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, 1997

          [ ]  Transition  report  under  Section 13 or 15(d) of the  Securities
               Exchange Act of 1934 
               For the  transition  period from ________ to _________

                       Commission File Number 33-17598-NY

                              The Tirex Corporation
                 (Name of Small Business Issuer in its charter)

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

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

                                 (514) 878-0727
              (the Company's telephone number, including area code)

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

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

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

                                      NONE

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

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

<PAGE>

                                       -0-
               (Issuer's revenues for its most recent fiscal year)

                                   $7,719,202
                   (Aggregate market value of the voting stock
                     held by non-affiliates of the Company)

                       38,774,625 shares, $.001 par value
 (Number of shares outstanding of each of the Company's classes of common stock,
                            (as of October 10, 1997)

         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

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

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

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

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

                Quarterly Reports of Forms 10-QSB of the Company
          for the quarters ended September 30, 1996, December 31, 1996,
                               and March 31, 1997

                   Current Reports on Forms 8-K of the Company
  Dated, December 22, 1996, January 10, 1997, February 5, 1997, March 7, 1997,
                          June 24, 1997, July 11, 1997


<PAGE>

ITEM 1.  DESCRIPTION OF BUSINESS

Business Development

     The  Tirex  Corporation   (hereinafter,   the  "Company"  or  "Tirex")  was
incorporated in Delaware on August 19, 1987 under the name "Concord Enterprises,
Inc." Its name was changed to  "Stopwatch  Inc." on June 20,  1989(1) and to the
"Tirex  America  Inc." on March 10, 1993.  On July 11,  1997,  during the period
subsequent  to that  covered  herein,  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,  directly and through its  subsidiary
"Tirex  Canada  Inc.",(2)  is presently  engaged in the business of  developing,
manufacturing,  selling, and leasing a cryogenic tire disintegration system (the
"TCS-1  System") which  integrates  proprietary  disintegration  technology with
established  conventional  mechanical  and  technologies.  It is also  currently
conducting  negotiations  with C.G.  Tire,  Inc., a  wholly-owned  subsidiary of
Continental General Tire Inc., respecting a five-year tire shredding project for
the province of Quebec. In addition, the Company is exploring, with the Montreal
operation  of Solutia  Inc.  (a  successor  to part of the  business of Monsanto
Canada Inc.),  the feasibility of expanding the Company's  operations to include
thermoplastic/rubber  compounding  operations  at the former  Monsanto  Montreal
facility.

     The Company  acquired its proprietary tire  disintegration  technology (the
"Tirex Technology") in the fall of 1992(3).  Since the beginning of 1993, it has
devoted the bulk of its efforts to completing  the design and  development,  and
commencing  the  manufacture,  of the TCS-1  System and  raising  the  financing
required for such  project.  In August of 1995,  the Company moved its corporate
headquarters to Quebec and formed its subsidiary, 3143619 Canada Inc. (known and
doing  business,   and  hereinafter   referred  to,  as  "Tirex  Canada  Inc.").
Construction of the first full scale prototype of the TCS-1 began in February of
1997 and is expected to be

----------
     (1) For a discussion of the merger with Stopwatch,  the healthcare business
which was intended, but was never commenced,  by Stopwatch,  and the reasons for
the termination of the Stopwatch  business plan,  reference is made to Item 1 of
Registrant's  annual report on Form 10-K for the fiscal year ended  December 31,
1988,  its transition  report on Form 10-K for the transition  period ended June
30,  1989,  and its annual  report on Form 10-KSB for the fiscal year ended June
30, 1995.

     (2) Unless context necessarily requires otherwise,  references  hereinafter
to the "Company" refer to The Tirex  Corporation  and its  subsidiary,  Canadian
Corporation   3143619  (known  and  doing  business  as  "Tirex  Canada  Inc."),
collectively.

     (3) For  discussions  in detail of the Company's  acquisition  of the Tirex
Technology and the associated  corporate and management changes which took place
between  the  autumn  of 1992  and  January  of 1995,  reference  is made to the
discussions  thereof included in Item I of the Company's annual reports of Forms
10-KSB for the fiscal years ended June 30, 1995 and June 30, 1996.


                                       3
<PAGE>

completed by the end of November  1997.  The Company  began taking orders on the
TCS-1 System in October of 1995 and, to date,  has received  deposits of $25,000
each on five Systems.  The Company has located and entered into written and oral
agreements  with  various  engineering  and  manufacturing   subcontractors  and
component  suppliers,  which Management  believes will supply it with sufficient
production capacity to meet all current and projected orders, on a timely basis,
commencing  upon  satisfactory  completion of testing  operations of the initial
TCS-1 System (see "Products and Services" below, in this Item I).

The Scrap Tire Disposal Business

Scrap Tire Disposal Problems and Development of New Uses for Scrap Tires

     The company's management believes that there is a need to find alternatives
to  conventional  methods for disposing of the vast amounts of solid waste which
are continually being dumped into fast disappearing  land-fill space or burnt in
incinerators.  Even though  scrap tires  represent  only about 1.2% of the total
tonnage of solid waste annually produced in North America, the disposal of scrap
tire can  pose  serious  environmental  problem.  Among  the  numerous  problems
relating to landfilling or stockpiling scrap tires, is the fact that whole tires
cannot be  successfully  buried in landfills  because the  combination  of their
size, configuration, and weight causes buried tires eventually to work their way
up to the surface.  Moreover,  when  stockpiled  above ground,  tires can create
serious fire, public health,  and environmental  hazards ranging from dump fires
which  generate  large and dense clouds of black smoke and are very difficult to
extinguish,  to the creation of vast breeding grounds for mosquitoes and vermin.
According to the Scrap Tire Management Council ("STMC") "Scrap Tire Use/Disposal
Study - 1996  Update",  current  estimates  for scrap tire  stockpiles  run from
approximately  700 million to 800 million,  which would  correspond to a tire-to
person ratio in the United States of America between 2.5 and 3.0.

     As a result,  many states have either  passed or have  pending  legislation
regarding discarded tires,  including  legislation  limiting the dumping of used
tires to  specifically  designated  areas.  Also in  recognition  of the serious
environmental  problems created by discarded tires,  there has been a shift from
the dumping or  landfilling  of waste  tires to  development  of various  market
applications. According to the STMC, there are currently three major markets for
scrap tires:

     (a)  using scrap  tires as "tire  derived  fuel" or "TDF"  which  comprises
          burning the tires,  either whole or after  reduction to  approximately
          two inch chips;

     (b)  exporting scrap tires for refitting and re-use as tires; and

     (c)  disintegrating scrap tires into their components (rubber,  steel wire,
          and fiber) and  recycling  the  salvageable  steel and rubber into new
          products;


                                       4
<PAGE>

     The STMC 1996 update report  indicated that the largest use presently being
made of scrap tires is burning  them as tire  derived  fuel.  From 1994 to 1996,
this usage grew 50% to 152 million tires burned in 1996.  The second largest use
of scrap tires was exporting them (15 million in 1996). But, while ground rubber
represented  only the third largest use of scrap tires, the STMC study indicated
that this area enjoyed "the biggest  surge" with an increase of 177% over 1994".
As a result, approximately 190 pounds of crumb rubber were produced in 1996 (vs.
69 million  pounds in 1994) In addition,  210 million pounds of tire buffings (a
by-product  from the  retreading  industry  were also  processed  for an overall
market demand for size reduced  rubber (crumb rubber and buffings) of around 400
million pounds at the end of 1996. A more detailed discussion is included.

     The Company believes that modern waste disposal  problems combined with the
considerable depletion of natural, non-renewable resources, such as raw material
used for tire  manufacture,  the decreasing  availability of many cultivated raw
materials,  and the  resulting  increases  in the costs  thereof,  will make the
recycling of waste  products  such as used tires into  reusable raw  materials a
critical imperative for society and for the economy.  The Company also believes,
however, that because present market conditions demonstrate that the capital and
operating  costs of currently  available tire recycling  systems are high,  and,
because of the  inefficiency  of the  technologies  being used, the  by-products
therefrom, expensive to produce, that tire recycling will not be an economically
viable industry until such problems are addressed. The Company believes that the
TCS-1 System will successfully address these problems. The TCS-1 System has been
designed not only to cost less in terms of initial capital outlay required,  but
to cut maintenance, operating, and energy costs drastically and to significantly
increase the quantity and quality of the  by-products  yielded by the  recycling
process.

     The  Company  believes  that the  advent of a greater  and more  dependable
supply of high  quality  rubber  crumb could  contribute  to and  encourage  the
continuance  of the kind of huge growth in the market for rubber  crumb which is
currently  occurring.  Should the TCS-1 System be developed by the Company,  the
Company hopes to participate in such market. (See "Potential Markets" below).

Products and Services

The TCS-1 System

Overview

     The TCS-1  System  comprises a complete,  turn-key,  environmentally  safe,
cryogenic   tire   disintegration   system   which   incorporates    proprietary
disintegration and cryogenic technology with established conventional mechanical
and  technological  techniques.  While the TCS-1 System is still in the research
and development stage,  substantial  progress has been made during and since the
end of the fiscal year ended June 30, 1997 with initial  engineering  design and
development


                                       5
<PAGE>

nearing completion.  Construction of the first full scale production model began
in February of 1997 and is expected to be  completed by the end of 1997. A three
to six month test phase is scheduled to begin  immediately  upon  completion  of
such  production  model for the purpose of  optimizing  the  performance  of the
System and eliminating any problems which may arise under operating  conditions.
This will also allow the Company to definitively test the limits of the System's
production capabilities.

     The TCS-1  System is  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.

     The principle  features of the TCS-1 System which management  believes make
it  superior  to other  existing  tire  recycling  systems on the  market  today
include:

     *    A cooling process which management believes will substantially  reduce
          the cost of refrigerants.

     *    A multiple stage tire  disintegration unit which: (I) will not subject
          the tire to  shredding  or  hammer-milling  operations;  (ii)  will be
          environmentally  safe; and (iii) is capable of yielding  rubber powder
          in a wide  range of  particle  size,  a  capability  which  Management
          believes will enable it to meet a variety of market demands.

     *    The ability to produce steel,  fiber cord, and rubber powder with only
          insignificant intermingling.

     *    Highly  efficient  utilization  of  energy  resulting  in  low  energy
          requirements  and usage (more than 90% of the cold air generated  will
          be used to cool the tires).

     *    Low capital cost.

     *    Low maintenance requirements.

Construction and Design of the TCS-1 System

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


                                       6
<PAGE>

     *    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.  Management  believes
          that natural rubber,  which is more flexible than synthetic rubber, is
          capable of being  reused in a  significantly  wider  range of products
          than is synthetic  rubber.  The TCS-1 System has been designed to take
          advantage of these  differences  to produce a separate  rubber  powder
          reclaimed  exclusively  from the sidewalls.  Management  believes that
          such  "sidewall"  rubber  powder will have a higher  market value than
          rubber produced today from a mixture of tread and sidewall rubber;

     *    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.

     The TCS-1 System will comprise four main sections consisting of separation,
cryogenic,  disintegration,  and product handling systems.  An internal computer
will monitor all  essential  wear points as well as certain other aspects of the
System.

     The   principal   feature  of  the  TCS-1  System  will  be  the  Company's
proprietary,  non-shredding disintegration mechanism which will, under cryogenic
conditions, disintegrate used tires into: (i) two types of rubber powder (rubber
from the  sidewalls  of the tire  will be  processed  separately  from the tread
rubber); (ii) steel wire sections;  and (iii) fiber cord sections. The steel and
fiber  yielded by the System  will  normally  contain  insignificant  amounts of
rubber.

     The basic components of the TCS-1 System will include:

     (a)  a tire preparation  assembly which will remove the steel beads,  clean
          the tires,  separate sidewalls from the tread, and cut both treads and
          sidewalls;

     (b)  a  refrigeration  unit,  approximately  eight feet wide,  sixteen feet
          high, and 40 feet long;

     (c)  a completely enclosed cryogenic tire disintegration unit approximately
          20 feet wide, 16 feet high and 40 feet long;

     (d)  two  freezing  chambers,  each ten feet wide,  twenty  feet high,  and
          twelve feet long;


                                       7
<PAGE>

     (e)  a fiber baler used to bundle fibers into bales with steel bonds; and

     (f)  miscellaneous conveyors and fiber separation equipment

     In April of 1997,  the Company  replaced its  original,  one-quarter  scale
model  with a new,  larger  sized (1/2  scale)  working  prototype  of the TCS-1
System's  proprietary  disintegration  unit.  This  scale  model  disintegration
mechanism will be used to run test  operations to discover,  identify,  and cure
any  problems  which may arise,  as well as to test the  limits of the  System's
productive capacity, under operating conditions.  This will enable the Company's
engineering  team  to  design  and  develop,  under  operating  conditions,  the
components of the disintegration  mechanism for the full-scale  production model
of the TCS-1  System,  which is presently  under  construction.  The scale model
disintegration  mechanism  is also being used to  produce  rubber  crumb for the
purpose of testing the nature, quality, and potential marketability thereof.

     The  foregoing  production  schedule  may  not be met  unless  the  Company
completes and closes a private  placement of its  securities in an amount of not
less than $700,000. Any failure or delay in the Company's ability to obtain such
financing will be directly  reflected in a commensurate  delay or failure in the
completion of the  construction,  and the  commencement  of the testing,  of the
production model.

Economy of Operation

     The TCS-1 System has been  designed to  substantially  reduce the amount of
energy and equipment maintenance required to disintegrate tires, to increase the
ease and efficiency of separating  the steel,  rubber,  and fiber  components of
tires,  and to produce what  Management  believes will be more saleable and more
highly  valued   by-products  than  are  produced  by  other  systems  currently
available. Test operations indicate that the cost of disintegrating a tire using
the TCS-1 System will be about $.50 as compared with current tire disintegration
costs, using other  technologies,  of up to $2.00 per tire.  Additionally all of
the end products  which the TCS-1 System is designed to yield are expected to be
saleable

     The TCS-1 System has been  designed to operate  continuously  (with minimum
amounts  of  downtime  for  maintenance),   and  to  consume  approximately  650
horsepower operating at 460 volts, and is designed to require substantially less
energy than is used by presently existing  equipment.  TCS-1 System will be able
to process  both  automobile  and truck tires in  quantities  equivalent  to 180
automobile tires per hour, or 1,000,000 automobile tires per year.

Projected Functions, Operations, and Capabilities

     The following discussion of the functions,  operations, and capabilities of
the TCS-1 System are based upon engineering  design plans and specifications and
test operations of: (i) the 1/2 scale prototype disintegration  mechanism;  (ii)
the automated front-end system; and (ii) various


                                       8
<PAGE>

other  components  of the system which have already  been  completed  and tested
separately.  This  discussion  also assumes that the System,  when  complete and
fully integrated,  will function as planned, of which there can be no assurance.
Furthermore,  because  the  TCS-1  System  is  still in the  development  stage,
however, the Company cannot, as at the date hereof,  guaranty how long after the
completion of the first  full-scale  production  model, if ever, the System will
perform fully in accordance with Management's expectations.

Step-by-Step Operations

     The projected  step-by step  operations of the TCS-1 System 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  System's
          freezing  chambers  through separate air locks. The temperature of the
          air within the freezing  chambers  will be kept at  approximately  170
          degrees below zero by constant  recirculation  through a refrigeration
          unit.  The sidewall and tread sections will remain within the freezing
          chambers  until they are cooled to a point  between 90 and 100 degrees
          below zero (fahrenheit).

     (d)  The frozen sections will then pass through proprietary  disintegrators
          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.  Furthermore,  although the fiber threads may be broken
          into  shorter  lengths,  they will still 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 System.

     (h)  100% of the  rubber  powders  yielded  by the  TCS-1  System  will pas
          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.


                                       9
<PAGE>

Comparison  of the Projected TCS-1 System
  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
(ii) "ambient" systems.  Management believes that the TCS-1 System will have the
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 System,  at this time,  the Company is not aware of any
such tire disintegration system or technology.

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

Methods

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

                                    Projected
                                      TCS-1
                                     System

Methods

The  projected  TCS-1  System  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.


                                       10
<PAGE>

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

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 System.  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.

                                    Projected
                                      TCS-1
                                     System

Equipment, Energy and
  Maintenance Requirements

The projected  TCS-1 System 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 System will be  comparatively  light in terms of
bulk and weight.  Moreover,  the TCS-1 System 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.

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

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 and none of the systems with which  Management
is  acquainted  make any  attempt to recycle  any of the cold  energy  generated
thereby.

                                    Projected
                                      TCS-1
                                     System

Cooling Techniques

The TCS-1 System 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 this to further
reduce operating costs. Moreover, unlike conventional cryogenic systems which do
not attempt to recover the cold energy from the rubber powder,  the TCS-1 System
has  been  designed  to use 90% of the  available  cold  energy  to  reduce  the
temperature of tires entering the system.  A specialized  cooling  chamber makes
this possible.


                                       11
<PAGE>

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

Costs and Expenses

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

                                    Projected
                                      TCS-1
                                     System

Costs and Expenses

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

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

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.  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.


                                       12
<PAGE>

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.

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.


                                       13
<PAGE>

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.

                                    Projected
                                      TCS-1
                                     System

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

The  proposed  TCS-1 System has been  designed to avoid the  problems  described
opposite which arise out of current tire disintegration methods by insuring that
the steel and fiber  components of the tire are not  subjected,  at any time, to
chopping,  shredding,  or hammer or  knife-milling  operations which destroy the
integrity of the wire or cord-like  configurations  of the steel and fiber. This
is  expected  to  prevent  the   creation  of  steel  powder  and  fiber  fluff.
Disintegration will be accomplished solely through the exertion of pressure. The
TCS-1 System disintegration  process is not expected to break the steel wires or
to affect their integrity in any way. Based upon performance  tests of the TCS-1
System's  proprietary  disintegration  mechanism,  the Company  expects that the
TCS-1  System's  ability to prevent the  creation of steel powder will result 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 will not lose its thread or cord-like  configuration,  will be
broken  in the  disintegration  process  into  lengths  of from 1/2 to 4 inches.
Rubber  that is  attached to the fiber  creates a saleable  product  with unique
properties.  Furthermore,  tests  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 System 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 System 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.


                                       14
<PAGE>

                              Existing Conventional
                              Cryogenic and Ambient
                                     Systems

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.

                                    Projected
                                      TCS-1
                                     System

Recovery  Ratio

For the reasons  described  above,  and based on performance  tests of the scale
model  prototype of the TCS-1  System'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.


                                       15
<PAGE>

Production and Supply

     The Company  has been  engaged in  designing  and  developing,  and intends
within the current fiscal year to begin  manufacturing,  on a commercial  basis,
its proprietary cryogenic tire disintegration system,  referred to herein as the
"TCS-1 System".  The Company's activities to date have focused on the design and
creation of the TCS-1 System. 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 System (see
"Agreements With Subcontractors", below).

     If the  Company is able to raise  sufficient  funding  and if no  presently
unforeseen problems with the technology develop, the Company expects to commence
manufacturing  the TCS-1 System on a commercial  basis prior to the end of 1997.
The  Company  intends  to  continue  to effect  all TCS-1  System  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 System  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 allow the
Company to meet all TCS-1 System 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  Systems 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  Systems,  which  are  not  manufactured  by the
Company's  subcontractors  specifically for the TCS-1 System, 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.


                                       16
<PAGE>

Agreements With Subcontractors

Agreement with Fedico, Inc.

     In January of 1997,  the Company  entered  into an  agreement  (the "Fedico
Agreement")  with Fedico,  Inc. of  St-Hubert,  Quebec  ("Fedico"),  a machinery
design firm located in Quebec. Prior thereto, Fedico had provided consulting and
other  design  engineering  services  to the  Company  since the spring of 1996.
Pursuant  to the terms of the Fedico  Agreement,  Fedico will act as the project
leader,  guiding the over-all  design and  engineering  of the TCS-1 System.  In
addition to  supervising  the over-all  assembly and start-up  procedures of the
first  full-scale  production  model of the TCS-1  System,  Fedico will  design,
engineer,  and fabricate certain  peripheral  equipment.  The term of the Fedico
Agreement is for seven years, retroactively effective as of September, 1996.

     The Agreement provides further that Fedico will:

     (a)  collaborate  with the Company on development of initial  specification
          requirements,  by way of: (i) researching and evaluating the available
          applicable technologies;  (ii) conceptualizing designs concepts; (iii)
          preparing  preliminary  layout  drawings of each  component and of the
          integration thereof into the TCS-1 System.

     (b)  Prepare  detailed  preliminary  layout  designs of each element of the
          TCS-1 System;

     (c)  Prepare  detailed  drawings  of each  element of the TCS-1  System and
          prepare  the  "bill  of  materials"  which is a  complete  list of all
          components of the System;

     (d)  Be present or  available,  during the  assembly of the TCS-1 System to
          correct any problems that may arise;

     (e)  Be present or available during start-up  procedures upon completion of
          the assembly of the TCS-1  System and correct any problems  that arise
          during the course of such procedures;

     (f)  Upon  commencement  of  satisfactory  operation  of the TCS-1  System,
          revise all drawings to produce complete, final, "as-built" designs and
          prepare a documentation  package for the facilitation of the operation
          and maintenance of the System.

     The  Fedico  Agreement  also  provides  for the  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. The terms of the Fedico Agreement are substantially


                                       17
<PAGE>

as set forth in detail in the  Company's  annual  report on Form  10-KSB for the
year  ended  June  30,  1996.  For  further  details,  reference  is made to the
discussion  contained  in Item I of the 1996  10-K  under  "Proposed  Product  -
Proposed Agreement with Fedico, Inc."

Agreement with Lefebvre Freres Limitee

     In January of 1997,  the Company  entered into an agreement  (the "Lefebvre
Agreement") with Lefebvre Freres Limitee ("Lefebvre"),  a subsidiary of Lefebvre
Inc.,  of  Montreal,   Quebec.  Lefebvre,   specializes  in  custom  design  and
fabrication  of  industrial  machinery.  With its  sister  companies,  Foresteel
(specializing  in pressure  vessels and  welding) and Atelier  D'Usinage  Trempe
(specializing in high precision  machining),  Lefebvre is widely  recognized for
its extensive  experience and expertise in designing and constructing  equipment
used in the pulp and paper, metallurgy,  fiber, power generation, and many other
industries.  Lefebvre had been providing the Company with design  consulting and
other valuable  design  engineering  services to the Company since the spring of
1996. In recognition of services  rendered by Lefebvre prior to the finalization
of the Lefebvre  Agreement,  it was made retroactively  effective as of July 23,
1996.  Services  provided  by  Lefebvre  prior  to  January  1997  included  the
completion  of  the  initial  design   specifications  for  the  TCS-1  System's
Disintegration Unit Assembly.

     Under the terms of the Lefebvre Agreement,  Lefebvre was retained to design
and  construct  a  prototype   disintegration  unit  for  the  TCS-1  System  at
competitive rates. Lefebvre agreed to accept payment of approximately  one-third
of its price for the  foregoing  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,  that part of the  design  work on the
disintegration  system, which was allocated to the stock portion of the purchase
price, had been completed.

     The  terms of the  Lefebvre  Agreement  are  substantially  as set forth in
detail in the Company's annual report on Form 10-KSB for the year ended June 30,
1996. For further details, reference is made to the discussion contained in Item
I of the 1996 10-K under  "Proposed  Product - Proposed  Agreement with Lefebvre
Freres Limitee"

Agreement with Plasti-Systemes, Inc.

     In  January  of  1997,   the  Company   entered  into  an  agreement   (the
"Plasti-Systemes  Agreement") with Plasti-Systemes,  Inc. ("Plasti-Systemes") of
Ville D'Anjou Quebec began providing  consulting services respecting the design,
construction,  and  installation  of the  "front-end"  of the TCS-1 System.  The
Plasti-Systemes  Agreement  provides for  Plasti-Systemes  to design  (including
rendering of all necessary  engineering  drawings),  construct,  and install the
"front-end"  of the TCS-1 System.  The Front End System will consist of a series
of mechanisms


                                       18
<PAGE>

which will  automatically,  at the rate of three tires per minute: (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.

