAGEMENT.  There has never been a Stockholders'  Annual Meeting and
none is  planned.  The  Board of  Directors  has  proposed  that  the  Company's
Certificate  of  Incorporation   should  be  amended  and  restated  to  contain
provisions  that may make it more difficult to acquire control of the Company by
means of tender offer,  over-the-counter purchases, a proxy fight, or otherwise.
If adopted by the required vote of the Company's  shareholders,  the  amendments
will include: (i) the addition of a "fair price" provision to the Certificate of
Incorporation  that  regulates  business  combinations  with any person or group
beneficially owning fifteen percent (15%) or more of the Company's common stock,
including a voting requirement of seventy-five percent (75%) of the voting power
of all outstanding  voting shares of the Company  (excluding shares held by such
fifteen  percent  (15%)  stockholder  or group of  stockholders)  for a business
combination,  unless the business  combination  is approved by a majority of the
members of the Board of  Directors  who have held office since prior to the date
of the 1999 annual meeting (the  "Continuing  Directors")  or satisfies  certain
minimum price and procedural requirements;  (ii) the addition to the Certificate
of Incorporation of a provision  granting authority to the Board of Directors to
adopt one or more shareholder rights plans, rights agreements, or other forms of
"poison pills" in the future without  further  shareholder  approval,  (iii) the
addition to the  Certificate of  Incorporation  of a provision  classifying  the
Board of Directors into three classes;  (iv) the addition to the  Certificate of
Incorporation  of a  seventy-five  percent  (75%)  voting  requirement  for  any
stockholder  action to be taken by  written  consent;  (v) an  amendment  to the
Certificate of  Incorporation  requiring the affirmative  vote of the holders of
seventy-five  percent (75%) of the outstanding  voting stock to amend, alter and
repeal the By-laws and to allow the Board of Directors to amend, alter or repeal
the By-laws without stockholder consent; (vi) the addition to the Certificate of
Incorporation  of a  provision  electing to be  governed  by the  provisions  of
Section  203 of the  Delaware  General  Corporation  Law  which,  under  certain
circumstances,  imposes restrictions on proposed business combinations between a
company and an interested  stockholder of such company;  (vii) the addition of a
seventy-five percent (75%) voting requirement in order to amend, alter or repeal
the foregoing proposed amendments to the Certificate of Incorporation; (viii) an
amendment  to the  By-laws  eliminating  the ability of  stockholders  to call a
special meeting;  and (ix) the addition to the By-laws of a provision  requiring
that  stockholders  submit  director   nominations  and  other  business  to  be
considered at meetings of  stockholders  at least 90 days in advance of any such
meeting of stockholders.  The proposed amendments are not being submitted to the
shareholders  in  response  to any  effort,  of which the  Company is aware,  to
accumulate the Company's common stock or to obtain control of the Company.

         The proposed  amendments,  individually and collectively,  may have the
effect of making more difficult and discouraging a merger, tender offer or proxy
fight,  even if such transaction or occurrence may be favorable to the interests
of some or all of the Company's  stockholders.  The proposed amendments also may
delay the  assumption  of control by a holder of a large block of the  Company's
common stock and the removal of incumbent management, even if such removal might
be  beneficial  to some or all of the  stockholders.  Furthermore,  the proposed
amendments  may have the effects of deterring or  frustrating  certain  types of
future  takeover  attempts  that may not be approved by the  incumbent  Board of
Directors,  but that the holders of a majority of the shares of Company's common
stock  may deem to be in their  best  interests  or in which  some or all of the
stockholders may receive a substantial premium over prevailing market prices for
their stock.

         By having the effect of discouraging  takeover  attempts,  the proposed
amendments also could have the incidental  effect of inhibiting  certain changes
in  management  (some or all of the  members of which  might be  replaced in the
course of a change of control) and also the temporary fluctuations in the market
price of the  Company's  common  stock that could  result from actual or rumored
takeover attempts. Moreover, tender offers or other non-open market acquisitions
of stock are  usually  made at prices  above the  prevailing  market  price of a
company's  stock.  In  addition,  acquisitions  of stock in the open  market  by
persons attempting to acquire control may cause the market price of the stock to
reach levels that are higher than might  otherwise be the case.  Approval of the
some or all of the proposed  amendments may deter such  purchases,  particularly
purchases for less than all of the Company's  shares,  and therefore may deprive
holders of the Company's  common stock of an opportunity to sell their shares at
a temporarily higher market price.

                                       75
<PAGE>


         Purchasers of the Company's shares should note that such amendments, if
adopted,  will  result in there being  special  requirements  for  supermajority
shareholder  approval of any subsequent business combination and the possibility
that  after  an  acquiror  (for  purposes  of this  discussion,  an  "Interested
Shareholder")  purchases a certain  percentage of the Company's common stock, it
will be forced to pay a higher  price to other  Company  shareholders  in such a
business  combination.  This would  likely would make it more costly for a third
party to acquire  control of the  Company.  Thus,  the proposed  amendments  may
decrease the likelihood of a tender offer for less than all of the shares of the
common stock of the Company,  which may adversely affect stockholders who desire
to participate in such a tender offer. In certain cases, the proposed fair price
amendment's   minimum  price  provisions,   while  providing  objective  pricing
criteria,  could be arbitrary  and not  indicative  of value.  In  addition,  an
Interested  Stockholder may be unable, as a practical matter, to comply with all
of the procedural  requirements.  In these  circumstances,  unless an Interested
Stockholder  were able to obtain  special  stockholder  approval  of a  proposed
Business  Combination,  it would be forced either to negotiate with the Board of
Directors on terms  acceptable to the Board or to abandon the proposed  business
combination.  The  proposed  amendments  also would give veto power to  minority
stockholders with respect to a proposed Business  Combination that is opposed by
a majority  of  Continuing  Directors  but that is desired by a majority  of the
Company's  stockholders  unless the minimum pricing and procedural  requirements
were  met.  If  members  of  the  Company's  current  management  and  principal
shareholders were to maintain their current stock ownership, they would have the
ability to block the requisite  vote. In addition,  the proposed  amendments may
tend to insulate  incumbent  directors against the possibility of removal in the
event of a takeover attempt because only the Continuing Directors would have the
authority to reduce to a simple  majority or eliminate  the special  stockholder
vote required for a particular Business Combination.

         While  some  of the  proposed  amendments  would  directly  affect  the
possibility  of the  Company's  being the subject of a tender offer or a hostile
takeover,  others will directly  limit the ability of minority  shareholders  to
participate in Company affairs.  The classified  Board of Directors  provisions,
will  divide the Board of  Directors  into three  classes of  directors  serving
staggered  two-year  terms,  with two  directors  to be elected  at each  annual
meeting  of  shareholders.  This will  extend  the time  required  to change the
composition of the Board of Directors.  The provision requiring  shareholders to
give 90 days advance notice to the Company of any nomination for election to the
Board of Directors, or other business to be brought at any shareholders' meeting
will make it more difficult for shareholders to nominate candidates to the Board
of Directors who are not supported by  management.  This  provision will make it
more  difficult  to  implement  shareholder  proposals  even  if a  majority  of
shareholders are in support thereof.  Each of these provisions may also have the
effect of  deterring  hostile  takeovers  or  delaying  changes  in  control  or
management of the Company. In addition,  the  indemnification  provisions of the
Company's  Certificate of  Incorporation  and Bylaws may represent a conflict of
interest between  management and the  shareholders  since officers and directors
may be indemnified prior to any judicial determinations as to their conduct.

         Under Delaware law, each of the proposed  amendments to the Certificate
of  Incorporation  and By-laws  described above requires the affirmative vote of
the holders of a majority of the Company's  outstanding  shares of common stock.
All of the proposals are permitted by law. If stockholders approve any or all of
the  proposed  amendments,  the  Company  will file a  Restated  Certificate  of
Incorporation that reflects the proposed  amendments with the Secretary of State
of the  State  of  Delaware.  Each of the  proposed  amendments  adopted  by the
Company's  stockholders  will become effective  regardless of whether any of the
other proposed amendments to be acted upon at the Meeting is adopted.

         In  addition  to  the  proposed   amendments  to  the   Certificate  of
Incorporation and By-laws,  the present Certificate of Incorporation  authorizes
the Board of  Directors  to issue  shares of Class A Stock  having such  rights,
preferences  and  privileges  as  designated  by the Board of Directors  without
stockholder  approval  (see "Risk  Factor No. 25  "Possible  Adverse  Effects of
Authorization and Issuance of Preferred Stock").


ITEM 7.           FINANCIAL STATEMENTS

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

                                       76
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)


                                      INDEX

                                                                    PAGE
                                                                    ----

Report of Independent Auditors                                       75
Consolidated Balance Sheet                                           76
Consolidated Statement of Operations                                 77
Consolidated Statements of Stockholders' Equity (Deficit)            78
Consolidated Statements of Cash Flows                                80
Notes to Consolidated Financial Statements                           82

                                       77
<PAGE>


                         Report of Independent Auditors


Board of Directors
The Tirex Corporation and Subsidiaries

We have  audited  the  accompanying  consolidated  balance  sheet  of The  Tirex
Corporation and Subsidiaries (a development  stage company) as of June 30, 1999,
and the related  consolidated  statements of  operations,  stockholders'  equity
(deficit) and cash flows for the years ended, June 30, 1999 and 1998 and for the
cumulative  period from March 26, 1993,  (date of  inception)  to June 30, 1999.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  The  Tirex
Corporation and Subsidiaries (a development stage company) at June 30, 1999, and
the results of their  operations,  and their cash flows for the years ended June
30, 1999 and 1998, and for the cumulative  period from March 26, 1993,  (date of
inception) to June 30, 1999, in conformity  with generally  accepted  accounting
principles.

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


                                             Pinkham & Pinkham, P.C.
                                             Certified Public Accountants



September 28, 1999
Cranford, New Jersey

                                       78
<PAGE>
<TABLE>
<CAPTION>
                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                           Consolidated Balance Sheet
                                  June 30, 1999

                                     ASSETS
<S>                                                                          <C>
Current assets
Cash and cash equivalents                                                    $    177,256
Accounts receivable                                                                51,434
Inventory                                                                          25,698
Notes receivable                                                                  104,406
Sales tax receivable                                                               81,244
R& D Investment tax credit receivable                                             952,704
Prepaid expenses and deposits                                                     413,766
                                                                             ------------
                                                                                1,806,508
                                                                             ------------

Property and equipment, at cost, net of accumulated
depreciation of $59,517                                                         2,282,295
                                                                             ------------

Other assets
Prepaid expenses and deposits                                                     183,920
Deferred financing costs                                                          125,281
                                                                             ------------
                                                                                  309,201
                                                                             ------------
                                                                             $  4,398,004
                                                                             ============

                                        LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable                                                                $    409,939
Current portion of long-term debt                                                 106,385
Current obligations under capitalized lease                                        25,147
Accounts payable and accrued expenses                                           1,202,960
Accrued salaries                                                                  622,953
Deposits payable                                                                  143,500
                                                                                2,510,884
Other liabilities
Long term debt (net of current portion)                                           436,610
Capital lease (net of current portion)                                             88,508
Convertible subordinated debentures                                               766,600
Loan from officers                                                                149,406
                                                                                1,441,124
Stockholders' equity
 Common stock,  $.001 par value, authorized
  120,000,000 shares,  issued and outstanding,
   97,359,353 shares                                                               97,360
 Class A stock;.001 par value, authorized 5,000,000
   shares issued and outstanding, 0 shares                                             --
 Additional paid-in capital                                                    15,155,355
 Deficit accumulated during the development stage                             (14,961,362)
 Unrealized gain on foreign exchange                                              154,643
                                                                             ------------
                                                                                  445,996
                                                                             ------------
                                                                             $  4,398,004
                                                                             ============
</TABLE>
                      See Notes to Consolidated Financial Statements

                                            79
<PAGE>
<TABLE>
<CAPTION>
                        THE TIREX CORPORATION AND SUBSIDIARIES
                           (A DEVELOPMENTAL STAGE COMPANY)

                        Consolidated Statements of Operations

                                                                         Cumulative
                                                                        Period from
                                                                       March 26, 1993
                                                                          (Date of
                                                                       Inception) to
                                    Year Ended June 30,     1998       June 30, 1999
                                           1999           Restated        Restated
                                    ------------------- ------------   --------------
<S>                                     <C>             <C>             <C>
Revenues                                $    390,848    $    880,000    $  1,325,573

Cost of sales                                204,988         796,490       1,015,830
                                        ------------    ------------    ------------

Gross profit                                 185,860          83,510         309,743
                                        ------------    ------------    ------------

Operations
General and administrative                 3,229,332       1,970,277       6,185,672
Depreciation and amortization                 47,222          12,361          71,250
Research and development                   1,677,068       2,581,928       7,723,168
                                        ------------    ------------    ------------

Total expense                              4,953,622       4,564,566      13,980,090
                                        ------------    ------------    ------------

Loss before other income and expenses     (4,767,762)     (4,481,056)    (13,670,347)
                                        ------------    ------------    ------------

Other income (expenses)
Interest expense                            (119,923)        (53,387)       (183,929)
Interest income                               15,422           2,540          17,962
Income from stock options                         --              --          10,855
                                        ------------    ------------    ------------
Loss on disposal of equipment                     --              --          (2,240)
                                        ------------    ------------    ------------
                                            (104,501)        (50,847)       (157,352)
                                        ------------    ------------    ------------

Net loss                                  (4,872,263)     (4,531,903)    (13,827,699)

Other comprehensive loss
         Loss on foreign exchange            (37,616)        (38,538)        (76,307)
                                        ------------    ------------    ------------

Comprehensive loss                      $ (4,909,879)   $ (4,570,441)   $(13,904,006)
                                        ============    ============    ============

Net loss per common share               $       (.07)   $       (.10)   $       (.65)
                                        ============    ============    ============

Weighted average shares of common
 stock outstanding                        66,029,439      45,704,410      21,511,812
                                        ============    ============    ============
</TABLE>
                    See Notes to Consolidated Financial Statements

                                         80
<PAGE>
<TABLE>
<CAPTION>
                                        THE TIREX CORPORATION AND SUBSIDIARIES
                                           (A DEVELOPMENTAL STAGE COMPANY)

                              Consolidated Statements of Stockholders' Equity (Deficit)

                                                                                 Deficit
                                                                              Accumulated
                                                                Additional       During     Unrealized
                                        Common Stock              Paid-in     Developmental  Foreign
                                    Shares         Amount         Capital         Stage      Exchange       Total
                                  -----------    -----------    -----------   ------------- -----------  ------------
<S>                                 <C>                <C>          <C>         <C>             <C>        <C>
Balance at June 30, 1992            3,383,020          3,383        194,980     (1,057,356)     --         (858,993)

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


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

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


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

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


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

                                    See Notes to Consolidated Financial Statements
</TABLE>
                                                          81
<PAGE>
<TABLE>
<CAPTION>
                                         THE TIREX CORPORATION AND SUBSIDIARIES
                                            (A DEVELOPMENTAL STAGE COMPANY)

                               Consolidated Statements of Stockholders' Equity (Deficit)


                                                                             Deficit
                                                                           Accumulated
                                                             Additional       During        Unrealized
                                     Common Stock              Paid-in     Developmental     Foreign
                                 Shares         Amount         Capital        Stage          Exchange          Total
                              ------------   ------------   ------------   -------------   ------------    ------------
<S>                             <C>                <C>         <C>           <C>                     <C>         <C>
Balance at June 30, 1995        16,794,390         16,792      1,957,315     (1,977,719)             --          (3,612)

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


Balance at June 30, 1996        21,872,742         22,984      2,913,096     (3,104,763)             --        (168,683)
Stock issued for options                --             --        912,838             --              --         912,838
Stock issued for services        5,067,912          3,955        690,234             --              --         694,189
Shares issued in exchange
 for debt                          251,382            252         43,965             --              --          44,217
Issuance of common stock        10,257,936         10,259        335,132             --              --         345,391
Grants issued                           --             --        408,597             --              --         408,597
Net loss for year                       --             --             --     (2,376,279)             --      (2,376,279)
                              ------------   ------------   ------------   ------------    ------------    ------------


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

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


Balance at June 30, 1998        63,641,438         63,642     10,258,116    (10,051,483)        183,785         454,060
                              ------------   ------------   ------------   ------------    ------------    ------------
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 for 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
                              ============   ============   ============   ============    ============    ============

                                     See Notes to Consolidated Financial Statements
</TABLE>
                                                           82
<PAGE>
<TABLE>
<CAPTION>
                                 THE TIREX CORPORATION AND SUBSIDIARIES
                                    (A DEVELOPMENTAL STAGE COMPANY)

                                 Consolidated Statements of Cash Flows

                                                                                          Cumulative
                                                                                          Period from
                                                                                         March 26, 1993
                                                                                           (Date of
                                                           Year ended June 30,           Inception) to
                                                         1999              1998          June 30, 1999
                                                     ------------      ------------      --------------
<S>                                                  <C>               <C>                <C>
Cash flows from operating activities:
Net loss                                             $ (4,909,879)     $ (4,570,441)      $(13,904,006)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
Depreciation and amortization                              47,222            11,952             70,842
Loss on disposal and abandonment of assets                     --                --             15,559
Stock issued in exchange for interest                      24,519                --             28,736
Stock issued in exchange for services and expenses      2,759,744           926,576          6,693,951
Stock options issued in exchange for services             385,600         2,185,413          2,571,013
Unrealized gain on foreign exchange                       (29,142)          183,785            154,643
Change in assets and liabilities:
(Increase) decrease  in :
  Accounts receivable                                     (51,434)               --            (51,434)
  Employee advances                                            --           185,942                 --
  Inventory                                               (25,698)               --            (25,698)
 Sales tax receivable                                      52,624           (83,584)           (81,244)
 R&D investment  tax credit receivable                    (96,886)         (585,900)          (952,704)
 Other assets                                             462,337        (1,063,943)          (607,806)
(Decrease) increase in :
 Accounts payable and accrued expenses                    272,762           381,896          1,568,036
 Accrued salaries                                         622,953                --            622,953
 Due to stockholders                                           --                --              5,000
                                                     ------------      ------------       ------------

Net cash used in operating activities                    (485,278)       (2,428,304)        (3,892,159)
                                                     ------------      ------------       ------------

Cash flow from investing activities:
Increase in notes receivable                                   --          (216,240)          (225,969)
Reduction in notes receivable                             121,563                --            121,563
Equipment                                                (131,166)          (72,871)          (244,798)
Equipment assembly costs                               (1,098,790)         (117,759)        (1,999,801)
Organization cost                                              --                --              6,700
Reduction of security deposit                                  --                --             (1,542)
Deferred start up costs                                        --            74,683                 --
                                                     ------------      ------------       ------------

Net cash used in investing activities                  (1,108,393)         (332,187)        (2,343,847)
                                                     ------------      ------------       ------------

Cash flows from financing activities:
         Loans from officers                              149,406                --            149,406
Loan granted to director                                       --            10,881                 --
Deferred financing costs                                   32,964          (158,255)          (125,291)
Proceeds from deposits                                         --          (336,500)           143,500
Proceeds from notes payable                                 2,013           285,375            409,939
Payments on lease obligations                              (4,167)               --             (4,167)
Proceeds from issuance of convertible
 subordinated debentures                                       --         1,035,000          1,035,000
Proceeds from loan payable                                 56,607           299,467            591,619
Proceeds from issuance of stock options                        --                --             20,000
                                                     ------------      ------------       ------------
Sub-total                                            $    236,823      $  1,135,968       $  2,220,006
                                                     ------------      ------------       ------------
</TABLE>
                             See Notes to Consolidated Financial Statements

                                                  83
<PAGE>
<TABLE>
<CAPTION>
                        THE TIREX CORPORATION AND SUBSIDIARIES
                             A DEVELOPMENTAL STAGE COMPANY

                         Consolidated Statements of Cash Flows

                                                                         Cumulative
                                                                         Period from
                                                                        March 26, 1993
                                                                          (Date of
                                                Year ended June 30,     Inception) to
                                               1999           1998      June 30, 1999
                                            -----------    -----------  --------------
<S>                                         <C>            <C>           <C>
Sub-total from prior page                   $   236,823    $ 1,135,968   $ 2,220,006

Proceeds from grants                          1,044,133        669,906     2,122,636
Proceeds from issuance of common stock            2,913         21,796        57,129
Proceeds from additional paid-in capital         88,087      1,176,755     2,013,234

Net cash provided by financing activities     1,371,956      3,004,425     6,413,005

Net (decrease) increase in cash and cash
 equivalents                                   (221,715)       243,934       176,999

Cash and cash equivalents - beginning
 of year                                        398,971        155,037           257

Cash and cash equivalents - end of year     $   177,256    $   398,971   $   177,256
                                            ===========    ===========   ===========
</TABLE>

Supplemental Disclosure of Non-Cash Activities:

         In 1999 and 1998, the Company  recorded an increase in common stock and
in additional paid-in capital of $343,952 and $126,347,  respectively, which was
in  recognition  of the  payment  of debt.  In 1999 and 1998 stock was issued in
exchange for services  performed  and expenses in the amount of  $2,759,744  and
$926,576  respectively.  In 1999 and 1998 stock  options were issued in exchange
for services totaling $385,600 and $2,185,413 respectively.

