SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-KSB/A
(Mark One)

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

      For the fiscal year ended June 30, 1998

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

      For the transition period from _______ to ______

                       Commission File Number 33-17598-NY

                              The Tirex Corporation
                 (Name of Small Business Issuer in Its Charter)

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

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

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

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

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

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

                                      NONE

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

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


                                       
<PAGE>

                                    $880,000
               (Issuer's revenues for its most recent fiscal year)

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

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

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

                       DOCUMENTS INCORPORATED BY REFERENCE
                                   into Part I

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

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

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

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

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

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

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

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


                                       2
<PAGE>

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

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

                                                       Bid Prices
         Period                                       Common Stock
         ------                                       ------------
Fiscal Year Ended June 30, 1997                  Low              High
                                                 ---              ----
         September 30, 1996                     $0.19             $0.45
         December 31, 1996                       0.13              0.44
         March 31, 1997                          0.23              0.58
         June 30, 1997                           0.18              0.44

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

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

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

Shareholders

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


                                       3
<PAGE>

Dividends

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

Sales of Unregistered Securities

      The following sets forth information respecting the dates, purchasers, and
consideration   respecting   sales  of  common  stock  by  the  Company  without
registration under the Securities Act of 1933, as amended (the "Securities Act")
during the fiscal year ended June 30,  1998,  and not  previously  reported in a
quarterly report on Form 10-Q.(1)

Sales to Executive Officers in Respect of Services Rendered

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

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

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


                                       4
<PAGE>

                                       Amount of                     No. of
                                   Salary & Expenses                 Shares
       Name                             Owed                         Issued
       ----                        -----------------                 ------
  Terence C. Byrne                     $59,183                      423,038
  Frances Katz Levine                   45,191                      323,023
  Louis V. Muro                         33,200                      237,312
  John L. Threshie, Jr.                  6,167                       44,081
  Vijay Kachru                           9,450                       67,548

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

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

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


                                       5
<PAGE>

      Securities Issued as Compensation Under Written Employment Agreements

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

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

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

Issuance of Stock in Consideration for Financial Accommodations

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


                                       6
<PAGE>

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

      Securities Issued As Compensation Under Written Consulting Agreements

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

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

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

Securities Issued As Compensation For Goods and Services Rendered

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

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


                                       7
<PAGE>

Securities Issued For Waiver of Advance Payment on Lease

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

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

Basis for Section 4(2) Claimed

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

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

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

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

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

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

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


                                       8
<PAGE>

These  securities  were sold as twenty  units  (the "Type A Units") in a private
placement (the "Type A Private Placement",  made by the Company between November
5, 1997 and May 11, 1998,  through H.J.  Meyers & Co., Inc., as placement  agent
(the  "Placement  Agent"),  at a price of  $25,000  per  Unit.  Each Type A Unit
consisted of one 10% Convertible  Subordinated Debenture in the principal amount
of  $25,000  (the  "Type  A  Debentures")  and  100,000  warrants  (the  "Type A
Warrants")  to  purchase  a like  number of shares  of the  common  stock of the
Company (the "Type A Warrant Shares").

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

         The 2,000,000 outstanding Type A Warrants are exercisable at a price of
$.001 per share.  The Type A Debentures  are  convertible  commencing on the day
following  the  effective  date of the  Company's  Registration  Statement  at a
conversion  ratio  equal to a maximum  of 67.5%  and a  minimum  of 61.5% of the
closing bid price of the Company's  common stock on the trading date immediately
preceding  the date of the  Company's  receipt  of a notice of  conversion.  The
factors which affect the  conversion  ratio are discussed,  above,  in Item 1 of
this Report  under the  caption,  "Material  Financing  Activities  - The Type A
Private  Placement".  After  December  31, 1999,  the Type A Debentures  will be
redeemable,  at the request of the holder,  at 125% of the principal amount plus
all accrued unpaid interest on the principal amount.