     The Plasti-Systemes Agreement, which was made retroactively effective as of
October 16, 1996, covers mechanical work and equipment.  Plasti-Systemes  agreed
to  accept  payment  of  26%  of its  total  price  for  the  foregoing  255,010
unregistered  shares of the common  stock of the Company.  The stock  portion of
such price was issued to  Plasti-Systemes  on January  17,  1997.  Prior to such
date,  that part of the design and  engineering  work on the  front-end  system,
which was  allocated  to the  stock  portion  of the  purchase  price,  had been
completed.  The terms of the Plasti-Systemes  Agreement are substantially as set
forth in detail in the Company's annual report on Form 10-KSB for the year ended
June  30,  1996.  For  further  details,  reference  is made  to the  discussion
contained  in  Item I of the  1996  10-K  under  "Proposed  Product  -  Proposed
Agreement with Plasti-Systemes, Inc."

Potential Markets

General

     The Company  believes that the potential market for its TCS-1 System can be
expected to directly  reflect the level of demand for  economical,  high quality
rubber crumb derived from the recycling of scrap tires.

     The following  discussion of the potential markets for rubber crumb assumes
that the TCS-1 System will be capable of  economically  producing  high quality
recycled  rubber crumb,  in a variety of sizes,  capable of being used in a wide
range  of  products.   While  this  accurately  reflects   management's  present
expectations,  it should be noted that the TCS-1 System is still in the research
and development stage. Further, because development of the TCS-1 System is at an
early stage,  the Company cannot give any assurance with respect to if, or when,
it will in fact be able to  complete  the design and  construction  of the TCS-1
System in accordance  with its plans and  specifications  or that, if completed,
the TCS-1  System will perform as  expected.  Therefore,  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
System will develop.

Effect of Environmental Concerns
  on Development of New Markets for Scrap Tires

     Until  approximately 1990, low tipping fees made landfills the most popular
option for the  disposal of scrap  tires.  In fact,  according to the Scrap Tire
Management  Council  (the  "STMC"),  until  that  time,  management  and  market
development  efforts for scrap  tires were  non-existent  or  minimal.  This was
reflected in the fact that in 1990, only 25 million (approximately 11%) of the


                                       19
<PAGE>

scrap tires  generated  annually  in the United  States  were  marketed  for any
purpose whatsoever. The remaining 89% were dumped or stockpiled. However, within
the past few years,  changes  in the  market for scrap  tires has been swift and
dynamic,  resulting  in  significant  market  application  alternatives  to  the
landfilling and stockpiling of scrap tires.

     The STMC  reported in its "Scrap  Tire Use  Disposal  Study - 1996  Update"
(which was  published  in April of 1997 and is  referred  to herein as the "STMC
Study"), that significant progress has been achieved with respect to development
of scrap tire management  alternatives to landfilling and stockpiling.  In 1996,
market  applications  were  found  for 76% of all scrap  tires  (or 202  million
tires). This means,  however,  that even as of 1996, 64 million additional tires
(or 24% of the  annually  generated  scrap  tires that  year)  were still  being
landfilled or stockpiled in the United States alone.

     Notwithstanding the foregoing progress,  in most developed  countries,  the
traditional  dumping of tires in  landfills  has been  completely  banned or the
number of tires legally permitted to be dumped has been  substantially  reduced.
Unfortunately,  such measures often have the effect of simply  exacerbating  the
problem of illegal tire dumping and above ground  stockpiling.  Increasingly  in
the United States,  individual states sponsor scrap tire management programs. By
1994, 48 states had legislated  laws governing and regulating  proper  handling,
recovery, reuse, and disposal of discarded scrap tires. To date, over 34 of such
states have  provided  at least some of the funding  needed to build and support
the tire  recycling  infrastructure  which is or will be required to assure that
the state's annual generation of scrap tires, as well as its already  stockpiled
tires, will be recovered,  reused, and recycled.  In Canada, most provinces have
similar regulations.  As a result of this proliferation of state regulations and
the influence of the environmental movement, national attention has increasingly
focused on the need to develop alternative methods of scrap tire disposal.

Market for Rubber Crumb

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

     Recycling tires into reusable rubber crumb (or "ground  rubber") was, as of
1996, the third largest use of scrap tires. "Rubber Crumb" is the end product of
the tire  disintegration  processes discussed in, "Products and Services" below.
The ideal rubber crumb 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.  As noted above,  the
STMC Study reported that the largest use presently  being made of scrap tires is
burning them as tire derived


                                       20
<PAGE>

fuel,  with export  (for  refitting  and reuse as tires)  taking  second  place.
However, as noted above, the use of scrap tires for ground rubber experienced an
enormous   surge  during  the  last  two  years,   increasing  two  hundred  and
seventy-seven percent (277%) from 4,500,000 tires in 1994 to 12,500,000 tires in
1996.  Historically,  most  rubber  crumb  available  and sold in the market was
derived not from recycled scrap tires,  but from tire  "buffings",  a by-product
from the retreading  industry created when used tires are prepared to accept new
treads. This situation has recently improved  significantly,  however, with tire
buffings  now  representing  52% and  scrap  tires  representing  48% of  source
material for rubber  crumb.  According to the STMC,  the demand for rubber crumb
for various uses could experience  further  substantial  increases over the next
two to five years,  with expected  overall  growth in sales of rubber crumb from
25% to 33%. The Company believes that because the supply of buffings is limited,
the main  source of an  increased  supply of rubber  crumb  must come from scrap
tires.

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


     *    Rubber Modified  Asphalt ("RMA",  168 million pounds in 1996):  Rubber
          crumb can be blended with asphalt to modify the  properties of asphalt
          used in highway construction.  Rubber crumb 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  ground  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  ground 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.  States  using RMA to a  significant
          degree include Arizona,  California and Florida,  with lesser activity
          in Kansas and Texas.

     *    Bound Rubber Products (134 million pounds 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 1996): Fine rubber crumb
          or powder  reclaimed  from  scrap  tires  can be used as a low  volume
          filler material in


                                       21
<PAGE>

          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 1996):
          Coarse  rubber crumb 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 rubber crumb for these
          purposes will generally make playing  surfaces and running tracks more
          resilient  and less rigid,  but capable of  maintaining  traction  and
          shape.

     *    Molded and Extruded  Plastics and Rubber (18 million  pounds in 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 1996):  Coarse rubber crumb is
          used in friction brake materials for brake pads and brake shoes.

Possibilities for Market Expansion and Added Value
  Through Availability of More, and Higher Quality, Product

     Notwithstanding  the  recent  growth in the use of scrap  tires for  ground
rubber,  this  application  represented only 6% of the market for scrap tires in
1996. The Company attributes this limited market penetration  principally to the
lack of available  high quality  product.  The TCS-1 System,  however,  has been
specifically  designed to address this problem through the economical production
of high  quality  crumb rubber than is, to the best of  management's  knowledge,
currently being produced from scrap tires.  The Company  believes that increases
in the amount and quality of available crumb, at economically reasonable prices,
creatively marketed, will inspire new uses for rubber crumb and expand the range
and  variety  of  products  composed,  in  whole or in  part,  of such  product.
Moreover, the Company believes that as the demand for rubber crumb recycled from
scrap tires  increases,  this market value will  increase in  proportion  to the
quantity of product sold and will that the product will be come  inherently more
valuable.

     The  Company  believes  that  growth in the market  for  rubber  crumb will
directly  reflect a number of  factors,  including  but not  limited to: (i) the
amount of rubber crumb available; (ii) the cost of available rubber crumb; (iii)
the quality and characteristics of available crumb; and (iv) the availability of
suitable substitutes for rubber crumb.


                                       22
<PAGE>

     There can be no assurance at this time,  however,  that the availability of
rubber  crumb of the quality  which the Company  expects  that the TCS-1 will be
able to produce,  will necessarily lead to a significant expansion of the market
for such product,  or if it does, that the Company will necessarily benefit from
such expansion.


Prospect of "Devulcanization"

     One of the principal  difficulties  in producing a marketable  rubber crumb
from scrap tires is the inherent  nature of the recycled  rubber itself.  Rubber
used in the  manufacture  of tires is  vulcanized,  a process by which sulfur is
combined with the rubber in order to impart strength and  dimensional  stability
to the rubber.  Because of such  vulcanization,  the ability to chemically  bond
recycled  rubber with other  polymers  (rubber or plastic)  materials is greatly
diminished.  While to date, to the best of management's knowledge, no technology
for the economical devulcanization of rubber exists, there is at present a great
deal  of  research  and  development  activity  in  this  area.  if and  when an
economical devulcanization process is achieved, a new market for recycled rubber
could be opened.

Proposed Services

     The Company  requires all of its TCS-1 System  purchasers to agree to enter
into a Maintenance  and Technical and Market  Support  Agreement  (the "Proposed
Maintenance Agreements"). In connection therewith the Company intends to provide
timely,  high  quality  technical  support to insure that the TCS-1  System will
perform  in  conformance  with its  specifications.  Until the test phase of the
first production sized model of the TCS-1 System is completed,  the Company will
be unable to finalize the definitive parameters of the services which it intends
to offer under the Proposed  Maintenance  Agreements.  Currently  proposed plans
call for the Company, or the Company's designated service provider,  to provide,
or be  responsible  for,  all  technical  and  other  labor  necessary  for  the
maintenance of the TCS-1 System at a performance level capable of disintegrating
the equivalent of one million  automobile  tires per year on a twenty-four  hour
per day,  three hundred  sixty-five  day per year basis,  in accordance  with an
operations  and  performance  specifications  manual  to  be  furnished  to  the
customer.

     The Proposed Maintenance  Agreements are expected to require the Company to
provide (i) regularly scheduled on-site preventive maintenance including but not
be  limited  to  inspection  and  assessment  of  wear  factors   affecting  all
constituent  components  of the System and  determination  and  effectuation  of
replacement  and/or  recalibration  requirements and (ii)  unscheduled  remedial
maintenance, on an as needed basis. Other responsibilities which the Company, or
its  authorized  service  provider,  are  intended to assume  under the Proposed
Maintenance Agreements will include: (i) providing and maintaining  computerized
equipment to monitor and document the  performance  by the operator of the TCS-1
System of all routine maintenance procedures;  (ii) reviewing the data retrieved
thereby on a monthly,  or more frequent,  basis; (iii) immediately  advising the
operator of any improper performance of any of such


                                       23
<PAGE>

Procedures;  (iv) providing  remedial  instructions to the Operator's  personnel
with respect to the proper performance of certain routine maintenance procedures
to be  performed  by the TCS-1  System  Operator,  and;  (v) upon request of the
Operator,  re-training its personnel.  The Proposed  Maintenance  Agreements are
intended also to provide that the Company,  or its authorized  service provider,
will provide an initial training period for the operator's  personnel as well as
continuing training, seminars and updates, on an as needed basis.

     The  Proposed  Maintenance  Agreements  are also  intended  to provide  for
additional technical and market support including Pre-Operational Support by way
of,  among  other  things:  (i)  assistance  to the  Operator  with  respect  to
procedures  and  requirements  related to obtaining all licenses,  permits,  and
other  requirements for the establishment and operation of a TCS-1 System Plant,
including  the  development,  documentation,  and  furnishing  of  all  required
technical,  environmental,  operational,  and other  information  and data; (ii)
instructions and assistance with respect to all applicable  federal,  state, and
local  regulations and  requirements  respecting the preparation of the site and
the installation and operation of a TCS-1 System at the site.

     In addition,  the  Proposed  Maintenance  Agreements  will require that the
Company,  or its authorized service provider  establish and maintain  laboratory
facilities at which they shall:


     (a)  test and  monitor  the  quality  and  properties  of the rubber  crumb
          produced by the TCS-1 System,  including but not limited to: (i) total
          production  rates (ii) the  comparative  percentages  of various crumb
          rubber  mesh  sizes  produced,  and (iii)  wear  factors  existing  or
          developing  in the  disintegration  mechanisms,  so as to  generate  a
          continual  data base for the  anticipation  and  determination  of the
          maintenance,   remediation,  and  recalibration  requirements  of  the
          disintegration  mechanisms and all other constituent components of the
          System under actual operating conditions;

     (b)  test and monitor,  on a continuing  basis,  oil samples from the TCS-1
          System so as to ascertain and monitor the wear factors on the bearings
          and on other components of the System.

     (c)  record and  maintain all test data and records for the TCS-1 System in
          a monthly log to be furnished to the operator at regular  intervals on
          a monthly  basis,  or on request by the operator,  and be available to
          the Operator at all times to discuss the meaning and  significance  of
          all test  results and any  remedial or other  actions  which such data
          indicate is necessary or advisable;

     (d)  creating  and  developing  new  products  and  uses for  rubber  crumb
          produced by the TCS-1 System.

     It is intended that the Company,  or its authorized  service  provider will
also  be  responsible  for  certain  accounting  and  record  keeping  services,
including providing accounting software to


                                       24
<PAGE>

monitor the operations  and output of the TCS-1 System.  It is intended that the
Proposed  Maintenance  Agreements will also impose obligations upon the Company,
or its authorized  service  providers to stock  replacement  parts for the TCS-1
System in order to minimize any interruptions in the continual  operation of the
System.

     The monthly maintenance fee for all services to be provided by the Company,
or its authorized service provider under the Proposed Maintenance  Agreements is
presently expected to be $9,500 per month.

Negotiations With Proposed Service Provider

     The Company is presently  negotiating  with Louis  Sanzaro  ("Sanzaro"),  a
director  of  the  Company  and  the  controlling  person  of the  two  entities
(Ocean/Ventures  III,  Inc. and Oceans Tire  Recycling & Processing  Co.,  Inc.)
which have ordered nine of the ten TCS-1 Systems presently on order, to organize
and operate a maintenance company capable of serving as the Company's authorized
service  provider and meeting all of the above described  responsibilities.  Mr.
Sanzaro  has worked  closely  with the Company on the  development  of the TCS-1
System and the proposed  maintenance and technical support program.  Mr. Sanzaro
is a highly  respected,  knowledgeable,  and  experienced  operator of recycling
organizations  in New  Jersey  and the  Company  believes  that he is  eminently
qualified to organize and head its  maintenance  and technical  support  effort.
While the parties have not yet entered into an  agreement  respecting  the terms
under which Mr.  Sanzaro or an  organization  under his control  will direct the
Company's  maintenance services,  they are currently in negotiations  respecting
such  arrangements.  Currently,  however,  the Company  expects that the service
provider to be organized and operated by Mr.  Sanzaro will be paid a flat fee of
$4,000 per month to cover all of the services  described  in Item I, above.  The
service  provider is also  expected  to  furnish,  at no  additional  cost,  all
equipment necessary to effect the provision of such services.

Tirex Canada

     The governments of Canada and, in particular,  the province of Quebec, have
officially  acknowledged  the  pivotal  role played by  business  investment  in
research and  development in ensuring  sustained  economic  growth and long-term
prosperity.  In order to encourage such activities,  these  governments  support
research and  development  programs by granting  individuals  and businesses tax
incentives  that encourage  technological  development  in Quebec.  As a result,
Quebec  offers the most  generous tax  incentives  for research and  development
programs  of which the  Company is aware.  In May of 1995,  in an effort to take
advantage  of  such  financial   incentives,   the  Company  formed  a  Canadian
corporation,  3143619 Canada Inc.  (referred to herein as "Tirex Canada") 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  System  and,
thereafter, to serve as the Company's manufacturing arm. For a discussion of the
initial capitalization of Tirex Canada, the distribution of its shares among the
Company and officers and directors of the


                                       25
<PAGE>

Company who are  Canadian  residents,  the terms of the  shareholders  agreement
pursuant to which such shares are held,  including but not limited to the rights
of the Company to regain 100% record  ownership  of Tirex  Canada,  reference is
made to the  discussion  under  the  caption  "Existing  and  Proposed  Canadian
Financing,  Manufacturing, and Research and Development Operations" in Item 1 of
the  Company's  annual  report on Form 10-K for the  fiscal  year ended June 30,
1996.

The Tirex Canada License

     Tirex Canada holds an exclusive,  ten year license to design,  develop, and
manufacture  the TCS-1  System in North  America.  The terms of the said license
require that Tirex Canada may  manufacture  TCS-1 Systems only upon and pursuant
to  specific  purchase  orders and  requires  that Tirex  Canada  sell all TCS-1
Systems which it manufactures exclusively to the Company.

Canadian Financial Assistance - Grants and Commitments

     Transfer  of the  Company's  research  and  development,  and its  proposed
manufacturing,  activities  to Tirex  Canada has made the Company  eligible  for
various  Canadian and Quebec  government  programs  which provide grants and tax
incentives   for   eligible   investment,    research   and   development,   and
employee-training  activities.  Canadian and Quebec tax incentives take the form
of deductions and tax credits with respect to eligible  research and development
expenditures. Certain of the tax credits are refundable when they exceed the tax
payable.  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 even slightly existing
processes, materials products or devices.

     Refundable tax credits are calculated as a percentage of eligible  research
and development  expenses.  They 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. During the last fiscal year, virtually all of the
activities  connected  with  the  development  and  construction  of  the  first
production model of the TCS-1 System qualified as eligible  expenses.  Moreover,
some approved, anticipated tax credits for contemplated research and development
expenditures can serve as "receivables"  for the  collateralization  of debt. In
this regard,  the Company  received the following  grants and commitments  since
moving its operations to Quebec in the summer of 1995:

     (a)  Prior to the period covered by this report,  on March 22nd,  1996, the
          Ministry of  Industry,  Trade,  and  Commerce  of Quebec (the  "Quebec
          MITC") accepted a feasibility study, conducted by Techtran: Technology
          Transfer   Institute,   a  technology-based   consulting  and  project
          financing organization specializing in the development, financing, and
          project  implementation of new technologies.  To qualify for financial
          aid under this program, studies must be carried out by


                                       26
<PAGE>

          independent  Quebec  consulting firms, be related to eligible projects
          to be  established  in Quebec,  and be done in  respect of  admissible
          projects. To be deemed "admissible",  projects must address one of the
          industrial  sectors under the responsibility of the Quebec Ministry of
          Industry,  Commerce, Science and Technology (the "Quebec MICST") while
          being consistent with the government  industrial  development  policy.
          The  development  of the TCS-1 System was confirmed as an  "admissible
          project"  in this  regard  when the  Techtran  Feasibility  Study  was
          accepted by the Quebec  MITC.  In  connection  therewith,  the Company
          received a total of $36,800 Canadian dollars,  from the Quebec MITC in
          refundable tax credits, representing reimbursement of 40% of Company's
          costs for the said study.

     (b)  On May 6, 1996,  the Company  received a commitment for a contribution
          of up to $500,000  Canadian  dollars  (approximately  $360,000  United
          States  dollars  at  current  exchange  rates)  under  the  Industrial
          Recovery  Program for Southwest  Montreal for the  development  of the
          TCS-1  System.  Such  commitment   comprises  repayable  loans  in  an
          aggregate  amount not to exceed the  greater of (i)  approximately  US
          $370,370 or (ii) twenty  percent of the total costs  actually  paid by
          the Company in connection with the development of the TCS-1 System. To
          date,  the Company has received a total of $450,000  Canadian  dollars
          (approximately  $326,000  United  States  dollars at current  exchange
          rates)  under such loan  commitment.  The balance will be available to
          the Company upon completion of the project.

     (c)  On October 16, 1996, the Company  obtained an "Agreement for Financial
          Assistance For Technology Development" (the "Recyc-Quebec  Agreement")
          from  La  Societe   Quebecoise  de   Recuperation   et  de  Recyclagez
          ("Recyc-Quebec").   Pursuant  thereto,   Recyc-Quebec,   a  provincial
          government  organization,  has  agreed to  provide  the  Company  with
          financial  assistance  consisting  of the grant of an amount  equal to
          fifty percent of the total eligible expenses of the development of the
          first  full  scale,   production   model  of  the  TCS-1  System  (the
          "Project"),  up to an amount of seventy five thousand Canadian dollars
          (Cdn $75,000) (approximately fifty-four thousand United States dollars
          [US  $54,000]  at current  exchange  rates).  To date the  Company has
          received 50,000 Canadian dollars (approximately thirty-eight thousand,
          four hundred  United States  dollars [US $38,400] at current  exchange
          rates)   under   this   agreement.   Such   payment   was  based  upon
          Recyc-Quebec's  receipt  and  acceptance  of the  Company's  proofs of
          payment of eligible expenses in the approximate amount of Cdn $ 76,800
          (approximately  US  $56,064).  The Company  will be able to obtain the
          balance of 25,000 Canadian dollars  (approximately  nineteen thousand,
          two hundred United States dollars [$19,200] at current exchange rates)
          after it has paid 100% of all eligible expenses related to the Project
          and a final report respecting the achievements of the Project has been
          delivered to and accepted by Recyc-Quebec.


                                       27
<PAGE>

Sales and Marketing

Distribution

     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,  and is
continuing to  concentrate,  its efforts on completing the design,  development,
and  construction of the first  production model of the TCS-1 System and raising
adequate financing to support such efforts. It has, therefore, not yet commenced
a full  scale  marketing  campaign  and  does  not  intend  to do so  until  the
production  model is complete  and  adequate  funding is  available to cover the
costs thereof.  During the last two fiscal years and the subsequent  period, the
Company has however taken initial steps to prepare a foundation for a world-wide
marketing program. In connection therewith,  the Company has taken the following
steps during the last fiscal year:

     (a)  Appointed  Vijay  Kachru as Vice  President of Market  Development  to
          oversee market and product development activities;

     (b)  Entered  into  negotiations  with Alan  Crossley,  a  director  of the
          Company,  with respect to his serving as Sales and Marketing  director
          for Europe;

     (c)  Obtained the agreement of Louis Sanzaro, a director of the Company and
          the principal of Ocean  Ventures III, Inc. and Oceans Tire Recycling &
          Processing Co., Inc. to accept appointment as the Company's  exclusive
          sales  distributor  in the  United  States  and  Puerto  Rico (see the
          discussions,  below, in this Item 1. under the caption,  "Sales";  See
          also  Item 12 of  this  Report,  "Certain  Relationships  and  Related
          Transactions").

     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.

Market Research and Development Studies


                                       28
<PAGE>

     In January of 1997, the Company retained Gapco Inc., a market research firm
located in Madrid,  Spain,  headed by Alan Crossley.(4) The study indicated that
the tire recycling  Industry in Spain is in its infancy but is under pressure to
desist from the current  practice of  landfilling  with  unshredded  tires,  and
concludes  that there is therefore a possible  opportunity  at this time for the
introduction of alternative scrap tire disposal methods.

     Similar  studies  are  being  conducted  in the rest of  Europe,  India and
Pakistan.  The  company  believes  that both India and  Pakistan  are  potential
importers  of ground  rubber,  or rubber  crumb.  This is based on the fact that
these countries are expanding their tire and auto  manufacturing  capacities and
are already  experiencing  supply shortages in rubber and carbon black. Based on
the initial  research  the company  believes  that the  recycling of tires would
eventually  gravitate  toward  production of products that can be assimilated in
industries which  manufacture any products which use rubber and plastic in their
manufacture.

Dependence on Major Customer

     To date the Company has  received  orders for ten TCS-1  Systems,  eight of
which were ordered by  Ocean/Ventures  III,  Inc.("O/V III") of Toms River,  New
Jersey  ("O/V  III") and one of which was  ordered by Oceans  Tire  Recycling  &
Processing  Co., Inc.  ("OTRP").  Both O/V III and OTRP are under the control of
Louis  Sanzaro.  The loss of either of these two  customers  would  have a major
adverse effect on the Company. However, the Company also believes that while Mr.
Sanzaro's  companies comprise the initial TCS-1 System 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.

Sales

The O/V III Agreements

     On May 29, 1997, the Company  entered into an Equipment  Lease and Purchase
Agreement (the "O/V III L&P Agreement") with Ocean/Ventures III, Inc.("O/V III")
of Toms River, New Jersey ("O/V III"). This agreement modified the terms of, and
replaced,  a prior agreement  between the parties dated June 6, 1995 (the "Prior
O/V III  Agreement").(5)  O/V III is under common ownership and control with the
solid waste recycling firm, Ocean County

----------
     (4) Mr.  Crossley,  a director of the Company,  was  appointed as Sales and
Marketing Director for Europe in July of 1997 after the completion of such study

     (5) Reference is made to the detailed  discussion of the terms of the Prior
O/V III  Agreement  included in Item I of the  Company's  annual  report of Form
10-KSB for the  fiscal  year ended June 30,  1996,  in the  subtopic  "Sales and
Marketing" under the caption, "The O/V III Agreements".