Equipment was purchased via leases totaling  $117,821 during the year ended June
30, 1999.

Convertible  debentures  were exchanged into stock totaling  $268,400 during the
year ended June 30, 1999.  Accrued  interest of $24,519 was also  converted into
stock.

Supplemental Disclosure of Cash Flow Information:

Interest paid                  $   20,530     $     --      $ 50,962
                               ==========     ========      ========

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


                 See Notes to Consolidated Financial Statements

                                       84
<PAGE>


           THE TIREX CORPORATION AND SUBSIDIARIES INC. AND SUBSIDIARY
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements


Note 1 -SUMMARY OF ACCOUNTING POLICIES
CHANGE OF NAME
In June, 1998 the Company changed its name from Tirex America, Inc. to The Tirex
Corporation and Subsidiaries.

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

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

In furtherance of the foregoing, on November 5, 1992, J. Richard Goldstein,  MD,
Peter R. Stratton and Robert Kopsack  resigned from their  positions as officers
and  directors  of  the  Company.   From  June  1989  until  the  date  of  such
resignations,  Dr.  Goldstein  was the Company's  President and Chief  Executive
Officer, Mr. Stratton was Vice-President, Chief Operating Officer, Secretary and
Treasurer,  and Mr. Kopsack was the Company's Vice President. In resigning their
positions, Dr. Goldstein and Messrs. Stratton and Kopsack acknowledged that they
acceded  to  their  respective  positions  and  had  received   compensation  in
consideration of their  representations  that they would, and their best efforts
to, implement a business plan for the Company which would encompass, among other
things,  the  establishment and operating of skilled nursing care facilities for
patients with Acquired Immune Deficiency Syndrome.  Compensation received by Dr.
Goldstein and Messrs.  Stratton and Kopsack  consisted of cash  payments,  stock
issuances,  and the grants of stock options and/or stock purchase  warrants.  As
part of their resignations,  Dr. Goldstein and Messrs. Stratton and Kopsack each
executed  releases whereby the Company was released and forever  discharged from
all debts, obligations,  covenants, agreements,  contracts, claims or demands in
law or in  equity,  including  but not  limited  to any stock  options  or stock
purchase  warrants granted or promised to them, which against the Company,  each
ever had, or thereafter may have for or by reason of any matter,  cause or thing
up to and through November 5, 1992. Each of Dr.  Goldstein and Messrs.  Stratton
and Kopsack also acknowledged the termination and rescission of their respective
employment  agreements  with the Company to such  persons as the Company  should
direct for the purpose of  satisfying  certain of the Company's  obligations  to
third parties. In consideration of the resignations and releases executed by Dr.
Goldstein and Messrs. Stratton and Kopsack, Edward Mihal and each of the sixteen
shareholders  of the  Company  acting in concert  with Mr.  Mihal  executed  and
delivered  reciprocal  personal  releases to and on behalf of Dr.  Goldstein and
Messrs. Stratton and Kopsack. In connection with the foregoing resignations, Dr.
Goldstein  and Messrs.  Stratton and Kopsack  appointed,  as an interim board of
directors,  Patrick  McLaren,  George  Fattell,  and Edward Mihal (the  "Interim
Management").  It was  the  goal of the  Interim  Management  to  find  suitable
acquisition  and/or  development  by the Company.  On December 29, 1992,  Edward
Mihal  resigned  his  position  as an officer  and a director of the Company and
Louis V. Muro was  appointed  as an officer and  director of the Company to fill
the vacancy created thereby.

                                       85
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 1 -SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
REORGANIZATION
On March 26,  1993,  the Company  entered  into an  acquisition  agreement  (the
"Acquisition Agreement") with Louis V. Muro, Patrick McLaren and George Fattell,
officers and  directors of the Company  (collectively  the  "Sellers"),  for the
purchase  of  certain  technology  owned  and  developed  by  the  Sellers  (the
"Technology")  and  extensive  and detailed  plans (the  "Business  Plan") for a
business which will engage in the exploitation of the Technology. The Technology
will be used to design, develop and construct a prototype machine and thereafter
a production  quality  machine for the cryogenic  disintegration  of used tires.
Pursuant to the Acquisition  Agreement,  Sellers agreed to assign,  transfer and
sell to the Company all of their right, title and interest in the Technology and
Business Plan in exchange for fifteen million nine hundred thousand (15,900,000)
shares of the Company's  common stock,  $.001 par value per share (the "Sellers'
Stock") of which eleven million nine hundred thousand  (11,900,000)  shares were
put into escrow.  The Business Plan and Technology were developed by the Sellers
prior to their  affiliation  or association  with the Company.  The Sellers were
engaged as the Company's  officers and directors for the purpose of implementing
the  Business  Plan with the  Technology  or such  other  technology  which they
believed could reasonably satisfy the requirements of the Business Plan.

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

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

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

DEVELOPMENTAL STAGE
At June 30, 1999 the Company is still in the development  stage.  The operations
consist mainly of raising capital,  obtaining financing,  developing  equipment,
obtaining   customers  and  supplies,   installing  and  testing  equipment  and
administrative activities.

BASIS OF CONSOLIDATION
The consolidated  financial statements include the consolidated  accounts of The
Tirex  Corporation and its subsidiaries and Tirex Canada R&D, Inc.. Tirex Canada
R&D, Inc. is held 49% by the Company and 51% by the shareholders of the Company.
The  shares  owned by the  shareholders  are  held in  escrow  by the  Company's
attorney and are restricted from transfer . All  intercompany  transactions  and
accounts have been eliminated in consolidation.

                                       86
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 1 -SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the  statement of cash flows all  certificates  of deposits with
maturities of 90 days or less, were deemed to be cash equivalents.

ACCOUNTS RECEIVABLE
Management believes that all accounts receivable as of June 30, 1999, were fully
collectible; therefore, no allowance for doubtful accounts were recorded.

INVENTORY
The Company values inventory at the lower cost (first-in,  first-out  method) or
market.

PROPERTY AND EQUIPMENT
Property  and  equipment  are  recorded at cost less  accumulated  depreciation.
Depreciation  is  computed  provided  using the  straight-line  method  over the
estimated useful lives of five years.

Repairs and  maintenance  costs are  expensed as incurred  while  additions  and
betterments are capitalized.  The cost and related  accumulated  depreciation of
assets sold or retired are  eliminated  from the accounts and any gain or losses
are reflected in earnings.

ESTIMATES
Preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 123
In 1997, the Company  adopted  Statement of Financial  Accounting  Standards No.
123,   "Accounting  for  Stock-Based   Compensation"   ("SFAS  123").  SFAS  123
encourages,  but does not require companies to record at fair value compensation
cost for stock-based  compensation  plans. The Company has chosen to account for
stock-based   compensation  using  the  intrinsic  value  method  prescribed  in
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for stock
options is  measured as the excess,  if any, of the quoted  market  price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock. The difference  between the fair value method of SFAS-123 and
APB 25 is immaterial.

ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 128
In February  1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting Standards No. 128, "Earnings per Share" (SFAS
128).  SFAS 128 changes the standards for computing and presenting  earnings per
share (EPS) and supersedes Accounting Principles Board Opinion No. 15, "Earnings
per  Share."  SFAS  128  replaces  the   presentation  of  primary  EPS  with  a
presentation  of basic EPS.  It also  requires  dual  presentation  of basic and
diluted EPS on the face of the income  statement  for all entities  with complex
capital   structures  and  requires  a  reconciliation   of  the  numerator  and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.  SFAS 128 is effective for financial  statements issued
for periods  ending after December 15, 1997,  including  interim  periods.  This
Statement requires restatement of all prior-period EPS data presented.

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

                                       87
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 1 -SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Adoption of Statement of Accounting Standard No. 128
Basic earnings per common share is computed using the weighted average number of
shares of common stock  outstanding for the period.  Diluted earnings per common
share is computed  using the weighted  average  number of shares of common stock
and dilutive  common  equivalent  shares  related to stock  options and warrants
outstanding during the period.

The  adoption of SFAS 128 had no effect on  previously  reported  loss per share
amounts for the year ended June 30, 1997.  For the years ended June 30, 1999 and
1998,  primary  loss per  share  was the same as basic  loss per share and fully
diluted  loss per share was the same as diluted  loss per share.  A net loss was
reported in 1998 and 1997, and  accordingly,  in those years the denominator was
equal to the  weighted  average  outstanding  shares with no  consideration  for
outstanding  options and  warrants to purchase  shares of the  Company's  common
stock,  because to do so would have been  anti-dilutive.  Stock  options for the
purchase  of  13,212,673  and  9,212,673  shares  at June  30,  1999  and  1998,
respectively, and warrants for the purchase of 1,000,000 and 2,000,000 shares at
June 30,  1999 and  1998  respectively,  were  not  included  in loss per  share
calculations, 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  value of the  Company's  debt  instruments  are based on the amount of
future cash flows associated with each instrument discounted using the Company's
borrowing rate. At June 30, 1999 and 1998,  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 $14 million as of
June 30, 1999,  expiring in the years 2004  through  2011.  However,  based upon
present Internal Revenue regulations  governing the utilization of net operating
loss carryovers where the corporation has issued  substantial  additional stock,
most of this loss carryover may not be available to the Company.

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

The Company has research and development  investment tax credits receivable from
Canada and Quebec amounting to $952,704 at June 30, 1999.

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

REVENUE RECOGNITION
Revenue is recognized when the product is shipped to the company.

                                       88
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 2 -GOING CONCERN
As shown in the accompanying  financial  statements,  the Company incurred a net
loss of $4,910,000 during the year ended June 30, 1999.

In March 1993, the Company,  which was still in the development stage, developed
a new  Business  Plan.  As at June 30,  1999 the  Company  was in the process of
constructing a production  quality machine for the cryogenic  disintegration  of
used tires. At June 30, 1999, the Company was still in the development stage.

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

Note 3 -FINANCING COSTS
During the year ended June 30, 1998 the Company incurred  $158,255 in connection
with debt financing.  These costs have been  capitalized in other assets and are
being amortized over the terms of the financing. Amortization of financing costs
for the year ended June 30, 1999 was $32,964.

Note 4-PROPERTY AND EQUIPMENT
       FINANCING COSTS

As of June 30, 1999 plant and equipment consisted of the following:

Furniture, fixtures and equipment                                    $   170,808
Leasehold improvements                                                   171,004
Construction in progress - equipment                                   2,000,000
                                                                     -----------
   2,341,812
Less accumulated depreciation and amortization                            59,517
                                                                     -----------
                                                                     $ 2,282,295
                                                                     ===========

Depreciation  and  amortization  expense  charged to operations  was $42,770 and
$12,361 for the years ended June 30, 1999 and 1998, respectively.

Note 5-  NOTES PAYABLE
The Company has available a $510,000 line of credit which bears  interest at the
Canadian  prime rate plus 1.25% to finance  75%of its research  and  development
investment tax credits incurred for the fiscal year ended June 30, 1999. At June
30, 1999,  $408,302  was  outstanding  against this line of credit.  The note is
collateralized by the personal guarantees of certain officers, certain equipment
of Tirex Canada and guaranteed by The Tirex  Corporation and  Subsidiaries.  The
loan is guaranteed at a rate of 80% by the Garantie-Quebec (Guarantee-Quebec), a
subsidiary  of a  Quebec  Government-owned  corporation,  Investissements-Quebec
(Investments-Quebec)  and is  repayable  from  the  research  and  developmental
investment tax credits received. The Canadian prime rate of interest at June 30,
1999 was 6 1/4%.

Under the terms of the note  payable to the bank,  the  Company is  required  to
maintain a current  ratio of 1:1 by June 30, 1999 and 1.2:1 by June 30,  2000, a
tangible  net  worth of  $750,000,  and the  furnishing  of  periodic  financial
statements.  During the year ended June 30, 1999,  the Company  failed to comply
with certain loan covenants.

The Company has two notes payable to investors at June 30, 1999 totaling  $1,637
to pay for accrued interest on the debt which was converted to stock.

                                       89
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                                                                                  <C>
Note 6-  LONG-TERM DEBT
         Federal Office of Regional Development (Ford-Q)                             1999
         Loan payable under the Industrial Recovery Program                          ----
         amounting  to 20% of certain  eligible  costs  incurred  (maximum  loan
         $340,252)  repayable in annual  installments  over a forty-eight  month
         period following completion of the project,  unsecured and non-interest
         bearing. (If the Company defaults the loans become
         interest bearing)                                                         $340,252

         Loans  payable  under the Program for the  Development  of Quebec SME's
         based on 50% of approved  eligible costs for the  preparation of market
         development  studies  in  certain  regions.  Loans  are  unsecured  and
         non-interest  bearing.  (If  the  Company  defaults  the  loans  become
         interest bearing)

         - Loan payable over five years  commencing
            June 2000 due June 2004                                                  64,648

         - Loan payable over five years, commencing
            June 2001, due 2005                                                      60,020

         - Loan payable in amounts equal to 1% of annual
            sales in Spain through June 30, 2007                                     13,610

         - Loan payable in amounts equal to 11/2% of annual
            sales in Spain and Portugal through June 30, 2004                        64,465
                                                                                   --------
                                                                                    542,995
         Less:  current portion                                                     106,385

                                                                                   $436,610
                                                                                   ========
Minimum principal repayments of each of the next five years as follows:

                  1999                                                             $106,385
                  2000                                                              114,697
                  2001                                                              157,033
                  2002                                                               29,243
                  2003                                                               37,555
                  Thereafter                                                         98,082
                                                                                   --------
                                                                                   $542,995
                                                                                   ========
                                       90
</TABLE>

<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 7-  CAPITALIZED LEASE OBLIGATIONS
         The Company leases certain  equipment  under  agreements  classified as
         capital  leases.  The cost and the accumulated  amortizations  for such
         equipment as of June 30, 1999 was $122,609 and $12,289, respectively.

         The following is a schedule by years of future  minimum lease  payments
         under capital leases of equipment  together with the obligations  under
         capital leases (present value of future minimum rentals) as of June 30,
         1999.

                       Years Ended
                        June 30,
                            2000                                     $   34,605
                            2001                                         28,075
                            2002                                         28,075
                            2003                                         28,075
                            2004                                         20,955
                   Total minimum lease payments                         139,785
                   Less amount representing interest                     26,130
                   Total obligations under capital lease                113,655
                   Less current installments of obligations
                    under capital leases                                 25,147
                   Long-term obligation under capital leases,
                    with interest rate of 9.3%                       $   88,508

Note 8-  CONVERTIBLE SUBORDINATED DEBENTURES

         Convertible subordinated debentures consist of the following:
<TABLE>
<CAPTION>
                                           Type A                             Type B
                                           ------                             ------
<S>                                       <C>                                <C>
         Balance a June 30, 1999          $386,600                           $380,000

         Interest rate                       10%                                10%

         Maturity                 Earlier of (i)-the completion    Earlier of (i)-two years from the
                                  of a public offering yielding    issue date or (ii)-the completion
                                  gross proceeds of not less       of a public offering of its
                                  than 8,000,000, (ii)-the         securities by the Maker.  These
                                  closing on financing in          debentures are subordinated to
                                  excess of 4,500,000,             all current and future bank debt.
                                  These debentures are
                                  subordinated to all current
                                  and future bank debt.

         Redemption rights        If not converted the holder      If not converted the holder may
                                  may require the Company          require the Company to redeem
                                  to redeem at any time after      at any time after maturity for the
                                  maturity at a premium of 125%    principal amount plus interest
                                  of the principal amount plus
                                  interest
</TABLE>
                                       91
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 8 - CONVERTIBLE SUBORDINATED DEBENTURES (CONTINUED)
<TABLE>
<CAPTION>
<S>                         <C>                                <C>
         Conversion ratio   61.5% of the average of the        $.20 per share.  During the
                            closing bid price of the           year ended June 30, 1999,
                            common stock as reported           $155,000 of convertible
                            by NASDAQ during the five          debentures were converted
                            day period preceding the           to common stock.
                            Company's receipt of a notice
                            of conversion by a debenture
                            holder.  During the year ended
                            June 30, 1999 debentures totaling
                            $113,400 were converted to
                            common stock.

         Warrants           As part of the debenture
                            package, the Company issued
                            2,000,000 warrants to purchase
                            a like number of shares of
                            common stock at $.001 per share
                            During the year ended June 30, 1999,
                            $1,000,000 warrants were exercised.
</TABLE>
Note 9 - RELATED PARTY TRANSACTIONS
         On July  22,  1994,  3,000,000  shares  of The  Tirex  Corporation  and
         Subsidiaries,  Inc.  were  released  from escrow and issued to Louis V.
         Muro and Patrick McLaren (1,500,000 shares each) in accordance with the
         terms and provisions of the Acquisition Agreement dated March 26, 1993.

         The  Company  entered  into  various  employment  agreements  with  the
         executive  officers and general  Counsel whereby the Company will pay a
         total  of  $565,000  a  year  plus  benefits.  All  of  the  employment
         agreements  call for terms ranging from 3 - 8 years. In addition to the
         employment services, the officers agree not to compete with the Company
         for the two year period following the termination of employment.  If an
         officer is terminated  other than for cause or for "good  reason",  the
         terminated  officer  will be paid twice the amount of their base salary
         for twelve  months.  During the year ended June 30, 1999, two employees
         were terminated and received  severance pay totaling $500,000 which was
         paid in stock.  The employees  also  received  options to buy 4,000,000
         shares of stock for par value or $4,000.  The  options  were  exercised
         July 31,  1999.  The  value of the  options  were  recorded  as paid in
         capital at June 30, 1999 for 50% of the  average  price of the stock or
         $381,600.

         Included in accrued  salaries at June 30, 1999 is $343,626 of salary to
         officers and  employees  which the company  subsequently  issued common
         stock for. Various loans due to the officers  totaling $149,406 will be
         paid in stock during the year ended June 30, 2000.

         At June 30,  1999 and  1998,  the  Company  had notes  receivable  from
         various  officers in the amount of $74,406 and $195,969,  respectively.
         One note in the amount of $70,405  bears  interest at an annual rate of
         8% above  prime  through  September  1998 and 2% above prime since that
         date and is collateralized by 400,000 shares of Tirex Corporation which
         is held by the officer.  The remaining notes are  non-interest  bearing
         and are payable on demand.

         At June 30, 1999 the Company had a note  receivable  for $30,000 from a
         Company in which a director  as a  financial  interest.  The note bears
         interest at prime plus 2% and is due on demand.

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

                                       92
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 9 - RELATED PARTY TRANSACTIONS (CONTINUED)
         The revenue recognized during the year ended June 30, 1998 was received
         by a  Company  in  which a  director  in the  Company  has a  financial
         interest.