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

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

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


                                       9
<PAGE>

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

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

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

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

Basis for Section Rule 506 Exemption Claimed

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

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

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

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


                                       10
<PAGE>

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

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


                                       11
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

      The  following is  management's  discussion  and  analysis of  significant
factors  which have  affected the Company's  financial  position and  operations
during the fiscal years ended June 30, 1997 ("Fiscal  1997"),  and June 30, 1998
("Fiscal 1998").  This discussion also includes events which occurred subsequent
to the end of Fiscal 1998 and contains  both  historical  and  forward-  looking
statements.   When   used   in   this   discussion,   the   words   "expect(s)",
"feel(s)","believe(s)",  "will", "may",  "anticipate(s)" "intend(s)" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to  differ  materially  from  those  projected.  Factors  that  might  cause  or
contribute to such differences  include, but are not limited to, those discussed
in "Risk  Factors".  Readers are cautioned not to place undue  reliance on these
forward-looking statements,  which speak only as of the date hereof. Readers are
also urged to carefully review and consider the various disclosures elsewhere in
this Report which discuss factors which affect the Company's business, including
the discussion at the end of this  Management's  Discussion and Analysis,  under
the subcaption  "Risk Factors".  This  discussion  should be read in conjunction
with the  Company's  Consolidated  Financial  Statements,  respective  notes and
Selected Consolidated Financial Data included elsewhere in this Report.

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

      In January 1998, the  fully-automated  front-end tire preparation  module,
and in March 1998, the cryogenic tire freezing  section of the first  full-scale
TCS-1 Plant (the "First Production Model") were completed and delivered to OTRP.
As discussed in more detail,  below, the Company received a total of $880,000 in
respect  thereof and this Plant is presently  installed at the Company's  90,000
square  foot  Montreal  manufacturing  facility  (see also Item 1 of this Report
"Existing and Proposed Businesses - Sales and Marketing - Agreements with Oceans
Tire  Recycling  &  Processing  Co.,   Inc.["OTRP"]  and  Proposed  TCS-1  Plant
Operations:  Sales  of  Rubber  Crumb  and  Manufacture  and  Sale  of  Finished
Products"). All major components of the First Production Model were successfully
tested and were  operational  on a  noncontinuous  running basis by May 1998. In
mid-June  1998,  the  Company  initiated  the  second  stage of  testing,  which
consisted  of  testing  all  major  components  and all  functions  of the First
Production Model, individually, on a continuous running basis. By September 1998
(subsequent to the period covered by this Report), results of second stage tests
indicated that  approximately  85% of the TCS-1 Plant  components met all of the
Company's  specifications.  In addition,  under continuous  testing  conditions,
certain   unanticipated   design  anomalies  were  discovered,   which  required
modification. The Company also identified several opportunities for improvements
in the  original  design of the TCS-1  Plant,  which the Company  believes  will
increase economy and efficiency of its operation. In September 1998, the Company
retained the Montreal engineering firm of Beaudoin, Hurens and Associates,  Inc.
("BHA") to: (i) prepare  and/or  finalize all design and  engineering  drawings,
operation and technical manuals,  and other  documentation  respecting the TCS-1
Plant;  and (ii) make an  independent  engineering  assessment  of the Company's
findings  from its  second  stage  testing  of the  TCS-1  Plant to  verify  and
authenticate  the  modifications  which  were  required  to assure  the  Plant's
conformity   with   targeted   performance   criteria.   The  Company   retained
Plasti-Systemes  Inc.  of Montreal to do all  mechanical  fabrications  required
during the final stage of the project.  The foregoing  modifications,  including
engineering fees, required previously  unbudgeted  expenditures in the aggregate
amount of approximately $500,000, approximately $250,000


                                       12
<PAGE>

of which had been paid as of December 31, 1998. The required  modifications were
completed subsequent to the period covered by this Report in December of 1998 on
a single  fracturing  mill and a single  freezing tower in the First  Production
Model.  Completion of the second fracturing mill and freezing tower,  which will
be  included  therein,  is  scheduled  to occur  in  April  of 1999.  Management
presently  estimates that commencement of full-scale  commercial  manufacture of
TCS-1 Plants will occur in March of 1999.