                                       29
<PAGE>

Recycling Center, Inc. Under the terms of the L&P Agreement,  O/V III Agreement,
O/V III will  purchase  and lease the  various  components  which  comprise  the
constituent  parts of the TCS-1  System.  The  Agreement  provides for lease and
purchase arrangements for eight Systems 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,  certain  non-proprietary
equipment (the  "Non-Proprietary  Equipment") will be purchased by O/V III for a
total  purchase price of $2,250,000.  Such  equipment  includes,  but may not be
limited to: (i) all bailing systems contained in the TCS-1 System, including all
associated  ancillary  equipment and  conveyance  and exit belts,  chutes and/or
other components combined or integrated therewith, and (i) freezing chambers and
cryogenic systems.

     The other  constituent  components of the TCS-1 System  comprise  equipment
which  is  proprietary  to  the  Company  (the  "Proprietary  Equipment").  Such
Proprietary Equipment is, under the terms of the O/V III L&P Agreement,  subject
to a five year operating lease, with monthly lease payments of $12,500 each. The
Proprietary  Equipment consists of (i) the  disintegration  system including but
not limited to all grinders contained therein,  and (i) the separation  systems,
including  but not  limited  to: (a) a  magnetic  separator;  (b) a  fiber/crumb
separator;  (c) fiber  collector;  (d) crumb rubber sizing  system;  and (e) all
integrated conveyance and exit belts, chutes, and other components.

     The O/V III L&P  Agreement  calls for the  delivery of the first  System by
October 1998, with seven additional  Systems  scheduled for delivery every three
months  thereafter,  through July 2000. The Agreement  requires a downpayment of
$25,000 for each System to be paid not less than  fourteen  months  prior to the
anticipated  delivery  date.  In an effort to assist  the  Company at this early
stage of its development,  to date, O/V III has prepaid $25,000 down payments on
five Systems.  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,  an additional  $100,000 to be paid three months prior to
the  anticipated  delivery date,  and $1,825,000 on O/V III's  acceptance of the
System.

     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 System;

     (b)  a  rubber  crumb   purchase   option   agreement  (the  "Rubber  Crumb
          Agreement")  pursuant  to which O/V III has granted to the Company and
          option to  purchase  up to 40% of the  rubber  crumb,  yielded  by the
          disintegration  of scrap  tires in the  TCS-1  System,  at  negotiated
          prices.  The  Company  is  currently   exploring  the  feasibility  of
          vertically  integrating  its  operations  so as to include  the rubber
          crumb


                                       30
<PAGE>

          brokerage   business  and/or  the  value-added  rubber  crumb  product
          development  business. It obtained the rubber crumb purchase option in
          connection with the foregoing.

     The  parties  also  agreed  that they would  enter into a  maintenance  and
technical support agreement (the "Maintenance and Technical Support  Agreement")
pursuant  to which the  Company or its  designated  service  provider  ("Service
Provider")  will provide or be  responsible  for all  technical  and other labor
necessary for the maintenance of the TCS-1 System at a performance level capable
of disintegrating  the equivalent of one million  automobile tires per year on a
twenty-four hour per day, three hundred sixty-five day per year basis.  Services
to be provided shall include but not be limited to the following:  (i) regularly
scheduled on-site preventive maintenance, which shall include but not be limited
to  inspection  and  assessment  of  wear  factors   affecting  all  constituent
components  of the System and  determination  and  effectuation  of  replacement
and/or recalibration requirements, and (ii) unscheduled remedial maintenance, on
an as needed basis.  Both scheduled and  unscheduled  service  maintenance  will
include adjustments and replacement of parts, as deemed necessary by the Service
Provider.  The  Company is  presently  in  negotiations  with Louis  Sanzaro,  a
principal  of O/V  III,  with  respect  to  the  possibility  of  Mr.  Sanzaro's
establishing an equipment  maintenance company to serve as the Company's Service
Provider for all Systems sold by the Company,  including but not limiting to the
eight Systems to be purchased by O/V III.

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 will  purchase  the first  production
model TCS-1 System.  Under the terms of the Agreement,  the anticipated delivery
date for this System was September 15, 1997.  The parties have agreed however to
waive delivery until November 1997.  OTRP will accept  delivery at the Company's
facility in Montreal(6)  to allow initial test phase  operations to be conducted
under  supervision  of both the  Company  and OTRP.  This  will  also  create an
opportunity for OTRP's personnel to be trained by the Company's  technical staff
in the operation of the TCS-1 System.

     The terms of the OTRP L&P  Agreement,  pursuant  to which  the  constituent
components  of  the  TCS-1  System  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  Non-Proprietary  Equipment is $1,225,000 and
the terms of the 60-month  operating  lease call for monthly  lease  payments of
$8,770  each.  

----------
     (6) The  Company  intends  to  purchase  or lease a facility  adequate  for
installation  and testing of the System in the  immediate  future.  Reference is
made to Item 2. "Properties" of this Report.


                                       31
<PAGE>

Accordingly,  the aggregate lease/purchase price under the OTRP L&P Agreement is
$1,751,200.  OTRP has obtained  "pre-commencement" sale and lease-back financing
from an outside source for the  Non-Proprietary  Equipment being purchased under
the Agreement. Pursuant thereto, OTRP has been making lease payments since April
of 1997. The terms of OTRP's lease financing arrangements provide for the lessor
to deliver the purchase  price payments  directly to the Company,  to be used to
fund  the   construction  of  the  first  TCS-1   production   model.  To  date,
approximately  $605,000 of such  financing has been paid to the Company and used
for such purpose.

     Pursuant to the terms of the OTRP 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.

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 System,  with delivery scheduled for the end
of the  second  quarter of 1998.  The terms of the  Recycletron  L&P  Agreement,
pursuant to which the constituent  components of the TCS-1 System 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  Non-Proprietary
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 System.

     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.

Backlog

     As of September 18, 1997, the Company's  backlog  amounted to  $28,501,200.
Backlog  includes  firm  orders  under  executed  Equipment  Lease and  Purchase
Agreements. The amount


                                       32
<PAGE>

shown  includes the aggregate of: (i) the full purchase price for those parts of
the  TCS-1  System  which  will be sold by the  Company,  and (ii)  total  lease
payments under the five-year operating lease which forms part of every Equipment
Lease and Purchase Agreement. The $28,501,200 backlog presently booked includes:
(i) one TCS-1 System  ordered by OTRP for an aggregate  lease/purchase  price of
$1,751,200,  for which the Company has already  received  prepayment of $605,000
toward  the  purchase  price;  (ii)  eight  systems  ordered  by O/V  III for an
aggregate  lease/purchase  price of $3,000,000  each,  for which the Company has
already received over $130,000 by way of prepayments of the $25,000 downpayments
(due for each system fourteen months before the scheduled  delivery date of such
System) on five of the eight  Systems  ordered  by O/V III;  and (iii) one TCS-1
System  ordered  by  Recycletron  for  an  aggregate   lease/purchase  price  of
$2,750,000,  for which the  Company has  received a $25,000  down  payment.  The
foregoing ten TCS-1 Systems are scheduled for delivery between November 1997 and
July 2000, with two of such Systems (the OTRP and Recycletron Systems) scheduled
for  delivery  during the current  fiscal  year.  The balance of the ten Systems
currently on order are  scheduled  for delivery  between  November 1998 and July
2000.

     The Company has not included in its backlog any  revenues  which may result
from the Royalty  Agreements  which all TCS-1 System  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  System.  The Company has also not included an  additional
$5.7 million  dollars in revenues which it expects to receive under the Proposed
Maintenance  Agreements to be signed in connection  with the ten Systems already
on order (see "Proposed Services", above in this Item I).

     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.

Research and Development Activities

     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 System as well as to raising the  financing  necessary
for such activities. The Company expended approximately $600,000 on research and
development  activities during the fiscal year ended June 30, 1997, (virtually )
all of which funds were applied to the design, development,  and construction of
the first TCS-1 production model.


                                       33
<PAGE>

     Research and Development  activities  during the fiscal year ended June 30,
1997,  focused on completion of the  engineering  design of the TCS-1 System and
redesign  of  the  front  end  system  to  increase   automation   and  optimize
performance.

     All of such  activities  were carried out by the Company's  engineering and
technical  staff,  consisting  of Louis V.  Muro,  Vice  President  in Charge of
Engineering,  and John Carr, Program Director, who devoted 100% of their time to
such projects.  Such activities were conducted in conjunction with the Company's
outside Consultant,  Bentley  Environmental  Engineering Inc., and the Company's
outside  subcontractors,  Plasti-Systemes,  Fedico,  Inc., and Lefebvre  Freres,
Limitee.

     Although  the basic design and  development  of the TCS-1 is expected to be
brought to  completion  by the end of 1997,  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 endeavor to develop new
products  and uses for the rubber crumb  produced by the  operation of the TCS-1
System.

Seasonality

     The Company  does not believe  that its future  operating  results  will be
subject to quarterly variations.

Employees

     During the fiscal year ended June 30, 1997, the Company had seven employees
including its officers:  Terence C. Byrne,  Louis V. Muro,  John  Threshie,  and
Vijay Kachru,  its in-house  Corporate  and  Securities  Counsel,  its Technical
Program Director, and one  secretary-receptionist.  All of the foregoing persons
devote their full time to the  business and affairs of the Company.  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.

Patents

     On December 18, 1996, the Company filed patent  applications  in the United
States  and  Canada  based on  provisional  priority  under  preliminary  patent
applications  filed on December 19,  1995.  Prior to such  filings,  the Company
relied on trade secrets,  proprietary  know-how and technological  innovation to
develop its technology and the designs and  specifications for the TCS-1 System.
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 Tirex


                                       34
<PAGE>

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.  The Company  believes  that the steps it has
taken to date will provide some degree of protection  and that the issuance of a
patent pursuant to its  application  will  materially  improve this  protection.
However,  no  assurance  can be  given  that  this  will be the case or that the
Company  will in fact be granted a patent.  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 issuance of a patent  pursuant to its current  application
or, should a patent be granted, the validity thereof.

     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   concluded  that  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.

Competition

     The  Company  knows  of  no  devices,  apparatus  or  equipment,  utilizing
technology  which is  identical or  comparable  to the TCS-1  System,  which are
presently  being  sold or used  anywhere  in the  world,  nor is it aware of any
patents  relating  to the  Technology.  However,  the  Technology  and the TCS-1
System,  if and when  developed,  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 Company will
be able to apply to the TCS-1 System.  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
Company's Technology or the TCS-1 System, if


                                       35
<PAGE>

developed,  can successfully  compete with existing systems or with any improved
or new systems which may be developed in the future.

Government Regulation

     While the Company's equipment manufacturing  operations may not be directly
subject  to  extraordinary   government  regulations,   the  operations  of  the
purchasers  and  operators of such  equipment  may be subject to  extensive  and
rigorous  government  regulation  designed  to  protect  the  environment.   The
Company's  proposed  rubber  crumb  re-grinding,  and  on-site  tire  shredding,
operations  will,  however  be  directly  subject to these  types of  government
regulation.  As a result,  the  business  of the  Company  will be  directly  or
indirectly  subject  to,  and  may  be  affected  by,  government   regulations.
Management  does not  expect  that  the  operation  of the  TCS-1  Systems,  the
re-grinding  operations,  or the  on-site  tire  shredding  will  result  in the
emission of air pollutants,  the disposal of combustion residues, or the storage
of hazardous substances (as is the case with other tire recycling processes such
as pyrolysis). However, establishing and operation any of the foregoing types of
plants for tire recycling  will require  numerous  permits and  compliance  with
environmental  and other government  regulations,  both in the United States and
Canada and in most other foreign countries.  Moreover,  the Company is currently
making  preparations to enter into a five-year tire shredding  project in Quebec
(see "Proposed Tire Shredding  Operations").  These  operations,  as well as the
businesses of TCS-1 System  operators,  may involve,  to varying degrees and for
varying periods of time, the storage or "stockpiling" of scrap tires which, with
their  size,   volume  and   composition,   can  pose  a  particularly   serious
environmental problem. Among the numerous problems relating to stockpiling scrap
tires, is the fact that when stockpiled above ground, tires create serious fire,
public health,  and  environmental  hazards  ranging from fires,  which generate
large and dense clouds of black smoke and are extremely difficult to extinguish,
to the creation of vast breeding grounds for mosquitoes and vermin. As a result,
many states have either passed or have pending  legislation  regarding discarded
tires including  legislation  limiting the storage of used tires to specifically
designated  areas.  For  reasons  including,  but not  limited  to the  problems
described  above,  the Company and the  purchasers  of its TCS-1 Systems will 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.

     Compliance  with  applicable  environmental  and other laws and regulations
governing  the  business of the  Company may impose a financial  burden upon the
Company  that  could  adversely  affect  its  business,   financial   condition,
prospects,  and results of operations.  Likewise,  the burden of compliance with
laws and  regulations  governing  the  installation  and/or  operation  of TCS-1
Systems could  discourage  potential  customers  from  purchasing a TCS-1 System
which would adversely affect the Company's  business,  prospects,  results,  and
financial condition. 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  System and make such  by-products
less  profitable or even  impossible to sell at an  economically  feasible price
level.


                                       36
<PAGE>

     The process of obtaining required  regulatory  approvals may be lengthy and
expensive  for both the Company and for its TCS-1  System  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.  Furthermore,  changes in
existing  regulations  or adoption of new  regulations  could impose  costly new
procedures for  compliance,  or prevent the Company or its TCS-1  customers from
obtaining, or affect the timing of, regulatory approvals.

     The Company believes that existing government regulations, while extensive,
will not  result in the  disability  of either the  Company or its TCS-1  System
customers to operate profitably and in compliance with such regulations. In this
regard,  it has retained  environmental  attorneys in Montreal to advise it with
respect to compliance  with local  environmental  regulations  applicable to its
proposed tire shredding  operations.  It has also engaged a consultant to advise
purchasers  of  its  TCS-1  Systems  with  respect  to  compliance   with  local
environmental  regulations  applicable to the  installation and operation of the
TCS-1  System.  To date,  the  Company has not had to make  significant  capital
expenditures  relating  to  environmental  compliance  because  it has  not  yet
commenced  operations.  However,  the inception of equipment  manufacturing and,
possibly,   tire  shredding   operations  together  with  continually   changing
compliance  standards and  technology,  may affect the Company's  future capital
expenditure requirements relating to environmental  compliance.  Moreover, 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  requirements  on the Company or on its
TCS-1 System customers, which could cause or result in competitive advantages to
the  Company's  competitors  or  make  the  Company's  or its  TCS-1  customers'
businesses less profitable, or unprofitable, to operate.

Proposed Tire Shredding Operations

     The Company  has taken  preliminary  steps to enter a new related  business
segment.  Plans  for  these  proposed  operations  include  on-site  scrap  tire
shredding operations in Quebec under a five-year, government sponsored stockpile
abatement  program (the "Quebec  Program") which will fund the clean-up of scrap
tire stockpiles at the rate of Cdn $1.00  (approximately  $0.72 U.S., at current
exchange  rates) for every tire recycled and removed.  In connection  therewith,
the Company is presently engaged in negotiations  with CG TIRE, Inc. ("CGT"),  a
wholly owned subsidiary of Continental General Tire Inc. ("General Tire")(7) and
Recyc-Quebec, the Canadian

----------
     (7) General Tire is the fourth largest tire  manufacturer  in the world. It
has  denominated  CG TIRE,  Inc.  as "The  Continental  General  Tire  Recycling
Effort")


                                       37
<PAGE>

government  agency  involved  in  designing  and  managing  the Quebec Used Tire
Program.  According to Recyc-Quebec,  there could be more than 30 millions tires
accumulated  in about 40 stockpiles  in the province of Quebec.  As it is always
the case for  stockpile  estimates in North America  however,  these numbers are
only approximate.

     In order to qualify to  participate  in the Quebec  Program and receive the
Cdn $1.00 per tire payment,  recycling  operations must take place in Quebec and
must be  effected  by a  recycling  company  located in Quebec.  The  Company is
located  in Quebec  and it has been  advised by  Recyc-Quebec  that the  on-site
shredding  operations  which the Company  proposes to conduct  will qualify as a
"recycling  activity" for purposes of the Quebec Program. The Company is seeking
a long-term commitment from the Quebec government for a total of Cdn $20,000,000
(approximately  $14,400,000  U.S., at current exchange rates) to be allocated to
tipping fees of Cdn $1.00 per tire for the  Company.  In  connection  therewith,
meetings have been held and discussions  have occurred by and among the Company,
CGT, Mr. Bernard  Landry (the  Vice-Premier  of Quebec),  and Mr. Albert Leblanc
(the  President of  Recyc-Quebec).  While the Company is  reasonably  optimistic
about the outcome of such  meetings  and  discussions,  it is unable to give any
assurance  that it will in fact be successful  in obtaining the firm  commitment
from the  government  which it will require in order to commence  operations  in
this  area.  Moreover,  even if the  Company is able to move  forward  with this
project, there can be no assurance at this time that it will be profitable.

     The Company is currently  negotiating  the terms of an  agreement  with CGT
which,  while  not  finalized,  presently  contemplates  that:  (i) CGT would be
obligated to accept, for a tipping fee of Cdn $0.25  (approximately  $0.18 U.S.)
per tire to be paid to CGT, up to 4 million tires per year in 2 inch chips; (ii)
The  Company  would be  responsible  for  delivery  of the tires to CGT in North
Carolina,  in accordance  with an agreed upon schedule and other terms.  Current
plans  contemplate that the Company would be responsible for acquiring the tires
from  various  Quebec  stockpile  owners,  reducing the whole tires into 2" X 2"
chips with mobile shredders, and removing the tire chips from the sites by means
of truck  transportation to a train off-loading facility in Quebec for transport
by train to CGT's facility near Charlotte, North Carolina.

     On August 12, 1997, the Company  entered into an agreement with Mr. Richard
Grenier (the "Grenier  Agreement") for the purchase of approximately 4.5 million
scrap tires  presently  owned by Mr.  Grenier and  stockpiled on his property in
St-Jean-Chrystostome,  Quebec,  for an aggregate  purchase price of Cdn $175,000
(approximately  $126,000 U.S., or $0.028 per tire, at current  exchange  rates).
Payment terms required a nonrefundable downpayment of Cdn $15,000 (approximately
$10,800 U.S. at current exchange rates) upon execution, with the balance payable
at the  closing  of the  Grenier  Agreement,  which must take place on or before
October 31, 1997. The Grenier Agreement also provides that the Company will have
access to the property on which the tires are  stockpiled  and will be permitted
to conduct the shredding of the tires thereat. The Company will acquire only the
tire inventory and not the land on which it is stored nor any piece of equipment
situated thereon.  The Company is currently in negotiations,  and has received a
letter of intent  from,  the  owner of  another  Quebec  stockpile  (the  "Ganby
Stockpile")  of  approximately  500 000  tires,  to  acquire  such tires free of
charge. In addition the Company is


                                       38
<PAGE>

engaged in  negotiations  with the owner of the largest scrap tire  stockpile in
Quebec (the "Franklin Stockpile"),  located in Franklin,  just a few miles north
of the NY State border, to secure supply for up to 25 million  additional tires.
The Company is unable to state at this time  whether it will be able to close on
the Grenier  Agreement  within the  required  time  period or what the  eventual
outcome of its  negotiations  respecting the Ganby and Franklin  Stockpiles will
be.

     The company has retained Avery de Billy,  a Montreal law firm  specializing
in environmental law, to advise it with respect to any environmental liabilities
which the Company may incur in connection with these proposed  operations and to
assist the Company with meeting all  regulatory  requirements  and standards and
obtaining all permits and legal certificates required in connection therewith.

Proposed Financing Activities

     The Company is currently conducting negotiations with a brokerage firm (the
"Proposed  Placement  Agent")  respecting  a private  placement  (the  "Proposed
Private  Placement") of the securities of the Company  pursuant to the exemption
from the  registration  requirements  of the  Securities Act of 1933, as Amended
(the "Securities  Act"),  available under Rule 506 of Regulation D thereof.  The
terms presently being negotiated  contemplate an offering of Units consisting of
10%  convertible,  subordinated  debentures  and  common  stock or common  stock
purchase warrants, for the aggregate amount of $1,400,000.  No agreement has yet
been  reached with the  Proposed  Placement  Agent and the terms of the Proposed
Private Placement have not yet been finalized. There can be no assurance at this
time that the Proposed  Private  Placement  will be attempted  or, if attempted,
that  the  Company  will be  successful  in  raising  adequate,  if  any,  funds
therefrom.

     The Company has entered into a letter of intent with a brokerage  firm (the
"Proposed  Underwriter")  for such firm to  underwrite a public  offering of the
common stock of the  Company,  in an amount of not less than  $8,000,000,  at or
around the end of March 1998.  There can be no  assurance at this time that such
Proposed Public Offering will actually take place.

ITEM 2.  PROPERTIES

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


                                       39
<PAGE>

applicable fees or charges. The lease is renewable for an additional three years
at market rates then prevailing.

     The Company  intends  during the present  fiscal year to rent or purchase a
manufacturing  and storage facility of  approximately  100,000 square feet to be
used for assembling and warehousing the TCS-1 Systems,  as they are manufactured
by the Company.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is the  defendant in an action,  commenced on June 18, 1997, in
the United States District Court for the District of New Jersey,  entitled Great
American  Commercial  Funding Corp. vs. Tirex America Inc. The action arises out
of a certain  "placement fee agreement",  executed by the Company in February of
1986,  under  which  the  Company,  among  other  things,  undertook  to pay the
plaintiff  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 plaintiff
succeeded in obtaining financing acceptable to the Company.  Although the amount
and terms of the "financing" were not mentioned in the documents, it was clearly
understood by the parties that the Company was then seeking to obtain,  and that
the agreement contemplated, financing in an amount (assumed necessarily to be in
the multi-million dollar range),  adequate to fund the design and development of
the TCS-1  System  and to enable  the  Company to  initiate  manufacturing  such
Systems on a commercial  basis.  Under the Agreement:  (i) the plaintiff did not
undertake to do anything other than "attempt" to secure financing  acceptable to
the  Company  and (ii) the Company  had  absolute  discretion  whether or not to
accept any and all "financing" proposals.

     Several  months  elapsed  after the Company  signed the  Agreement  without
plaintiff  ever  introducing  the  Company to any third  party  which was ready,
willing,  and able to produce the kind and type of financing which the plaintiff
knew the  defendant was seeking and needed;  However,  plaintiff did recommend a
firm in long  island  which was  engaged  in the  business  of  equipment  lease
financing.  The Company then  introduced  one of its customers to the such lease
financing  firm.  The  customer   ultimately  entered  into  a  lease  financing
arrangement  with such firm,  pursuant  to which the  Company was able to obtain
some limited amounts of pre-delivery funds, but only because the customer agreed
to do so, and the customer's principals fully collateralized any and all advance
payments/loans made by or through the lease financing firm. Because the advances
made to the Company pursuant to that lease-financing arrangement clearly did not
in any way constitute the type of financing  contemplated  by the parties or the
Agreement,  the Company believes it has no financial obligation to the plaintiff
pursuant to said "placement fee agreement".

     The Company has filed an Answer  denying any  liability to the plaintiff in
light,  among other things,  of the foregoing facts, and asserting,  among other
things,   that:   (i)  the  agreement  was  induced  by   plaintiff's   material
misrepresentations; (ii) enforcement thereof would be clearly


                                       40
<PAGE>

unconscionable  in the  circumstances;  (iii)  plaintiff  never  introduced  the
Company to any third  party  which was ready,  willing,  and able to produce the
type of financing  which the plaintiff  knew the Company was seeking and needed;
and (iv) the  so-called  "placement  fee  agreement"  was  merely an offer for a
unilateral  contract  which  was  terminated  or  revoked,  and  notice  of such
revocation  was  timely   communicated  to  plaintiff  before  it  rendered  any
substantial  performance  in  reliance  upon  the  offer.  The  Company  and its
litigation counsel,  Sheldon A. Weiss,  believe that the plaintiffs complaint is
without merit and that the Company ultimately will prevail in this litigation.

     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 fiscal year ended June 30, 1997, the matter of changing the name
of the Company from Tirex America Inc. to The Tirex Corporation was submitted to
a vote of the  shareholders  of the Company.  Such vote was taken in  accordance
with Delaware General  Corporation  Law,  Section 228(a),  on February 21, 1997,
pursuant to which the holders of record, in person or by proxy, of approximately
52% of the issued and  outstanding  shares of common  stock of the  Company,  by
their  consent  in  writing,  authorized,  approved,  and  adopted a  resolution
respecting the amendment of the Company's certificate of incorporation. Pursuant
thereto,  effective  July 11, 1997,  the  certificate  of  incorporation  of the
Company was amended so as to change the name of the Company from "Tirex  America
Inc." to "The Tirex Corporation".