Note 10- EXCHANGE OF DEBT FOR COMMON STOCK
         During the year ended June 30, 1999, the Company recorded  increases in
         common stock and paid-in capital of $343,952,  which was in recognition
         for the exchange of common stock for debt owed. Debt totaling  $164,000
         was payable to certain related parties to the Company.

Note 11- COMMON STOCK
         During  the years  ended June 30,  1999 and 1998,  the  Company  issued
         common stock to individuals in exchange for services performed totaling
         $2,759,744  and $926,576,  respectively.  Included in these amounts are
         payments to  officers  of the Company and in house  counsel in exchange
         for salary and  consulting  in the amount of  $2,210,502  and $361,945,
         respectively.  Also  included in the amounts  paid in stock  during the
         year ended June 30, 1999 was an exclusive rights contract payable to an
         officer  totaling  $406,250.   The  dollar  amounts  assigned  to  such
         transactions  have  been  recorded  at the fair  value of the  services
         received,  because  the fair value of the  services  received  was more
         evident than the fair value of the stock surrendered.

Note 12- STOCK OPTION
         On May 19,  1995,  the  Company  sold to a director  of the  Company an
         option to purchase  20,000 shares of Cumulative  Convertible  Preferred
         Stock at an exercise price of $10 per share, exercisable during the two
         year  period  beginning  May 19,  1995,  and ending May 18,  1997.  The
         director paid $20,000 for the option.  The terms of the Preferred Stock
         purchasable  under the option call for  cumulative  cash dividends at a
         rate of $1.20 per share and conversion into 2,000,000 or more shares of
         common stock.  The conversion to common stock ratio varies depending on
         when the conversion is made. At May 29, 1997,  the exercise  period was
         extended  until May 18, 1999.  During the year ended June 30, 1999, the
         director  exercised the option to buy 1,234,567  shares of common stock
         for $40,000. The balance of these options have expired.
<TABLE>
<CAPTION>
         Compensatory Common Stock Options
         ---------------------------------                               Compensation
                                                                             Cost
                                                                       For the Year Ended
                                                   Number of Shares      June 30, 1999
                                                   ----------------    ------------------
<S>                                                    <C>                     <C>
         Balance at July 1, 1998                        9,212,673                   --

         Stock options granted during the year
         ended June 30, 1999                            4,000,000              381,600

         Stock options exercised during the year
         ended June 30, 1999                                   --                   --
                                                    -------------         ------------

         Balance at June 30, 1999                      13,212,673         $    381,600
                                                    =============         ============
</TABLE>

The options  expire at various  dates  through  April 2000.  The exercise  price
ranges from .001 to .50 with the weighted average exercise price equal to .14.

Note 13- ACQUISITION BY MERGER OF RPM INCORPORATED
         During November 1997, the Company entered into a merger  agreement with
         RPM  Incorporated  ("RPM").  The Company acquired all of the assets and
         liabilities of RPM by acquiring all of the outstanding  common stock of
         RPM in  exchange  for  common  stock in the  Company on a unit for unit
         basis. RPM ceased to exist following the exchange.

                                       93
<PAGE>


                     THE TIREX CORPORATION AND SUBSIDIARIES
                         (A DEVELOPMENTAL STAGE COMPANY)

                   Notes to Consolidated Financial Statements

Note 13- ACQUISITION BY MERGER OF RPM INCORPORATED (CONTINUED)
         The assets and liabilities  acquired by the Company from RPM consist of
         the proceeds from the sale of  debentures as well as the  debentures of
         $535,000. The financing fees on the issuance of the debentures totaling
         $61,755 is included in the statement of  operations  for the year ended
         June 30, 1998. A total of 535,000 shares were issued as a result of the
         merger  valued at  $16,050.  A total of $16,050 was  received  for this
         stock.

         The  Company  entered  into an  additional  agreement  with the  former
         shareholders of RPM for a consulting  agreement for a period of 5 years
         expiring in June,  2002.  In exchange  for this  consulting  agreement,
         3,000,000 shares of common stock were issued valued at $240,000.  Other
         than the consulting  agreement and the issuance of the debentures,  RPM
         was inactive.

         For accounting  purposes the Company  recorded the merger as a purchase
and not as a pooling of interests.

Note 14- GOVERNMENT ASSISTANCE
         The Company  receives  financial  assistance  from  Revenue  Canada and
         Revenue  Quebec in the form of scientific  research tax credit.  During
         the  year  ended  June  30,  1999 the  company  received  approximately
         $1,058,000 which has been recorded as paid in capital.

Note 15- COMMITMENTS
         The Company leases office and warehouse space at an annual minimum rent
         of  $82,000  for the  first  year,  $169,000  for the  second  year and
         $211,000  per year for the  third  through  the fifth  year.  The lease
         expires 2003.  The Company is also  responsible  for its  proportionate
         share of any  increase in real estate  taxes and  utilities.  Under the
         terms of the lease,  the Company is required to obtain  adequate public
         liability  and property  damage  insurance.  The minimum  future rental
         payments under this lease are as follows:

                  June 30,                           Amount
                  --------                         ----------
                    2000                           $  176,900
                    2001                              204,100
                    2002                              204,100
                    2003                              170,100
                                                   ----------
                                                   $  755,200
                                                   ==========

         Rental  expense for the year ended June 30,  1999 and 1998  amounted to
         $111,930 and  $55,532,  respectively.  One of these  leases  contains a
         second  ranking  moveable  hypothec  in the amount of  $300,000  on the
         universality of the corporations moveable property.


Note 16- RESTATED FINANCIAL STATEMENTS
         The  financial  statements  for  June 30,  1998 and for the  cumulative
         period from March 26, 1983 to June 30, 1999 have been restated to break
         out other comprehensive income.

                                       94
<PAGE>


Note 17- CONTINGENCY
         The Company is involved  with a lawsuit  with a prior  consultant.  The
         complaint alleged that the Company breached its consulting agreement by
         failing to pay  compensation  due there under and sought damages in the
         amount of $221,202  including  interest  and legal  costs.  The Company
         filed  a  counter  claim  for  fraud,  breach  of  contact  and  unjust
         enrichment  on the part of the  consultant.  The Company  sought relief
         consisting  of  compensatory  damages  in the  amount  of  $28,800  and
         cancellation  of the  stock  certificate  issued to the  plaintiff  for
         263,529 shares; a declaratory judgment that the consulting agreement is
         of no force and effect; punitive damages; and interest and legal costs.
         The Company's position is that this case is completely without merit.

Note 18- ACCUMULATED OTHER COMPREHENSIVE INCOME
         The deficit  accumulated  during the  development  stage included other
         accumulated comprehensive income totaling $76,307.

                                       95
<PAGE>


ITEM 8.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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


                                    PART III

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

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

     The following  sets forth,  as of June 30, 1999,  the names and ages of all
directors,  executive officers,  and other significant employees of the Company;
the date when each director was appointed;  and all positions and offices in the
Company  held by each.  Each  director  will hold  office  until the next annual
meeting of  shareholders  and until his or her  successor  has been  elected and
qualified:
                                                                    DATE
                                    OFFICES                       APPOINTED
           NAME         AGE           HELD                         DIRECTOR
   -------------------- ---  ------------------------         -----------------
   Terence C. Byrne      42  Chairman of the                  Jan. 18, 1995
                             Board of Directors and
                             Chief Executive Officer

   Louis V. Muro         67  Vice President                   Jan. 1, 1996
                             of Engineering
                             and Director

   John L. Threshie, Jr. 45  Vice President, and
                             Assistant Secretary              Not Applicable

   Louis Sanzaro         49  Past President,and               January 17, 1997
                             Chief Operating Officer,
                             (until November 23, 1999)
                             and Director

   Michael D.A. Ash      50  Secretary, Treasurer, and Chief
                             Financial and Accounting
                             Officer                          Not Applicable

   John G. Hartley       51  Director                         February 21, 1995

   Henry Meier           42  Director                         February 11, 1999


         The  Board of  Directors  has no  standing  committees  other  than the
executive  committee  which  consists  of  three  members.  The  members  of the
executive  committee,  as of June 30, 1999 were Terence C. Byrne, Louis V. Muro,
and Louis Sanzaro. Mr. Sanzaro resigned from the executive committee,  effective
November  23,  1999,  to avoid a  possible  future  conflict  of  interest.  The
executive  committee  can  exercise all powers of the full board with respect to
the management of the Company's business.

         On February  11, 1999,  the Company  instituted  an overall  management
restructuring and  reorganization.  The reasons for such  reorganization did not
involve any  disagreements  among management  members or between the Company and
any such  individuals.  Rather,  it was the agreed  consensus  of all members of

                                       96
<PAGE>


management  that the Company is  presently in the process of evolving out of the
developmental  stage and into an early  operational  stage and that,  reflecting
such  development,  its  management and personnel  requirements  are growing and
changing.  The  current  reorganization  of the  Company's  management  is being
effected for the purpose of better  positioning  the Company to change its focus
from pure research and  development  activities to a combination  of commercial,
revenue producing operations and continuing research and development activities.
The Company believes that the reorganization of its management will maximize and
enhance its ability to meet the changing needs and  requirements of its business
as it grows and develops.

         The management reorganization included the following: Alan Crossley and
John L.  Threshie,  Jr.  resigned  from the  Board of  Directors.  Mr.  Threshie
resigned from the position of secretary, has been appointed assistant secretary,
and continues to serve as vice president of the Company.  Mr. Crossley continues
to serve as Director of European Market Development.  The Company intends to ask
Mr.  Crossley to join an advisory  board  proposed to be  established.  Further,
Terence C. Byrne  resigned his  positions  as  president,  treasurer,  and chief
financial and  accounting  officer,  and was appointed  Chairman of the Board of
Directors.  Mr. Byrne continues to hold the office of Chief Executive Officer of
the Company.  Louis  Sanzaro  resigned his  position as Vice  President  and was
appointed  President  of the  Company.  Mr.  Sanzaro was also  appointed  to the
Executive  Committee of the Board of  Directors  to fill the vacancy  created by
John G. Hartley's resignation therefrom. In January 1999, Michael Ash joined the
Company  and  as  part  of  the  reorganization,  he  was  appointed  Secretary,
Treasurer,  and Chief Financial and Accounting  officer.  Finally,  Vijay Kachru
resigned her position of Vice  President of marketing  development.  Ms.  Kachru
will continue to be employed by the Company in other capacities.


FAMILY RELATIONSHIPS

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


BUSINESS EXPERIENCE

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

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

                                       97
<PAGE>


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

         JOHN L.  THRESHIE,  JR. Mr.  Threshie has served as a Vice President of
the Company since June 1995. He was appointed Assistant Secretary of the Company
on February 11, 1999.  From December 1996 until February 11, 1999, Mr.  Threshie
held the position of secretary, and from June 1995 until February 11, 1999, as a
director, of the Company. He also served as a Director for The Tirex Corporation
Canada  Inc.  and  Tirex  Canada  R&D  Inc.   from  June  1998  and  June  1995,
respectively,  until  February  11,  1999.  He has more than  fourteen  years of
experience  in the areas of  management,  marketing  and sales  primarily in the
field of  advertising.  Mr.  Threshie  holds a  Bachelor  of  Science  Degree in
Business from the University of North Carolina.  He was employed as an insurance
and  financial  broker by Primerica  Financial  Services from 1991 through 1994.
From 1988 to 1990,  Mr.  Threshie  was an  advertising  account  supervisor  for
Ammirati & Puris Inc., an  advertising  firm in New York.  From 1983 to 1988 Mr.
Threshie was employed as a senior account  executive at the advertising  firm of
Saatchi  and  Saatchi,  Inc.  From 1979 to 1983 Mr.  Threshie  was  employed  by
Milliken & Co. as a sales representative.

         LOUIS  SANZARO.  Mr.  Sanzaro has been a director of the Company  since
January  1997 and a director of The Tirex  Corporation  Canada  Inc.  since June
1998.  He served as a consultant  to the Company from January 1, 1997 until June
1998,  when he was appointed Vice  President of Operations  and Chief  Operating
Officer (see,  below,  "Certain  Relationships  and Related  Transactions").  On
February 11, 1999, Mr. Sanzaro  resigned as vice president of operations and was
appointed to the position of  president of the Company.  Effective  November 23,
1999, and to avoid a possible future conflict of interest,  Mr. Sanzaro resigned
as President  of the  Company.  Mr.  Sanzaro  holds a degree in  marketing  from
Marquette University. In 1997, he was named "Recycler of the Year" for the State
of New Jersey and was also  awarded the  distinction  of being named  "Recycling
Processor of the Decade" by Ocean County,  New Jersey. He is the President and a
member of the  Board of  Directors  of the  nation-wide,  Construction  Material
Recycling  Association.  Since 1986, Mr. Sanzaro has served as President and CEO
of Ocean County  Recycling  Center,  Inc. ("Ocean County  Recycling"),  in Tom's
River, New Jersey.  Ocean County Recycling is in the business of remanufacturing
construction  and  demolition  debris  for  reuse  as a  substitute  for  virgin
materials in the construction and road building industries.  In addition,  since
1989,  Mr.  Sanzaro  has  served  as Vice  President  and COO of  Ocean  Utility
Contracting  Co., Inc., a New Jersey the Company engaged in the  installation of
sewer  and  water  main   pipelines   and  the   construction   of  new  roadway
infrastructure. From 1973 until 1990, Mr. Sanzaro was the President and CEO of J
and  L  Excavating  and  Contracting   Co.,  Inc.,  a  company  engaged  in  the
construction of residential,  commercial,  industrial,  and government building.
Mr. Sanzaro was a member of the Board of Directors of the New Jersey  state-wide
Utility Transportation.

         JOHN G.  HARTLEY.  Mr.  Hartley  holds a Bachelor of Science  Degree in
Economics  from  Manchester  University in England.  In addition to serving as a
Director for the Company,  he has served as a director for The Tirex Corporation
Canada Inc since June 1998.  He has acted as a  director  of Pacer  Plants  Inc.
since 1985.  Pacer  Plants is a publicly  held  company  with offices in Boston,

                                       98
<PAGE>


Mass.  and is  engaged  in the  business  of  Plants  Engineering  for high tech
industries.  Since 1993,  Mr.  Hartley has also served as a consultant  to Moore
Rowland International, an investment banking firm headquartered in Monaco.

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

         HENRY P. MEIER.  Mr.  Meier was  appointed to the board of directors of
the  Company on February  11,  1999.  He holds a Bachelor  of Science  Degree in
Business from Rider University,  Lawrenceville, New Jersey and a Master's Degree
in Business from Monmouth  University,  West Long Branch,  New Jersey. Mr. Meier
has  worked  as a  Certified  Public  Accountant  since  1984,  maintaining  own
accounting  practice  (Henry P. Meier C.P.A.) since 1993.  From 1992 until 1996,
Mr.  Meier was Chief  Financial  Officer of Basic Line,  Inc.,  a  multi-million
dollar  plastic  houseware  manufacturer.  Since  1996,  he has  served as Chief
Financial Officer of the "Ocean Group", a group of companies specializing in the
fields of  remanufacturing of construction and demolition debris for reuse, tire
recycling,  construction  payroll leasing and real estate ownership from 1996 to
present. Louis Sanzaro, until November 23, 1999 has been the Company's President
and Chief Operating Officer is a controlling  person of all entities included in
the "Ocean Group".

                                       99
<PAGE>


COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

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


ITEM 10. EXECUTIVE COMPENSATION

CURRENT REMUNERATION

         Except  for  individually  negotiated  employment  agreements  with its
executive  officers,  the  Company  has no stock  option  or stock  appreciation
rights, long term or other incentive  compensation plans,  deferred compensation
plans, stock bonus plans,  pension plans, or any other type of compensation plan
in place for its  executive  officers,  directors,  or other  employees.  Except
pursuant  to the terms of their  respective  agreements,  none of its  executive
officers or directors have ever received compensation of any such types from the
Company  pursuant  to  plans  or  otherwise.  The  following  table  sets  forth
information  concerning the annual compensation received or accrued for services
provided in all  capacities  to the Company for the fiscal  years ended June 30,
1996, 1997, 19981998 by the Company's chief executive and all executive officers
of the  Company  serving as such as at June 30,  1998 or at any time  during the
year ended June 30, 1998 whose  compensation may be deemed for these purposes to
have exceeded $100,000 (see "Executive  Compensation - Employment  Contracts and
Termination of Employment and Change-in-Control  Arrangements") In all instances
where cash salary  payments are described as having been "waived",  unregistered
shares of the  Company's  common stock were issued in lieu of such cash payments
and no further  payments,  in cash or stock, are due in respect of such waivers.
Stock issued in lieu of cash salary  payments was valued at one-half the average
market  price of such stock  during the periods in which such salary was earned.
Determination of the market price for such purpose was based upon the average of
the bid and ask prices of such stock, as traded in the  over-the-counter  market
and quoted in the OTC Bulletin Board. The 50% discount from the market price was
determined  arbitrarily,  by  negotiation  between the Company and its 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 the
Company's  common stock and the liquidity of such market has  historically  been
volatile.  Future  announcements  concerning  the  Company  or its  competitors,
including the results of testing,  technological  innovations  or new commercial
products  may have a  significant  impact on the market  price of the  Company's
securities.  Management  believes  that,  as of the dates when such  shares were
issued,  they had no or only very  minimal  actual  market  value and the actual
potential market value of such shares,  if any, was at such dates, and as at the
date hereof  remains,  highly  contingent  upon, and subject to,  extremely high
risks (see, below, Note 7 to the Summary Compensation Table).