      The Company will also be required to make additional  capital  investments
and   expenditures   over  the  next  twelve  months  in  connection   with  the
establishment  at  the  Company's   Montreal  facility  of  rubber  mat  molding
operations  under the IM2  Agreement.  Management  estimates  that costs for the
entire  project will aggregate to  approximately  $925,000.  This includes:  (i)
approximately  $325,000 for  modifications to the Company's  Montreal  facility,
necessary to accommodate these operations and for materials handling  equipment,
approximately  $168,000 of which had been paid as of December 31, 1998; and (ii)
approximately  $600,000 to acquire and install a complete rubber mat molding and
flocking plant (with the exception of the molds which will be furnished by IM2),
approximately  $132,000  of which had been paid as of  December  31,  1998.  The
Company plans to use the output of the First  Production  Model of the TCS Plant
in its rubber mat molding operations.

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

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


                                       13
<PAGE>

liabilities  from  operation  of the First  Production  Model will be divided in
proportion to their respective contributions.

      Because  of  the  lengthy  delays  in  the   commencement   of  commercial
operations, the Company has also had to, and may in the near future be forced to
continue to, cover its overhead  costs from  sources  other than  revenues  from
operations.  As at January 15, 1999, the Company  estimates that overhead costs,
which will be incurred  prior to the  generation  of revenues  adequate to cover
them, will aggregate to approximately $250,000.

Liquidity and Capital Resources

      The  activities  of the  Company  since  its  formation  in  1987  and the
inception of its current  business in 1993 have been  financed by sources  other
than  operations.  Such  financing  was  principally  provided  by the  sale  of
securities in private  transactions,  including  three  private  placements to a
limited number of accredited  investors,  which the Company completed on May 11,
1998, and which yielded aggregate net proceeds of $2,063,795 (see "The Company -
Material  Financing  Activities").  In total,  funds  raised by the Company from
private sales of its securities are as follows:

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

      During the fiscal  years  ended  June 30,  1997 and June 30,  1998 and the
interim   six-month  period  ended  December  31,  1998,  the  Company  received
additional  funding  from Quebec and Canadian  government  grants,  loans,  loan
guarantees and refundable tax credits for purposes of completing the development
of the TCS-1 Plant and for the international  marketing of such plants (see Item
1. of this Report,  "Existing  and Proposed  Businesses - Canadian  Operations -
Canadian  Financial  Assistance Grants,  Loans, and Commitments").  Canadian and
Quebec government  research and development tax incentives take the form of both
tax  deductions  from otherwise  taxable  income and tax credits  respecting the
eligible research and development expenditures of the Company (see "Existing and
Proposed  Businesses  -  Canadian  Operations").  Insofar  as  tax  credits  for
scientific research and experimental development are concerned, such credits are
offered by both the  governments  of Canada and of Quebec.  The tax  credits are
calculated  as a percentage  of research  and  development  expenditures  deemed
eligible by the Revenue  Departments of each  government.  The percentages  vary
according  to the size of the company  (defined  according to the asset base and
revenues generated by the company),  the residency of the majority of the voting
control and other  factors.  In the case of both the  provincial and the federal
governments,  where the amount of the tax credit exceeds other tax  liabilities,
such as taxes on income and on capital,  and subject to certain other conditions
which a company meets, the amount of any difference is paid to the company, thus
the term, "Refundable Tax Credits". The effective rate of the credit varies from
one company to another as a function of a number of factors,  not least of which
are:  (i) the  nature of the costs  being  claimed  such as labor  costs  versus
non-labor costs (the credit for labor costs is higher than for non-labor costs);
and (ii) the proportion of expenditures which can be attributed to


                                       14
<PAGE>

research and  development  but which are not deemed eligible for the tax credits
by their  nature.  Insofar as the Company is  concerned,  the tax  credits  have
varied  from  approximately  25%  to  30%  of  total  research  and  development
expenditures,  including certain types of expenditures deemed ineligible for tax
credits.  During the last three fiscal years,  virtually  all of the  activities
connected with the development and construction of the First Production Model of
the TCS-1 Plant have qualified as expenses eligible for refundable tax credits.