                                    PART II

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

Market Information

     The  Company's   Common  Stock,  is  traded  on  a  limited  basis  in  the
over-the-counter  market. The following table sets forth representative high and
low bid prices by calendar quarters as reported by the Electronic Bulletin Board
of the National  Association  of Securities  Dealers  during the last two fiscal
years  and the  subsequent  interim  period  through  September  12,  1997.  Bid
quotations represent prices between dealers, and do not include resale mark-ups,
mark-downs or other fees or commissions, and do not necessarily represent actual
transactions.


                                       41
<PAGE>

                                                          Bid Prices
        Period                                           Common Stock
        ------                                           ------------
                                                       Low         High
 Fiscal Year Ended June 30, 1995

        September 30, 1995                             1/8         3/4
        December 31, 1995                              1/8         3/8
        March 31, 1996                                 1/8         0.28
        June 30, 1996                                  0.10        9/16

 Fiscal Year Ended June 30, 1996

        September 30, 1996                             3/16        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 1997

        September 12, 1997                             0.13        0.46

Shareholders

     As of  September  23,  1997,  the number of holders of record of the common
stock, $.001 par value, of the Company was 311.

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.


                                       42
<PAGE>

Sales of Unregistered Securities

     The following sets forth information respecting the dates, purchasers,  and
consideration  involved  in sales of its  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,  1997,  and not  previously  reported in a
quarterly report on Form 10-Q.(8)

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, 1997, the Company
had available financial resources to meet only part of its salary obligations to
its  executive  officers  and  its  corporate  and  securities  counsel,  and to
reimburse  such  persons for  out-of-pocket  disbursements  made by them for the
account,  or on behalf,  of the  Company.  As a result,  such  persons  accepted
unregistered  shares of the  Company's  Common Stock,  valued,  for this purpose
only,  at fifty percent of the average of the bid and ask prices for of stock as
traded in the  over-the-counter  market and reported in the electronic  bulletin
board of the NASD, as follows:

     On April 28, 1997, in consideration of unpaid executive  services  rendered
during the fiscal  quarter  ended March 31,  1997,  the Company  authorized  the
issuance of an aggregate of 453,532  shares to three of its  executive  officers
and its in-house  corporate counsel at a per share price of $.214,  representing
50%  of  the  average  of the  bid  and  ask  price  for  the  Common  Stock  of
approximately $.428 per share during the said fiscal quarter. On that same date,
the Company authorized the issuance of an aggregate of 132,299 shares to another
executive officer in consideration of unpaid executive  services rendered during
the seven  month-month  period  ended March 31,  1997,  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,  during the
three fiscal quarters when such unpaid services were rendered, as follows:

--------
     (8) For information  respecting sales of unregistered  shares of its Common
Stock  made by the  Company  during the first  three  quarters  of fiscal  1997,
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, 1996,  December 31, 1996, and March
31, 1997.


                                       43
<PAGE>

           Period for
          Which Shares               Price Per                 No. Of
           are Issued                  Share                   Shares
           ----------                  -----                   ------

         Sept 1, 1996
            through
         Sept 30, 1996               US $0.169                 32,396

         Quarter ended
         Dec 31, 1996                US $0.1433                68,520

         Quarter ended
         March 31, 1997              US $0.214                 31,383

Issuance of Stock Pursuant to Consulting Agreements

     1. On April 28, 1997, in consideration of business and financial consulting
services  rendered  by a  nonaffiliated  financial  consultant  (the  "Financial
Consultant"), the Company authorized the issuance of 79,462 shares of its Common
Stock to the said  nonaffiliated  consultant for an aggregate  purchase price of
$20,000 (Canadian) (approximately,  US $14,780 at exchange rates in effect as at
such date). In accordance with the terms of the Consulting  Agreement applicable
thereto, this represented a per share price equal to the average of the high and
low  prices of the  Company's  common  stock as  traded in the  over-the-counter
market and quoted in the NASD  Electronic  Bulletin  Board,  during the ten (10)
days of trading immediately  preceding April 3, 1996, when the average per share
high-ask  price and the average per share  low-bid  price of the common stock of
the Company were approximately US $0.204 and US $0.168,  respectively,  yielding
an average of such prices during such period of approximately US $0.186.

     2. On April 28,  1997,  in  consideration  of  financial  public  relations
consulting services rendered by a nonaffiliated public relations consultant (the
"Public Relations  Consultant"),  the Company  authorized the issuance of 99,502
shares of its Common Stock to the said nonaffiliated Public Relations Consultant
for an aggregate purchase price of $20,000.  In accordance with the terms of the
Public Relations Consulting Agreement applicable thereto, this represented a per
share  price  equal to 50% of the  average  of the high  and low  prices  of the
Company's  common stock as traded in the  over-the-counter  market and quoted in
the  NASD  Electronic  Bulletin  Board,  during  the ten  (10)  days of  trading
immediately  preceding March 11, 1997, when the average per share high-ask price
and the average per share low-bid price of the common stock of the


                                       44
<PAGE>

Company were  approximately US $0.435 and US $0.369,  respectively,  yielding an
average of such prices  during such period of  approximately  US $0.402,  50% of
which was $0.201.

     These sales are claimed to have been  exempt  from  registration  under the
Securities Act pursuant to Section 4(2) thereof, as more fully described below.

Basis for Exemption Claimed

     With respect to all sales and other  issuances of securities as hereinabove
described:

     (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  services;
          Such persons had continuing direct access to all relevant  information
          concerning  the Company  and/or have such  knowledge and experience in
          financial and business  mattes that they are capable of evaluating the
          merits and risks of such  investment and are able to bear the economic
          risk thereof.

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

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

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 year ended June 30, 1997.


                                       45
<PAGE>

Liquidity and Capital Resources

     The  activities  of the  Company  since  its  inception  in 1987  have been
financed  by sources  other than  operations.  Such  financing  was  principally
provided by the sale of securities in private transactions, as follows:

                                            Proceeds From
                 Year Ended                   Sales of
                 June 30th                   Securities
                 ---------                   ----------

                   1997                      $ 318,685
                   1996                         80,872
                   1995                         22,316
                   1994                        237,430
                   1993                         76,055
                   1990                         80,812
                   1989                         77,000

     As at June 30, 1997, the Company had total assets of $1,555,620  reflecting
an increase of  $1,357,988  as compared to June 30, 1996 when total  assets were
$197,632. The foregoing reflects an increase of $606,227 attributable to accrued
design and development costs of the TCS-1 System, and increases in: (i) cash in
the amount of $154,797;  (ii) research and development tax credit receivables in
the amount of  $269,918;  (iii) loan to  directors  in the  aggregate  amount of
$10,881;  (iv) deferred start up costs of $74,683; (v) note receivable of 8,571;
(vi)  sales tax  receivable  of  $50,284;  and (vi)  advances  to  employees  of
$185,942.  During that same period,  total  liabilities  increased by $1,327,921
from $367,429 at June 30, 1996 to $1,695,350 at June 30, 1997. Such increase was
due primarily to the recording of  liabilities  associated  with the accruing of
various expenses,  including: (i) $342,442 in accrued officers' salaries, all of
which will be paid in  unregistered  stock of the Company and not in cash;  (ii)
$415,000  reflecting the Company's receipt of refundable  deposits from O/V III,
and  recycletron;  (iii)  increase in debt  consisting of loans from the Bank of
Montreal  and  FORDQ  in  the  respective  amounts  of  $299,096  and  $271,383.
Reflecting the foregoing, as at June 30, 1997, the Company had a working capital
deficit (current assets minus current  liabilities) of $1,013,559 as compared to
a working  capital  deficit of $246,031 at June 30, 1996. The major part of such
working capital deficit ($491,840)  represents accrued officers' salaries, to be
paid by the Company in stock and not in cash,  and  deposits of future  sales of
$480,000.

     The Company  currently  has limited  material  assets of $19,954,  negative
working  capital and a negative net worth of  $139,730.  The success of its tire
disintegration equipment manufacturing business and its ability to continue as a
going concern will be dependent  upon the Company's  ability to obtain  adequate
financing  to complete  the design and  development  of the TCS-1  System and to
commence manufacturing and sales activities related thereto. The Company


                                       46
<PAGE>

believes  that it will be able to do so during  the  fiscal  year which will end
June 30,  1998.  Currently,  the Company is  negotiating  the terms of a private
placement of the  Company's  securities  in an amount of up to  $1,400,000  (the
"Proposed  Private  Placement").  The  Company is also  conducting  negotiations
respecting  the terms of a public  offering of the Company's  common stock in an
amount of not less than $8,000,000 (the "Proposed Public Offering"). The Company
can give no assurance at this time that either the Proposed Private Placement or
the Proposed Public Offering will be attempted or, if attempted,  that either of
such offerings will be successfully completed.

Results of Operations

     The Company has never engaged in any significant business activities. There
were no revenues from operations during the fiscal year ended June 30, 1997.

     The  financial  statements  which  form a part of this  Report  reflect  an
increase in total general and administrative  expenses, from $793,948 for fiscal
1996, to $1,358,767  for fiscal 1997.  However,  the great bulk of such increase
reflects  the  accrual,  as  expenditures,  of $403,681 in  executive  officers'
salaries, payment of virtually all of which was actually waived by the executive
officers,  who  accepted  shares of the  Company's  Common Stock in lieu of such
payment.  Management  believes that the amounts accrued in respect of the shares
issued to  compensate  the  executive  officers'  reflect  the fair value of the
services  rendered and not the value of the stock at the time it was issued.  In
respect of the value of the  compensation  actually  received by such  officers,
management  believes that it is  impossible  to determine the actual  current or
potential value, if any, of the 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 (v) the uncertainty  respecting
the  Company's  ability to continue  as a going  concern,  (See the  discussions
included  above,  in this  report  in Item I,  "Proposed  Business"  and Item 5,
"Market for the Company's Common Equity and Related  Stockholder  Matters".  See
also, Item 12 of this Report,  "Certain Relationships and Related Transactions -
Issuance of Stock in Lieu of Salaries and Consulting Fees").

     From  inception  (July 15, 1987)  through  June 30,  1997,  the Company has
incurred  a  cumulative  net  loss  of  $3,761,277.  Approximately  28% of  such
cumulative  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  expensing of costs  associated  with
the unsuccessful attempt to establish such health care business. The Company


                                       47
<PAGE>

never commenced its proposed health care operations and therefore,  generated no
revenues  therefrom.  The Company is presently in the business of designing  and
developing cryogenic tire disintegration  equipment (the "TCS-1 System"),  which
it intends to begin  manufacturing  on a  commercial  basis,  during the current
fiscal year.  Design and development  work on the first  production model of the
TCS-1 System has been brought to approximately 90% completion.  Unless and until
the  Company  successfully  develops  and  commences   manufacturing  and  sales
operations  respecting such a machine,  the Company will continue to generate no
revenues from operations.

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.


                                       48
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY

                         (A Developmental Stage Company)

                                    I N D E X

                                                                         Page
                                                                         ----

Report of Independent Auditors                                            50 
                                                                     
Consolidated Balance Sheet                                                51
                                                                     
Consolidated Statements of Operations                                     52
                                                                     
Consolidated Statements of Stockholders' Equity (Deficit)               53 - 54
                                                                     
Consolidated Statements of Cash Flows                                   55 - 56
                                                                     
Notes to Consolidated Financial Statements                              57 - 63
                                                                     

                                      -49-
<PAGE>

                         Report of Independent Auditors


Board of Directors
Tirex America, Inc. and Subsidiary

We have audited the  accompanying  consolidated  balance sheet of Tirex America,
Inc. and subsidiary (a  development  stage company) as of June 30, 1997, and the
related consolidated  statements of operations,  stockholders' equity (deficit),
and cash  flows  for the  years  ended  June  30,  1997  and  1996,  and for the
cumulative  period from July 15,  1987,  (date of  inception)  to June 30, 1997.
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 Tirex America, Inc.
and subsidiary (a  development  stage company) at June 30, 1997, and the results
of their operations,  and their cash flows for the years ended June 30, 1997 and
1996,  and for the  cumulative  period from July 15, 1987 (date of inception) to
June 30, 1997, 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.



                                        Nevoso, Pivirotto, Pinkham & Foster
                                        Certified Public Accountants, LLC

October 9, 1997
Fairfield, New Jersey


                                      -50-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                           Consolidated Balance Sheet
                                  June 30, 1997

                                     Assets

Current assets
   Cash and cash equivalents (Note 1)                  $   155,037
   Note receivable (Note 5)                                  9,729
   Employee advances (Note 5)                              185,942
   Sales tax receivable                                     50,284
   R&D Investment tax credit receivable (Note 1)           269,918
   Loan - director (Note 5)                                 10,881
                                                       -----------
                                                                    $   681,791
                                                      
Equipment, at cost, net of accumulated                
   depreciation of $5,160 (Note 1)                                       14,794
                                                      
Other assets                                          
   Equipment development costs (Notes 1 and 9)             783,451
   Deferred start-up costs (Note 1)                         74,683
   Organization costs, net of accumulated             
    amortization of $641 (Note 1)                              901
                                                       -----------
                                                                        859,035
                                                                    -----------
                                                                    $ 1,555,620
                                                                    ===========
                  Liability and Stockholders' Equity (Deficit)
                                                      
Current liabilities                                   
   Notes payable (Note 3)                              $   122,551
   Accrued expenses (Note 5)                               892,254
   Loan payable (Note 4)                                   200,545
   Deposit payable (Note 5)                                480.000
                                                       -----------
                                                                    $ 1,695,350
                                                      
Commitments and contingencies                                              --
                                                      
Stockholders' equity (deficit) (Notes 1,3,4 and 5)    
   Common stock, $.001 par value, authorized          
   50,000,000 shares, issued and                      
   outstanding, 37,449,972 shares                           37,450
   Additional paid-in capital                            3,584,097
   Deficit accumulated during the development stage     (3,761,277)
                                                       ------------
                                                                      ( 139,730)
                                                                    -----------
                                                                    $ 1,555,620
                                                                    ===========
                                                     
                 See Notes to Consolidated Financial Statements


                                      -51-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                               Cumulative
                                                                               Period from
                                                                              July 15, 1987
                                                                                (Date of
                                                   Year Ended June 30,        Inception) to
                                                  1997            1996        June 30, 1997
                                              ------------    ------------    ------------
<S>                                           <C>             <C>             <C>         
Revenues                                      $       --      $     10,000    $     55,976
Cost of sales                                         --             4,500          14,352
                                              ------------    ------------    ------------
Gross profit                                          --             5,500          41,624
                                              ------------    ------------    ------------
General and administrative expenses:
   Costs expended in connection with
     securing "Certificate of Need"                   --              --           309,000
   Officers' salary (Notes 5 & 7)                  160,025         652,935       1,212,410
   Consulting services                             896,591          43,021       1,002,886
   Other salaries                                     --              --            42,528
   Professional services                            82,427          34,533         428,476
   Rent (Note 10)                                    7,946           9,100         159,981
   Automobile                                         --              --            47,801
   Travel and entertainment                        167,758          22,412         251,871
   Telephone                                         6,582           7,399          37,148
   Depreciation and amortization (Note 1)            4,299           3,637          20,600
   Utilities                                          --              --            21,888
   Office expenses                                  13,877           6,487          86,312
   Advertising                                        --             1,680           6,482
   Miscellaneous                                       327           2,189          27,214
   Franchise and other tax                           1,232             443          23,932
   Interest and bank charges (Notes 3 and 4)         8,531           2,088          79,143
   Investor relations                                2,657           4,754           9,514
   Repairs and maintenance                            --              --             6,375
   Contributions                                      --              --             1,680
   Insurance                                          --              --             5,018
   Abandonment loss                                   --              --            10,000
   Transfer agent                                    6,515           3,270          21,104
                                              ------------    ------------    ------------
Total general and administrative expenses        1,358,767         793,948       3,811,363
                                              ------------    ------------    ------------
Operating loss                                  (1,358,767)       (788,448)     (3,769,739)
                                              ------------    ------------    ------------
Other income (expenses)
   Income from stock options                          --              --            10,855
   Loss on disposal of equipment                    (2,240)           --            (2,240)
   Gain on foreign exchange (Note 1)                 1,027          (1,180)           (153)
                                              ------------    ------------    ------------
                                                    (1,213)         (1,180)          8,462
                                              ------------    ------------    ------------
Net loss                                      $ (1,359,980)   $   (789,628)   $ (3,761,277)
                                              ============    ============    ============
Net loss per common share                     $       (.05)   $       (.04)   $       (.25)
                                              ============    ============    ============
Weighted average shares of common
    stock outstanding (Note 1)                  27,992,502      19,647,590      15,304,512
                                              ============    ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -52-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

            Consolidated Statement of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                          Deficit
                                                                                                        Accumulated
                                                                           Additional                      During
                                                     Common Stock            Paid-in     Subscriptions  Developmental
                                                 Shares        Amount        Capital      Receivable        Stage          Total
                                               ----------   -----------    -----------    -----------    -----------    -----------
<S>                                            <C>          <C>            <C>            <C>            <C>            <C>      
Balance at July 15, 1987                             --     $      --      $      --      $      --      $      --      $      --

Issuance of common stock                              500         5,000           --           (1,750)          --            3,250
Net loss for period                                  --            --             --             --          (82,286)       (82,286)
                                               ----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1988                              500         5,000           --           (1,750)       (82,286)       (79,036)

5,200 for 1 stock split and change
 in par value                                   2,599,500        (2,400)         2,400           --             --             --
Merger with Concord Enterprises,
 Inc                                              682,228           682        111,869           --             --          112,551
Net loss for year                                    --            --             --             --         (464,284)      (464,284)
Payment received on common
  stock subscribed                                   --            --             --            1,750           --            1,750
                                               ----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1989                        3,282,228         3,282        114,269           --         (546,570)      (429,019)

Exercise of 80,792 warrants at
 $1 per share                                      80,792            81         80,711           --             --           80,792
Stock issued for late pay                          20,000            20           --             --             --               20
Net loss for year                                    --            --             --             --         (359,444)      (359,444)
                                               ----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1990                        3,383,020         3,383        194,980           --         (906,014)      (707,651)

Net loss for year                                    --            --             --             --         (132,782)      (132,782)
                                               ----------   -----------    -----------    -----------    -----------    -----------

Balance at June 30, 1991                        3,383,020         3,383        194,980           --       (1,038,796)      (840,433)

Net loss for year                                    --            --             --             --          (18,560)       (18,560)
                                               ----------   -----------    -----------    -----------    -----------    -----------
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 year                                    --            --             --             --         (165,296)      (165,296)
                                               ----------   -----------    -----------    -----------    -----------    -----------
Balance at June 30, 1993                       22,496,676        22,497        998,694           --       (1,222,652)      (201,461)
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -53-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

            Consolidated Statement of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                           Deficit
                                                                                                         Accumulated
                                                                            Additional                     During
                                                     Common Stock             Paid-in    Subscriptions  Developmental
                                                 Shares         Amount        Capital      Receivable       Stage          Total
                                               ----------    -----------    -----------    -----------   -----------    -----------
<S>                                            <C>          <C>            <C>            <C>            <C>            <C>      

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

Stock issued                                        2,000              2             (2)          --            --             --
Forgiveness of 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        147,858           --            --          153,450
Forgiveness of debt                               200,000            200         24,300           --            --           24,500
Issuance of common stock                          402,857            401         21,915           --            --           22,316
Net loss for year                                    --             --             --             --        (209,721)      (209,721)
                                               ----------    -----------    -----------    -----------   -----------    -----------

Balance at June 30, 1995                       16,794,390         16,792      1,591,265           --      (1,611,669)        (3,612)

Stock issued for services                       3,975,662          3,976        509,196           --            --          513,172
Forgiveness of debt                               391,857            392         29,008           --            --           29,400
Issuance of common stock                          710,833            710         80,161           --            --           80,871
Net loss for year                                    --             --             --             --        (789,628)      (789,628)
                                               ----------    -----------    -----------    -----------   -----------    -----------

Balance at June 30, 1996                       21,872,742         21,870      2,209,630           --      (2,401,297)      (169,797)

Stock issued for services                       5,067,912          5,069        995,370           --            --        1,000,439
Forgiveness and assumptiion
   of debt                                        251,382            252         43,965           --            --           44,217
Issuance of common stock                       10,257,936         10,259        335,132           --            --          345,391
Net loss for year                                    --             --             --             --      (1,359,980)    (1,359,980)
                                               ----------    -----------    -----------    -----------   -----------    -----------

Balance at June 30, 1997                       37,449,972    $    37,450    $ 3,584,097    $      --     $(3,761,277)   $  (139,730)
                                               ==========    ===========    ===========    ===========   ===========    ===========

</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -54-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                  Cumulative  
                                                                                  Period from
                                                                                 July 15, 1987
                                                                                   (Date of
                                                      Year Ended June 30,        Inception) to
                                                     1997            1996        June 30, 1997
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>         
Cash flows from operating activities:         
   Net loss                                      $ (1,359,980)   $   (789,628)   $ (3,761,277)

 Adjustments to reconcile net loss to net cash
    provided by operating activities:
   Depreciation and amortization                        4,299           3,637          20,600
   Loss on disposal and abandonment of
     assets                                             2,240            --            15,559
   Stock issued in exchange for interest                4,217            --             4,217
   Stock issued in exchange for services            1,000,441         513,172       1,696,463
 Change in assets and liabilities:
   Increase in employee advances                     (185,942)           --          (185,942)
   Increase in sales tax receivable                   (50,284)           --           (50,284)
   Increase in R&D investment tax credit
        receivable                                   (269,918)           --          (269,918)
   Increase in other assets                              --              --            (6,700)
   Increase in accrued expenses                       656,325         212,171       1,235,243
   Increase in due to stockholders                       --              --           473,191
                                                 ------------    ------------    ------------

   Net cash used in operating activities             (198,602)        (60,648)       (828,848)
                                                 ------------    ------------    ------------

Cash flows from investing activities:
   Increase in note receivable                         (8,571)           --            (9,729)
   Equipment                                           (5,924)        (14,030)        (53,012)
   Equipment assembly costs                          (606,028)       (116,023)       (783,252)
   Reduction of security deposit                         --             1,600           6,700
   Organization cost                                     --              --            (1,542)
   Deferred start-up costs                            (74,683)           --           (74,683)
                                                 ------------    ------------    ------------

   Net cash used in investing activities             (695,206)       (128,453)       (915,518)
                                                 ------------    ------------    ------------

Cash flows from financing activities:
   Loan granted to director                           (10,881)           --           (10,881)
   Proceeds from deposit                              415,000          15,000         480,000
   Proceeds from note payable                          98,551            --           122,551
   Proceeds from loan payable                         200,545          35,000         235,545
   Proceeds from loan payable- stockholders              --              --            73,013
   Proceeds from issuance of stock options               --              --            20,000
                                                 ------------    ------------    ------------

Sub-total                                        $    703,215    $     50,000    $    920,228
                                                 ------------    ------------    ------------
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -55-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                                  Cumulative  
                                                                                  Period from
                                                                                 July 15, 1987
                                                                                   (Date of
                                                      Year Ended June 30,        Inception) to
                                                     1997            1996        June 30, 1997
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>         
Sub-total from prior page                        $    703,215   $     50,000    $    920,228

   Proceeds from issuance of common stock              10,258            711          35,803
   Proceeds from additional paid-in capital           335,132         80,160         943,372
                                                 ------------   ------------    ------------
   Net cash provided by financing activities        1,048,605        130,871       1,899,403
                                                 ------------   ------------    ------------
Net increase (decrease)  in cash                      154,797        (58,230)        155,037

Cash and cash equivalents - beginning of year             240         58,470            --
                                                 ------------   ------------    ------------
Cash and cash equivalents - end of year             $155, 037   $        240    $    155,037
                                                 ============   ============    ============

Supplemental Disclosure of Non-Cash Activities:

   In 1997 and 1996,  the Company  recorded an  increase in common  stock and in  additional
   paid-in  capital of $44,217 and $29,400,  respectively,  which was in  recognition of the
   forgiveness  and  assumption of debt. In 1997 and 1996,  stock was issued in exchange for
   services performed in the amount of $1,000,441 and $513,172 respectively

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

Supplemental Disclosure of Cash Flow 
  Information:

   Interest paid                                 $       --     $      2,088    $     70,612
                                                 ============   ============    ============
   Income taxes paid                             $       --     $       --      $       --
                                                 ============   ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                      -56-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Accounting Policies

         Nature of Business

         Tirex America,  Inc. (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.