                                       100
<PAGE>
<TABLE>
<CAPTION>
                                     SUMMARY COMPENSATION TABLE
====================================================================================================
                                                                    Annual Compensation
                                                    ================================================
                                                       Salary               Bonus           Other
       Name and Principal Position        Year           ($)                 ($)             ($)
----------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>                 <C>               <C>
                                          1999      $250,000(1)         (11) (12) (13)    $    0(14)
                                          ----------------------------------------------------------
                                          1998      $250,000(2)(7)(8)   (11) (12) (13)    $5,075(14)
                                          ----------------------------------------------------------
           Terence C. Byrne               1997      $250,000(3)(7)(8)   (11) (12) (13)    $  422(14)
President, and Chief Executive Officer    ----------------------------------------------------------
                                          1996      $250,000(4)(7)(8)   (11) (12) (13)    $    0(14)
----------------------------------------------------------------------------------------------------
                                          1999      $150,000(5)         (11) (12) (13)    $    0(14)
                                          ----------------------------------------------------------
                                          1998      $150,000(6)(7)(8)   (11) (12) (13)    $4,224(14)
                                          ----------------------------------------------------------
             Louis V. Muro                1997      $150,000(7)(7)(8)   (11) (12) (13)    $1,056(14)
    Vice President of Engineering         ----------------------------------------------------------
                                          1996      $150,000(8)(7)(8)   (11) (12) (13)    $    0(14)
----------------------------------------------------------------------------------------------------
           Louis A. Sanzaro               1999      $175,000(9)         (11) (12) (13)    $    0(14)
        Chief Operating Officer
       (until November 23, 1999)
----------------------------------------------------------------------------------------------------
            Michael D.A. Ash              1999      $125,000(10)        (11) (12) (13)    $    0(14)
         Secretary-Treasurer &
        Chief Financial Officer
====================================================================================================

NOTES TO SUMMARY COMPENSATION TABLE APPEAR ON FOLLOWING PAGE:
</TABLE>
                                                 101
<PAGE>


(1) FOR THE YEAR ENDED JUNE 30, 1999,  MR. BYRNE  RECEIVED CASH SALARY  PAYMENTS
FROM THE COMPANY IN THE AGGREGATE  AMOUNT OF $71,000.85.  (THIS DOES NOT INCLUDE
CASH DISBURSEMENTS MADE TO MR. BYRNE DURING FISCAL 1999 BY WAY OF REIMBURSEMENTS
FOR EXPENSES PAID BY HIM FOR OR ON BEHALF OF THE COMPANY). MR. BYRNE WAIVED CASH
PAYMENT OF THE BALANCE OF $178,999.15 IN SALARY  PAYMENTS UNDER THE TERMS OF HIS
EMPLOYMENT  AGREEMENT  WITH THE COMPANY (THE "BYRNE  EXECUTIVE  AGREEMENT")  FOR
FISCAL 1999. THE TERMS AND CONDITIONS OF THE BYRNE  EXECUTIVE  AGREEMENT,  WHICH
CALLS FOR AN ANNUAL  SALARY IN THE AMOUNT OF  $250,000,  ARE  DISCUSSED  IN MORE
DETAIL,  BELOW,  UNDER THE CAPTION,  "EMPLOYMENT  CONTRACTS AND  TERMINATION  OF
EMPLOYMENT AND CHANGE-IN-CONTROL  ARRANGEMENTS - EXECUTIVE AGREEMENTS".  IN LIEU
OF CASH PAYMENT OF SALARY AND REIMBURSABLE  EXPENSES, MR. BYRNE AGREED TO ACCEPT
SHARES OF THE COMPANY'S  STOCK,  VALUED AT ONE-HALF THE AVERAGE  MARKET PRICE OF
SUCH STOCK  DURING THE PERIODS IN WHICH SUCH SALARY WAS EARNED OR SUCH  EXPENSES
WERE  INCURRED.  THE  NUMBER OF  COMPENSATION  SHARES  ISSUED  TO MR.  BYRNE FOR
SERVICES RENDERED PURSUANT TO HIS EXECUTIVE AGREEMENT DURING FISCAL 1999 AND FOR
UNREIMBURSED  EXPENSES  INCURRED  DURING  FISCAL 1999  AGGREGATED  TO  2,030,913
SHARES.  HOWEVER,  IN  SEPTEMBER  1998  COMPUTATIONAL  ERRORS  THAT  RESULTED IN
UNDERSTATEMENTS  OF  SALARY  PAID TO MR.  BYRNE FOR THE  PERIODS  JULY 1, 1997 -
NOVEMBER  30, 1997 AND DECEMBER 1, 1997 - MARCH 31, 1998 WERE  DISCOVERED.  AS A
CONSEQUENCE  THEREOF, MR. BYRNE WAS INFORMED THAT HE WOULD HAVE TO RETURN TO THE
COMPANY FOR  CANCELLATION  AN AGGREGATE OF 508,109 (THE "RETURN  SHARES") OF THE
1,303,920   COMPENSATION  SHARES.   22,804  OF  THE  RETURN  SHARES  CONSIST  OF
COMPENSATION  SHARES  RECEIVED BY MR. BYRNE IN DECEMBER 1997 AND 485,305  RETURN
SHARES CONSIST OF  COMPENSATION  SHARES  RECEIVED BY MR. BYRNE IN APRIL 1998. IN
DECEMBER 1998,  MR. BYRNE RETURNED THE 485,305 RETURN SHARES  RECEIVED BY HIM IN
APRIL 1998.  THE 22,804  RETURN  SHARES  RECEIVED  BY HIM IN DECEMBER  1997 WERE
SUBSEQUENTLY TRANSFERRED TO AN ASSIGNEE OF MR. BYRNE. MR. BYRNE ARRANGED FOR THE
RETURN  OF  THESE  SHARES.  FOR A  DISCUSSION  IN  DETAIL  OF ALL  ISSUANCES  OF
COMPENSATION  SHARES MADE TO MR. BYRNE DURING FISCAL 1998,  INCLUDING THE DATES,
AMOUNTS, AND SHARE PRICES THEREOF,  REFERENCE IS MADE TO, "CERTAIN RELATIONSHIPS
AND RELATED  TRANSACTIONS - ISSUANCE OF STOCK IN LIEU OF SALARIES AND CONSULTING
FEES AND STOCK RESTRICTION AGREEMENTS",  BELOW. SUBSEQUENT TO JUNE 30, 1998, MR.
BYRNE HAS CONTINUED TO WAIVE PAYMENT OF SUBSTANTIAL  PORTIONS OF HIS CONTRACTUAL
SALARY AND HE HAS AGREED TO CONTINUE  TO WAIVE ALL OR PART OF SUCH SALARY  UNTIL
THE COMPANY'S FINANCIAL POSITION IMPROVES SIGNIFICANTLY.

2)  FOR THE YEAR ENDED JUNE 30, 1998,  MR. BYRNE  RECEIVED CASH SALARY  PAYMENTS
FROM THE COMPANY IN THE AGGREGATE  AMOUNT OF $70,362.68.  (THIS DOES NOT INCLUDE
CASH DISBURSEMENTS MADE TO MR. BYRNE DURING FISCAL 1998 BY WAY OF REIMBURSEMENTS
FOR EXPENSES PAID BY HIM FOR OR ON BEHALF OF THE COMPANY). MR. BYRNE WAIVED CASH
PAYMENT  OF THE  BALANCE  OF  $179,637.32  IN  SALARY  PAYMENTS  AND  $3,750  IN
REIMBURSABLE  EXPENSES  DUE TO HIM UNDER THE TERMS OF HIS  EMPLOYMENT  AGREEMENT
WITH THE COMPANY (THE "BYRNE  EXECUTIVE  AGREEMENT")  FOR FISCAL 1998. THE TERMS
AND  CONDITIONS  OF THE BYRNE  EXECUTIVE  AGREEMENT,  WHICH  CALLS FOR AN ANNUAL
SALARY IN THE AMOUNT OF $250,000, ARE DISCUSSED IN MORE DETAIL, BELOW, UNDER THE
CAPTION,    "EMPLOYMENT    CONTRACTS   AND   TERMINATION   OF   EMPLOYMENT   AND
CHANGE-IN-CONTROL  ARRANGEMENTS - EXECUTIVE AGREEMENTS". IN LIEU OF CASH PAYMENT
OF SALARY AND  REIMBURSABLE  EXPENSES,  MR. BYRNE AGREED TO ACCEPT SHARES OF THE
COMPANY'S  STOCK,  VALUED AT  ONE-HALF  THE AVERAGE  MARKET  PRICE OF SUCH STOCK
DURING  THE  PERIODS  IN WHICH SUCH  SALARY  WAS  EARNED OR SUCH  EXPENSES  WERE
INCURRED.  THE NUMBER OF  COMPENSATION  SHARES  ISSUED TO MR. BYRNE FOR SERVICES
RENDERED  PURSUANT  TO HIS  EXECUTIVE  AGREEMENT  DURING  FISCAL  1998  AND  FOR
UNREIMBURSED  EXPENSES  INCURRED  DURING  FISCAL 1998  AGGREGATED  TO  1,303,920
SHARES.

(3) FOR THE YEAR ENDED JUNE 30, 1997,  MR. BYRNE  RECEIVED CASH SALARY  PAYMENTS
FROM THE COMPANY IN THE AGGREGATE AMOUNT OF $62,457. (THIS DOES NOT INCLUDE CASH
DISBURSEMENTS  MADE TO MR. BYRNE DURING FISCAL 1997 BY WAY OF REIMBURSEMENTS FOR
EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY).  MR.  BYRNE WAIVED CASH
PAYMENT OF THE BALANCE OF $187,543 IN SALARY PAYMENTS DUE TO HIM UNDER THE TERMS
OF HIS EMPLOYMENT  AGREEMENT WITH THE COMPANY (THE "BYRNE EXECUTIVE  AGREEMENT")
FOR FISCAL 1997.  THE TERMS AND  CONDITIONS  OF THE BYRNE  EXECUTIVE  AGREEMENT,
WHICH CALLS FOR AN ANNUAL  SALARY IN THE AMOUNT OF  $250,000,  ARE  DISCUSSED IN
MORE DETAIL, BELOW, UNDER THE CAPTION,  "EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL  ARRANGEMENTS - EXECUTIVE AGREEMENTS".  IN LIEU
OF CASH PAYMENT OF SALARY,  MR. BYRNE AGREED TO ACCEPT  SHARES OF THE  COMPANY'S
STOCK,  VALUED AT ONE-HALF  THE AVERAGE  MARKET  PRICE OF SUCH STOCK  DURING THE
PERIODS  IN WHICH SUCH  SALARY WAS  EARNED.  THE NUMBER OF  COMPENSATION  SHARES
ISSUED TO MR. BYRNE FOR SERVICES  RENDERED  PURSUANT TO HIS EXECUTIVE  AGREEMENT
DURING FISCAL 1997 AGGREGATED TO 1,130,217 SHARES. FOR A DISCUSSION IN DETAIL OF
ALL  ISSUANCES OF  COMPENSATION  SHARES MADE TO MR.  BYRNE  DURING  FISCAL 1997,
INCLUDING THE DATES,  AMOUNTS,  AND SHARE PRICES THEREOF,  REFERENCE IS MADE TO,
"CERTAIN  RELATIONSHIPS AND RELATED  TRANSACTIONS - ISSUANCE OF STOCK IN LIEU OF
SALARIES AND CONSULTING FEES AND STOCK RESTRICTION AGREEMENTS", BELOW.

(4) FOR THE YEAR ENDED JUNE 30, 1996,  MR. BYRNE  RECEIVED CASH SALARY  PAYMENTS
FROM THE COMPANY IN THE AGGREGATE AMOUNT OF $17,424. (THIS DOES NOT INCLUDE CASH
DISBURSEMENTS  MADE TO MR. BYRNE DURING FISCAL 1996 BY WAY OF REIMBURSEMENTS FOR
EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY).  MR.  BYRNE WAIVED CASH
PAYMENT  OF THE  BALANCE OF $ 232,576  IN SALARY  PAYMENTS  DUE TO HIM UNDER THE

                                       102
<PAGE>


TERMS OF BYRNE EXECUTIVE  AGREEMENT FOR THE YEAR ENDED JUNE 30, 1996. IN LIEU OF
CASH  PAYMENT OF SALARY,  MR.  BYRNE  AGREED TO ACCEPT  SHARES OF THE  COMPANY'S
STOCK,  VALUED AT ONE-HALF THE AVERAGE  MARKET PRICE OF SUCH STOCK DURING ALL OR
PART OF THE PERIOD IN WHICH SUCH SALARY WAS EARNED.  THE NUMBER OF  COMPENSATION
SHARES  ISSUED TO MR.  BYRNE FOR  SERVICES  RENDERED  PURSUANT TO HIS  EXECUTIVE
AGREEMENT DURING FISCAL 1996 AGGREGATED TO 1,676,075.

(5) FOR THE FISCAL  YEAR ENDED JUNE 30,  1999,  MR.  MURO  RECEIVED  CASH SALARY
PAYMENTS FROM THE COMPANY, IN THE AGGREGATE AMOUNT OF $54,703.99. (THIS DOES NOT
INCLUDE  CASH  DISBURSEMENTS  MADE  TO MR.  MURO  DURING  FISCAL  1998 BY WAY OF
REIMBURSEMENTS  FOR EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY.) MR.
MURO  WAIVED  CASH  PAYMENT OF THE  AGGREGATE  BALANCE OF  $95,296.01  IN SALARY
PAYMENTS DUE TO HIM UNDER THE TERMS OF HIS EMPLOYMENT AGREEMENT WITH THE COMPANY
(THE "MURO  EXECUTIVE  AGREEMENT")  FOR FISCAL 1999. IN LIEU  THEREOF,  MR. MURO
AGREED TO ACCEPT SHARES OF THE COMPANY'S  STOCK,  VALUED AT ONE-HALF THE AVERAGE
MARKET PRICE OF SUCH STOCK DURING THE PERIODS IN WHICH SUCH SALARY WAS EARNED OR
SUCH EXPENSES WERE  INCURRED.  THE NUMBER OF  COMPENSATION  SHARES ISSUED TO MR.
MURO  FOR  SERVICES  RENDERED  PURSUANT  TO  HIS  EXECUTIVE  AGREEMENT  AND  FOR
UNREIMBURSED  EXPENSES  INCURRED  DURING  FISCAL 1999  AGGREGATED  TO  1,283,122
SHARES.  HOWEVER,  IN  SEPTEMBER  1998  COMPUTATIONAL  ERRORS  THAT  RESULTED IN
UNDERSTATEMENTS  OF  SALARY  PAID TO MR.  MURO FOR THE  PERIODS  JULY 1,  1997 -
NOVEMBER  30, 1997 AND DECEMBER 1, 1997 - MARCH 31, 1998 WERE  DISCOVERED.  AS A
CONSEQUENCE  THEREOF,  MR. MURO WAS INFORMED THAT HE WOULD HAVE TO RETURN TO THE
COMPANY FOR  CANCELLATION  AN AGGREGATE OF 230,077 (THE "RETURN  SHARES") OF THE
650,957  COMPENSATION SHARES. 4,298 OF THE RETURN SHARES CONSIST OF COMPENSATION
SHARES  RECEIVED BY MR. MURO IN DECEMBER 1997 AND 225,779  RETURN SHARES CONSIST
OF COMPENSATION SHARES RECEIVED BY MR. MURO IN APRIL 1998. IN DECEMBER 1998, MR.
MURO  RETURNED  ALL OF THE  RETURN  SHARES.  FOR A  DISCUSSION  IN DETAIL OF ALL
ISSUANCES OF COMPENSATION SHARES MADE TO MR. MURO DURING FISCAL 1998,  INCLUDING
THE DATES,  AMOUNTS,  AND SHARE  PRICES  THEREOF,  REFERENCE IS MADE TO "CERTAIN
RELATIONSHIPS  AND RELATED  TRANSACTIONS - ISSUANCE OF STOCK IN LIEU OF SALARIES
AND CONSULTING FEES", BELOW. SUBSEQUENT TO JUNE 30, 1998, MR. MURO HAS CONTINUED
TO WAIVE PAYMENT OF SUBSTANTIAL  PORTIONS OF HIS  CONTRACTUAL  SALARY AND HE HAS
AGREED TO  CONTINUE  TO WAIVE  ALL OR PART OF SUCH  SALARY  UNTIL THE  COMPANY'S
FINANCIAL POSITION IMPROVES SIGNIFICANTLY.

(6) FOR THE FISCAL  YEAR ENDED JUNE 30,  1998,  MR.  MURO  RECEIVED  CASH SALARY
PAYMENTS FROM THE COMPANY, IN THE AGGREGATE AMOUNT OF $62,023.44. (THIS DOES NOT
INCLUDE  CASH  DISBURSEMENTS  MADE  TO MR.  MURO  DURING  FISCAL  1998 BY WAY OF
REIMBURSEMENTS  FOR EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY.) MR.
MURO  WAIVED  CASH  PAYMENT OF THE  AGGREGATE  BALANCE OF  $87,976.06  IN SALARY
PAYMENTS AND $3,750 IN  REIMBURSABLE  EXPENSES DUE TO HIM UNDER THE TERMS OF HIS
EMPLOYMENT  AGREEMENT  WITH THE COMPANY  (THE "MURO  EXECUTIVE  AGREEMENT")  FOR
FISCAL 1998. IN LIEU THEREOF,  MR. MURO AGREED TO ACCEPT SHARES OF THE COMPANY'S
STOCK,  VALUED AT ONE-HALF  THE AVERAGE  MARKET  PRICE OF SUCH STOCK  DURING THE
PERIODS IN WHICH SUCH  SALARY WAS EARNED OR SUCH  EXPENSES  WERE  INCURRED.  THE
NUMBER OF COMPENSATION  SHARES ISSUED TO MR. MURO FOR SERVICES RENDERED PURSUANT
TO HIS EXECUTIVE AGREEMENT AND FOR UNREIMBURSED  EXPENSES INCURRED DURING FISCAL
1998 AGGREGATED TO 650,957 SHARES.

(7) FOR THE FISCAL  YEAR ENDED JUNE 30,  1997,  MR.  MURO  RECEIVED  CASH SALARY
PAYMENTS  FROM THE COMPANY IN THE  AGGREGATE  AMOUNT OF $51,510.  (THIS DOES NOT
INCLUDE  CASH  DISBURSEMENTS  MADE  TO MR.  MURO  DURING  FISCAL  1997 BY WAY OF
REIMBURSEMENTS  FOR EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY.) MR.
MURO WAIVED CASH PAYMENT OF THE AGGREGATE  BALANCE OF $98,490 IN SALARY PAYMENTS
DUE TO HIM UNDER THE TERMS OF HIS  EMPLOYMENT  AGREEMENT  WITH THE COMPANY  (THE
"MURO  EXECUTIVE  AGREEMENT") FOR THE YEAR ENDED JUNE 30, 1997. IN LIEU THEREOF,
MR. MURO AGREED TO ACCEPT SHARES OF THE COMPANY'S STOCK,  VALUED AT ONE-HALF THE
AVERAGE  MARKET  PRICE OF SUCH STOCK DURING THE PERIODS IN WHICH SUCH SALARY WAS
EARNED.  THE  NUMBER OF  COMPENSATION  SHARES  ISSUED TO MR.  MURO FOR  SERVICES
RENDERED  PURSUANT TO HIS EXECUTIVE  AGREEMENT  DURING FISCAL 1997 AGGREGATED TO
595,540. FOR A DISCUSSION IN DETAIL OF ALL ISSUANCES OF COMPENSATION SHARES MADE
TO MR. MURO DURING FISCAL 1997,  INCLUDING THE DATES,  AMOUNTS, AND SHARE PRICES
THEREOF,  REFERENCE IS MADE TO "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
ISSUANCE OF STOCK IN LIEU OF SALARIES AND CONSULTING FEES", BELOW.

(8) FROM  JANUARY 18, 1995  THROUGH  DECEMBER  31,  1995,  MR. MURO SERVED AS AN
ENGINEERING  CONSULTANT TO THE COMPANY  PURSUANT TO THE TERMS OF HIS  CONSULTING
AGREEMENT  (THE  "MURO  CONSULTING  AGREEMENT")  WHICH  PROVIDED  FOR  AGGREGATE
CONSULTING FEES IN THE AMOUNT OF $150,000.  EFFECTIVE  JANUARY 1, 1996, MR. MURO
SERVED AS THE  COMPANY'S  VICE  PRESIDENT  OF  ENGINEERING  PURSUANT TO THE MURO
EXECUTIVE  AGREEMENT,  WHICH  PROVIDES  FOR SALARY  PAYMENTS  TO MR. MURO IN THE
ANNUAL AMOUNT OF $150,000.  FOR THE SIX-MONTH  PERIOD WHICH COMMENCED ON JULY 1,
1995 AND ENDED ON DECEMBER  31,  1995,  MR.  MURO WAIVED  PAYMENT IN CASH OF ALL
CONSULTING  FEES DUE TO HIM.  FOR THE  BALANCE OF THE FISCAL YEAR ENDED JUNE 30,
1996,  MR. MURO RECEIVED CASH SALARY  PAYMENTS FROM THE COMPANY IN THE AGGREGATE
AMOUNT OF $7,592.  (THIS DOES NOT INCLUDE  CASH  DISBURSEMENTS  MADE TO MR. MURO
DURING FISCAL 1996 BY WAY OF  REIMBURSEMENTS  FOR EXPENSES PAID BY HIM FOR OR ON
BEHALF OF THE COMPANY.) MR. MURO WAIVED CASH PAYMENT OF THE AGGREGATE BALANCE OF
$142,408 IN  CONSULTING  FEES AND SALARY  PAYMENTS DUE TO HIM UNDER THE TERMS OF
THE MURO  CONSULTING  AGREEMENT  AND THE MURO  EXECUTIVE  AGREEMENT FOR THE YEAR

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<PAGE>


ENDED JUNE 30, 1996.  IN LIEU  THEREOF,  MR. MURO AGREED TO ACCEPT SHARES OF THE
COMPANY'S  STOCK,  VALUED AT  ONE-HALF  THE AVERAGE  MARKET  PRICE OF SUCH STOCK
DURING ALL OR PART OF THE PERIOD IN WHICH SUCH  CONSULTING  FEES AND SALARY WERE
EARNED.  THE  NUMBER OF  COMPENSATION  SHARES  ISSUED TO MR.  MURO FOR  SERVICES
RENDERED PURSUANT TO HIS CONSULTING AND EXECUTIVE  AGREEMENTS DURING FISCAL 1996
AGGREGATED TO 1,074,367.