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

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

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

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


                                       15
<PAGE>

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

Notes to this table appear on the following page.


                                       16
<PAGE>

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

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

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

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

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


                                       17
<PAGE>

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

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

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

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

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

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

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


                                       18
<PAGE>

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

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

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


                                       19
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
                                             Amount of
                                              Funds
                                            Received By
                                 Maximum    Company as of                                                                   Rate of
                                Amount of    December 31,                                                                  Interest
                                  Loan         1998
    Nature of Project                                                                 Repayment Terms
 
                                                         ===============================================================
                                                                                                    Amount of Payment
                                                                        Date Due
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>          <C>                                    <C>                      <C>    
Market Research                Cdn $20,000         Cdn      At the end of any fiscal year in       1% of gross annual       None
Feasibility Study for                          $20,000       which the Company has revenues       revenue from sales in
Iberian Peninsula                                           from sales of TCS-1 Plants in the             Iberia
                                                                   Iberian Peninsula
------------------------------------------------------------------------------------------------------------------------------------
Market Research                Cdn $20,000         Cdn      At the end of any fiscal year in       1% of gross annual       None
Feasibility Study for                          $20,000       which the Company has revenues       revenue from sales in
India                                                         from sales of TCS-1 Plants in                India
                                                                        India
------------------------------------------------------------------------------------------------------------------------------------
Market Research                Cdn $95,000         Cdn               June 30, 2001                      Cdn$6,333           None
Respecting Potential                           $95,000               June 30, 2002                     Cdn$12,666
United States Markets                                                June 30, 2003                     Cdn$18,999
for Rubber Crumb                                                     June 30, 2004                     Cdn$25,333
                                                                     June 30, 2005                     Cdn$31,666
------------------------------------------------------------------------------------------------------------------------------------
Iberian Market Development     Cdn $95,000         Cdn      At the end of any fiscal year in      1.5% of gross annual      None
Activities Related to                          $95,000      which the Company has revenues       revenue from sales in
Positioning the Company to                                  from sales of TCS-1 Plants in               Iberia
Market TCS-1 Plants,                                                    Iberia
Rubber Crumb, and Related 
Products in Iberia
------------------------------------------------------------------------------------------------------------------------------------
Market Research Activities     Cdn $98,000     $98,000               June 30, 2001                   Cdn $ 6,533.33         None
Respecting the Feasibility                         Cdn               June 30, 2002                   Cdn $13,066.66
of using Rubber Crumb in                                             June 30, 2003                   Cdn $19,600.00
Thermoplastic Elastomer                                              June 30, 2004                   Cdn $26,133.33
Compounds in the United                                              June 30, 2005                   Cdn $32,666.66
States and Canada.
====================================================================================================================================
</TABLE>

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


                                       20
<PAGE>

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

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

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

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


                                       21
<PAGE>

another broker-dealer,  ready, willing, and able to underwrite a public offering
of the Company's  securities.  At this time, the Company is not able to give any
assurances that, in such event, it will be successful in locating an underwriter
or that its efforts will ultimately result in a public offering. If the proceeds
from the above described potential sources of funding should be insufficient for
the Company's requirements and it is not able to effect a public offering of its
securities  within the next  twelve  months,  or find  other  sources of outside
funding,  the Company's  financial  position and its prospects for beginning and
developing   profitable  business  operations  could  be  materially   adversely
affected.