                                      -57-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (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
         finders  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 resign
         their  positions as officers and directors of the Company.  In addition
         to their  resignations  they  acknowledged  that none of the  requisite
         performance  levels  for the  release of any of the  11,900,000  escrow
         shares had been met and renounced all rights to such shares.

         In May of 1995,  in order to take  advantage  of various  research  and
         development incentives,  the Company and officers of the Company formed
         a Canadian  corporation named 3143619 Canada, Inc. (Tirex Canada).  All
         of the research and development  work on the first  production model of
         the  TCS-1  System is being  completed  by Tirex  Canada  and after the
         completion of the model, they will manufacture the product.

         On  July  11,  1997  the  Company's  name  was  changed  to  The  Tirex
         Corporation.

         Basis of Consolidation

         The  consolidated  financial  statements  include the accounts of Tirex
         America,  Inc.  and  its  subsidiary  Tirex  Canada.  All  intercompany
         transactions and accounts have been eliminated in consolidation.


                                      -58-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (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 deposit
         with  maturities  of 90 days or less,  were  deemed to be cash and cash
         equivalents.

         Equipment Development Costs

         Deferred development costs are stated at cost net of any investment tax
         credits  when there is  reasonable  assurance  that the credits will be
         realized.  Amortization  will begin once  commercial  production of the
         product has  commenced  and will be computed  based upon the  estimated
         useful life of related products as determined from management's  future
         sales  estimates  and will not  exceed  five years from the date of the
         product's market launching.

         Deferred Start-Up Costs

         Deferred  start-up costs represent  pre-operating  expenses and will be
         amortized  on a  straight-line  basis  over a three  year  period  once
         commercial operations have commenced.

         Equipment

         Equipment   is   recorded  at  cost  less   accumulated   depreciation.
         Depreciation is provided over the estimated  useful lives of the assets
         by using the straight-line method of depreciation.

         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.

         Organization Costs

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

         Per Share Data

         The primary income (loss) per share was computed on the weighted number
         of shares of common stock outstanding  during the period.  Common share
         equivalents  were not  included  as their  inclusion  would  have  been
         anti-dilutive.

         Income Taxes

         The Company has net  operating  loss  carryovers  of  approximately  $4
         million as of June 30, 1997,  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.


                                      -59-
<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 1 - Summary of Accounting Policies (continued)

         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 $269,918.

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

Note 2 - Going Concern

         As shown in the accompanying financial statements, the Company incurred
         a net loss of $1,359,980  during the year ended June 30, 1997 and as of
         that date,  the  Company's  current  liabilities  exceeded  its current
         assets by  $1,013,559  and its  total  liabilities  exceeded  its total
         assets by $139,730.

         In March 1993, the Company,  which was still in the development  stage,
         developed  a new  Business  Plan.  The  Company  is in the  process  of
         constructing   a   production   quality   machine  for  the   cryogenic
         disintegration  of used tires.  The Company  also plans to recycle used
         tires using ambient temperature  disintegration  equipment. At June 30,
         1997,  the Company is still in the  development  stage.  Fees generated
         from  tipping  and  culling  were  insufficient  to  fund  the  current
         operations of the Company.  All of these factors  create an uncertainty
         about the Company's ability to continue as a going concern.

         The Company is  currently  in the  process of trying to obtain  funding
         needed  through a private  placement of its  securities in an amount of
         not less than $700,000,  which will provide  working  capital while the
         Company constructs its cryogenic disintegration machine. The ability of
         the Company to continue as 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 - Notes Payable

         The Company  has  available  a line of credit  which bears  interest at
         prime  plus 3%.  Under  this line of credit  the  Company  may borrow a
         maximum of 80% of their receivable  balance from FORD-Q and the related
         Rev  Canada  receivable.  At June 30,  1997,  $98,551  was  outstanding
         against  this  line  of  credit.  The  note  is  collateralized  by the
         receivable from FORD-Q. The prime rate of interest at June 30, 1997 was
         4.5%. This line was paid in full in July, 1997.

         The  Company  also  had  a  note  payable  in  the  amount  of  $24,000
         outstanding  as of June  30,  1997.  The  repayment  terms  were  being
         negotiated as of that time.


                                      -60-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 4 - Loan Payable

                                                  1997           1996
                                               ---------      ---------
         FORD-Q                                $ 178,806      $    --
         IDEA-SME                                 14,493           --
         IDEA-SME                                  7,246           --
                                               ---------      ---------
                                               $ 200,545      $    --
                                               =========      =========

         On April 11, 1996 the Company  entered into a loan  agreement  with the
         Federal Office of Regional  Development - Quebec (FORD-Q) which will be
         repayable  annually over a period of forty-eight  months  following the
         completion  of the  project.  The loan is being  contributed  under the
         Industrial  Recovery  Program  for  South-West  Montreal  and  will  be
         calculated  as the  lesser of  $362,319  or 20% of the  eligible  costs
         incurred for the  construction  of a commercial  scale prototype of the
         cryogenic scrap tire disintegration system. The loan is non-interesting
         bearing and unsecured. The Company received $178,806 under this program
         in fiscal 1997.

         On April  30,  1997 the  Company  received  a  refundable  contribution
         awarded under the terms of the Program for the  Development of Quebec's
         SME'S (IDEA-SME).  The contribution is repayable in amounts equal to 1%
         of the annual gross sales in Spain and Portugal occurring after June 1,
         1997. $14,493 was received under this program in fiscal 1997.

         On March 26, 1997, the Company  received a refundable  contribution for
         the  preparation  of market  development  studies  for India  under the
         Quebec SME  development  assistance  program  (IDEA-SME).  The  maximum
         contribution  is $14,493 based on 50% of the approved  eligible  costs.
         The  contribution  is  repayable  in amounts  equal to 1% of the annual
         gross sales in India occurring after June 1, 1997. As of June 30, 1997,
         the Company had received $7,246 under this program.

         On June 6, 1997, the Company entered into an agreement under the Quebec
         SME development  assistance  program (IDEA-SME) to receive a refundable
         contribution  for  market   development   activities  for  the  Iberian
         Peninsula.  The  maximum  contribution  is  $68,841  ,  based on 50% of
         approved eligible costs. The contribution is repayable in amounts equal
         to 1.5% of the annual  gross sales in Spain and in  Portugal  occurring
         after June 1, 1998 less amounts repaid through the amounts noted in the
         April 30, 1997 agreement.

Note 5 - Related Party Transactions

         In 1994,  a  stockholder  loaned  the  Company  $5,000.  This  loan was
         converted to common stock and  additional  paid-in  capital  during the
         year ended June 30, 1997.

         On July 22, 1994, 3,000,000 shares of Tirex America, 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  has entered  into  employment  agreements  with all of its
         executive officers and with its in-house corporate counsel. 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.


                                      -61-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 5 - Related Party Transactions (continued)

         Included in accrued  expenses at June 30, 1997 is $366,462 of salary to
         officers  which the company  subsequently  issued common stock for. The
         Company  advanced  funds to its officers and directors  during the year
         ended  June 30,  1997 in the amount of  $185,942.  These will be repaid
         during the year ending June 30, 1998.

         At June 30,  1997 and  1996,  the  Company  had notes  receivable  from
         various officers in the amount of $9,729 and $1,158,  respectively.  At
         June 30,  1997 the Company had a loan  receivable  from a director  for
         $10,881. All of these notes and loans are non-interest bearing and will
         be repaid during the year ending June 30, 1998.

         During the year ended June 30,  1997,  a director of the Company paid a
         debt of $39,217  on behalf of the  Company  in  exchange  for stock and
         additional paid-in-capital.

         Deposits  payable  include an amount of  $455,000  which are payable to
         companies which are owned by a director of the Company.

Note 6 - Forgiveness of Debt

         In 1997 and 1996,  the Company  recorded  increases in common stock and
         additional paid-in capital of $5,000 and $29,400,  respectively,  which
         was in  recognition  of the  forgiveness  of  debt by  certain  related
         parties of the Company.

Note 7 - Common Stock

         During  the years  ended June 30,  1997 and 1996,  the  Company  issued
         common stock to individuals  for services  performed and forgiveness of
         debt totaling $1,044,657 and $542,572, respectively.  Included in these
         amounts are  payments to officers of the Company in exchange for salary
         in the  amount of  $786,526  and  $502,756,  respectively.  The  dollar
         amounts  assigned to such  transactions  have been recorded at the fair
         value of the services received,  because the fair value of the services
         received was more evident than the fair value of the stock surrendered.

Note 8 - 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,  1999.  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 shares of common stock. The
         conversion  to  common  stock  ratio  varies   depending  on  when  the
         conversion  is  made.  At June  30,  1997,  the  option  has  not  been
         exercised.

Note 9 - Government Assistance

         The  Company  has  entered  into an  agreement  with  Recyc-Quebec  for
         financial  assistance covering 50% of certain defined costs incurred in
         developing the cryogenic scrap tire disintegration  system to a maximum
         of $54,348.  $36,500 has been received  during the year and this amount
         has reduced the equipment development costs on the balance sheet.


                                      -62-

<PAGE>

                       TIREX AMERICA, INC. AND SUBSIDIARY
                         (A Developmental Stage Company)

                   Notes to Consolidated Financial Statements

Note 10 - Commitments

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

                          1998                      $ 18,967
                          1999                        18,967
                          2000                        18,967
                                                    --------

                                                    $ 56,901
                                                    ========

Note 11 - Contingency

         The Company is a defendant  in an action  which  commenced  on June 18,
         1997  entitled  Great  American  Commercial  Funding  Corp.  vs.  Tirex
         America,  Inc. The Company  agreed to pay the plaintiff a placement fee
         of $250,000  and to grant them an option to acquire  400,000  shares of
         the  company's  common  stock at a price of $.01 per share in the event
         that the plaintiff succeeded in obtaining  financing  acceptable to the
         Company. The amount and terms of the financing are not mentioned in the
         documents.  The  plaintiff  recommended  an equipment  lease  financing
         company who in turned introduced the Company to one of their customers.
         The customer ultimately entered into a lease financing arrangement with
         Tirex America,  Inc.  Because the advances made to the Company pursuant
         to that lease  financing  arrangement  did not  constitute  the type of
         financing  originally  contemplated,  the  Company  believes  it has no
         financial  obligation to the plaintiff.  The Company and its litigation
         counsel believe that the plaintiffs complaint is without merit and that
         the Company will prevail in this litigation.

Note 12 - Subsequent Event

         Subsequent to the year end, the Company received an additional  $99,888
         under the FORD-Q  Industrial  Recovery  Program and  $41,304  under the
         Program for the Development of Quebec SME'S.


                                      -63-

<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 OFFICER, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers

     The following  sets forth the names and ages of all directors and executive
officers of the Company and 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          39          President,               Jan. 18, 1995
                                        Treasurer,
                                        and Director

Louis V. Muro             63          Vice President           Jan. 1, 1996
                                        of Engineering
                                        and Director

John G. Hartley           50          Director                 Feb 21, 1995

John L. Threshie, Jr.     43          Secretary,               June 1, 1995
                                        Vice President           
                                        of Operations
                                        and Director

Louis Sanzaro             47          Director                 January 17, 1997

Alan Crossley             49          Director                 January 17, 1997

Vijay Kachru              46          Vice President of        Sept 1, 1996
                                        Market Development


                                       64
<PAGE>

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 and executive officer, of the Company:

     TERENCE C.  BYRNE.  Mr.  Byrne has served as  president,  treasurer,  and a
director of Company  since  January 18, 1995.  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
Systems  Corporation,  a public  company  engaged  in the  business  of  systems
engineering for high tech  industries.  From July 1989 to August 1992, Mr. Byrne
served as president of Digital  Optronics  Corporation,  a public company which,
until August 1992, was engaged in the business of manufacturing digital optronic
measuring  devices,  (principally) for the defense industry.  From November 1988
(prior to being acquired by Digital  Optronics) until March 1992, Mr. Byrne also
served  as  president  and  a  director  of  Byrne  Industries,  Inc.("BII"),  a
wholly-owned  subsidiary of Digital  Optronics,  Inc. BII was, until the drastic
down-turn  in the  defense  industry  in  March  of  1991,  in the  business  of
manufacturing   electronic  defense  equipment  as  a  sub-contractor  to  major
multi-billion dollar defense industry companies, such as Lockheed Aviation.

     LOUIS V. MURO. Mr. Muro acted as an  engineering  consultant to the Company
from January 18, 1995 until  January 1, 1996 when he was appointed as a director
and as vice president in charge of engineering. Mr. Muro served as a director of
the Company from December 29, 1992 until January 18, 1995. He also served as the
Company's  secretary  from  December  29,  1992  until  March  1994  when he was
appointed  president of the Company,  a position he held until January 18, 1995.
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.


                                       65
<PAGE>

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 G.  HARTLEY.  Mr.  Hartley  holds a  Bachelor  of  Science  Degree  in
Economics from Manchester  University in England.  He has acted as a director of
Pacer  Systems Inc.  since 1985.  Pacer  Systems is a publicly held company with
offices in Boston,  Mass. and is engaged in the business of Systems  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.

     JOHN L.  THRESHIE,  JR. Mr.  Threshie holds a Bachelor of Science Degree in
Business  from the  University  of North  Carolina.  He was self  employed  as a
management consultant, doing business as 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, where Mr.
Threshie supervised all advertising for BMW of North America.

     LOUIS  SANZARO.  Mr.  Sanzaro,  who is 47  years  old,  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.

     ALAN  CROSSLEY.  Mr.  Crossley,  who is 49 years  old,  holds a  degree  in
Economics from Cambridge  University in England and an MBA degree from INSEAD in
France.  In  addition to serving as a Director of  Registrant,  Mr.  Crossley is
participating in developing, and will have charge of implementing, the Company's
projected marketing  operations in Europe and Asia. Since 1986, Mr. Crossley has
served as president of FAISLESA,  Arganda del Rey in Madrid, Spain.  FAISLESA, a
company which Mr. Crossley  established in 1986 as a venture capital project, is
a manufacturer and applicator of thermal insulants and  water-proofing  products
for the  construction  industry.  It runs a  network  of  regional  distributors
throughout  Spain and has its own  application  crews in the  Madrid  Area.  Mr.
Crossley  has full  executive  responsibility  in all  areas  of  manufacturing,
marketing,  research,  and administration of FAISLESA.  Mr. Crossley's  previous
business  experience  includes  his  work  as:  a  Eurocurrency  trader  in  the
International  Division of S.G. Warburg and Co. Ltd., Merchant Bankers in London
(1968-1970);


                                       66
<PAGE>

a management  consultant for McKinsey and the Company,  Inc. in Brazil,  France,
Germany,  Holland,  Italy,  Spain,  Switzerland,  the UK and the  United  States
(1971-1977);  Managing  Director  of Satlan,  S.A.,  a Madrid  firm  involved in
International trading of petroleum products and various commodities  (1977-1980)
and; President of Gapco, S.A., a Madrid commercial and financial consulting firm
(1980-1994).

     VIJAY KACHRU. Ms. Kachru, who is 46 years old holds, a Bachelor's degree in
English  literature  and  has  attended  business  management,   marketing,  and
behavioral sciences courses at McGill University in Montreal.  She was appointed
Vice President in charge of Market  Development  for the Company on September 1,
1996.  From  1992  until  she  joined  the  Company,  Ms.  Kachru  worked  as an
independent  consultant in the area of market  research and market  development.
Pfizer  Canada,  CP Rail  marketing  division and Techtran  Technology  Transfer
Company  were among her clients  during this period.  From 1989 until 1992,  Ms.
Kachru was a training  specialist  for CP Rail  System  where she  designed  and
implemented a drug and alcohol abuse control program  throughout  North America.
From  1981 to 1989,  Ms.  Kachru  worked as a  consultant  with,  among  others,
Proudfoot Consulting Firm on projects with Bell Canada, Alberta Great Telephone,
Firestone  Bridgestone,   East  Midland  Electric  Board  in  England,  Columbus
McKennin, and International Paper.

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

     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;  none  of its  executive
officers or directors have any 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,
1995,  1996, and 1997 by the Company's  chief executive and the persons who are,
or were during such periods,  the Company's  most highly  compensated  executive
officers  and whose  compensation  may be  deemed  for  these  purposes  to have
exceeded $100,000.


                                       67
<PAGE>

                           SUMMARY COMPENSATION TABLE
================================================================================

                                                   Annual Compensation

                                           =====================================

                                                                      Other
                                                                     Annual
                                                                     Compen-
                                           Salary        Bonus       sation
      Name and Principal                     ($)          ($)          ($)
           Position               Year
             (a)                  (b)        (c)          (d)          (e)
--------------------------------------------------------------------------------
       Terence C. Byrne           1997   $62,457 (1)   (10)(12)    (1)(10)(11)
   President and Treasurer
                                ------------------------------------------------
                                  1996   $17,424 (2)   (10)(12)    (2)(10)(11)
                                ------------------------------------------------
                                  1995     -0- (3)     (10)(12)    (3)(10)(11)
--------------------------------------------------------------------------------
        Louis V. Muro             1997   $51,510 (4)   (10)(12)    (4)(10)(11)
Vice President of Engineering
                                ------------------------------------------------
                                  1996    7,592 (5)    (10)(12)    (5)(10)(11)
                                ------------------------------------------------
                                  1995     -0- (6)     (10)(12)    (6)(10)(11)
--------------------------------------------------------------------------------
     Frances Katz Levine          1997   $17,437 (7)   (10)(12)    (7)(10)(11)
          Secretary             ------------------------------------------------
   (Resigned Dec. 22, 1997)       1996     -0- (8)     (10)(12)    (8)(10(11)   
                                ------------------------------------------------
                                  1995     -0- (9)     (10)(12)    (9)(10)(11)  

================================================================================

Notes To Summary Compensation Table:

(1) For the year ended June 30, 1997,  Mr. Byrne  received cash salary  payments
directly from the Tirex Corporation,  or indirectly,  through Tirex Canada Inc.,
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,  in this Item 10, 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


                                       68
<PAGE>

to Mr. Byrne during fiscal 1997, including the dates,  amounts, and share prices
thereof, reference is made to Item 12 of this report, "Certain Relationships and
Related Transactions - Issuance of Stock in Lieu of Salaries and Consulting Fees
and Stock  Restriction  Agreements".  Subsequent  to the period  covered by this
report, 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, 1996,  Mr. Byrne  received cash salary  payments
directly from Tirex America Inc., or  indirectly,  through Tirex Canada Inc., in
the aggregate amount of $17,424 (this does not include cash  disbursements  made
to Mr. Byrne during  fiscal 1996 by way of  reimbursements  for expenses paid by
him for or on behalf of the  Company).  Mr.  Byrne  waived  cash  payment of the
balance  of $  232,576  in salary  payments  due to him under the terms of Byrne
Executive Agreement for the year ended June 30, 1996. In lieu of cash payment of
salary,  Mr. Byrne agreed to accept  shares of the  Company's  stock,  valued at
one-half the average market price of such stock during all or part of the period
in which such salary was earned. The number of Compensation Shares issued to Mr.
Byrne for services  rendered  pursuant to his Executive  Agreement during fiscal
1996  aggregated  to  1,676,075.  For a discussion in detail of all issuances of
Compensation  Shares made to Mr. Byrne during fiscal 1996,  including the dates,
amounts, and share prices thereof,  reference is made to Item 12 of this report,
"Certain  Relationships and Related  Transactions - Issuance of Stock in Lieu of
Salaries and Consulting Fees and Stock Restriction Agreements".

(3) For the  approximately  five and one-half  month  period which  commenced on
January  18,  and ended on June 30,  1995,  Mr.  Byrne  waived  cash  payment of
$104,166 in total salary  payments due to him under Byrne  Executive  Agreement.
This does not include  cash  disbursements  made to Mr. Byrne during the quarter
ended June 30, 1995 by way of reimbursements  for expenses paid by him for or on
behalf of the Company.  In lieu of cash salary payment of the foregoing  amount,
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  ("Compensation  Shares").  The number of  Compensation
Shares  issued to Mr.  Byrne for  services  rendered  pursuant to his  Executive
Agreement during fiscal 1995 aggregated to 1,478,174. For a discussion in detail
of all  issuances of  Compensation  Shares made to Mr. Byrne during fiscal 1995,
including the dates,  amounts,  and share prices  thereof,  reference is made to
Item 12 of the Company's  annual report on Form 10-KSB for the fiscal year ended
June 30, 1995,  "Certain  Relationships  and Related  Transactions - Issuance of
Stock in Lieu of Salaries and Consulting Fees".

(4) For the fiscal  year ended June 30,  1997,  Mr.  Muro  received  cash salary
payments  directly from Tirex America Inc., or indirectly,  through Tirex Canada
Inc.,  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")  during the year ended June 30,  1997.  In lieu  thereof,  Mr.  Muro
agreed to accept shares of the Company's


                                       69
<PAGE>

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 Item 12 of
this report, "Certain Relationships and Related Transactions - Issuance of Stock
in Lieu of Salaries and  Consulting  Fees".  Subsequent to the period covered by
this report, Mr. Muro has continued to waive payment of substantial  portions of
his  contractual  salary and he has agreed to  continue  to waive all or part of
such salary until the Company's financial position improves significantly.

(5) 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 annually). 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  directly from Tirex America
Inc., or  indirectly,  through  Tirex Canada Inc.,  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 during the year ended June
30, 1996.  In lieu  thereof,  Mr. Muro agreed to accept  shares of the Company's
stock,  valued at one-half the average  market price of such stock during all or
part of the period in which such  consulting  fees and salary were  earned.  The
number of Compensation  Shares issued to Mr. Muro for services rendered pursuant
to his  Consulting  and Executive  Agreements  during fiscal 1996  aggregated to
1,074,367.  For a discussion in detail of all issuances of  Compensation  Shares
made to Mr. Muro during  fiscal 1996,  including the dates,  amounts,  and share
prices  thereof,  reference  is  made  to  Item  12  of  this  report,  "Certain
Relationships  and Related  Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees".

(6) Mr.  Muro  waived  cash  payment of $75,000  in  consulting  fees due to him
pursuant to the Muro Consulting  Agreement for the  approximately 24 week period
which  commenced  on January  18, 1995 and ended on June 30, 1995 (this does not
include  cash  disbursements  made to Mr.  Muro  during  this  period  by way of
reimbursements  of expenses).  In lieu of such unpaid  consulting fees, 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 fees
were earned.  The number of Compensation  Shares issued to Mr. Muro for services
rendered  pursuant to his Consulting  Agreement during fiscal 1995 aggregated to
464,000. For a discussion in detail of all issuances of Compensation Shares made
to Mr. Muro during fiscal 1995,  including the dates,  amounts, and share prices
thereof, reference is made to Item 12 of the Company's


                                       70
<PAGE>

annual  report on Form 10-KSB for the fiscal year ended June 30, 1995,  "Certain
Relationships  and Related  Transactions - Issuance of Stock in Lieu of Salaries
and Consulting Fees".

(7) During fiscal 1997,  Ms. Levine was employed by the Company as its Secretary
and General Counsel from July 1, 1996 through  December 21, 1996 under the terms
of an employment  agreement dated January 18, 1995 (the "First Levine Employment
Agreement").  On December 22, 1996, resigned her positions as Secretary 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
Securities  Counsel  pursuant to the terms of her  employment  agreement,  dated
December  22, 1996 (the "Second  Levine  Employment  Agreement").  The terms and
conditions of both the First and the Second Levine Employment  Agreements,  call
for an  annual  salary in the  amount of  $150,000,  and are  discussed  in more
detail,  below,  in this Item 10, under the caption,  "Employment  Contracts and
Termination  of  Employment  and  Change-in-Control   Arrangements  -  Executive
Agreements".  For the year ended June 30, 1997,  for services  rendered  through
December 21, 1996, as an executive  officer of the Company,  and thereafter,  as
corporate  counsel to the Company,  Ms.  Levine  received  cash salary  payments
directly from The Tirex Corporation, or indirectly, through Tirex Canada Inc. in
the  aggregate  amount of $17,437.45  (this does not include cash  disbursements
made to Ms. Levine during fiscal 1997 by way of reimbursements for expenses paid
by her for or on behalf of the  Company).  Ms.  Levine waived cash payment of an
aggregate of $136,702.55  in salary  payments due to her under the terms of both
the First and the Second Levine  Employment  Agreements for fiscal 1997. In lieu
of cash salary  payments,  Ms.  Levine  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 Ms.  Levine  for  services  rendered  under both the First and
Second Levine  Employment  Agreements  during fiscal 1997  aggregated to 824,868
shares. For a discussion in detail of all issuances of Compensation  Shares made
to Ms. Levine during fiscal 1997, including the dates, amounts, and share prices
thereof, reference is made to Item 12 of this report, "Certain Relationships and
Related Transactions - Issuance of Stock in Lieu of Salaries and Consulting Fees
and Stock  Restriction  Agreements".  Subsequent  to the period  covered by this
report, Ms. Levine has continued to waive payment of substantial portions of her
contractual  salary and she has agreed to  continue to waive all or part of such
salary until the Company's financial position improves significantly.