(9)  FOR THE FISCAL  YEAR ENDED JUNE 30,  1999,  MR.  SANZARO  RECEIVED  NO CASH
SALARY PAYMENTS FROM THE COMPANY (THIS DOES NOT INCLUDE CASH  DISBURSEMENTS MADE
TO MR. SANZARO DURING FISCAL 1998 BY WAY OF REIMBURSEMENTS  FOR EXPENSES PAID BY
HIM FOR OR ON BEHALF OF THE  COMPANY.)  MR.  SANZARO  WAIVED CASH PAYMENT OF THE
AGGREGATE  BALANCE OF $175,000 IN SALARY  PAYMENTS DUE TO HIM UNDER THE TERMS OF
HIS EMPLOYMENT  AGREEMENT WITH THE COMPANY (THE "SANZARO  EXECUTIVE  AGREEMENT")
FOR FISCAL  1999.  IN LIEU  THEREOF,  MR.  MURO  AGREED TO ACCEPT  SHARES OF THE
COMPANY'S  STOCK,  VALUED AT  ONE-HALF  THE AVERAGE  MARKET  PRICE OF SUCH STOCK
DURING  THE  PERIODS  IN WHICH SUCH  SALARY  WAS  EARNED OR SUCH  EXPENSES  WERE
INCURRED.  THE NUMBER OF COMPENSATION  SHARES ISSUED TO MR. SANZARO FOR SERVICES
RENDERED  PURSUANT TO HIS  EXECUTIVE  AGREEMENT  AND FOR  UNREIMBURSED  EXPENSES
INCURRED DURING FISCAL 1999 AGGREGATED TO 2,391,939  SHARES.  THROUGHOUT  FISCAL
1999, MR. SANZARO  WAIVED CASH PAYMENT OF HIS ENTIRE  CONTRACTUAL  SALARY AND HE
HAS AGREED TO CONTINUE TO WAIVE ALL OR PART OF SUCH SALARY  UNTIL THE  COMPANY'S
FINANCIAL POSITION IMPROVES SIGNIFICANTLY.

(10) FOR THE FISCAL  YEAR ENDED JUNE 30,  1999,  MR. ASH  RECEIVED  CASH  SALARY
PAYMENTS FROM THE COMPANY, IN THE AGGREGATE AMOUNT OF $9,603.66.  (THIS DOES NOT
INCLUDE  CASH  DISBURSEMENTS  MADE  TO MR.  ASH  DURING  FISCAL  1998  BY WAY OF
REIMBURSEMENTS  FOR EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY.) MR.
ASH  WAIVED  CASH  PAYMENT OF THE  AGGREGATE  BALANCE  OF  $46,533.01  IN SALARY
PAYMENTS DUE TO HIM UNDER THE TERMS OF HIS EMPLOYMENT AGREEMENT WITH THE COMPANY
(THE "ASH EXECUTIVE AGREEMENT") FOR FISCAL 1999. IN LIEU THEREOF, MR. ASH AGREED
TO ACCEPT SHARES OF THE COMPANY'S  STOCK,  VALUED AT ONE-HALF THE AVERAGE MARKET
PRICE OF SUCH STOCK  DURING THE  PERIODS IN WHICH SUCH SALARY WAS EARNED OR SUCH
EXPENSES WERE INCURRED.  THE NUMBER OF COMPENSATION SHARES ISSUED TO MR. ASH FOR
SERVICES  RENDERED  PURSUANT TO HIS  EXECUTIVE  AGREEMENT  AND FOR  UNREIMBURSED
EXPENSES INCURRED DURING FISCAL 1999 AGGREGATED TO 901,305 SHARES, NOT INCLUDING
THE 1,000,000 SHARES ISSUED TO MR. ASH AS A SIGNING BONUS. THROUGHOUT THE PERIOD
OF  EMPLOYMENT  OF MR. ASH IN FISCAL  1999  STARTING  WITH HIS HIRING IN JANUARY
1999,  MR. ASH HAS  CONTINUED TO WAIVE  PAYMENT OF  SUBSTANTIAL  PORTIONS OF HIS
CONTRACTUAL  SALARY.  SUBSEQUENT  TO JUNE 30,  1999  VOLUNTARILY  ABROGATED  HIS
EXECUTIVE  AGREEMENT  WITH THE  COMPANY  FOR  PURPOSES  OF  ENTERING  INTO A NEW
AGREEMENT FOR THE PERIOD FROM SEPTEMBER 1, 1999 TO DECEMBER 31, 2000 UNDER WHICH
MR. ASH WILL  CONTINUE  TO PROVIDE  SERVICES  AS  SECRETARY-TREASURER  AND CHIEF
FINANCIAL  OFFICER  FOR THE  COMPANY  UNDER A  CONSULTING  CONTRACT.  MR.  ASH'S
COMPENSATION FOR THIS SIXTEEN-MONTH  PERIOD WILL BE PAID THROUGH THE ISSUANCE OF
2,000,000 SHARES OF THE COMPANY,  WHICH SHARES WILL BE ISSUED IN  PRE-DETERMINED
QUANTITIES AT VARIOUS DATES THROUGHOUT THE SIXTEEN-MONTH PERIOD.

(11) MANAGEMENT  BELIEVES THAT IT IS IMPOSSIBLE TO DETERMINE THE ACTUAL  CURRENT
OR POTENTIAL  VALUE, IF ANY, OF SUCH SHARES IN LIGHT OF THE FACT THAT, AS OF THE
DATES WHEN SUCH  SHARES WERE ISSUED TO THE  EXECUTIVE  OFFICERS,  THEY HAD NO OR
ONLY VERY MINIMAL ACTUAL MARKET VALUE AND THE ACTUAL  POTENTIAL  MARKET VALUE OF
SUCH  SHARES,  IF ANY,  WAS AT SUCH DATES,  AND AS AT THE DATE  HEREOF  REMAINS,
HIGHLY  CONTINGENT  UPON, AND SUBJECT TO, EXTREMELY HIGH RISKS INCLUDING BUT NOT
LIMITED TO THE FOLLOWING FACTORS: (I) THE VERY EARLY STAGE OF DEVELOPMENT OF THE
COMPANY'S BUSINESS; (II) THE COMPANY'S LACK OF SUFFICIENT FUNDS TO IMPLEMENT ITS
BUSINESS PLAN AND THE ABSENCE OF ANY  COMMITMENTS  FROM  POTENTIAL  INVESTORS TO
PROVIDE  SUCH FUNDS;  (III) THE ABSENCE OF A RELIABLE,  STABLE,  OR  SUBSTANTIAL
TRADING MARKET FOR SUCH SHARES; (IV) THE RESTRICTIONS ON TRANSFER ARISING OUT OF
THE  ABSENCE OF  REGISTRATION  OF SUCH  SHARES  AND  CERTAIN  STOCK  RESTRICTION
AGREEMENTS  WHICH EACH OF SUCH PERSONS HAS ENTERED INTO; AND (V) THE UNCERTAINTY
RESPECTING  THE  COMPANY'S  ABILITY TO  CONTINUE  AS A GOING  CONCERN,  (SEE THE
DISCUSSIONS  INCLUDED ABOVE,  IN "EXISTING AND PROPOSED  BUSINESSES" AND "MARKET
FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS").

(12) ALL COMPENSATION  SHARES AND STOCK BONUSES ISSUED TO THE EXECUTIVE OFFICERS
NAMED  IN THIS  SUMMARY  COMPENSATION  TABLE IN LIEU OF CASH  COMPENSATION  WERE
ISSUED PURSUANT TO CERTAIN SPECIAL COMPENSATION AGREEMENTS AND STOCK RESTRICTION
AGREEMENTS  BETWEEN EACH OF THEM AND THE COMPANY.  THE TERMS AND  CONDITIONS  OF
SUCH AGREEMENTS ARE DISCUSSED IN DETAIL BELOW,  UNDER "EMPLOYMENT  CONTRACTS AND
TERMINATION  OF  EMPLOYMENT  AND  CHANGE-IN-CONTROL   ARRANGEMENTS  -  EXECUTIVE
AGREEMENTS AND SPECIAL  COMPENSATION  AGREEMENTS" AND IN "CERTAIN  RELATIONSHIPS
AND RELATED TRANSACTIONS - SALES OF AND RESTRICTIONS ON SHARES HELD BY EXECUTIVE
OFFICERS", BELOW.

(13) ON MAY 29, 1997,  THE COMPANY  AWARDED  STOCK  BONUSES TO MR. BYRNE AND MR.
MURO (THE "STOCK  BONUSES"),  FOR THE FISCAL  YEARS ENDED JUNE 30, 1995 AND 1996
(THE "1995/1996 BONUSES").  ON SEPTEMBER 3, 1997, THE COMPANY AWARDED ADDITIONAL
STOCK BONUSES TO EACH OF THESE PERSONS IN THE FORM OF OPTIONS TO PURCHASE COMMON
STOCK (THE "1997 BONUS  OPTIONS") AND ON JANUARY 13, 1998,  THE COMPANY  AWARDED

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<PAGE>


BONUSES TO SUCH PERSONS (THE "1998  BONUSES")  CONSISTING  OF A REDUCTION IN THE
EXERCISE  PRICE OF THE 1997  BONUS-OPTIONS  FROM  THE FULL  MARKET  PRICE OF THE
COMMON STOCK ON THE  EXERCISE  DATE  THEREOF TO $.001 PER SHARE.  THE  FOREGOING
BONUSES WERE GRANTED TO THESE  INDIVIDUALS IN RECOGNITION  OF: (I) THEIR SUCCESS
IN BRINGING THE COMPANY FROM A VIRTUAL START-UP  POSITION IN JANUARY 1995 TO ITS
PRESENT  STAGE  OF  DEVELOPMENT,  AND  (II)  THAT  SUCH  PERSONS  HAVE  NOT BEEN
ADEQUATELY COMPENSATED FOR THEIR CONTRIBUTIONS BECAUSE, AMONG OTHER THINGS, THEY
HAVE  ACCEPTED,  FOR  ALL OF THE  SERVICES  RENDERED  BY  THEM  TO THE  COMPANY,
COMPENSATION CONSISTING PRINCIPALLY OF SHARES OF THE COMPANY'S COMMON STOCK, THE
VALUE  OF WHICH  HAS BEEN AND  CONTINUES  TO BE  COMPLETELY  DEPENDENT  UPON THE
SUCCESS OF THE COMPANY AND  THEREFORE  HAS ALWAYS  PLACED AND CONTINUES TO PLACE
THE RECIPIENTS  THEREOF AT RISK.  THE AWARDING OF EACH OF THE AFORESAID  BONUSES
WAS  APPROVED BY THE FULL BOARD OF DIRECTORS  AND WAS  EFFECTED  PURSUANT TO THE
TERMS OF THE COMPANY'S  EMPLOYMENT  AGREEMENTS  WITH EACH OF SUCH PERSONS.  SUCH
AGREEMENTS  PROVIDE THAT MR.  BYRNE AND MR. MURO ARE EACH  ELIGIBLE TO RECEIVE A
DISCRETIONARY  BONUS FOR EACH YEAR (OR PORTION  THEREOF) DURING THE TERM OF SUCH
AGREEMENT AND ANY EXTENSIONS  THEREOF,  WITH THE ACTUAL AMOUNT OF ANY SUCH BONUS
TO BE DETERMINED IN THE SOLE DISCRETION OF THE BOARD OF DIRECTORS BASED UPON ITS
EVALUATION  OF THE  EXECUTIVE'S  PERFORMANCE  DURING  SUCH YEAR.  THE  1995/1996
BONUSES  CONSISTED OF OPTIONS TO PURCHASE THE FOLLOWING  NUMBERS OF SHARES, AT A
PER SHARE EXERCISE PRICE OF $.001 PER SHARE, IN THE FOLLOWING AMOUNTS: MR. BYRNE
- 1,413,382 SHARES;  MR. MURO - 1,115,093 SHARES.  THE 1997 BONUSES CONSISTED OF
OPTIONS TO PURCHASE THE FOLLOWING NUMBERS OF SHARES: MR. BYRNE - 2,000,000;  MR.
MURO - 1,000,000 AT THE EXERCISE PRICE DESCRIBED  ABOVE, AS REDUCED TO $.001 PER
SHARE  PURSUANT TO THE AWARD OF THE 1998 BONUSES.  BECAUSE THE SHARES WHICH WERE
PURCHASED PURSUANT TO THE EXERCISE OF THE FOREGOING  OPTIONS,  WERE ISSUED UNDER
THE TERMS OF THE ABOVE DESCRIBED EMPLOYMENT AGREEMENTS, THEY ARE ALSO SUBJECT TO
THE TERMS OF THE  RESPECTIVE  STOCK  RESTRICTION  AGREEMENTS  WHICH EACH OF SUCH
PERSONS  HAS ENTERED  INTO.  THE TERMS AND  CONDITIONS  OF SUCH  AGREEMENTS  ARE
DISCUSSED  IN  DETAIL  BELOW,  IN  "EMPLOYMENT   CONTRACTS  AND  TERMINATION  OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS - EXECUTIVE AGREEMENTS AND SPECIAL
COMPENSATION  AGREEMENTS" AND IN "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- SALES OF AND RESTRICTIONS ON SHARES HELD BY EXECUTIVE OFFICERS".

(14) REPRESENTS  ADDITIONAL  COMPENSATION  RECEIVED IN THE FORM OF CAR ALLOWANCE
PAYMENTS. CARALLOWANCE PAYMENTS WERE WAIVED IN FISCAL 1999. THIS AMOUNT DOES NOT
INCLUDE  THE  1,000,000  SHARES OF COMMON  STOCK OF THE  COMPANY  WHICH MR.  ASH
RECEIVED AS A SIGNING BONUS NOR THE 500,000 SHARES WHICH MR. SANZARO RECEIVED AS
A SIGNING BONUS.

(15) FOR THE FISCAL YEAR ENDED JUNE 30, 1999, MR. FRECHETTE RECEIVED CASH SALARY
PAYMENTS FROM THE COMPANY, IN THE AGGREGATE AMOUNT OF $71,011.83. (THIS DOES NOT
INCLUDE CASH  DISBURSEMENTS  MADE TO MR.  FRECHETTE DURING FISCAL 1999 BY WAY OF
REIMBURSEMENTS  FOR EXPENSES  PAID BY HIM FOR OR ON BEHALF OF THE  COMPANY.) MR.
FRECHETTE  WAIVED CASH PAYMENT OF THE AGGREGATE  BALANCE OF $41,488.17 IN SALARY
PAYMENTS DUE TO HIM UNDER THE TERMS OF HIS EMPLOYMENT AGREEMENT WITH THE COMPANY
(THE  "FRECHETTE  EXECUTIVE  AGREEMENT")  FOR FISCAL 1999. IN LIEU THEREOF,  MR.
FRECHETTE AGREED TO ACCEPT SHARES OF THE COMPANY'S STOCK, VALUED AT ONE-HALF THE
AVERAGE  MARKET  PRICE OF SUCH STOCK DURING THE PERIODS IN WHICH SUCH SALARY WAS
EARNED OR SUCH EXPENSES WERE INCURRED.  THE NUMBER OF COMPENSATION SHARES ISSUED
TO MR. FRECHETTE FOR SERVICES RENDERED  PURSUANT TO HIS EXECUTIVE  AGREEMENT AND
FOR  UNREIMBURSED  EXPENSES  INCURRED  DURING FISCAL 1999  AGGREGATED TO 477,155
SHARES NOT INCLUDING THE 1,000,000  SHARES ISSUED TO MR.  FRECHETTE AS A SIGNING
BONUS.


COMPENSATION OF DIRECTORS

         The directors of the Company are not  compensated for their services as
such, except as follows:  Three of the Company's five present directors received
unregistered shares of the Company's common stock ("Directors Shares").  Messrs.
Byrne and Hartley received Directors Shares in consideration of their agreements
to join the  Company's  Board of  Directors  in  January  of 1995.  Mr.  Sanzaro
received  Directors  Shares as compensation  for services under the terms of his
Directors  Compensation  Agreement,  dated July 7, 1997.  Directors  Shares were
issued, or transferred to the Company's  directors as follows:  2,500,000 shares
were transferred by two members of the Company's former management to Terence C.
Byrne on January 18, 1995;  100,000 shares were issued by the Company to John G.
Hartley on February 16, 1995; and 100,000 shares were issued to Louis Sanzaro on
or about July 7, 1997.  At the time the  Directors  Shares were  transferred  or
issued  to  the  respective  directors,   they  accepted  shares  based  upon  a
combination  of their  perceived  valuation of both present and possible  future
value of the shares,  rather than the actual value of the Company's common stock
at that time.  It was the position of the  recipients of such shares that, as of
the dates they were received,  their actual and potential  value,  if any, could
not be  determined,  and that any  attempt to specify  such  valuation  with any
reasonable  assurance,  would have been flawed,  without  substance,  and highly
contingent  upon, and subject to, extremely high risks including but not limited
to the following factors: (i) the absence of a reliable,  stable, or substantial

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<PAGE>


trading  market for the Company's  common  stock,  the  possibility  that such a
market might never be developed, and the resultant minimal, or total absence of,
market  value  for any  substantial  block of common  stock;  (ii) the very high
intrinsic risks associated with early development stage businesses,  such as the
Company's;  (iii) the Company's  lack of sufficient  funds,  as at such issuance
dates,  to implement  its business plan and the absence of any  commitments,  at
such  times,   from  potential   investors  to  provide  such  funds;  (iv)  the
restrictions  on transfer  arising out of the  absence of  registration  of such
shares; and (v) the uncertainty  respecting the Company's ability to continue as
a going concern (See the  discussions  included above, in "Existing and Proposed
Businesses" and "Market for the Company's Common Equity and Related  Stockholder
Matters").

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
   AND CHANGE-IN-CONTROL ARRANGEMENTS

EXECUTIVE AGREEMENTS
  AND SPECIAL COMPENSATION AGREEMENTS

1.  TERMS OF THE EXECUTIVE AGREEMENTS

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

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

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

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

Mr. Sanzaro5     June 15, 1998          November 23, 1999         US$175,000

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

Mr. Frechette    August 17, 1998        May 17, 1999              US$150,000

Mr. Ash          January 4, 1999        December 31, 2000         Note following

         Subsequent to fiscal 1999, Mr. Ash voluntarily  abrogated his Executive
Agreement  with the Company for purposes of entering into a new agreement  under
which his compensation would be in the form of shares. Under this new agreement,
Mr. Ash continues 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 extends to December
31, 2000 and is  renewable  by mutual  consent of the  Company and Mr. Ash.  Mr.
Ash's  compensation is payable only in shares of the Company,  thus permitting a
substantial  cash flow benefit to the Company.  Mr. Ash's  compensation  for the
sixteen-month period to end December 31, 2000 is established at 2,000,000 common
shares or such other  number of shares  which would be derived in the event of a
stock split or reverse stock split.

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

---------------
   5   MR.  SANZARO'S  EXECUTIVE  AGREEMENT  CANCELLED  AND  REPLACED AN EARLIER
       CONSULTING   AGREEMENT   BETWEEN  THE  COMPANY  AND  HIM  (SEE   "CERTAIN
       RELATIONSHIPS AND RELATED TRANSACTIONS").

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<PAGE>


         The Executive Agreements with Messrs.  Byrne, Muro, and Sanzaro and Ash
also  include  severance  provisions  which  provide,  among other  things,  for
severance  compensation  in the event that the  employment  of the  executive is
terminated  by the Company  other than for cause,  or by the executive for "good
reason", as that term is defined in the Executive  Agreements,  or pursuant to a
change in control of the Company.  The various Executive  Agreements provide for
severance  compensation,  as follows: (i) In the case of Messrs. Byrne, Sanzaro,
and Muro,  200% of the amount of the base salary for a period of twelve  months;
(ii)  In the  case  of  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 1,000,000 common shares of the Company.