   
      As at June 30,  1998,  the  Company  had  total  assets of  $3,814,648  as
compared to  $1,555,620 at June 30, 1997  reflecting an increase of  $2,259,028.
Fiscal year-end total assets at June 30, 1997 had reflected a previous  increase
of $1,357,988 over $197,632 at June 30, 1996. Management attributes the increase
in total  assets  at June 30,  1998  principally  to (i)  continuing  consulting
agreements  which have been recorded as prepaid expenses on the Balance Sheet in
the  approximate  amount  of  $970,000;  all  compensation  payable  under  such
agreements was paid by way of the issuance of an aggregate of 4,000,000 share of
Common Stock to two consultants and the granting of the CGT Option, the terms of
which are  discussed,  below,  in Risk Factor No. 6 "Dilutive  and Other Adverse
Effects  of  Presently  Outstanding  Debentures,  Warrants,  and  Options";  the
attributed value of all shares of Common Stock issued as compensation under such
consulting  agreements and the CGT Option has been included in Paid-in  Capital;
(ii)  Property  and  Equipment  in the amount of $977,288  which  represents  an
increase of $190,630  over Property and Equipment of $786,658 at June 30, 1997;.
(iii) cash assets in the amount  $398,971 at June 30,  1998,  which  reflects an
increase  of  $243,934  over cash  assets in the amount of  $155,037 at June 30,
1997.  The cash  position  of the  Company  at June 30,  1997 had  reflected  an
increase of $154,797  over $240 in cash assets at June 30, 1996;  (iv)  research
and development tax credit  receivables  ("R&D TCR's") in the amount of $855,818
at June 30, 1998,  which  reflects an increase of $535,498 over R&D TCR's in the
amount of $320,320 at June 30, 1997 R&D TCR's at June 30, 1997 had  reflected an
increase  of  $269,918  over  $50,402  in R&D  TCR's at June 30,  1996;  (v) the
recognition  of deferred  financing  costs in the amount of  $158,255;  and (vi)
outstanding  loans to  officers  in the  aggregate  amount  of  $195,969,  which
represents an increase of $180,59O over $15,379 in outstanding loans at June 30,
1997  (see  Item  12  of  this  Report,   "Certain   Relationships  and  Related
Transactions" - "Loan  Transactions with Terence C. Byrne and Affiliated Entity"
and "Loans to Louis Sanzaro and Affiliate.)

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


                                       22
<PAGE>

      Reflecting the  foregoing,  the financial  statements  indicate that as at
June 30, 1998, the Company had a working capital  surplus  (current assets minus
current liabilities) of $373,198 and that as at June 30, 1997, the Company had a
working capital  deficit of $1,013,659.  The primary causes of this net increase
in net working  capital were:  (i) an increase in research and  development  tax
credits  receivable  in the  amount of  $585,900,  (ii) an  increase  of prepaid
expenses and deposits respecting on-going consulting agreements in the amount of
$970,000, and, (iii) a decrease in deposits payable of $336,500.

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

Results of Operations

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

      The financial  statements  which are included in this Report reflect total
general and administrative expenses of $1,970,277 for Fiscal 1998 which reflects
an increase of  $1,691,329  over Fiscal 1997,  when  general and  administrative
expenses were $278,948.  During fiscal 1998, the Company's total operating costs
increased by  $2,198,031,  from  $2,366,535  for fiscal 1997 to  $4,564,566  for
fiscal  1998.  The majority of such  increase is the result of various  factors,
including:  (i) an increase of $510,000 in respect of  valuations  attributed to
stock bonuses  granted to officers and counsel;  (ii) an increase of $358,000 in
respect of  valuations  attributed  to stock issued for various  consulting  and
professional  fees;  (iii) an increase of $112,000 in financing  fees, by way of
commissions and expense  allowance to the Selling Agent in the Type A and Type B
Private  Placements;  (iv) an increase  of $229,000 in travel and  entertainment
costs; (v) an increase of $406,000 in respect of valuations  attributed to stock
issued in  consideration  for the release of an exclusive  rights agreement (see
Item 12 of this  Report,  "Certain  Relationships  and  Related  Transactions  -
Consulting and Executive  Agreements with Louis Sanzaro");  and (vi) an increase
of $306,000  in costs  directly  associated  with the  development  of the TCS-1
Plant.  Total research and development  costs during Fiscal 1998 were $2,581,928
which reflected an increase of $498,640 over research and development  costs for
Fiscal 1997. During the year ended June 30, 1998, shares of Common Stock with an
aggregate attributed value of $1,870,000 were issued in exchange for services as
compared to Common Stock with an aggregate attributed value of $1,600,000 during
the year ended June 30, 1997.