(8) For the year  ended  June 30,  1996,  Ms.  Levine  received  no cash  salary
payments  directly from Tirex America Inc., or indirectly,  through Tirex Canada
Inc. (this does not include cash  disbursements made to Ms. Levine during fiscal
1996 by way of  reimbursements  for expenses paid by her for or on behalf of the
Company). Ms. Levine waived cash payment of the $150,000, in salary payments due
to her under the terms of the First  Levine  Employment  Agreement  for the year
ended June 30, 1996, and in lieu thereof,  Ms. Levine 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 Ms. Levine for services  rendered pursuant to her
Executive Agreement during fiscal 1996


                                       71
<PAGE>

aggregated  to  942,459.  For  a  discussion  in  detail  of  all  issuances  of
Compensation Shares made to Ms. Levine during fiscal 1996,  including the dates,
amounts, and share prices thereof,  reference is made to Item 12 of this report,
"Certain  Relationships and Related  Transactions - Issuance of Stock in Lieu of
Salaries and Consulting Fees and Stock Restriction Agreements".

(9) For the  approximately  five and one-half  month  period which  commenced on
January  18, and ended on June 30,  1995,  Ms.  Levine  waived  cash  payment of
$68,750  in  total  salary  payments  due  to her  under  the  Levine  Executive
Agreement.  This does not include cash  disbursements  made to Ms. Levine during
this period by way of  reimbursements  for expenses paid by her for or on behalf
of the Company.  In lieu of cash salary  payments in the foregoing  amount,  Ms.
Levine 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  ("Compensation  Shares").  The number of  Compensation
Shares  issued to Ms.  Levine for services  rendered  pursuant to her  Executive
Agreement  during fiscal 1995 aggregated to 886,904.  For a discussion in detail
of all issuances of  Compensation  Shares made to Ms. Levine during fiscal 1995,
including the dates,  amounts,  and share prices  thereof,  reference is made to
Item 12 of the Company's  annual report on Form 10-KSB for the fiscal year ended
June 30, 1997,  "Certain  Relationships  and Related  Transactions - Issuance of
Stock in Lieu of Salaries and Consulting Fees".

(10)  Management  believes that it is impossible to determine the actual current
or potential  value, if any, of the 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 this report in Item I, "Proposed  Business" and
Item  5,  "Market  for the  Company's  Common  Equity  and  Related  Stockholder
Matters").

(11) All  Compensation  Shares  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,  in  this  Item  10,  "Employment   Contracts  and
Termination  of  Employment  and  Change-in-Control   Arrangements  -  Executive
Agreements and Special  Compensation  Agreements" and in Item 12 of this report,
"Certain  Relationships and Related  Transactions - Sales of and Restrictions on
Shares Held by Executive Officers".


                                       72
<PAGE>

(12) On May 29, 1997, The Company  awarded stock bonuses to Mr. Byrne,  Mr. Muro
and Ms. Levine (the "Stock  Bonuses"),  for the fiscal years ended June 30, 1995
and 1996,  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 the Stock  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, Mr. Muro, and Ms.
Levine  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 Stock 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; Ms. Levine - 811,684 shares.  Because these shares 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 this Item 10,  "Employment  Contracts  and
Termination  of  Employment  and  Change-in-Control   Arrangements  -  Executive
Agreements and Special  Compensation  Agreements" and in Item 12 of this report,
"Certain  Relationships and Related  Transactions - Sales of and Restrictions on
Shares Held by Executive Officers".

Compensation of Directors

     The  directors  of the Company are not  compensated  for their  services as
such,  except as follows:  Except for Mr.  Muro,  all of the  Company's  present
directors,  as well as Ms. Levine,  who was a director until her  resignation on
December 22, 1996,  received  unregistered  shares of the Company's common stock
("Directors  Shares").  Messrs.  Byrne,  Hartley,  and Threshie  and Ms.  Levine
received  Directors  Shares  in  consideration  of their  agreement  to join the
Company's board of directors and, in the case of Mr. Threshie,  in consideration
of services  rendered as well as his  agreement  to serve as Vice  President  in
Charge of Operations without compensation. Messrs. Crossley and Sanzaro received
Directors  Shares as  compensation  for  services,  under  the terms of  certain
Directors  Compensation  Agreements,  dated July 7, 1997.  Directors Shares have
been issued,  or transferred to the recipients  thereof,  as follows:  2,500,000
shares  transferred by two members of the Company's former management to Terence
C. Byrne on January 18, 1995;  500,000 shares  transferred by two members of the
Company's former management to Frances Katz Levine on January 18, 1995;  100,000
shares  issued by the Company to John G. Hartley on February  16, 1995;  250,000
shares issued by the Company to John L. Threshie,  Jr. on June 1, 1995;  100,000
shares  issued to each of Alan  Crossley  and Louis  Sanzaro on or about July 7,
1997.  At the time the  Directors  Shares  were  transferred  or  issued  to the
respective directors, such


                                       73
<PAGE>

shares had no or only very minimal  market value and the potential  market value
of such shares,  if any, was, and 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;  and (iv) the  restrictions  on  transfer  arising out of the absence of
registration of such shares (See the discussions  included above, in this report
in Item I,  "Proposed  Business"  and Item 5, "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 and with its in-house corporate counsel,  Frances Katz Levine
(the "Executive Agreements").  The respective commencement and termination dates
of the Executive  Agreements,  as amended are as follows: Mr Byrne,  January 18,
1995 - December  31,  2003;  Mr. Muro,  January 1, 1996  December 31, 2000;  Mr.
Threshie, January 1, 1996 - December 31, 1998, Ms. Kachru - August 31, 1999, and
Ms. Levine, December 22, 1996 - December 21, 2000.(9) The Agreements provide for
annual  salaries,  of $250,000 to Mr. Byrne $150,000 to each of Mr. Muro and Ms.
Levine,  $50,000 to Mr. Threshie,  and $90,000 Canadian  (approximately  $65,000
U.S. at current exchange rates) to Ms. Kachru.  Such agreements also 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 

-------- 
     (9) Ms.  Levine was  employed by the Company as its  Secretary  and General
Counsel  from July 1,  1996  through  December  21,  1996  under the terms of an
employment  agreement  dated  January  18, 1995 (the  "First  Levine  Employment
Agreement").  On December 22, 1996, resigned her positions as Secretary 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
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.


                                       74
<PAGE>

payment of any such bonuses to be reviewed annually by a Compensation Committee,
with the exception that Ms. Kachru's agreement  requires  semi-annual review for
eligibility  for  bonuses  and  raises.  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  two-year  period
following termination of employment with the Company and for various other terms
and conditions of employment.

     The  Executive  Agreements  with Mr. Byrne,  Mr. Muro,  and Ms. Levine also
include severance  provisions which provide among other things that 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
terminated executive will be paid, as severance  compensation,  twice the amount
of his or her base salary for a period of twelve months.

     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  Agreement.  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 Item 12, of this
report,  "Certain  Relationships and Related Transactions - Issuance of Stock in
Lieu  of  Salaries  and  Consulting   Fees").  As  at  the  various  dates  when
Compensation  Shares  were  issued to the  executive  officers,  such shares had
either no, or only very minimal,  actual  market value and the actual  potential
market value of such shares,  if any, was, and 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;  and (iv) the  restrictions  on  transfer  arising out of the absence of
registration of such shares (See the discussions  included above, in this report
in Item I,  "Proposed  Business"  and Item 5, "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 NASDAQ Electronic Bulletin Board, during part or all of the


                                       75
<PAGE>

period in which the salary was earned under the Executive Agreement.  All of the
Compensation  Shares  issued to Mr.  Byrne,  Mr. Muro,  and Ms.  Levine 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 in
accordance  with the Rules and  Regulations  of the  Securities  Act of 1933, as
amended,  but limit the right to have any of the Compensation Shares included in
a  registration  statement  on Form S-8 until  after  they have been  issued and
outstanding for not less than eighteen months.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners.

     The following  table sets forth  information as of September 23, 1996, 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 Canada.  Neither
the  Company  nor Tirex  Canada  have any  shares of any other  class  issued or
outstanding.

                          PRINCIPAL SHAREHOLDERS TABLE

--------------------------------------------------------------------------------
Title              Name and                  Amount and
 of               Address of                  Nature of         Percent of
Class             Beneficial                 Beneficial          Class (1)
                    Owner                       Owner
--------------------------------------------------------------------------------
              
Common         Terence C. Byrne              11,619,430 (2)        33.4%
The Tirex      489 Grosvner Street                               
Corporation    Westmount, Quebec                                 
               H3Y 2S5                                           
Class A                                                          
Common                                          34 (3)               34%
Tirex                                                            
Canada                                                           
                                                                 
Common         CG TIRE, INC.                 4,308,2920 (4)           * (4)
The Tirex      The Continental General                        
Corporation    Tire Recycling Effort
               1800 Continental Blvd.
               Charlotte, NC 28273


                                       76
<PAGE>

                     PRINCIPAL SHAREHOLDERS TABLE CONTINUED

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

Common         Frances Katz Levine (8)        4,016,762              9.8%
The Tirex      621 Clove Road
Corporation    Staten Island, NY 10310

Common         Louis V. Muro (8)              6,681,191             16.4%
The Tirex      435 Roy Avenue
Corporation    Dorval, Quebec H953E2
               Canada

Class A
Common                                               17 (3)           17%
Tirex
Canada

Common         The NAIS Corporation           5,231,092             13.5%
The Tirex      94 Washington Avenue
Corporation    Lawrence, NY 11559

* Percentages less than 1% not shown

Notes

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

Security Ownership of Management

     The following  table sets forth  information  as of October 10, 1996,  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 Canada
by each of the  executive  officers  and  directors  of the  Company  and by all
executive officers and directors as a group:


                                       77
<PAGE>

                         MANAGEMENT SHAREHOLDINGS TABLE

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

Common         Terence C. Byrne              13,619,430 (2)         30%
The Tirex      489 Grosvner Street
Corporation    Westmount, Quebec
               H3Y 2S5

Class A
Common                                               34 (3)         34%
Tirex
Canada

Common         Alan Crossley                    214,658 (5)          *
The Tirex      Gran Via de Hortaleza
Corporation    82A, 1B
               Madrid, Spain 28043

Common         John G. Hartley                   20,000 (6)          *
The Tirex      7/9 Boulevard D'Italie
Corporation    Monte Carlo MC 98000
               Monaco

Common         Vijay Kachru                     167,821              *
The Tirex      1598 Pine Ave. West
Corporation    Montreal, Quebec H3B 1B4


                                       78
<PAGE>

                    MANAGEMENT SHAREHOLDINGS TABLE CONTINUED

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

Common         Louis V. Muro                  6,681,191 (8)         16.4%
The Tirex      435 Roy Avenue
Corporation    Dorval, Quebec H953E2
               Canada

Class A
Common                                               17 (3)           17%
Tirex
Canada

Common         Louis V. Sanzaro                 302,581 (7)            *
The Tirex      1900 Vermont Avenue
Corporation    Toms River, NJ 08755

Common         John L. Threshie, Jr.            471,310             1.77%
The Tirex      200 Lansdowne,
Corporation    Westmount, Quebec
               Canada, H3Z 3E1

Common         All directors and             17,476,991 (2)        55.62%
The Tirex       officers as a group
Corporation              (7 persons)

Class A        All directors and                     34 (3)           34%
Common          officers as a group
Tirex           (7 Persons)
Canada

* Percentages less than 1% not shown

(Notes to Tables appear on Following Page)


                                       79
<PAGE>

Notes:

     (1) The  percentages  listed in the tables are  calculated  on the basis of
38,774,625 shares of the common stock,  $.001 par value, of the Company ("Common
Stock") outstanding as at September 23, 1997, with the following exceptions: (a)
The percentage deemed to be beneficially owned by CG TIRE, Inc. is calculated on
the basis of 38,774,625  shares of Common Stock currently issued and outstanding
plus 4,308,292 shares of common stock which, as at the date hereof,  CG Tire has
the right to acquire  within 60 days  pursuant to its option (see  footnote (4),
below;  (b) The  percentage  deemed  to be  beneficially  owned by Mr.  Byrne is
calculated on the basis of 38,774,625  shares of Common Stock  currently  issued
and  outstanding  plus  2,000,000  shares of common stock which,  as at the date
hereof, Mr. Byrne has the right to acquire within 60 days pursuant to his option
(see footnote (2),  below;  and (c) The  percentages  deemed to be  beneficially
owned by Mr.  Muro and Ms.  Levine  are  calculated  on the basis of  38,774,625
shares of Common Stock currently issued and outstanding plus 1,000,000 shares of
common stock which, as at the date hereof, each of them has the right to acquire
within 60 days pursuant to its option (see footnotes (2), below.

     (2)  Includes:  (i)  5,507,414  shares  held of record  by Mr.  Byrne as of
September  23, 1997;  (ii) 434,328  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) 446,596  shares
held of record by John W. Surgent,  over which shares Mr. Byrne has voting power
pursuant  to an  irrevocable  proxy  granted  to  him on  June  13,  1996;  (iv)
5,231,0921,  shares held of record by The NAIS Corporation over which shares Mr.
Byrne has voting power pursuant to an  irrevocable  proxy granted to him in June
of 1997;  and (v)  2,000,000  shares  which Mr.  Byrne has the right to  acquire
within  sixty days  pursuant to an option  granted to him on September 3, during
the period subsequent to that covered by this Report.  The option exercise price
is  equal  to the  average  of the  high  ask  and the  low  bid  price  of this
Corporation's common stock, as traded in the over-the-counter  market and quoted
in the NASDAQ electronic  bulletin board as at the close of business on the date
of the grant of the said option, which was $0.39.

     (3) Messrs.  Byrne and Muro hold all shares of Tirex  Canada Class A Common
Stock  pursuant  to the terms of a  Shareholders  agreement  among  them and the
Company (the "Tirex Canada Shareholders Agreement"), pursuant to which they will
be obligated to transfer all such shares to the Company,  for no  consideration,
at  such  time  as  such  transfer  will  not be in  violation  of any  Canadian
government regulations governing tax and other financial incentives which may be
available to Tirex Canada. The terms of the Tirex Canada Shareholders  Agreement
are  discussed  in more  detail,  below,  in Item  12 of this  Report,  "Certain
Relationships and Related  Transactions",  under the caption "Transfer of 17% of
Tirex Canada Shares From Mr. Forbes to Mr. Byrne."

     (4) Includes  4,308,292  shares which CG TIRE,  Inc. (CGT) has the right to
acquire within sixty days 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 NASDAQ  electronic  Bulletin  Board
during the ten business days preceding the date of a notice


                                       80
<PAGE>

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.  CGT is a  wholly-owned
subsidiary of Continental General Tire Inc. ("General Tire"), one of the largest
tire manufacturers in the world. CGT is called by General Tire, "The Continental
General Tire  Recycling  Effort.  The Option,  which has a three-year  term, was
granted to CGT on April 24, 1997, in  consideration  of CGT's  agreement to: (1)
explore  with the Company  the  possibility  of the  Company's:  (a)  furnishing
General Tire with all or part of its 80-mesh rubber crumb  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 rubber crumb requirements, any further development of such specifications in
the future, the suitability of the TCS-1 System for meeting such specifications,
and the further  development of the Company's  technology in  coordination  with
Continental Tire's product  development  requirements.  Since such time, CGT has
worked closely on a number of projects designed to accomplish the foregoing (see
the discussion,  above, under the caption "Proposed Tire Shredding Operations").
CGT has not, as of the date hereof,  exercised any part of the Option.  However,
On August 13,  1997,  CGT gave notice ot the Company  that it wished to exercise
the Option, in part, for the number of shares of the common stock of the Company
which  constituted  two and one-half  percent  (2.5%) of the common stock of the
Company, issued and outstanding as at that date (the "August 13th Portion"). The
Company was, at that time, engaged in (still ongoing) negotiations  respecting a
private  placement of its securities to be effected under Rule 506 of Regulation
D. In connection therewith,  the Company wished to establish a six-month period,
during which no sales of unregistered  securities were effected except for sales
made pursuant to employee  compensation  plans.  The Company  wished to do so in
order to  establish a "safe  harbor"  under Rule 502 of  Regulation  D. This was
required in order to insure that past sales of  unregistered  securities made by
the Company would not be "integrated"  with the contemplated  private  placement
and therefore make the Rule 506 exemption from the registration  requirements of
the Securities Act unavailable to the Company. As a result of the foregoing,  at
the time of CG TIRE's  August 13, 1997 notice that it wished to exercise part of
the Option,  the Company requested that CG TIRE postpone such exercise so as not
to cause the  Company to effect any sales  which  would  nullify  the said "safe
harbor".  CGT agreed,  and in  consideration  for CG TIRE's waiving its right to
exercise on August 13,  1997,  the  Company  agreed to amend the Option so as to
insure that when CGT does exercise the Option for the August 13th  Portion,  the
option  exercise price for the shares included in such Portion will be the price
that  would have been in effect as of August  13,  1997.  Under the terms of the
Option, CGT has the right to have the shares underlying the Option registered at
any time during the exercise period. Subsequent to August 13, 1997, CGT demanded
that such  registration  be effected and the Company intends to comply with such
demand by filing with the  Securities  and Exchange  Commission  a  registration
statement on Form SB-2,  including all of the shares  underlying the Option,  as
promptly as practicable following the date hereof.


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<PAGE>

     (5) Includes  214,658 shares held of record by Sinermad  Comercio E Invest,
Lda. of Madeira, Portugal ("SCIL"). Mr. Crossley is a controlling person of SCIL
and, as such, has sole or shared voting and investment power over such shares.

     (6) Mr. Hartley holds an option (the "Hartley  Option") to purchase  twenty
thousand (or, under certain circumstances, more) shares of the Company's Class A
Cumulative  Convertible  Preferred Stock (the "Preferred  Stock"),  which shares
will be convertible into up to two million shares of the Company's common stock.
Mr.  Hartley has not  exercised  such option nor has he indicated to the Company
that he intends to do so in the  foreseeable  future.  The figures  shown in the
Table,  above,  do not give effect to the exercise of the Hartley  Option and do
not  include any of the shares of common  stock  which  would be  issuable  upon
conversion of the Preferred  Stock. For a discussion in more detail of the terms
of the Hartley Option and Mr. Hartley's  purchase thereof,  reference is made to
Item 12 of this Report,  "Certain  Relationships and Related Transactions" under
the caption, "Extension of Exercise Period of Option Held by John G. Hartley".

     (7) Includes 302,581 shares held of record by Mr. Sanzaro's spouse,  Sharon
Sanzaro, over which shares Mr. Sanzaro disclaims any beneficial ownership.

     (8) Includes 1,000,000 shares which each of Mr. Muro and Ms. Levine has the
right to acquire  within  sixty  days  pursuant  to  options  granted to them on
September 3, 1997 during the period  subsequent  to that covered by this Report.
The said  options  were  granted to Mr. Muro and Ms.  Levine  under the terms of
their  respective  employment  agreements  with the  Company for the fiscal year
ended June 30, 1997.  The per share exercise price under the options is equal to
the average of the high ask and the low bid price of this  Corporation's  common
stock,  as traded  in the  over-the-counter  market  and  quoted  in the  NASDAQ
electronic  bulletin  board as at the close of business on the date of the grant
of the said option, which was $0.39.

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
years, or presently proposed transactions,  to which the Company was or is to be
a party,  in which  the  amount  involved  in such  transaction  (or  series  of
transactions)  was $60,000 or more and which any of the following persons had or
is to have a direct or indirect material interest: (i) any director or executive
officer of the Company;  (ii) any person who owns or has the right to acquire 5%
or


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<PAGE>

more of the issued and  outstanding  common stock of the Company;  and (iii) any
member of the immediate family of any such persons.

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 Systems.  Also on that same date, the
Company entered into an Equipment Lease and Purchase Agreement (the "Oceans Tire
L&P  Agreement")  with Oceans Tire  Recycling & Processing  Co.,  Inc.  ("Oceans
Tire") for the purchase and lease of the various  components which will comprise
the first production model of the TCS-1 System.  Louis Sanzaro,  a member of the
Company's Board of Directors is a controlling  person of both O/V III and Oceans
Tire.  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").  Mr.  Sanzaro  was  appointed  a director of the Company in January
1997.  For details of the terms and  provisions of the O/V III L&P Agreement and
the Oceans Tire L&P Agreement,  as well as certain ancillary agreements executed
or agreed  to in  connection  therewith,  reference  is made to the  discussions
contained under the captions,  "The O/V III  Agreements"  and  "Agreements  with
Oceans Tire Recycling & Processing  Co., Inc" in the Subtopic  "Sales" of Item I
of this Report.

Agreement to appoint Louis Sanzaro As
    Exclusive Sales Representative in North America

     Louis Sanzaro and the Company have agreed,  in principal  that Mr.  Sanzaro
will be appointed as the Company's  exclusive  sales  distributor  in the United
States and Puerto Rico.  The terms of the under which Mr.  Sanzaro will serve as
such have not yet been  finalized,  but the Company intends that such terms will
be as  beneficial,  or better,  to the Company than could be obtained in an arms
length transaction with a person with Mr. Sanzaro's qualifications.

Negotiations  With Louis  Sanzaro to Organize and Operate  Service  Provider For
Company

     As  Discussed  in  detail in the  Subtopic,  "Proposed  Services"  which is
included in Item I of this  Report,  the Company is presently  negotiating  with
Louis Sanzaro ("Sanzaro"), to organize and operate a maintenance company capable
of serving as the Company's  authorized  service provider and meeting all of the
services  described  which the Company will be  obligated  to provide  under its
Proposed Maintenance Agreements (See the Subtopic,  "Proposed Services" which is
included in Item I of this  Report).  Mr.  Sanzaro has worked  closely  with the
Company on the development of the TCS-1 System and the proposed  maintenance and
technical support program. Mr. Sanzaro is a highly respected, knowledgeable, and
experienced  operator of recycling  organizations  in New Jersey and the Company
believes that he is eminently qualified


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<PAGE>

to organize and head its maintenance and technical  support effort.  The parties
have not yet  entered  into an  agreement  respecting  the terms under which Mr.
Sanzaro,  or an  organization  under his  control,  will  direct  the  Company's
maintenance services.  Currently,  however, the Company expects that the service
provider to be organized and operated by Mr.  Sanzaro will be paid a flat fee of
$4,000 per month to cover all of the services  described  in Item I, above.  The
service  provider is also  expected  to  furnish,  at no  additional  cost,  all
equipment necessary to effect the provision of such services.

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 to purchase twenty thousand (20,000) shares of the Cumulative
Convertible  Preferred Stock of the Company  ("Preferred  Stock") at an exercise
price of $10 per share, during a two-year exercise period which commenced on May
19, 1995 and will terminate on May 18, 1997. Mr. Hartley paid the Company twenty
thousand dollars ($20,000) for the said Option.  Notwithstanding  the foregoing,
since the  Preferred  Stock is  convertible  into Common  Stock at a  decreasing
ratio,  should the total  number of shares of the  Preferred  Stock which can be
purchased  pursuant to the Option,  be  convertible  into fewer than two million
(2,000,000)  shares  of the  Company's  Common  Stock,  the  number of shares of
Preferred  Stock  purchasable  under the Option,  at the  exercise  price of ten
dollars per preferred share,  will be increased to such number as is convertible
to  2,000,000  shares  of  Common  Stock.  The  terms  of  the  Preferred  Stock
purchasable under the Option provide,  among other things, for cumulative annual
cash dividends at the rate of $1.20 per share and conversion  into shares of the
Company's Common Stock at the following ratios:

     (a)  From May 19, 1995 through  November  19, 1995,  one share of Preferred
          Stock and each $10 of accumulated and unpaid dividends thereon, for 91
          shares of Common Stock;

     (b)  From  November  19,  1995  through  February  18,  1996,  one share of
          Preferred  Stock  and each $10 of  accumulated  and  unpaid  dividends
          thereon, for 50 shares of Common Stock;

     (c)  From  February 19, 1996  through May 18, 1996,  one share of Preferred
          Stock and each $10 of accumulated and unpaid dividends thereon, for 33
          shares of Common  Stock;  

     (d)  From May 19, 1996 through May 18, 1997,  one share of Preferred  Stock
          and each $10 of  accumulated  and unpaid  dividends  thereon,  for the
          number of shares of the  Company's  Common Stock  purchasable  for ten
          dollars at a per share price equal to 30% of the then  current  Market
          Price of such Common Stock.