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

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

         All  of  the  Executive  Agreements,   as  amended,  provide  that,  as
compensation,  and in lieu of  payment in cash of salary,  due  thereunder,  the
Company may issue and the respective executive officers will accept unregistered
shares of the  Company's  common  stock,  valued at fifty  percent  (50%) of the
average  of  the  bid  and  ask  prices  of  such   stock,   as  traded  in  the
over-the-counter market and quoted in the OTC Bulletin Board, during part or all
of the period in which the salary was earned under the Executive Agreement.  All
of the Compensation  Shares issued to Mr. Byrne and Mr. Muro are also subject to
the terms and conditions of certain stock restriction agreements between each of
them and the Company. Such stock restriction  agreements,  as amended on May 30,
1996 and May 1, 1997 (the "Amended Stock Restriction Agreements"),  provide that
shares  subject  to  such  agreements  may be  sold,  hypothecated,  donated  or
otherwise  disposed  of, in  accordance  with the Rules and  Regulations  of the
Securities Act of 1933, as amended, and, under certain  circumstances,  included
in a registration statement on Form S-8.

                                      107
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

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

                          PRINCIPAL SHAREHOLDERS TABLE

               NAME AND                     AMOUNT AND
TITLE          ADDRESS OF                   NATURE OF
OF             BENEFICIAL                   BENEFICIAL               PERCENT OF
CLASS          OWNER                        OWNERSHIP                CLASS
-----          ----------                   ----------               ----------

Common         Batholomew International     11,772,361(2)            9.95%
The Tirex      Investments, Ltd.
Corporation    P.O. Box 484
               Basel House
               108 Halkett Place
               St. Helier, Jersey JE4 5SS
               Chanel Islands

Common         Terence C. Byrne              2,079,873(3)            1.76%
The Tirex      466 Cote St. Antoine
Corporation    Westmount, Quebec
               H3Y 2G9
Class A
Common                                              34(4)              34%
Tirex
R&D

                                      108
<PAGE>
                    PRINCIPAL SHAREHOLDERS TABLE (CONTINUED)

               NAME AND                     AMOUNT AND
TITLE          ADDRESS OF                   NATURE OF
OF             BENEFICIAL                   BENEFICIAL               PERCENT OF
CLASS          OWNER                        OWNERSHIP                CLASS
-----          ----------                   ----------               ----------
Common         CG TIRE, INC.                13,804,830(5)              10%
The Tirex      The Continental General
Corporation    Tire Recycling Effort
               1800 Continental Blvd.
               Charlotte, NC 28273

Common         Frances Katz Levine           7,255,312(6)            6.13%
The Tirex      621 Clove Road
Corporation    Staten Island, NY 10310

Common         SH Developments               8,592,607               7.26%
               C/o Alton Management S.A.
               5/2 Jumpers Building
               Rosia Road
               Gibralter

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

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

SECURITY OWNERSHIP OF MANAGEMENT

         The following  table sets forth  information  as of September 17, 1999,
with respect to the beneficial  ownership of the Common Stock,  $.001 par value,
of the Company and the Class A common stock of the Company's  subsidiary,  Tirex
R&D by each of the executive officers and directors of the Company and Tirex R&D
and by all respective executive officers and directors as a group:

                         MANAGEMENT SHAREHOLDINGS TABLE

               NAME AND                     AMOUNT AND
TITLE          ADDRESS OF                   NATURE OF
OF             BENEFICIAL                   BENEFICIAL               PERCENT OF
CLASS          OWNER                        OWNER                    CLASS (1)
-----          ----------                   ----------               ----------
Common         Terence C. Byrne             16,949,036(3)            14.33%
The Tirex      466 Cote St. Antoine
Corporation    Westmount, Quebec
               H3Y 2G9

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

Common         Louis V. Muro                 4,121,448                3.48%
The Tirex      374 Oliver Avenue
Corporation    Westmount, Quebec
               Canada H3Z 3C9

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

Common         Louis V. Sanzaro              4,918,911                4.16%
The Tirex      1497 Lakewood Road
Corporation    Toms River, NJ 08755

Common         John L. Threshie, Jr.
The Tirex      200 Lansdowne,
Corporation    Westmount, Quebec
               Canada, H3Z 3E1                  81,271                    *
                                      109
<PAGE>
                   MANAGEMENT SHAREHOLDINGS TABLE (CONTINUED)

               NAME AND                     AMOUNT AND
TITLE          ADDRESS OF                   NATURE OF
OF             BENEFICIAL                   BENEFICIAL               PERCENT OF
CLASS          OWNER                        OWNER                    CLASS (1)
-----          ----------                   ----------               ----------
Common         John G. Hartley               1,254,567                1.06%
The Tirex      7/9 Boulevard D'Italie
Corporation    Monte Carlo MC 98000
               Monaco


Common         Michael Ash                   1,210,309                1.02%
The Tirex      310 Montee Sabourin
Corporation    St. Bruno, Quebec
               Canada, J3V 4P6


Common         Henry P. Meier                  410,000                    *
The Tirex      1904 Waverly Place
Corporation    Oakhurst, New Jersey 07755


Common         All directors and            28,945,542               24.47%
The Tirex      officers as a group
Corporation    (7 persons)

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



* PERCENTAGES LESS THAN 1% NOT SHOWN

NOTES:

(1) THE  PERCENTAGES  LISTED  IN THE  TABLES  ARE  CALCULATED  ON THE  BASIS  OF
118,481,528  SHARES  OF THE  COMMON  STOCK,  $.001  PAR  VALUE,  OF THE  COMPANY
OUTSTANDING  AS OF NOVEMBER  23, 1999,  WITH THE  FOLLOWING  EXCEPTION:  (A) THE
PERCENTAGE DEEMED TO BE BENEFICIALLY OWNED BY CG TIRE, INC. IS CALCULATED ON THE
BASIS OF 118,481,528  SHARES OF COMMON STOCK  CURRENTLY  ISSUED AND  OUTSTANDING
PLUS 131,782,608  SHARES OF COMMON STOCK WHICH, CG TIRE HAS THE RIGHT TO ACQUIRE
PURSUANT TO ITS OPTION WITHIN 60 DAYS FROM THE DATE OF THIS REPORT (SEE,  BELOW,
FOOTNOTE 5 TO THIS TABLE)

(2) BARTHOLOMEW  INTERNATIONAL  INVESTMENTS  LTD.  IS OWNED  BY THE  BARTHOLOMEW
TRUST, THE BENEFICIARIES OF WHICH ARE TERENCE C. BYRNE, HIS SPOUSE,  AND HIS TWO
SONS.

(3) INCLUDES:  (I)  2,009,990  SHARES HELD OF RECORD BY MR. BYRNE AS OF FEBRUARY
11,  1999;  AND (II) 69,883  SHARES HELD OF RECORD BY MR.  BYRNE'S  WIFE,  DARLA
SAPONE  BYRNE,  OVER WHICH  SHARES MR.  BYRNE HAS VOTING  POWER  PURSUANT  TO AN
IRREVOCABLE  PROXY GRANTED TO HIM ON SEPTEMBER 27, 1996; (III) 11,772,361 SHARES
HELD  OF  RECORD  BY  BARTHOLOMEW  INTERNATIONAL  INVESTMENTS,  LTD.;  AND  (IV)
3,096,802 SHARES OWNED BY THE NAIS CORPORATION,  OVER WHICH SHARES MR. BYRNE HAS
VOTING POWER PURSUANT TO AN IRREVOCABLE  PROXY GRANTED TO HIM IN CONNECTION WITH
THE DECEMBER 18, 1998  SETTLEMENT OF A LAWSUIT  BROUGHT BY THE NAIS  CORPORATION
AGAINST THE COMPANY (SEE ITEM 3 OF THIS REPORT, "LEGAL PROCEEDINGS");

                                      110
<PAGE>


(4) MESSRS.  BYRNE  AND MURO HOLD ALL  SHARES OF TIREX R&D CLASS A COMMON  STOCK
PURSUANT  TO THE TERMS OF A  SHAREHOLDERS  AGREEMENT  AMONG THEM AND THE COMPANY
(THE  "TIREX  R&D  SHAREHOLDERS  AGREEMENT"),  PURSUANT  TO WHICH  THEY  WILL BE
OBLIGATED TO TRANSFER ALL SUCH SHARES TO THE COMPANY,  FOR NO CONSIDERATION,  ON
MAY 2, 2001,  UNLESS THE TERM OF SUCH AGREEMENT IS UNILATERALLY  EXTENDED BY THE
COMPANY.  THE  COMPANY  DOES NOT  INTEND  TO TAKE ANY  ACTIONS  OF ANY KIND WITH
RESPECT TO SUCH SHARES WHICH WOULD BE IN  VIOLATION  OF ANY CANADIAN  GOVERNMENT
REGULATIONS  GOVERNING TAX AND OTHER FINANCIAL INCENTIVES WHICH MAY BE AVAILABLE
TO TIREX R&D. THE TERMS OF THE TIREX R&D SHAREHOLDERS AGREEMENT ARE DISCUSSED IN
MORE DETAIL, BELOW, IN "CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS",  UNDER
THE CAPTION "TRANSFER OF 17% OF TIREX R&D SHARES FROM MR. FORBES TO MR. BYRNE."

(5) INCLUDES  13,804,830  SHARES  WHICH CG TIRE,  INC.  (CGT)  HAS THE  RIGHT TO
ACQUIRE AT ANYTIME  PRIOR TO APRIL 23, 2000 PURSUANT TO AN OPTION TO PURCHASE AT
A PER SHARE PRICE EQUAL TO FIFTY  PERCENT  (50%) OF THE AVERAGE OF THE FINAL BID
AND ASK PRICES OF THE COMMON STOCK OF TIREX, AS QUOTED IN THE OTC BULLETIN BOARD
DURING THE TEN BUSINESS DAYS PRECEDING THE DATE OF A NOTICE OF EXERCISE GIVEN BY
THE CG TIRE,  ALL,  OR ANY PART OF, THE NUMBER OF SHARES OF THE COMMON  STOCK OF
TIREX WHICH WOULD  CONSTITUTE  TEN  PERCENT,  UPON THEIR  ISSUANCE  (10%) OF THE
COMMON  STOCK OF TIREX,  ISSUED AND  OUTSTANDING  AT THE DATE OF  EXERCISE  (THE
"OPTION"),  ON A FULLY  DILUTED  BASIS.  THE CGT OPTION WAS AMENDED AT OR AROUND
AUGUST 13, 1997 AND MAY 18, 1998. THE OPTION,  WHICH HAS A THREE-YEAR  TERM, WAS
GRANTED TO CGT ON APRIL 24, 1997,  IN  CONSIDERATION  OF CGT'S  AGREEMENT TO (I)
EXPLORE  WITH THE COMPANY  THE  POSSIBILITY  OF THE  COMPANY'S:  (A)  FURNISHING
GENERAL TIRE WITH ALL OR PART OF ITS 80-MESH CRUMB RUBBER  REQUIREMENTS  AND (B)
ESTABLISHING  LOCAL TIRE  RECYCLING  CENTERS  FOR THE PURPOSE OF  ACCEPTING  FOR
DISINTEGRATION,  SCRAP TIRES FROM GENERAL TIRE'S NETWORK OF INDEPENDENT DEALERS;
AND (II) ADVISE THE COMPANY WITH RESPECT TO GENERAL  TIRE'S  SPECIFICATIONS  FOR
ITS CRUMB RUBBER REQUIREMENTS, ANY FURTHER DEVELOPMENT OF SUCH SPECIFICATIONS IN
THE FUTURE, THE SUITABILITY OF THE TCS-1 PLANT FOR MEETING SUCH  SPECIFICATIONS,
AND THE FURTHER  DEVELOPMENT OF THE COMPANY'S  TECHNOLOGY IN  COORDINATION  WITH
CONTINENTAL TIRE'S PRODUCT DEVELOPMENT REQUIREMENTS. CGT HAS NOT, AS OF THE DATE
HEREOF, EXERCISED ANY PART OF THE OPTION.

(6) INCLUDES  1,808,061  SHARES HELD OF RECORD BY MS.  LEVINE'S  SPOUSE,  ROBERT
LEVINE, OVER WHICH SHARES MS. LEVINE DISCLAIMS ANY BENEFICIAL OWNERSHIP.

(7) PURSUANT TO THE SETTLEMENT OF A LAWSUIT  BROUGHT BY NAIS AGAINST THE COMPANY
ALL SHARES HELD OF RECORD BY NAIS ARE  SUBJECT,  FOR SO LONG AS THEY ARE HELD BY
NAIS OR ANY ASSIGNEE OF NAIS, TO A VOTING PROXY HELD BY TERENCE C.
BYRNE. (SEE FOOTNOTE 3 TO THIS TABLE AND ITEM 3.  "LEGAL PROCEEDINGS").

CHANGES IN CONTROL

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


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The following is a description of any transactions  during the last two
completed  fiscal  years,  the  current  fiscal year or any  presently  proposed
transactions,  to which the Company was or is to be a party, in which the amount
involved in such transaction (or series of transactions) was $60,000 or more (in
some  instances,  transactions  valued  at less  than  $60,000)  have  also been
included) and which any of the  following  persons had or is to have a direct or
indirect  material  interest:  (i) any  director  or  executive  officer  of the
Company;  (ii) any person who owns or has the right to acquire 5% or more of the
issued and outstanding common stock of the Company;  and (iii) any member of the
immediate family of any such persons.  The Company does not have any requirement
respecting the necessity for independent  directors to approve transactions with
related parties.  All transactions are approved by the vote or unanimous written
consent of the full board of directors or the  executive  committee of the board
of  directors,  which,  during the period  covered by this Report,  consisted of
Terence C. Byrne, John Hartley, and Louis V. Muro. On February 11, 1999, as part
of an overall  management  reorganization,  Mr.  Hartley  resigned from, and Mr.
Sanzaro was appointed to, the Executive Committee.  Mr. Sanzaro's resignation as
President  of  the  Company,  effective  November  23,  1999,  also  brings  his
resignation as a Member of the Executive Committee.  All members of the Board of
Directors,  individually and/or  collectively,  could have possible conflicts of
interest with respect to transactions with related parties.

                                      111
<PAGE>


ISSUANCE OF STOCK IN LIEU OF SALARIES AND UNREIMBURSED EXPENSES

         During the years ended June 30, 1998 and 1999, the Company's  executive
officers and,  since  December 22, 1996,  its in-house  corporate and securities
counsel,  Frances Katz Levine have waived substantial portions of their salaries
and unreimbursed  expenses made by them on behalf,  and for the account,  of the
Company, and have accepted shares of the Company's common stock in lieu thereof.
In connection  therewith;  shares have been issued for the periods  indicated as
follows:


YEAR ENDED JUNE 30, 1997

         For the fiscal  quarter  ended  September  30,  1996,  Mr. Byrne waived
payment of  $51,769,  Ms.  Levine  waived  payment of  $31,062,  Mr. Muro waived
payment of $29,324,  and Mr.  Threshie  waived payment of $9,945.  In connection
therewith, on September 30, 1996, the Company authorized the issuance of 329,738
shares to Mr. Byrne,  197,847 shares to Ms. Levine,  186,777 shares to Mr. Muro,
and 62,392 shares to Mr. Threshie.  The number of shares issued at such time was
calculated  on the basis of 50% of the  average of the bid and ask price for the
Company's  stock  (50% of $.314 or  approximately  $.157 per  share)  during the
three-month  period ended  September  30, 1996.  On April 28, 1997,  the Company
authorized the issuance to Vijay Kachru, who was an officer of the Company until
February 11, 1999,  of 32,396  shares in lieu of $5,475 in salary  waived by her
for services  performed during the month of September 1996. The number of shares
issued to Ms.  Kachru was  calculated on the basis of the price of the Company's
common stock during the quarter ended September 30, 1996.

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

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

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


YEAR ENDED JUNE 30, 1998

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

                                      112
<PAGE>


issued at 50% of the average  market price of the  Company's  common  stock.  In
correction of the foregoing error, on April 15, 1998, the Company authorized the
issuance of additional shares, as follows:  336,352 to Mr. Byrne, 151,309 to Mr.
Muro, 15,512 to Mr. Threshie, 47,690 to Ms. Kachru, and 206,379 to Ms. Levine.

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

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

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

                                      113
<PAGE>


         On April 20, 1998,  in  consideration  of executive  services  rendered
under the terms of his employment  agreement and  unreimbursed  expenses paid by
him for the account and on behalf of the Company,  during the  six-month  period
which  commenced  on July 1, 1997 and ended on December  31,  1997,  the Company
issued  597,966  shares of its  Common  Stock to Alan  Crossley,  the  Company's
Managing Director of European Market Development. For purposes of such issuance,
the shares were valued at $0.1475 per share, which value was equal to 50% of the
average of the bid and ask price for the  common  stock  during the period  when
such  unpaid  salary and  expenses  were earned and  incurred,  as traded in the
over-the-counter  market and quoted in the OTC Bulletin  Board. On May 29, 1997,
Mr.  Crossley,  through  GAPCO,  Inc., a  corporation  under his  control,  also
accepted an additional  84,658  shares of the Company's  common stock as part of
the  compensation  due to him  under his  consulting  agreement.  (See  "Certain
Relationships  and Related  Transactions - Consulting and Employment  Agreements
with Alan Crossley").  In consideration of executive services rendered under the
terms of his employment agreement and unreimbursed  expenses paid by him for the
account and on behalf of the Company during the six-month period which commenced
on January 1, 1998 and ended on June 30, 1998, the Company paid Mr.  Crossley in
cash. The unreimbursed  expenses incurred by Mr. Crossley for the account and on
behalf of the Company  during the twelve  month period ended June 30, 1998 which
were  subsequently  repaid to Mr.  Crossley in  connection  with his  employment
agreement, in a combination of cash and stock, aggregated to Cdn$115,000.


YEAR ENDED JUNE 30, 1999

         For the three month period ended  September 30, 1998,  Mr. Byrne waived
payment of  $28,486;  Ms.  Levine  waived  payment of  $41,492;  Mr. Muro waived
payment of $14,763;  Mr.  Threshie  waived  payment of $325;  Ms.  Kachru waived
payment of $338; and Mr. Sanzaro waived payment of $43,750. In December 1998 the
Company  authorized the issuance of 269,589 shares to Mr. Byrne,  392,679 shares
to Ms. Levine;  139,716 shares to Mr. Muro; 3,076 shares to Mr. Threshie;  3,195
shares to Ms. Kachru;  and 414,046 shares to Mr.  Sanzaro.  The number of shares
issued at such time was calculated on the basis of 50% of the average of the bid
and ask price for the Company's  common stock (50% of $.2113293 or approximately
$.1056646 per share) during the three month period ended September 30, 1998.

         For the  three-month  period ended  December 31, 1998, Mr. Byrne waived
payment of $34,201,  Ms.  Levine  waived  payment of $23,500 and Mr. Muro waived
payment of $18,259,  Mr.  Threshie  waived  payment of $787,  Ms.  Kachru waived
payment of $539, Mr. Sanzaro waived payment of $43,750 and Mr.  Frechette waived
payment of $13,060

         For the three month  period  ended March 31,  1999,  Mr.  Byrne  waived
payment of $41,395,  Ms. Levine  waived  payment of $23,250 in respect of salary
and  $36,825 in respect of expenses  for the  six-month  period  ended March 31,
1999, Mr. Muro waived payment of $18,523, Mr. Threshie waived payment of $2,203,
Ms. Kachru waived  payment of $2,087,  Mr.  Sanzaro waived payment of $43,750 in
respect of salary and $47,366 in respect of expenses for the eight-month  period
ended February 1999, Mr.  Frechette waived payment of $13,432 and Mr. Ash waived
payment of $19,678 In connection  with the cash  payments  waived for the second
and third quarters of fiscal 1999, on April 6, 1998,and in respect of the period
from October 1, 1998 to March 15, 1999, with the exception of the period covered
for the  expenses of Mr.  Sanzaro,  which period was a  nine-month  period,  the
Company  authorized the issuance of 858,030 shares to Mr. Byrne,  970,143 shares
to Ms.  Levine,  417,676  shares to Mr.  Muro,  34,320  shares to Mr.  Threshie,
1,297,748  shares to Mr.  Sanzaro,  301,045 shares to Mr.  Frechette and 201,145
shares to Mr. Ash, not including the signing bonus of 1,000,000 to Mr. Ash which
was  issued on the same  date..  The  number  of shares  issued at such time was
calculated  on the basis of 50% of the  average of the bid and ask price for the
Company's stock or approximately  $0.0882 per share) during the six-month period
ended March 31, 1999,  with the exception of the 1,000,000  shares issued to Mr.
Ash as a signing bonus which were issued at $0.09125 per share.