     To date,  Mr.  Hartley  has not  exercised  any part of the  Option and the
Company has not issued any shares of the Preferred  Stock.  On May 29, 1997, the
Company acknowledged that


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<PAGE>

(i)  delivery  of the  first  TCS-1  System  and the  commencement  of  business
operations by the Company had taken  substantially  more time than was estimated
by the Company in the Spring of 1995 when Mr. Hartley  purchased the Option.  In
recognition of this and other factors,  the Board of Directors  agreed to extend
the Option exercise period until May 18, 1999,  convertible  under the terms set
forth in subparagraph (d) above, with such conversion period extended to May 18,
1999.

Transfer of 17% of Tirex Canada Shares From Mr. Forbes to Mr. Byrne.

     As  discussed  above,  in Item I of this Report,  under the caption  "Tirex
Canada",  in May of  1995,  in an  effort  to take  advantage  of  such  certain
financial incentives, the Company formed a Canadian corporation,  3143619 Canada
Inc.  (referred to herein as "Tirex Canada") 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 System and  thereafter  serving as the  Company's
manufacturing  arm.  For a  discussion  of the initial  capitalization  of Tirex
Canada,  the original  distribution of its shares among the Company and officers
and  directors  of the  Company  who are  Canadian  residents,  the terms of the
shareholders agreement pursuant to which such shares are held, including but not
limited  to the  rights  of the  Company  to  regain  100%  record,  as  well as
beneficial, ownership of Tirex Canada, reference is made to the discussion under
the caption  "Existing  and  Proposed  Canadian  Financing,  Manufacturing,  and
Research and Development Operations" in Item 1 of the Company's annual report on
Form 10-K for the fiscal year ended June 30, 1996.

     On July 3, 1995,  there were,  and as at the date hereof there are, a total
of one hundred shares of Tirex Canada stock issued and outstanding.  In order to
position the Company to be eligible for Canadian government  sponsored financial
incentives,  on July 3, 1995, the Company transferred 51 of the 100 Tirex Canada
shares to Kenneth J. Forbes.  Mr. Forbes, a shareholder and a former director of
the Company,  is an officer and director of Tirex Canada. He agreed to hold such
shares  pursuant to the terms and  provisions of a  Shareholders  Agreement (the
"Tirex Canada Shareholders  Agreement") which provided, among other things, for:
(I) Mr. Forbes to retain  complete voting control over all shares held by him so
as to assure  "control"  by Canadian  Residents;  (ii) Tirex  Canada's  right to
redeem the shares  held by the record  holder in amounts  equal to any number of
shares of Tirex  Canada  which  may be sold to  private  investors  who are also
Canadian the Company's (this will prevent Company's  ownership interest in Tirex
Canada from being diluted to less than 49%; (iii)  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 ability of the  Company to  eventually
regain 100%  ownership of Tirex Canada at such time as such  ownership  will not
contravene any Canadian  regulations  respecting financial aid and assistance to
Tirex Canada or tax benefits to private Canadian  investors,  and (v) the escrow
of all shares subject to the Tirex Canada Shareholders Agreement.


                                       85
<PAGE>

     On  February  8, 1996,  in  accordance  with the terms of the Tirex  Canada
Shareholders  Agreement, at the request of the Company, Mr. Forbes transferred a
total of 34 of the 51 Canadian Shares held of record by him to Louis V. Muro and
Terence C. Byrne,  in equal parts.  Pursuant to an Amendment to the Tirex Canada
Shareholders  Agreement,  Messrs. Muro and Byrne, who are officers and directors
of both the Company and Tirex  Canada,  joined as parties to such  Agreement and
agreed to hold such shares  pursuant  to the terms and  provisions  thereof.  On
August 21, 1997, in accordance  with the terms of the Tirex Canada  Shareholders
Agreement,  at the request of the Company,  Mr. Forbes transferred the remaining
17 shares held by him to Terence C. Byrne,  the  Company's  president  and Chief
Executive Officer.

New 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.  For a discussion in more detail of the terms and  conditions of both
the First and the Second Levine Employment Agreements,  reference is made to the
information contained above in Item 10 of this report, "Executive Compensation -
Employment  Contracts  and  Termination  of  Employment  and   Change-in-Control
Arrangements."

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

     The Company is a party to employment  agreements with Terence C. Byrne, its
President  and CEO and with  Louis V.  Muro,  its 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,


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<PAGE>

reference is made to the information  contained above in Item 10 of this report,
"Executive Compensation - Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."

Executive Agreement With John L. Threshie, Jr.

     On February 20, 1997, the Company entered into an employment agreement with
John L.  Threshie,  Jr.,  pursuant  to which Mr.  Threshie  is  employed  as the
Company's Vice  President of Operations.  The agreement was made effective as of
January 1, 1996,  the date when Mr.  Threshie  began  serving in such  capacity.
Since  December 22, 1996,  pursuant to the terms of the  agreement,  he has also
served as  Secretary  of the Company.  The  agreement  is for a three-year  term
ending  December  31,  1998 and calls for  compensation  at the  annual  rate of
$50,000. For a discussion in more detail of the Executive Agreements,  reference
is made to the information contained above in Item 10 of this report, "Executive
Compensation   -  Employment   Contracts  and   Termination  of  Employment  and
Change-in-Control Arrangements".

Executive Agreement With V.J. Kashru

     On April 29, 1997,  the Company  entered into an employment  agreement with
Vijay  Kachru,  pursuant  to which Ms.  Kachru is employed an Director of Market
Development.  The Agreement was made effective as of September 1, 1996, the date
when  Ms.  Kachru  began  serving  in  such  capacity.  The  Agreement  is for a
three-year  term ending  August 31, 1999 and calls for  compensation  during the
term of the agreement, in the following amounts: (i) through and until March 31,
1998,  ninety thousand  Canadian dollars (CAN $90,000) per year; (ii) Commencing
as of February 1, 1998,  ninety  thousand United States dollars (US $90,000) per
year. For a discussion in more detail of the Executive Agreements,  reference is
made to the information  contained  above in Item 10 of this report,  "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. On January 17, 1997, the Board of Directors authorized the issuance
of a total of 1,113,636  shares of the Common  Stock of the Company  pursuant to
Mr.  Muro's  agreement to accept as  compensation  in 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


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<PAGE>

average of the bid and ask prices of the Company's  common  stock,  as traded in
the over-the-counter market and reported in the electronic bulletin board of the
NASD, during the calendar years of 1993 and 1994. The Company's stock was traded
only sporadically during such time. Therefore,  calculations were based upon the
fifteen months during 1993 and 1994 when actual trading took place and for which
it was possible to obtain  information.  The average of the high and low closing
prices   of  the   common   stock  of  this   corporation,   as  traded  in  the
over-the-counter  market during such fifteen month period, which the Company was
able to obtain, was approximately $.18333 per share.

Amendment to NAIS Corp Consulting Agreement

     On May 3, 1997, the Company entered into a Financial  Consulting  Agreement
(the "NAIS Consulting Agreement") with The NAIS Corp.("NAIS"), pursuant to which
NAIS was retained  for a period of three years for  compensation  consisting  of
5,231,092  (the "NAIS Shares") at a price of $.001 per share (the "NAIS Shares")
is a corporation  under the control of Mr. Jack Ehrenhause.  For a discussion in
more  detail of the  terms  and  conditions  of the NAIS  Consulting  Agreement,
reference is made to the Company's  Current  Report on For 8-K, dated as of June
24,  1997,  and filed  with the  Commission  on July 14,  1997 and the  exhibits
thereto.  On July 1,  1997,  the  parties  agreed to amend  the NAIS  Consulting
Agreement to more clearly state their mutual intentions  respecting the services
to be performed by NAIS, which at all times had been limited to providing advice
and opinions to the  Corporation  with  respect to  evaluating  the  managerial,
professional,  and  financial  requirements  of the  Company  and  advising  and
assisting   the  Company  with  respect  to  its  budgetary  and  business  plan
requirements,  marketing,  stockholder  relations,  public relations,  financial
arrangements, mergers, acquisitions, consolidations, joint ventures, and similar
corporate transactions. The parties entered into the said amendment because they
were concerned that certain  activities stated in the NAIS Consulting  Agreement
as duties of NAIS  were:  (i) not  expressive  of the actual  intentions  of the
parties and (ii)  capable of being  misconstrued  as direct  involvement  in the
effectuation of a private  placement or public offering of the securities of the
Company so as to be deemed to affect the  underwriting  compensation  payable in
connection therewith.  No other changes were made to the terms and conditions of
the  NAIS  Consulting  Agreement.  NAIS has the  right  to have the NAIS  Shares
registered  and has demanded  that such  registration  be effected.  The Company
intends to comply with such demand by filing with the  Securities  and  Exchange
Commission  a  registration  statement on Form SB-2,  including  all of the NAIS
Shares, as promptly as practicable following the date hereof.

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 Tirex,  as quoted in the NASDAQ
electronic  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, upon their


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<PAGE>

issuance,   ten  percent  (10%)  of  the  common  stock  of  Tirex,  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 which CGT had wished to, but pursuant to
the request of the Company,  did not, exercise as at that date. 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 Item 11. of this  Report,  "Security  Ownership  of  Certain
Beneficial Owners and Management".

Amendment of Stock Restriction Agreements.

     All  shares  issued  or   transferred,   either  as  Directors   Shares  or
Compensation  Shares  to Mr.  Byrne,  Mr.  Muro,  and Ms.  Levine  so  issued or
transferred  subject to the terms of certain stock  restriction  agreements (the
"Stock  Restriction  Agreements")  between the Company and each of such persons.
Such  Agreements  were amended on May 30, 1996 and on May 1, 1997.  Prior to the
amendments  described below, the Stock Restriction  Agreements  subjected all of
the Directors and  Compensation  Shares to restrictions on transfer for a period
of three years,  except for a limited  number of shares which were allowed to be
sold  pursuant to Rule 144 after two years,  and to forfeiture in the event that
employment  with the  Company  was  terminated  prior to the  expiration  of the
three-year terms of the respective Executive Agreements.

Amendments to Stock Restriction Agreements.

     On May 30, 1996, an the Company and each of the executive  officers entered
into amendments to their respective Stock Restriction  Agreements  (hereinafter,
the "Amended Stock Restriction  Agreements"),  which acknowledged the amendments
made concomitantly therewith to the Executive Agreements respecting the issuance
of  Compensation  Shares  in lieu  of  cash  compensation  under  the  Executive
Agreements and the possibility of the registration of all or part of such shares
pursuant to a  registration  statement on Form S-8. On May 1, 1997,  the Amended
Stock  Restriction  Agreements  were  further  amended so as to reflect  certain
changes in Rule 144 of the Securities  Act of 1933, as amended (the  "Securities
Act"),  and to shorten the period  required  before  Compensation  Shares of the
Company's common stock, are permitted to be included in a registration statement
on Form S-8.  The Amended  Stock  Restriction  Agreements  provide,  among other
things,  that: (i) all  Compensation  Shares will be issued and held pursuant to
the  terms of one  single  stock  restriction  agreement  rather  than one stock
restriction  agreement  for each stock  issuance,  as had been the case prior to
such amendment; (ii) under certain circumstances,  and within the limitations of
Rule 144, the Directors  Shares and the  Compensation  Shares held by affiliates
are eligible for sale by the holders  thereof one year after they were  acquired
from the  Company  and (ii) to the  extent  that they are  eligible,  commencing
eighteen months after their issuance, such shares can registered for sale to the
public pursuant to a registration statement on Form S-8 which includes a Reoffer
Prospectus;  (iii) there had been a mutual  error on the part of the Company and
each of the executive  officers  respecting the effect of the forfeiture clauses
contained in the Stock Restriction Agreements on the commencement of


                                       89
<PAGE>

the  executive  officers'  beneficial  ownership  of the stock  subject  thereto
insofar as such  provisions  would operate to delay the  commencement of the two
year holding  period for purposes of Rule 144 until after the  expiration of the
three-year  term of the Executive  Agreements.  The parties  agreed further that
such delay in the  commencement  of the Rule 144  holding  period had at no time
been  the  intent  of any of them  and  that  inclusion  of such  provision  had
therefore been an error ab initio (from the beginning).  Because such forfeiture
provision had been included in the Stock Restriction  Agreements  pursuant to an
error on the part of all of the  parties  with  respect  to  their  meaning  and
effect,  the parties agreed that such forfeiture  provisions should be deemed to
have been ab initio void and of no effect, that the Stock Restriction Agreements
should  be  deemed  never to have  included  such  forfeiture  provisions.  More
specifically,  with respect to the  foregoing  effects of the  amendments to the
Stock Restriction Agreements:

     The effect of the foregoing amendments was twofold, in that: (i)

     (1)  Rule 144 Sales. Rule 144 provides, among other things, that if certain
          information  concerning  the operating  and  financial  affairs of the
          Company is publicly available,  persons holding restricted  securities
          for a period  of one year may sell,  in each  subsequent  three  month
          period,  up to that number of such shares  equal to the greater of (I)
          one percent of the Company's outstanding common stock or (in the event
          that the Company's common stock shall be listed on a national exchange
          or  included  in  the  National   Association  of  Securities  Dealers
          Automated  Quotation  System  ["NASDAQ"]),  (ii)  the  average  weekly
          reported volume of common stock trading during the four calendar weeks
          preceding  the  filing of a notice of  proposed  sale.  All  executive
          officers,  directors, and holders of ten percent or more of the issued
          and  outstanding  common  stock of the  Company  may be  deemed  to be
          "affiliates"  of the Company for  purposes of Rule 144. If a period of
          at least two years  has  elapsed  since  stock was  acquired  from the
          Company or from an affiliate of the Company,  then  persons,  who have
          not been  affiliates  of the  Company  for a period of at least  three
          months, may sell such stock without any limitations or restrictions.

     (2)  Offers  and Sales  Pursuant  to  Registration  on Form  S-8.  Form S-8
          provides special and simplified  registration  procedures for employee
          benefit plans and/or the employer's  securities  that can be purchased
          pursuant  to the  plan.  A Form  S-8  registration  statement  becomes
          automatically  effective  upon filing with the Securities and Exchange
          Commission. Form S-8 can be utilized by a reporting company (a company
          which files annual,  quarterly,  and certain other reports pursuant to
          the requirements of Section 13 or 15(d) of the Securities Exchange Act
          of 1934) to be  offered  to,  or which  have  been  acquired  by,  its
          employees  pursuant to any written option,  purchase  savings,  bonus,
          appreciation,  profit sharing, thrift, incentive,  pension, or similar
          plan, or a written compensation contract. For purposes of registration
          under Form S-8, "written compensation  contracts" include individually
          negotiated contractual agreements and the term, "employee" includes,


                                       90
<PAGE>

          (in addition to  employees),  officers,  directors,  consultants,  and
          advisors,  provided they render  services not connected with offers or
          sales of securities in a capital raising transaction.  For purposes of
          eligibility for registration under a Form S-8:

          (a)  The employment agreements which the Company has entered into with
               each  of  its  executive  officers,  as  well  as  the  directors
               compensation agreements with Messrs. Sanzaro and Crossley and the
               employment agreement with Ms. Levine are individually  negotiated
               written  compensation  contracts  constituting  Employee  Benefit
               Plans, as defined in Rule 405 of the Securities Act of 1933;

          (b)  All of the  Compensation  Shares are considered to be "restricted
               securities" insofar as they were issued under an employee benefit
               plan  pursuant  to a  Securities  Act  exemption  prior  to their
               inclusion in a registration statement on Form S-8;

          (c)  Reoffers and resales of  restricted  securities  may only be made
               pursuant to a  registration  statement  on Form S-8 by means of a
               separate  "reoffer  prospectus",  which is prepared in accordance
               with the  requirements of Part I of Form S-3 and included in, and
               filed with, such registration  statement.  Restricted  securities
               may be  included in a reoffer  prospectus  only if they have been
               acquired  by the selling  shareholder  prior to the filing of the
               registration statement;

          (d)  If, at the time of filing a  registration  statement on Form S-8,
               the  company  whose  securities  are being  registered,  does not
               satisfy the  requirements for use of Form S-3, then the number of
               shares  to be  reoffered  or  resold  by  means  of  the  reoffer
               prospectus  included  in  such  registration  statement  by  each
               selling  shareholder  may not  exceed,  during  any  three  month
               period,  the greater of (i) one percent of the outstanding  class
               of such  securities  (or,  if such  registrant's  securities  are
               listed on a national  exchange or  included in NASDAQ,)  (ii) the
               average weekly reported volume of common stock trading during the
               four  calendar  weeks  preceding  the  filing  of  the  Form  S-8
               registration statement.  The Company has not, does not currently,
               and will not for at least the  twelve-month  period following May
               27, 1996,  satisfy the  registrant  requirements  for use of Form
               S-3. The  foregoing  amount  limitations  on the number of shares
               which may be reoffered and resold by each selling shareholder are
               therefore  applicable to all reoffer prospectuses forming part of
               any S-8 registration statement heretofore filed by the Company or
               hereafter  filed by the  Company  for at least the twelve  months
               following the filing date of this report.


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<PAGE>

3.  Resales of Stock by Executive Officers
     Pursuant to Rule 144 and Form S-8 Registration.

     Although the number of shares which may be sold by any individual executive
officer  of the  Company  pursuant  to  either  Rule 144 or a Form  S-8  reoffer
prospectus,  is limited as described  above, it should be noted that such volume
limitations  are exclusive of each other.  (Rule 144(e) provides that securities
sold pursuant to an effective  registration  statement (such as a Form S-8) need
not be included in  determining  the amount of securities  sold in reliance upon
Rule 144. In the most  practical and simple  terms,  this means that, as at such
time that the Rule 144 one-year  holding  period is  satisfied  for common stock
held by such persons,  each of the persons  discussed above would be entitled to
sell,  under  Rule 144,  a number of shares  equal to one  percent  of the total
issued and  outstanding  common  stock of the  Company  every three  months.  In
addition, each such person could also sell an equal amount of shares pursuant to
an S-8  registration  every three  months.  Such sales  could have a  depressive
effect on the price of the shares of the  Company's  common  stock in the public
market.  Such sales could also adversely  affect the Company's  ability to raise
capital at that time  through the sale of its equity  securities  as well as its
ability to make acquisitions using its shares of Common Stock.

4.  Possible Conflicts of Interest

     Messrs. Byrne and Muro hold the bulk of the Company's shares which could be
eligible for an S-8  registration or sale under Rule 144. These same individuals
comprise two of the three  members of the  executive  committee of the Company's
board of directors which has the power to authorize the issuance, as well as the
S-8  registration  of,  Compensation  Shares  (and any other  securities  of the
Company,  such as stock bonus shares).  As clearly  demonstrated,  the Company's
executive  officers have, since January of 1995 (except Mr. Muro who has done so
since  1993),  unstintingly  devoted  their  full-time  efforts  to the  goal of
establishing  and developing the Company's  business.  For most of such periods,
none of them have received more than minimal cash compensation plus unregistered
shares of the  Company's  common  stock which at the time of issuance  had no or
only minimal value.  Moreover, the stock which they received in compensation for
their services  cannot and will not ever have any  significant  value other than
that  which  will  arise  directly  out of the  success  of the  efforts of such
individuals in attaining the aforesaid goals. All members of the Company's board
of directors  believe that the  Company's  executive  officers have at all times
acted,  and will continue to act, in complete accord with their fiduciary duties
to the Company's  shareholders.  It should be noted,  however, that such persons
could have possible  conflicts of interest in  authorizing  the issuance  and/or
registration  of  securities  of the  Company,  including  but  not  limited  to
Compensation  Shares.  The  market  price of the  Company's  common  stock,  the
Company's  ability to raise capital  through the sale of its equity  securities,
and the Company's ability to make acquisitions  using its shares of common stock
could be  adversely  affected  by such  conflicts  of  interest.  Management  is
sensitive to this potential  problem and therefore  intends,  at such time as it
has the  financial  and  personnel  resources  to do so, to  establish a special
committee  of the  board of  directors  composed  of  disinterested  or  outside
directors, or another equivalent body, charged with the exclusive authority


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<PAGE>

to determine when and if shares issued by way of  compensation  to its executive
officers should be the subject of an S-8 registration.  The Company also intends
to adopt stock options and stock bonus plans in which its  directors,  officers,
and employees will be eligible to participate.

Issuance of stock in Lieu of Salaries and
  Consulting Fees

     During the years  ended June 30,  1997 and 1996,  the  Company's  executive
officers and,  since  December 22, 1996,  its in-house  corporate and securities
counsel,  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:

Year ended June 30, 1996

     For the one-month  period which commenced on July 1, 1995 and ended on July
31, 1995,  Mr. Byrne waived  payment of $20,833.34 and Ms. Levine waived payment
of $12,500.  In connection  therewith,  on July 25, 1995, the Company authorized
the issuance  138,888 shares to Mr. Byrne and 83,334 shares to Ms.  Levine.  The
number of shares issued to Mr. Byrne and Ms. Levine at such time was  calculated
on the basis of 50% of the  average  of the bid and ask price for the  Company's
stock  (approximately  $.30 per share) during the nine-day period preceding July
25, 1995.

     For the three and one-half  month period which  commenced on August 1, 1995
and ended on November  15, 1995,  Mr.  Byrne  waived  payment of $66,971 and Ms.
Levine waived payment of $43,750. In connection therewith, on November 15, 1995,
the Company  authorized  the  issuance  446,112  shares to Mr. Byrne and 291,667
shares to Ms. Levine. The number of shares issued to Mr. Byrne and Ms. Levine at
such time was  calculated  on the basis of 50% of the average of the bid and ask
price for the Company's stock (approximately $.30 per share) during the two-week
period preceding November 15, 1995.

     For the  three-month  period  which  commenced on July 1, 1995 and ended on
September  30,  1995,  Mr. Muro waived  payment of $37,500 in unpaid  consulting
fees. In connection  therewith,  on January 1, 1996, the Company  authorized the
issuance  250,000 shares to Mr. Muro. The number of shares issued to Mr. Muro at
such time was  calculated  on the basis of 50% of the average of the bid and ask
price  for the  Company's  stock  (approximately  $.30  per  share)  during  the
three-month period ended September 30, 1995.

     For the one and one-half month period which  commenced on November 16, 1995
and ended on December  31, 1995,  Mr.  Byrne  waived  payment of $31,250 and Ms.
Levine waived  payment of $18,750 In connection  therewith,  on January 1, 1996,
the Company  authorized  the  issuance  284,091  shares to Mr. Byrne and 170,455
shares to Ms. Levine. The number of shares


                                       93
<PAGE>

issued to Mr. Byrne and Ms.  Levine at such time was  calculated on the basis of
50%  of  the  average  of  the  bid  and  ask  price  for  the  Company's  stock
(approximately  $.22 per share) during the three-month period ended December 31,
1995.

     For the three-month  period which commenced on October 1, 1995 and ended on
December 31, 1995, Mr. Muro waived payment of $37,500 in unpaid consulting fees.
In connection therewith, on January 1, 1996, the Company authorized the issuance
340,910 shares to Mr. Muro. The number of shares issued to Mr. Muro at such time
was  calculated  on the basis of 50% of the average of the bid and ask price for
the Company's stock (approximately $.22 per share) during the three-month period
ended December 31, 1995.

     For the three-month  period which commenced on January 1, 1996 and ended on
March 31, 1996,  Mr. Byrne  waived  payment of  $57,864.50,  Ms.  Levine  waived
payment of  $37,500,  and Mr.  Muro waived  payment of  $35,457.  In  connection
therewith,  on April 1, 1996, the Company authorized the issuance 526,041 shares
to Mr. Byrne,  340,910 shares to Ms. Levine, and 322,337 to Mr. Muro. 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  (approximately $.22 per share)
during the three-month period ended March 31, 1996.

     For the two and one-half  month period which  commenced on January 15, 1996
and ended on March 31, 1996,  Mr.  Threshie  waived payment of $10,416 in unpaid
compensation.  In connection therewith, on April 2, 1996, the Company authorized
the issuance 94,691 shares to Mr.  Threshie.  The number of shares issued to Mr.
Threshie at such time was  calculated  on the basis of 50% of the average of the
bid and ask price for the Company's stock  (approximately $.22 per share) during
the three-month period ended March 31, 1996.

     For the  three-month  period which  commenced on April 1, 1996 and ended on
June 30, 1996, Mr. Byrne waived payment of $55,711, Ms. Levine waived payment of
$37,500,  Mr. Muro waived payment of $31,952, and Mr. Threshie waived payment of
$11,898.  In connection  therewith,  in the period subsequent to that covered by
this  report,  on July 12, 1996,  the Company  authorized  the issuance  280,943
shares to Mr. Byrne,  189,170  shares to Ms.  Levine,  161,120 to Mr. Muro,  and
61,015 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  (approximately  $.39 per share) during the three-month  period ended June
30, 1996.

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  329,738 shares to Mr.
Byrne,  197,847  shares to Ms.  Levine,  186,777 to Mr. Muro,  and 62,392 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


                                       94
<PAGE>

(approximately  $.314 per share) during the  three-month  period ended September
30, 1996. On April 28, 1997,  The Company  authorized the issuance to Ms. Kachru
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 285,876 shares to Mr. Byrne, 233,402 shares to Ms. Levine,  166,853
to Mr.  Muro,  and  84,260 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  (approximately  $.314  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 195,495 shares to Mr. Byrne,  142,776 shares to Ms. Levine,  106,224 to
Mr. Muro, 9,037 to Mr. Threshie,  and 31,383 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 (approximately $.314 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 319,108 shares to Mr. Byrne,  250,843 shares to Ms. Levine,  135,686 to
Mr. Muro, 18,915 to Mr. Threshie, and 35,572 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 (approximately $.314 per share) during the
three-month period ended June 30, 1997.

Subsequent Period

     During the approximately  three and one-half months since the end of fiscal
1997,  the Company's  executive  officers and in-house  corporate and securities
counsel,  have  continued to waive  substantial  portions of their  salaries and
unreimbursed  expenses  made by  them on  behalf,  and for the  account,  of the
Company. To date not shares have been issued in connection therewith.


                                       95
<PAGE>

Registration of Compensation Shares

The Company has filed with the Securities and Exchange  Commission  registration
statements on Forms S-8  respecting the shares of its Common Stock issued to its
executive officers and in-house corporate and securities counsel, as follows:

     (a)  On July 22, 1996,  the Company  registered  220,000 shares for each of
          Mr. Byrne and Ms. Levine;

     (b)  On March 21, 1997, the Company  registered  166,174 shares for each of
          Mr. Byrne and Ms.  Levine,  150,000  shares for Mr.  Muro,  and 50,000
          shares for Mr. Threshie;

     (c)  On August 27,  1997,  the Company  registered  221,572  shares for Mr.
          Byrne, 291,667 shares for Ms. Levine, 242,746 shares for Mr. Muro, and
          50,000 shares for Mr. Threshie.

     Unless   circumstances   compel  otherwise,   management  intends  to  file
additional  Form  S-8  registration  statements  for  reoffers  and  resales  of
additional  Compensation  Shares  now held  by,  or in  future  issued  to,  its
executive officers and other employees. The Company has not, does not currently,
and  will not for at least  the  twelve-month  period  following  May 19,  1997,
satisfy the registrant requirements for use of Form S-3. As a result, the number
of shares of the Company's  common stock which may be reoffered or resold by any
individual selling shareholder  pursuant to a reoffer prospectus included in any
Form S-8 registration statement filed by the Company, may not exceed, during any
three-month period, the greater of (i) one percent of the Company's  outstanding
common stock or, (in the event that the  Company's  common stock shall be listed
on a national exchange or included in NASDAQ),  (ii) the average weekly reported
volume of common stock  trading  during the four  calendar  weeks  preceding the
filing of such reoffer prospectus.


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<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

Financial Statements

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

     Consolidated Balance Sheet - June 30, 1997

     Consolidated Statements of Operations for the years ended 
        June 30, 1996 and 1997, and  cumulative  
        for the period from  inception  (July 15, 1987) to
        June 30, 1997

     Consolidated Statements of Owners' Equity (Deficit) as at
       July 15, 1987 and June 30, 1988 - 1997

     Consolidated Statements of Cash Flows for the years 
        ended June 30, 1996 and 1997 and cumulative for the 
        period from inception  (July 15,1987) to June 30, 1997

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.


                                       97
<PAGE>

Exhibits

     The  exhibits  filed as a part of this  Report  or  incorporated  herein by
reference are as follows:

                                                                     Exhibits
                                                                   Incorporated
                                                                     Herein By  
                                                                     Reference,
                                                                     Exhibit No.
                                                                     As Filed 
                                                                   With Document
                                                                     Indicated
                                                                     ---------
                                                                 
1. (a) Underwriting Agreement (2)                                        1(a)
   (b) Selected Dealer Agreement (2)                                     1(b)
   (c) Escrow Agreement (2)                                              1(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 between the Company
         and Robert V. McCausland dated January 15, 1993 (7)             2
   (e) Acquisition Agreement among the Company,
         Patrick McLaren, Louis V. Muro and George
         Fattell, dated March 26, 1993 (8)                               2

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)

4. (a) Specimen common stock certificate (3)                             4(a)
   (b) Specimen redeemable "A" common stock
         purchase warrant (1)                                            4(a)
   (c) Specimen redeemable "B" common stock
         purchase warrant (1)                                            4(b)
   (d) Specimen redeemable "C" common stock
         purchase warrant (1)                                            4(c)
   (e) Underwriter's Warrant (2)                                         4
   (f) Form of Option to John Hartley for the purchase


                                       98
<PAGE>

        of 20,000 shares of Preferred Stock (9)                          4(g)
   (g) Form of Exchangeable Option, Dated October 5,
        1995, to Sharon Sanzaro for the purchase of 560,000
        shares of common stock (9)                                       4(h)
   (h) Form of Exchangeable Option, Dated October 5,
        1995, to Raymond Pirraglia for the purchase of 140,000
        shares of common stock (9)                                       4(i)
   (i) Form of Exchangeable Option, Dated October 5,
        1995, to Terry Bentley for the purchase of 100,000
        shares of common stock (9)                                       4(j)
   (j) Form of Exchangeable Option, Dated January 1,
        1996, to Raymond Pirraglia for the purchase of 43,750
        shares of common stock(9)                                        4(k)
   (k) Form of Exchangeable Option, Dated January 1,
        1996, to Terry Bentley for the purchase of 31,250
        shares of common stock (9)                                       4(l)
   (l) Form of Exchangeable Option, Dated January 1,
        1996, to Sharon Sanzaro for the purchase of 175,000
        shares of common stock (9)                                       4(m)
   (m) Specimen Preferred Stock Certificate (9)                          4(f)
   (n) 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)
   (o) 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)
   (p) 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)
   (q) Form of Exchangeable Option, Dated July 1,
        1996, to Raymond Pirraglia for the purchase of 43,750
        shares of common stock (12)                                      4(q)
   (r) Form of Exchangeable Option, Dated July 1,
        1996, to Terry Bentley for the purchase of 31,250
        shares of common stock (12)                                      4(r)
   (s) Form of Exchangeable Option, Dated July 1,
        1996, to Sharon Sanzaro for the purchase of 175,000
        shares of common stock (12)                                      4(s)
   (t)  Form of Option, Dated April 24, 1997 to CG TIRE, INC.
         for the purchase of up to 10% of the common stock of Registrant


                                       99
<PAGE>

10.(a) Consulting Agreement among Concord and
         Stamford Financial Consulting, dated August 31, 1987 (2)        10
   (b) Letter between Concord and Stamford
         Financial Consulting, dated January 1987 (2)                    10(e)
   (c) Employment Agreement between the Company
         and J. R. Goldstein (1)                                         28(h)
   (d) Employment agreement between the Company
         and Peter Stratton (1)                                          28(i)
   (e) Employment agreement between the Company
         and Robert Kopsack (1)                                          28(j)
   (f) Certificate of need approval letter
         from the NJ Department of Health,
         dated August 1, 1988 (3)                                        10(e)
   (g) Architectural approval letter from
         the NJ Department of Health, dated
         August 4, 1988 (3)                                              10(f)
   (h) Letter of understanding from the
         NJ Department of Human Services,
         dated July 12, 1988 (3)                                         10(g)
   (i) Occupancy Contract, dated July 18, 1988
         between the NJ City Health Care Corp. and
         the Company for use of sixteenth floor,
         Jersey City Medical Center (1)                                  10(f)
   (j) Reimbursement letter, dated July 27, 1988
         from CIGNA Healthplan of Northern New
         Jersey, Inc. (1)                                                28(g)
   (k) Letter of Support, dated August
         29, 1988 from Northern New Jersey
         Health Planning Council (3)                                     10(k)
   (l) Letter of Support, dated August 23,
         1988 from Orange General Hospital (3)                           10(k)
   (m) Letter of Support, dated October 25,
         1988 from New Jersey Buddies (3)                                10(l)
   (n) Letter of Support, dated September 14,
         1987 from Hyacinth Foundation (3)                               10(m)
   (o) Letter of Support, dated August 12,
         1988 from The Jersey City Mayor's
         AIDS Task Force (3)                                             10(n)
   (p) Letter of Support, dated August 19, 1988
         from Regional Health Planning Council (3)                       10(o)
   (q) Letter of Support, dated December 16,
         1987 from the University of Medicine
         & Dentistry of New Jersey (3)                                   10(p)


                                      100
<PAGE>

   (r) Letter of Support, dated July 19, 1988
         from United Hospitals Medical Center (3)                        10(q)
   (s) Letter of Support, dated July 19, 1988
         from the Public Health Nursing Agency of
         Warren County (3)                                               10(r)
   (t) Letter of Support, dated August 2, 1988
         from Hackettstown Community Hospital (3)                        10(s)
   (u) Letter of Support, dated July 25, 1988
         from Irvington General Hospital (3)                             10(t)
   (v) Letter of Support, dated July 25, 1988
         from Catholic Community Services (3)                            10(u)
   (w) Letter of Support, dated July 21, 1988
         from the Inter County Council on
         Drug and Alcohol Abuse, Inc. (3)                                10(v)
   (x) Letter of Support, dated July 26, 1988
         from the Hospital Center at Orange (3)                          10(w)
   (y) Letter of Support, dated July 21, 1988
         from the Health Force of Essex County (3)                       10(x)
   (z) Letter of Support, dated July 21, 1988
         from Barnert Memorial Hospital Center (3)                       10(y)
   (aa) Letter of Support, dated July 19, 1988
         from Union Hospital (3)                                         10(z)
   (bb) Letter of Support, dated July 19, 1988
         from Saint Barnabas Medical Center (3)                          10(aa)
   (cc) Letter of Support, dated July 21, 1988
         from Meadowlands Hospital Medical Center (3)                    10(bb)
   (dd) Letter of Support, dated August 26, 1988
         from Integrity, Inc. (3)                                        10(cc)
   (ee) Letter of Support, dated September 6,
         1988 from Morristown Memorial Hospital (3)                      10(dd)
   (ff) Letter of Support, dated August 4, 1988
         from The Mountainside Hospital (3)                              10(ee)
   (gg) Letter of Support, dated August 12, 1988
         from Hunterdon Medical Center (3)                               10(ff)
   (hh) Letter of Support, dated July 26, 1988
         from C.U.R.A., Inc. (3)                                         10(gg)
   (ii) Certificate of need approval letter for
         home health care services from the NJ
         Department of Health, dated June 28, 1989 (6)                   10(ii)
   (jj) Demand Note and Letter Agreement, dated
         September 19, 1989 between the Company and
         Citizens First National Bank of New Jersey (6)                  10(jj)
   (kk) Promissory Note, dated September 2, 1987
         between the Company and Dorothy Goldstein (6)                   10(kk)


                                      101
<PAGE>

   (ll) Promissory Note, dated September 2, 1987
         between the Company and American Bronze Corp. (6)               10(ll)
   (mm) Promissory Note, dated November 23, 1988
         between the Company and Joseph Ritt (6)                         10(mm)
   (nn) Promissory Note, dated August 26, 1988
         between the Company and Peter D. Stratton (6)                   10(nn)
   (oo) Promissory Note, dated April 24, 1988
         between the Company and Robert E. Kopsack (6)                   10(oo)
   (pp) Promissory Note, dated December 5, 1988
         between the Company and
         Goldstein & Stratton Associates (6)                             10(pp)
   (qq) Promissory Note, dated September 16, 1987
          between the Company and J. Richard Goldstein (6)               10(qq)
   (rr) Executive Agreement, dated Jan 18, 1995,
         between the Company and Terence C. Byrne (9)                    10(rr)
   (ss) Executive Agreement, dated Jan 18, 1995,
         between the Company and Frances Katz Levine (9)                 10(ss)
   (tt) Stock Restriction Agreements, dated Jan 18, 1995,
         June 1, 1995, and July 31, 1995 between the Company
         and Terence C. Byrne (9)                                        10(tt)
   (uu) Stock Restriction Agreements, dated Jan 18, 1995,
         June 1, 1995, July 31, 1995 between the Company
         and Frances Katz Levine (9)                                     10(uu)
   (vv) Consultant Agreement, dated Jan 18, 1995,
         between the Company and Louis V. Muro (9)                       10(vv)
   (ww) Executive Agreement, dated Jan 1, 1996,
         between the Company and Louis V. Muro (9)                       10(ww)
   (xx) Distribution Agreement dated April 4, 1995,
          between the Company and Floogle Ltd.,
          as amended effective January 12, 1996* (9)                     10(xx)
   (yy) Sales Representation Agreement, dated July 25, 1995,
         between the Company and Contesa Consultores
         Tecnicos Especiales, S.A.*  (9)                                 10(yy)
   (zz) Marketing Services Agreement, dated July 25, 1995,
         between the Company and Contesa Consultores
         Tecnicos Especiales, S.A.  (9)                                  10(zz)

   (aaa) Superseded "Purchase and Option" Agreement, dated
           June 6, 1995, between the Company and
           Ocean/Ventures III, Inc.(9)                                   10(aaa)


                                      102
<PAGE>

   (bbb)   Revised  "Letter"  Agreement,  dated October 5, 1995,  among
           Tirex Canada, the Company, and Ocean/Ventures III, Inc. with
           Maintenance Agreement,  of even date therewith,  among Tirex
           Canada, the Company, and Ocean/Ventures III,
           Inc., as exhibit thereto. (9)                                 10(bbb)
   (ccc) License Agreement, dated October 5, 1995, among
           Tirex Canada, the Company and
           Ocean/Ventures III, Inc. (9)                                  10(ccc)
   (ddd) Master Lease Agreement, dated October 19, 1995,
           between the Company and Ocean/Ventures III, Inc. (9)          10(ddd)
   (eee) Lease Agreement, dated October 19, 1995,
           among Tirex Canada, the Company, and
           Ocean/Ventures III, Inc. re: 1st TCS-1 System (9)             10(eee)
   (fff) Sales Representation Agreement, dated November 3, 1995,
           between the Company and Sipael S.r.l.,  via C. Manassei 77,
           Roma 00151, Italy
           Tecnicos Especiales, S.A (9)                                  10(fff)
   (ggg) License Agreement , dated as of July 3, 1995 between
           the Company and Tirex Canada (9)                              10(ggg)
   (hhh) 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)
   (iii) Consulting Agreement, dated as of October 5, 1995, between
            the Company and Terry L. Bentley. (10)                       4.1
   (jjj) Consulting Agreement, dated as of October 5, 1996, between
            the Company and Sharon Sanzaro. (10)                         4.2
   (kkk) Consulting Agreement, dated as of October 5, 1996, between
            the Company and Raymond Pirraglia. (10)                      4.3
   (lll) Special Compensation Agreement, dated April 1, 1996,
            between the Company and Terence C. Byrne (11)                4.5
   (mmm) Special Compensation Agreement, dated April 1, 1996,
            between the Company and Frances Katz Levine (11)             4.6
   (nnn) Amendment No. 1 dated May 30, 1996, to Executive
            Agreement, dated Jan. 18, 1995, between the Company
            and Terence C. Byrne (11)                                    4.7
   (ooo) Amendment No. 1 dated May 30, 1996, to Executive
            Agreement, dated Jan. 18, 1995, between the Company
            and Frances Katz Levine (11)                                 4.8
   (ppp) 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


                                      103
<PAGE>

   (qqq) 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
   (rrr) Special Compensation Agreements, dated June 1, 1995,
              July 25, 1995, November 15, 1995, and March 18, 1996
          between the Company and Terence C. Byrne (12)                  10(rrr)
   (sss) Special Compensation Agreements, dated June 1, 1995,
              July 25, 1995, November 15, 1995, and March 18, 1996
          between the Company and Frances Katz Levine (12)               10(sss)
   (ttt) 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)
   (uuu) Letter dated October 14, 1996 from Ocean/Venture III, Inc.
              to Tirex America Inc. (12)                                 10(uuu)
   (vvv) 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)
   (www) Commitment, dated April 11, 1996, from the
              Industrial Recover Program for Southwest Montreal,
              for a loan of up to $500,000 (Canadian) (12)               10(www)
   (xxx) 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)
   (yyy) 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)
   (zzz) Financial Consulting Agreement, dated May 3, 1997,
              between Registrant and The NAIS Corp. (15)                 10
   (aaaa)Amendment, dated July 1, 1997, to Financial
              Consulting   Agreement,   dated  May  3,  1997,   between
              Registrant and the NAIS Corp.
   (bbbb)Employment Agreement, effective as of January 1, 1996, between
            Registrant and John L. Threshie, Jr. (13)                    4.4
   (cccc)Employment Agreement, dated April 29, 1997,
            between Registrant and Vijay Kachru
   (dddd)Amendment No.2, dated May 1, 1997, to Stock Restriction
            Agreement of April 1, 1996, between Registrant
            and Louis V. Muro
   (eeee)Amendment No. 2, dated May 1, 1997, to Stock Restriction
            Agreement of June 1, 1995 between Registrant
            and Terence C. Byrne
   (ffff)Amendment No. 2, dated May 1, 1997, to Stock Restriction


                                      104
<PAGE>

            Agreement of June 1, 1995 between Registrant
            and Frances Katz Levine
   (gggg)Employment Agreement, dated December 22, 1997, between
            Registrant and Frances Katz Levine
   (hhhh)Amendment, dated May 1, 1997, to Employment Agreement
            of December 22, 1996, between Registrant and
            Frances Katz Levine
   (iiii)Amendment, dated May 1, 1997, to Employment Agreement
            of January 18, 1995, between Registrant and
            Terence C. Byrne
   (jjjj)Amendment, dated May 1, 1997 to Employment Agreement
            of January 1, 1996, between Registrant and
            Louis V. Muro
   (kkkk)   Equipment Lease & Purchase Agreement, dated May 29, 1997,
            between Registrant and Oceans Tire Recycling & Processing
            Co., Inc.,  including  Royalty Agreement and Rubber Crumb
            Brokerage Agreement,  of even date therewith, as Exhibits
            thereto
   (kkkk)   Equipment Lease & Purchase Agreement, dated May 29, 1997,
            between   Registrant   and  Ocean   Ventures  III,  Inc.,
            including  Royalty  Agreement and Rubber Crumb  Brokerage
            Agreement, of even date therewith, as Exhibits thereto
   (llll)   Equipment Lease & Purchase Agreement, dated May 29, 1997,
            between   Registrant   and  Ocean   Ventures  III,  Inc.,
            including  Royalty  Agreement and Rubber Crumb  Brokerage
            Agreement, of even date therewith, as Exhibits thereto
   (mmmm)   Equipment Lease & Purchase Agreement, dated July 8, 1997,
            between   Registrant  and  Recycletron  Inc.,   including
            Royalty  Agreement and Rubber Crumb Brokerage  Agreement,
            of even date therewith, as Exhibits thereto

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)

21. (a) Subsidiaries of the Company


                                      105
<PAGE>

22. 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
        Registrant's name to "The Tirex Corporation" (16)                20

28  (a) Prospectus of the Company, dated November 29, 1988 (4)
    (b) Letter, dated June 15, 1989 from the Company to its
            stockholders regarding the merger with
            Stopwatch, Inc. and the corporate name change (3)            28(b)

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

----------
Notes

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

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

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

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

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

     (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.


                                      106
<PAGE>

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

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

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

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

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

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

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

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

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

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


                                      107
<PAGE>

Reports on 8-K

     The Company filed the following  current report on Form 8-K during the last
quarter of the period covered by this report:

Current Report on Form 8-K, dated,  June 24, 1997,  filed with the Commission on
July 14, 1997.


                                      108
<PAGE>

                                   SIGNATURES

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

                                     TIREX AMERICA INC.

                                     By   /s/ Terence C. Byrne
                                       -----------------------------------------
Date: October 10, 1997                 Terence C. Byrne, President and Treasurer

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

          SIGNATURES                             TITLE                Date

Principal Executive Officer:

  /s/ Terence C. Byrne                                          
-------------------------------------            President      October 10, 1997
     Terence C. Byrne               

Principal Financial and Accounting Officer:

  /s/ Terence C. Byrne                                          
-------------------------------------           Treasurer       October 10, 1997
     Terence C. Byrne                

A Majority of the Board of Directors:

   /s/ Terence C. Byrne                                         
-------------------------------------           Director        October 10, 1997
     Terence C. Byrne                

    /s/ John G. Hartley                                         
-------------------------------------           Director         October 9, 1997
     John G. Hartley                 

   /s/ Louis V. Muro                                            
-------------------------------------                           October 10, 1997
     Louis V. Muro                              Director

   /s/ John L. Threshie, Jr.         
-------------------------------------           Director        October 10, 1997
     John L. Threshie, Jr.           


                                      109
<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, 1997 or the subsequent interim period and,
as at the date  hereof,  no plans  exist for the  furnishing  of such  report or
materials subsequent to the filing of this Report.


                                      110
<PAGE>

                     INDEX OF EXHIBITS BEING FILED HEREWITH

      4  (t)     orm of Option, Dated April 24, 1997 to CG TIRE, INC.
                   for the purchase of up to 10% of the common stock of
                   Registrant.

     10  (aaaa)  mendment,  dated  July  1,  1997,  to  Financial
                   Consulting   Agreement,   dated  May  3,  1997,   between
                   Registrant and the NAIS Corp.
         (cccc)  mployment Agreement, dated April 29, 1997,
                   between Registrant and Vijay Kachru
         (dddd)  mendment No.2, dated May 1, 1997, to Stock Restriction
                   Agreement of April 1, 1996, between Registrant
                   and Louis V. Muro
         (eeee)  mendment No. 2, dated May 1, 1997, to Stock Restriction
                   Agreement of June 1, 1995 between Registrant
                   and Terence C. Byrne
         (ffff)  mendment No. 2, dated May 1, 1997, to Stock Restriction
                   Agreement of June 1, 1995 between Registrant
                   and Frances Katz Levine
         (gggg)  mployment Agreement, dated December 22, 1997, between
                   Registrant and Frances Katz Levine
         (hhhh)  mendment, dated May 1, 1997, to Employment Agreement
                   of December 22, 1996, between Registrant and
                   Frances Katz Levine
         (iiii)  mendment, dated May 1, 1997, to Employment Agreement
                   of January 18, 1995, between Registrant and
                   Terence C. Byrne
         (jjjj)  mendment, dated May 1, 1997 to Employment Agreement
                   of January 1, 1996, between Registrant and
                   Louis V. Muro
         (kkkk)  quipment Lease & Purchase Agreement, dated May 29, 1997,
                   between Registrant and Oceans Tire Recycling & Processing
                   Co., Inc., including Royalty Agreement and Rubber Crumb
                   Brokerage Agreement, of even date therewith, as Exhibits
                   thereto
         (llll)  quipment Lease & Purchase Agreement, dated May 29, 1997,
                   between   Registrant   and  Ocean   Ventures  III,  Inc.,
                   including  Royalty  Agreement and Rubber Crumb  Brokerage
                   Agreement, of even date therewith, as Exhibits thereto
         (mmmm)  quipment Lease & Purchase Agreement, dated July 8, 1997,
                   between Registrant and Recycletron Inc., including
                   Royalty Agreement and Rubber Crumb Brokerage Agreement,
                   of even date therewith, as Exhibits thereto

         21  Subsidiaries of the Company