         For the  three-month  period  ended June 30,  1999,  Mr.  Byrne  waived
payment of $72,916,  Ms. Levine waived payment of $43,750 for salary and $29,310
for expenses, Mr. Muro waived payment of $43,750, Mr. Threshie waived payment of
$601,  Ms. Kachru waived  payment of  $18,958.22,  Mr. Sanzaro waived payment of
$43,750,  Mr.  Frechette  waived payment of $8,854 and Mr. Ash waived payment of
$33,218.  In  connection  therewith,  in June 1999 the  Company  authorized  the
issuance of 903,294 shares to Mr. Byrne; 1,074,861 shares to Ms. Levine; 541,976
shares to Mr. Muro; 2,901 shares to Mr. Threshie;  219,175 shares to Ms. Kachru;
632,306 shares to Mr. Sanzaro, 99,057 shares to Mr. Frechette and 404,818 shares
to Mr. Ash. The number of shares issued at such time was calculated on the basis
of 50% of the average of the bid and ask price for the  Company's  common  stock
(50% of $.18266 or  approximately  $.09133  per  share)  during the three  month
period ended June 30, 1999.

                                      114
<PAGE>


LOAN TRANSACTIONS WITH TERENCE C. BYRNE AND AFFILIATED ENTITY

         On several  occasions during the fiscal year ended June 30, 1999 and in
the period subsequent thereto,  the Company required immediate cash infusions to
meet its financial obligations. To assist the Company on such occasions, Terence
C. Byrne,  or an entity with which Mr.  Byrne is  affiliated,  made loans to the
Company, as follows:

         OCTOBER  27, AND  NOVEMBER  30,  1998  LOANS TO COMPANY  AND MARCH 1999
INVESTMENT  IN THE  COMPANY On  October  27,  1998,  at the behest of Terence C.
Byrne,  Bartholomew   International   Investments  Limited  ("Bartholomew"),   a
corporation  owned by The Bartholomew  Trust, the beneficiaries of which are Mr.
Byrne and his spouse and  children,  made a loan to the Company in the amount of
$150,000. The loan was made pursuant to the Company's promissory note which bore
interest  at an annual  rate of 2% over the Bank of  Montreal's  Prime  Rate and
which was due and payable on July 26, 1999. On or about  November 30, 1998,  Mr.
Byrne  personally lent the Company an additional  $14,000 on identical terms. On
or about December 2, 1998, as part of the Company's negotiations to obtain short
term bank debt  financing,  Bartholomew  agreed to forego any  interest  on, and
repayment  in cash of, the  $150,000  loan,  and Mr.  Byrne agreed to forego any
interest  on,  and  repayment  in cash of,  the  $14,000  loan and both  parties
accepted in full satisfaction of such loan, unregistered shares of the Company's
common  stock valued at fifty  percent  (50%) of the average of the high ask and
low bid  prices of such  stock,  as traded in the  over-the-counter  market  and
quoted in the OTC  Electronic  Bulletin Board on December 1, 1998. In connection
therewith,  on December 2, 1998, the Company  authorized the issuance of a total
of  2,523,077  shares  of  this  corporation's   unregistered  common  stock  to
Bartholomew.  In March of, 1999, at the behest of Terence C. Byrne,  Bartholomew
invested the sum of $50,000 in the Company for which 677,966 shares were issued

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

CONSULTING AND EXECUTIVE AGREEMENTS WITH LOUIS SANZARO

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

         The Sanzaro  Consulting  Agreement  was  cancelled  and  replaced by an
employment  agreement between the parties (the "Sanzaro  Executive  Agreement"),
pursuant to which,  Mr. Sanzaro was appointed as the Company's Vice President of
Operations and Chief Operating Office.  Since February 11, 1999, Mr. Sanzaro has
served under the Sanzaro Executive Agreement as President of the Company.  For a
discussion in detail of the terms of the Sanzaro Executive Agreement,  reference
is made  to the  discussion  included  above,  under  "Management  -  Employment
Contracts and  Termination of Employment and  Change-in-Control  Arrangements" -
"Executive Agreements And Special Compensation Agreements").  Effective November
23, 1999, Mr.  Sanzaro  resigned as President of the Company to avoid a possible
future conflict of interest which could arise from his conclusion of a licencing
agreement with the Company under which companies controlled by Mr. Sanzaro would
have the right to market and manufacture  TCS-1 systems for the US market. As of
November  23,  1999,  Mr.  Sanzaro  is not  performing  any duties as COO of the
Company.

                                      115
<PAGE>


SHARES  ISSUED TO LOUIS  SANZARO IN  CONSIDERATION  OF  TERMINATING  RIGHT TO BE
APPOINTED EXCLUSIVE SALES REPRESENTATIVE IN NORTH AMERICA

         Prior to his being appointed an officer of the Company, Mr. Sanzaro and
the Company had agreed,  in principal that Mr. Sanzaro would be appointed as the
Company's  exclusive  sales  distributor  in the United  States and Puerto Rico.
Under the terms of the Sanzaro  Executive  Agreement,  Mr. Sanzaro  released the
Company from its  obligation to appoint him as its exclusive  sales  distributor
and to pay him  commissions  on sales of TCS-1 Plants made in the United  States
and Puerto Rico. In  consideration  for such release,  the Company issued to Mr.
Sanzaro 2,500,000 shares of its common stock.


AGREEMENTS WITH CUSTOMERS CONTROLLED BY LOUIS SANZARO

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

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

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

         It is the  present  intention  of the  parties to reform or rescind the
remaining  provisions  of the OTRP  Agreement  for the  purpose of  transferring
ownership of the entire First  Production  Model to the Company,  any one of its
existing  subsidiaries,  or to some other entity established jointly, or singly,
by the parties, or either one of them, for such purpose. The structure and terms
of the  ownership  of the First  Production  Model have not yet been  finalized.
However, in connection therewith, on December 16, 1998, the Company entered into
two sale and  lease-back  transactions  by and among the  Company,  North  Shore
Leasing &  Funding  Inc.  ("NLFI"),  and an  affiliate  of OTRP,  Ocean  Utility
Contracting,  Inc. ("OUCI").  Such transactions consisted of the Company's sales
to NLFI of the single  fracturing mill and the single freezing tower,  which are
components of the TCS-1 Plant installed at the Company's  Montreal  facility and
the lease back of such components to OUCI. The Company and OUCI have agreed that
all of OUCI's  rights  under the leases  will be assigned to the Company and the
Company will assume all of OUCI's  liabilities  thereunder.  Both leases provide
that at the end of the lease  term,  the lessee  will have the right to purchase
the leased  equipment  for $1.00.  Such right to  purchase  will be  included in
OUCI's  assignment  to the Company of its rights under the said leases (see this
Item 1.  "Existing and Proposed  Businesses - Proposed  TCS-1 Plant  Operations:
Sales of Rubber Crumb and Manufacture  and Sale of Finished  Products" under the
subcaption, "Proposed Ownership,  Establishment, and Operation of Tirex Advanced
Products Plant").

                                      116
<PAGE>


LOANS TO LOUIS SANZARO AND AFFILIATE

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

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


EXTENSION OF EXERCISE PERIOD OF OPTION HELD BY JOHN G. HARTLEY

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

         On May 11, 1999,  Mr. Hartley paid $40,000 under this option to acquire
1,234,567  common  shares of the Company at a price equal to one-third of market
value. The remainder of the option was allowed to expire by Mr.
Hartley.


TRANSFER OF 17% OF TIREX R&D SHARES FROM KENNETH J. FORBES TO TERENCE C. BYRNE.

         As discussed  above, in "Existing and Proposed  Businesses",  under the
caption  "Canadian  Operations",  in May of 1995, in order to take  advantage of
such certain financial  incentives,  the Company formed a Canadian  corporation,
3143619  Canada  Inc.  (referred  to herein as "Tirex  R&D") in the  Province of
Quebec,  Canada, for the purpose of completing all research and development work
on the first production  model of the TCS-1 Plant and thereafter  serving as the
Company's  manufacturing  arm.  There are a total of one hundred shares of Tirex
R&D stock  issued and  outstanding.  These shares are held of record as follows:
(i) 49% by the company;  (ii) 34% by Terence Byrne;  (iii) 17% by Louis V. Muro.
Messrs. Byrne and Muro are Canadian residents and, therefore, Tirex R&D has been
deemed to be eligible for Canadian government sponsored financial incentives.

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

                                      117
<PAGE>


EMPLOYMENT AGREEMENT WITH MS. LEVINE

         From January 18, 1995 through and including  December 21, 1996, Frances
Katz Levine was  employed by the Company as its  Secretary  and General  Counsel
under the terms of an  employment  agreement  dated January 18, 1995 (the "First
Levine  Employment  Agreement").  On December 22, 1996, Ms. Levine  resigned her
positions as Secretary,  General Counsel,  and as a Director of the Company. Her
resignation  was not caused by any  disagreement  with the Company on any matter
relating to the Company's  operations,  policies,  or  practices.  Following her
resignation  from the  foregoing  positions,  Ms.  Levine  has  continued  to be
employed by the Company as its in-house  Corporate and United States  Securities
Counsel  pursuant to the terms of her employment  agreement,  dated December 22,
1996  (the  "Second  Levine  Employment  Agreement").  The  Principal  terms and
conditions of the First and the Second Levine Employment Agreements,  other than
the  commencement  and  termination  dates and the positions and exact nature of
duties and responsibilities,  are essentially  identical,  except also for terms
which were added in order to insure that  benefits  and rights  earned under the
First  Employment  Agreement  would not be lost to Ms.  Levine  perforce  of the
foregoing  changes.  On May 1, 1997, the Second Levine Employment  Agreement was
amended to explicitly  state the original  intent of the parties that Ms. Levine
would remain eligible to receive a discretionary bonus for each year (or portion
thereof)  during which Ms.  Levine had served as Secretary  and General  Counsel
under the First Levine  Employment  Agreement.  Both the First and Second Levine
Employment  Agreements  provide  for  an  annual  salary  of  $150,000  and  the
reimbursement  of  business  related  expenses.  The  Second  Levine  Employment
Agreement,  which is currently in effect,  has a term which  expires on December
21,  2000.  Such  agreement  provides  for the  payment  of  bonuses at the sole
discretion of the Board of Directors  based upon a performance  evaluation.  The
Second Levine Employment Agreement also contains severance provisions similar to
those  contained  in the  Executive  Agreements  between the Company and each of
Terry  Byrne,  Lou  Muro  and Lou  Sanzaro.  It also  provides,  in light of the
Company's  cash  position,  that the Company  may, in lieu of payment in cash of
salary and reimbursable  expenses,  issue to Ms. Levine,  unregistered shares of
the  Company's  common  stock,  valued at 50% of the  average of the bid and ask
prices of such stock, as traded in the over-the-counter market and quoted in the
OTC Bulletin  Board,  during part or all of the period  during which such salary
was earned or such expenses were incurred.  Ms. Levine,  and her partner,  Scott
Rapfogel,  the Assistant  General  Counsel to the Company,  pursuant to amicable
discussions  with  Management,  resigned from their positions  effective July 1,
1999.  Severance  compensation was paid in the form of shares to each individual
in respect of shares for unpaid  compensation  and for severance  payments.  Ms.
Levine was issued 5,485,714 shares in total and Mr. Rapfogel received  4,022,857
shares in total.


EXTENSION OF EMPLOYMENT AGREEMENTS WITH MR. BYRNE AND MR. MURO

         The Company is a party to employment  agreements with Terence C. Byrne,
chairman of the board of  directors  and CEO of the  Company,  and with Louis V.
Muro, the Company's vice president in charge of engineering. On May 1, 1997, the
parties  amended  these  employment  agreements  so as to extend the term of Mr.
Byrne's  agreement  until  December  31,  2003 and Mr.  Muro's  agreement  until
December 31, 2000. No other changes were made pursuant to these amendments.  For
a  discussion  in more  detail  of the  terms and  conditions  of the  Company's
employment  agreements  with Mr.  Byrne and Mr.  Muro,  reference is made to the
information  contained above in "EXECUTIVE  COMPENSATION - EMPLOYMENT  CONTRACTS
AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS."


EXECUTIVE AGREEMENT WITH LOUIS SANZARO.

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

                                      118
<PAGE>


EXECUTIVE AGREEMENT WITH JEAN FRECHETTE.

         On July 24,  1998 the Company and The Tirex  Corporation  Canada,  Inc.
("Tirex  Canada")  entered into an employment  agreement  with Jean  Frechette ,
pursuant  to which  Mr.  Frechette  was  employed  as the  president  and  chief
operating  officer of Tirex  Canada  from  August 17,  1998 until May 1999.  The
agreement is for a five year term ending August 16, 2003 and provides for salary
compensation  at the annual rate of $150,000  along with a car allowance of $500
Canadian per month.  The  employment  agreement also included a signing bonus of
1,000,000  shares of the Company's common stock. For a discussion in more detail
of the  Frechette  Executive  Agreement,  reference  is made to the  information
contained   above  in  "Executive   Compensation  -  Employment   Contracts  and
Termination of Employment and  Change-in-Control  Arrangements".  Mr.  Frechette
resigned from his position on May 17, 1999.


EXECUTIVE AGREEMENT WITH JOHN L. THRESHIE, JR.

         On February 20, 1997, the Company entered into an employment  agreement
with John L. Threshie, Jr., pursuant to which Mr. Threshie is currently employed
as a vice president and as assistant  secretary of the Company.  Mr.  Threshie's
employment  agreement with the Company was made effective as of January 1, 1996,
the date when Mr.  Threshie  began  receiving  a salary  for  serving  as a vice
president.  The agreement was for a three-year term ending December 31, 1998 and
provided for compensation at the annual rate of $50,000.  Effective July 1, 1998
the salary  provisions  of the  agreement  were amended to provide for an annual
salary of $62,500 and as of December 31, 1998, it was further  amended to extend
the term of the  agreement to December 31,  1999.  From  December 22, 1996 until
February 11, 1999, Mr.  Threshie also served as secretary of the Company.  For a
discussion in more detail of the Executive Agreements,  reference is made to the
information  contained above in "Executive  Compensation - Employment  Contracts
and Termination of Employment and Change-in-Control Arrangements".


ISSUANCE OF STOCK TO MR. MURO AS COMPENSATION FOR PAST SERVICES

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

                                      119
<PAGE>


AMENDMENT OF STOCK OPTION HELD BY CG TIRE, INC.

         On April 24, 1997, the Company granted to CG TIRE, Inc. (CGT) an option
to purchase at a per share price equal to fifty  percent (50%) of the average of
the final bid and ask prices of the common  stock of the  Company,  as quoted in
the OTC  Bulletin  Board during the ten business  days  preceding  the date of a
notice of  exercise  given by the CG TIRE,  all,  or any part of,  the number of
shares of the common  stock of the Company  which would  constitute,  upon their
issuance,  ten  percent  (10%) of the common  stock of the  Company,  issued and
outstanding, on a fully diluted basis (the "CGT Option"). As of August 13, 1997,
the Company  agreed to amend the CGT Option with respect to the  purchase  price
for a certain  portion of the CGT Option.  On February 18,  1997,  CGT agreed to
further amend its Option to make it unexercisable prior to the effective date of
the registration  statement.  For a discussion in detail of the terms of the CGT
Option and the consideration  received by the Company therefor, see footnote (4)
to the Principal Shareholders Table,  included,  above in "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT".


CONSULTING AND EMPLOYMENT AGREEMENTS WITH ALAN CROSSLEY

         On July 1, 1997, the Company entered into an employment  agreement with
Alan Crossley (the "Crossley  Employment  Agreement"),  a former director of the
Company, pursuant to which, Mr. Crossley was appointed as the Company's Managing
Director of European Market Development.  This Agreement replaced and superseded
a  consulting  agreement  between the Company and Mr.  Crossley  (the  "Crossley
Consulting  Agreement").  The said Consulting Agreement had been entered into on
May 29, 1997 and had been made retroactively effective to January 15, 1997. Such
retroactive  effectiveness  reflected the time period during which Mr. Crossley,
directly and through GAPCO,  Inc., a corporation  controlled by Mr. Crossley had
actually  rendered services to the Company,  as its European Market  Development
Consultant.  The Crossley Consulting  Agreement provided for consulting services
consisting of advice and opinions to the Company concerning, and the undertaking
and effectuation of, activities necessary to establish and develop in Europe and
in India,  markets for the TCS-1 Plant and for rubber crumb and the  preparation
of market development  studies for the Iberian Peninsula and India. The Crossley
Consulting  Agreement  was for a two-year  term and provided  for the  following
compensation:  (i)  upon  completion  of  the  Iberian  Peninsula  Market  Study
conducted  by  GAPCO,  Inc.,  $40,000  (Canadian)  to be  paid in  either,  or a
combination  of, cash or  unregistered  shares of the  Company's  common  stock,
valued at $.17 per  share;  (ii) upon  completion  of the  Indian  Market  Study
conducted  by  GAPCO,  Inc.,  $40,000  (Canadian)  to be  paid in  either,  or a
combination  of, cash or  unregistered  shares of the  Company's  common  stock,
valued  at $.17 per  share,  and (ii) an  expense  allowance  of up to  $115,000
(Canadian)  or  approximately  US  $80,500.  Although  the  Crossley  Consulting
Agreement also provided for an annual salary of $75,000 (Canadian),  such salary
was not to commence  until July 1, 1997.  Because the  Consulting  Agreement was
replaced by the Crossley Employment  Agreement effective as of January 15, 1997,
no salary  payments were ever due or paid under the said  Consulting  Agreement.
However, pursuant to the terms of the Crossley Consulting Agreement, payments of
an aggregate of $80,000  (Canadian) were paid to Mr. Crossley,  in a combination
of cash and common stock,  in respect of certain  market studies for the Iberian
Peninsula  and  India  conducted  by  GAPCO,  Inc.  The  stock  portion  of such
compensation  was paid on May 29, 1997 with the issuance of 84,658 shares of the
Company's common stock. On April 6, 1999, Mr. Crossley was issued 649,576 shares
of the  Company at a price equal to $0.0935  per share in  compensation  for his
having  waived cash  payment of $60,751  due to him for  salaries  and  expenses
incurred during fiscal 1999.

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

                                      120
<PAGE>


BONUSES AND ADDITIONAL COMPENSATION TO EMPLOYEES

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

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

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

                                      121
<PAGE>


ITEM 13.  EXHIBITS

FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

FINANCIAL STATEMENTS

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

     Consolidated Balance Sheet - June 30, 1999

     Consolidated Statements of Operations for the years ended June 30, 1998 and
       1999, and  cumulative  for the period from inception  (March 26, 1993) to
       June 30, 1999

     Consolidated Statements of Owners' Equity (Deficit) as of
        June 30, 1992 - 1999

     Consolidated Statements of Cash Flows for the years ended June 30, 1998 and
       1999 and  cumulative  for the period from  inception  (March 26, 1993) to
       June 30, 1999



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:
<TABLE>
<CAPTION>
                                                                                        EXHIBITS INCORPORATED
                                                                                        HEREIN BY REFERENCE,
                                                                                        EXHIBIT NO. AS FILED
                                                                                        WITH DOCUMENT
                                                                                        INDICATED
                                                                                        ---------------------
<S>      <C>                                                                            <C>
2.       (a) Agreement and Plan of Merger and
                  Reorganization, dated May 9, 1989 (1)                                 2
         (b) Certificate of Merger, filed with the
                  Secretary of State of Delaware on June 8, 1989 (5)                    2(b)
         (c) Certificate of Merger, filed with the
                  Secretary of State of New Jersey on June 8, 1989 (5)                  2(c)
         (d) Acquisition Agreement among the Company,
                  Patrick McLaren, Louis V. Muro and George
                  Fattell, dated March 26, 1993 (8)                                     2
         (e) Certificate  of  Merger,  of  Tirex  Acquisition  Corp and RPM
                  Incorporated  filed with the Secretary of State of Delaware on
                  January 20, 1998 (20)
         (f) Agreement and Plan of Merger
                  (Tirex Acquisition Corp. and RPM Incorporated)

3.       (a) Certificate of Incorporation filed August 19, 1987 (2)                     3(a)
         (b) Certificate of Amendment filed June 20, 1989 (5)                           3(b)
         (c) Certificate of Amendment filed March 10, 1993 (8)                          3
         (d) Certificate of Amendment filed December 5, 1995 (9)                        3(e)
         (e) By-Laws (2)                                                                3(b)
         (f) Certificate of Amendment filed August 11, 1997
</TABLE>
                                      122
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                            <C>
         (g) Certificate of Amendment filed February 3, 1998 (21)                       3
         (h) Certificate of Incorporation of Tirex Acquisition Corp., filed
                  with the Secretary of State of Delaware on
                  December 15, 1997 (20)                                                3(h)
         (k) Certificate of Amendment to the Certificate of Incorporation,
                  filed with the Secretary of State of Delaware on
                  July 10, 1998 (19)                                                    3

4.       (a) Form of Option to John Hartley for the purchase
                     of 20,000 shares of Preferred Stock (9)                            4(g)
         (b) Form of  Exchangeable  Option,  Dated  October 5, 1995,  to
                     Sharon Sanzaro for the purchase of 560,000
                     shares of common stock (9)                                         4(h)
         (c) Form of  Exchangeable  Option,  Dated  October 5, 1995,  to
                     Raymond Pirraglia for the purchase of 140,000
                     shares of common stock (9)                                         4(i)
         (d) Form of  Exchangeable  Option,  Dated  October 5, 1995,  to
                     Terry Bentley for the purchase of 100,000
                     shares of common stock (9)                                         4(j)
         (e) Form of  Exchangeable  Option,  Dated  January 1, 1996,  to
                     Raymond Pirraglia for the purchase of 43,750
                     shares of common stock(9)                                          4(k)
         (f) Form of  Exchangeable  Option,  Dated  January 1, 1996,  to
                     Terry Bentley for the purchase of 31,250
                     shares of common stock (9)                                         4(l)
         (g) Form of  Exchangeable  Option,  Dated  January 1, 1996,  to
                     Sharon Sanzaro for the purchase of 175,000
                     shares of common stock (9)                                         4(m)
         (h) Specimen Preferred Stock Certificate (9)                                   4(f)
         (i) Form of Exchangeable Option, Dated as of March 31, 1996, to
                     Raymond Pirraglia for the purchase of 43,750
                     shares of common stock (12)                                        4(n)
         (j) Form of Exchangeable Option, Dated as of March 31, 1996, to
                     Terry Bentley for the purchase of 31,250
                     shares of common stock (12)                                        4(o)
         (k) Form of Exchangeable Option, Dated as of March 31, 1996, to
                     Sharon Sanzaro for the purchase of 175,000
                     shares of common stock (12)                                        4(p)
         (l) Form of Exchangeable Option, Dated July 1, 1996, to Raymond
                     Pirraglia for the purchase of 43,750
                     shares of common stock (12)                                        4(q)
         (m) Form of Exchangeable  Option,  Dated July 1, 1996, to Terry
                     Bentley for the purchase of 31,250
                     shares of common stock (12)                                        4(r)
         (n) Form of Exchangeable  Option, Dated July 1, 1996, to Sharon
                     Sanzaro for the purchase of 175,000
                     shares of common stock (12)                                        4(s)
         (o) Form of Option,  Dated April 24, 1997 to CG TIRE, Inc. for the
                     purchase of up to 10% of the common stock
                     of the Company (17)                                                4(t)
</TABLE>

                                      123
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                            <C>
         (p) Amendment, Dated September 30, 1997, to GC TIRE, Inc.(20)
         (q) Amendment, Dated February 16, 1998, to CG TIRE, Inc(20)
         (r) Form of "Type A" Subordinated,
                  Convertible Debenture
         (s) Form of "Type B" Subordinated
                  Convertible Debenture (20)                                            4(t)
         (t) Form of "Type A" Warrant
         (u) Stock Purchase Warrant
                  Issued To Security Capital Trading, Inc.
         (v) Form of Amendment to "Type B" Debenture (20)                               4(w)
         (w) Amendment to CGT Option (20)                                               4(x)
         (x) Form of "Type A" Securities
                  Purchase Agreement
         (y) Form of "Type B" Securities Purchase Agreement (20)                        4(y)
         (z) Form of "Type C" Subscription and Registration
                  Rights Agreement (20)                                                 4(aa)
         (aa) Option To Purchase Common Stock, Issued to
                  Alan Epstein, dated April 13, 1998 (18)                               4.2
         (bb) Form of Amendment to "Type A" Subordinated,
                  Convertible Debenture

10.      (a) Executive Agreement, dated Jan 18, 1995,
                  between the Company and Terence C. Byrne (9)                          10(rr)
         (b) Stock  Restriction  Agreements,  dated Jan 18,  1995,  June 1,
                  1995, and July 31, 1995 between the Company
                  and Terence C. Byrne (9)                                              10(tt)
         (c) Stock  Restriction  Agreements,  dated Jan 18,  1995,  June 1,
                  1995, July 31, 1995 between the Company
                  and Frances Katz Levine (9)                                           10(uu)
         (d) License Agreement , dated as of July 3, 1995 between
                  the Company and Tirex Canada (9)                                      10(ggg)
         (e) Shareholders  Agreement,  dated as of July 3, 1995, as amended
                  February 8, 1996 among the Company,
             Tirex Canada, Kenneth J. Forbes, Terence C. Byrne,
                  and Louis V. Muro (9)                                                 10(hhh)
         (f) Amendment, dated August 27, 1997 to Shareholders Agreement,
                  dated as of July 3, 1995, as amended
                  February 8, 1996 among the Company,
                  Tirex Canada, Kenneth J. Forbes,
                  Terence C. Byrne, and Louis V. Muro(20)                               10(f)
         (g) Special Compensation Agreement, dated April 1, 1996,
                   between the Company and Frances Katz Levine (11)                     4.6
         (h) Amendment No. 1 dated May 30, 1996, to Executive
                  Agreement, dated Jan. 18, 1995, between the Company
                  and Terence C. Byrne (11)                                             4.7
         (i) Amendment No. 1 dated May 30, 1996, to Stock Restriction
                  Agreement, dated June 1, 1995, between the Company
                  and Terence C. Byrne (11)                                             4.9
         (j) Amendment No. 1 dated May 30, 1996, to Stock Restriction
                  Agreement, dated June 1, 1995, between the Company
                  and Frances Katz Levine (11)                                          4.9
         (k) Special Compensation  Agreements,  dated June 1, 1995, July
                  25, 1995, November 23, 1995, and March 18, 1996
                  between the Company and Terence C. Byrne (12)                         10(rrr)
         (l) Special  Compensation  Agreements,  dated November 15, 1995
                  and March 18, 1996, and April 1, 1996
                  between the Company and Louis V. Muro (12)                            10(ttt)
         (m) English translation of Agreement for Financial Assistance
                  for Technology Development between La Societe Quebecoise
                  de Recuperation et de Recyclage and
                  Tirex Canada Inc. (12)                                                10(vvv)
</TABLE>
                                      124
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                            <C>
         (n) Commitment,  dated  April  11,  1996,  from the  Industrial
                  Recovery Program for Southwest Montreal,
                  for a loan of up to $500,000 (Canadian) (12)                       10(www)
         (o) Amendment No. 1 to Stock Restriction Agreement
                  of January 18, 1995, dated May 30, 1996, between
                  the Company and Terence C. Byrne. (12)                             10(xxx)
         (p) Amendment No 1. to Stock  Restriction  Agreement of January
                  18, 1995, dated May 30, 1996,
                  between the Company and Frances Katz Levine. (12)                  10(yyy)
         (q) Financial Consulting Agreement, dated May 3, 1997,
                  between the Company and The Nais Corp. (15)                        10
                  between the Company and the Nais Corp.
         (r) Employment Agreement, effective as of January 1, 1996, between
                  the Company and John L. Threshie, Jr. (13)                         4.4
         (s) Employment Agreement, dated April 29, 1997,
                  between the Company and Vijay Kachru (17)                          10(cccc)
         (t) Amendment  No.2,  dated May 1, 1997,  to Stock  Restriction
                  Agreement of April 1, 1996, between the Company
                  and Louis V. Muro (17)                                             10(dddd)
         (u) Amendment No. 2, dated May 1, 1997, to Stock Restriction
                  Agreement of June 1, 1995 between the Company
                  and Terence C. Byrne (17)                                          10(eeee)
         (v) Amendment No. 2, dated May 1, 1997, to Stock Restriction
                  Agreement of June 1, 1995 between the Company
                  and Frances Katz Levine (17)                                       10(ffff)
         (w) Employment Agreement, dated December 22, 1997, between
                  the Company and Frances Katz Levine (17)                           10(gggg)
         (x) Amendment,  dated May 1, 1997,  to  Employment  Agreement of
                  December 22, 1996, between the Company and
                  Frances Katz Levine (17)                                           10(hhhh)
         (y) Amendment,  dated May 1, 1997, to  Employment  Agreement of
                  January 18, 1995, between the Company and
                  Terence C. Byrne (17)                                              10(iiii)
         (z) Amendment,  dated May 1, 1997 to  Employment  Agreement  of
                  January 1, 1996, between the Company and
                  Louis V. Muro (17)                                                 10(jjjj)
         (aa) Equipment Lease & Purchase  Agreement,  dated May 29, 1997,
                  between the Company and Oceans Tire  Recycling & Processing
                  Co.,  Inc.,  including  Royalty  Agreement and Crumb rubber
                  Brokerage Agreement, of even date
                  therewith, as Exhibits thereto (17)                                10(kkkk)
         (bb) Equipment Lease & Purchase  Agreement,  dated May 29, 1997,
                  between the Company and Ocean Ventures III, Inc., including
                  Royalty Agreement and Crumb rubber Brokerage Agreement,  of
                  even date therewith,
                  as Exhibits thereto (17)                                           10(llll)
         (cc) Equipment Lease & Purchase  Agreement,  dated July 8, 1997,
                  between the Company and Recycletron Inc., including Royalty
                  Agreement  and Crumb rubber  Brokerage  Agreement,  of even
                  date therewith,
                  as Exhibits thereto (17)                                           10(mmmm)
         (dd) Consulting Agreement, dated April 18, 1998, between the Company
                  and Alan Epstein(18)                                               4.1
         (ee) Consulting Agreement, dated January 28, 1998, between the Company
                  and Louis Sanzaro (20)                                             10(gg)
         (ff) Executive Agreement made as of July 23, 1998 between the
                  Company and Louis Sanzaro (19)                                     10.1
         (gg) Executive Agreement made as of July 24, 1998 among the Company,
                  The Tirex Corporation Canada Inc. and Jean Frechette (19)          10.2
         (hh) Employment Agreement made as of June 22, 1998 between
                  the Company and Scott Rapfogel (19)                                10.3
</TABLE>
                                      125
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                            <C>
         (ii) Agreement, dated December 11, 1998, between the Company
                  and IM2 Merchandising and Manufacturing, Inc. (22)                    10(ii)
         (jj) Consulting Agreement, dated April 1, 1998, between the Company
                  and Security Capital Trading, Inc. (22)                               10(jj)
         (kk) Offer of Federal Office of Regional Development (Quebec), dated
                  July 4, 1997, of repayable contribution of CA$95,000 for market
                  development studies and activities in the United States
                  (Project No. 0762) (22)                                               10(kk)
         (ll) Offer of  Federal  Office of  Regional  Development  (Quebec),
                  dated March 9, 1998,  of repayable  contribution  of CA$98,000
                  for international market development activities
                  (Project No. 1158) (22)                                               10(ll)
         (mm) Offer of  Federal  Office of  Regional  Development  (Quebec),
                  dated March 26, 1997, of repayable  contribution  of CA$20,000
                  for preparation of market development studies for India
                  (Project No. 0635) (22)                                               10(mm)
         (nn) Passenger  Car  Equipment  Lease & Purchase  Agreement,  dated
                  August 19, 1998, between the Company and ENERCON
                  American Distribution Ltd.(22)                                        10(nn)
         (oo) Truck Tire Equipment Lease & Purchase Agreement,  dated August
                  19, 1998, between the Company and ENERCON
                  American Distribution Ltd.(22)                                        10(oo)
         (pp) Royalty Agreement, dated August 19, 1998,
                  between the Company and ENERCON American Distribution Ltd.(22)        10(pp)
         (qq) Rubber Crumb Purchase Option Agreement, dated August 19, 1998,
                  between Registrant and ENERCON American Distribution Ltd. (22)        10(qq)
         (rr) Purchase Rights Agreement, dated August 19, 1998,
                  between the Company and ENERCON American Distribution Ltd.(22)        10(rr)
         (ss) Passenger Car Equipment Lease & Purchase Agreement, dated
                  October 9, 1998,between the Company and ENERCON American
                  Distribution Ltd.(22)                                                 10(ss)
         (tt) Truck Tire Equipment Lease & Purchase Agreement, dated October
                  9, 1998, between the Company and ENERCON
                  American Distribution Ltd. (22)                                       10(tt)
         (uu) Royalty Agreement, dated October 9, 1998,
                  between the Company and ENERCON American Distribution Ltd.(22)        10(uu)
         (vv) Rubber Crumb Purchase Option Agreement, dated October 9, 1998,
                  between Registrant and ENERCON American Distribution Ltd. (22)        10(vv)
         (ww) Purchase Rights Agreement, dated October 9, 1998,
                  between the Company and ENERCON American Distribution Ltd.(22)        10(ww)
         (xx) Equipment Lease & Purchase Agreement, dated December 12, 1997,
                  between the Company and 750824 Alberta Ltd. (22)                      10(xx)
         (yy) European Market Development Consulting Agreement, dated May 29, 1997,
                  with Alan Crossley (22)                                               10(yy)
         (zz) Employment Agreement, dated July 1, 1997, with Alan Crossley (22)         10(zz)
         (aaa) Promissory Note, dated January 23, 1998, from the Company to
                  Terence C. Byrne in the amount of $102,000(22)                        10(aaa)
         (bbb) Promissory Note, dated October 27, 1998, from the Company to
                  Bartholomew International Investments Ltd. in the amount of
                  $150,000(22)                                                          10(bbb)
         (ccc) Release,  dated December 2, 1998, to Promissory  Notes,  dated
                  October 27, 1998 and November  30,  1998,  from the Company to
                  Bartholomew International Investments Ltd.
                  and Terence C. Byrne, respectively.(22)                               10(ccc)
         (ddd) Promissory Note, dated November 30, 1998, from the Company to
                  Terence C. Byrne in the amount of $14,000 (22)                        10(ddd)
         (eee) Promissory Note, dated April 8, 1998, from Louis V. Sanzaro to
                  the Company in the amount of $70,405.31(22)                           10(eee)
         (fff) Security and Pledge Agreement, dated April 8, 1998, between
                  Louis V. Sanzaro and the Company (22)                                 10(fff)
</TABLE>
                                      126
<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                            <C>
         (ggg) Amendment, dated September 5, 1998, to Promissory Note,
                   dated April 8, 1998, from Louis V. Sanzaro to the Company(22)        10(ggg)
         (hhh) Promissory Note, dated September 9, 1997, from Ocean Utility
                   Contracting Co., Inc. to the Company in the amount of $30,000(22)    10(hhh)
         (iii) Management  translation  of  Offer of Loan  Guarantee,  dated
                   January 16, 1998, from the Societe' de Developpement
                   Industrial du Quebec (original in French)(22)                        10(iii)
         (jjj) Loan Agreement, dated February 21, 1996, between Bank of Montreal
                   and the Company's subsidiary 3143619 Canada Inc.
                   ("Tirex R&D, Inc.")(22)                                              10(jjj)
         (kkk) Offer of Federal Office of Regional Development  (Quebec),  of
                   repayable  contribution  of CA$20,000  for market  development
                   studies for the Iberian peninsula
                   (Project No. 0526)(22)                                               10(kkk)
         (lll) Offer of Federal Office of Regional Development  (Quebec),  of
                   repayable  contribution  of CA$95,000  for market  development
                   activities for the Iberian peninsula
                   (Project No. 0761)(22)                                               10(lll)
         (mmm) Loan Agreement, dated May 7, 1999  between
                   the Scotiabank and the Company's subsidiary,
                   3143619 Canada, Inc. ("Tirex R& D, Inc.")
         (nnn) Management  translation of Offer of Loan Guarantee  dated June
                   9,  1999  from  GARANTIE-QUEBEC  (successor  to the  rights of
                   Societe' de  Developpement  Industrial du Quebec)  (orginal in
                   French)

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

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

21.      Subsidiaries of the Company(22)                                                21

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

99.      (a) Feasibility Study by Techtran:
                   Technology Transfer Institute (12)
</TABLE>

                                      127
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

                                      128
<PAGE>


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

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

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

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

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

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

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

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

         (22) Filed with the Securities  and Exchange  Commission as an exhibit,
numbered as indicated  above, to the Company's  annual report on Form 10-KSB for
the fiscal year ended June 30, 1998, which exhibits are  incorporated  herein by
reference.


REPORTS ON 8-K

     The Company filed current reports on Form 8-K on May 18, 1999 May 24, 1999.

                                      129
<PAGE>


                                   SIGNATURES

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

                                THE TIREX CORPORATION



                                By  /s/ TERENCE C. BYRNE
                                    --------------------------------------------
Date: December 2, 1999                  Terence C. Byrne, Chairman of the Board
                                        of Directors and Chief Executive Officer

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

PRINCIPAL EXECUTIVE OFFICER:

<S>                                           <C>                         <C>
  /s/ TERENCE C. BYRNE                        Chairman of the Board       December 2, 1999
 ---------------------                        of Directors and Chief
      Terence C. Byrne                        Executive Officer


PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:


  /s/ MICHAEL D.A. ASH                        Secretary, Treasurer,       December 2, 1999
 ---------------------                        and Chief Financial and
      Michael D.A. Ash                        Accounting Officer


A MAJORITY OF THE BOARD OF DIRECTORS:


  /s/ TERENCE C. BYRNE                        Director                    December 2, 1999
 ---------------------
      Terence C. Byrne


  /s/ LOUIS SANZARO                           Director                    December 2, 1999
 ---------------------
      Louis Sanzaro


  /s/ LOUIS V. MURO                           Director                    December 2, 1999
 ---------------------
      Louis V. Muro
</TABLE>

                                           130
<PAGE>


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



       No annual report or proxy  materials  have been sent to  security-holders
during the fiscal year ended June 30, 1999 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.

                                      131
<PAGE>


                                    EXHIBITS

                     INDEX OF EXHIBITS BEING FILED HEREWITH


                                                                            Page
                                                                            ----


10.
         (mmm)    Loan Agreement, dated May 7, 1999  between
                  Scotiabank and the Company's subsidiary,
                  3143619 Canada, Inc. ("Tirex R& D, Inc.")

         (nnn)    Management translation of Offer of Loan Guarantee dated June
                  9, 1999 from GARANTIE-QUEBEC (successor to the rights of
                  Societe' de Developpement Industrial du Quebec) (orginal in
                  French)

23.               Consent of Independent Auditor

                                      132