                                       23
<PAGE>

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

      From  inception  (July 15, 1987)  through  June 30, 1998,  the Company has
incurred a cumulative net loss of $10,051,483.  Approximately $1,057,356 of such
cumulative  net  loss was  incurred,  prior to the  inception  of the  Company's
present  business plan, in connection with the Company's  discontinued  proposed
health care business and was due primarily to the expending of costs  associated
with the  unsuccessful  attempt to  establish  such  health care  business.  The
Company  never  commenced its proposed  health care  operations  and  therefore,
generated no revenues therefrom.

Risk Factors

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

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

      1.  Development  Stage  Company:  No  Assurance  as to  Future  Profitable
Operations.  Because it is in the  development  stage and has had no significant
operations  to date,  the Company  cannot  predict with any certainty the future
success or failure of its  operations.  The  Company's  existing  business  (the
design and  manufacture of tire recycling  equipment) and its proposed  business
(the operation of tire recycling  equipment and the production of products using
the recycled  rubber produced  therefrom),  are both subject to all of the risks
inherent in the  establishment  of new businesses and there is no assurance that
the Company will generate net income or  successfully  expand its  operations in
the future. Moreover,


                                       24
<PAGE>

as a new enterprise,  it is  likely  to remain  subject to risks and occurrences
which  management  is unable to predict  with any degree of  certainty,  and for
which it is  unable to fully  prepare.  The  likelihood  of the  success  of the
Company in either business  segment must be considered in light of the problems,
expenses,  difficulties,  complications  and delays  frequently  encountered  in
connection with the formation of a new business and the competitive  environment
in which the  Company  will  operate.  Because  of the  Company's  very  limited
business history,  there is little evidence for investors to analyze in order to
make an informed judgment as to the merits of an investment in the Company.  Any
such  investment  should  therefore be  considered a high risk  investment in an
unseasoned  start-up  company  with the  possibility  of the loss of the  entire
investment.

      2. Need For  Substantial  Additional  Capital.  During the period  between
January 7, and May 11, 1998, the Company  completed and closed certain financing
activities which yielded  aggregate net proceeds to the Company in the amount of
$2,063,795  (see Risk  Factor  No. 6  "Dilutive  and Other  Adverse  Effects  of
Presently  Outstanding  Debentures,  Warrants,  and  Options" and "The Company -
Material Financing  Activities").  Upon completion of the last of such financing
activities  in May of  1998,  management  believed  that the  proceeds  realized
therefrom  (together with Canadian and Quebec government and governmental agency
grants and loans,  in various  forms) would  provide the Company  with  adequate
funding to accomplish the following: (i) complete and cover all of the Company's
costs related to the first  production model of the TCS-1 Plant (the "Production
Model");  (ii) renovate the Company's new manufacturing and assembly facility to
bring it into full  compliance  with all  applicable  provincial  and  municipal
regulations  (see  "Description  of  Property");  and (iii) cover the  Company's
overhead  costs and expenses  through the end of October 1998.  The Company has,
however,  had to revise its estimates regarding the adequacy of such funding for
several  reasons,  including  but  not  limited  to the  necessity  for  certain
unanticipated  modifications  to the TCS-1 Plant design and the Company's  entry
into a second business segment  involving the operation of a TCS-1 Plant and the
production of molded rubber floor mats.

      During the "Stage 2" test phase of the First Production Model, the Company
encountered  certain  unanticipated  design  flaws in the TCS-1  which  required
modification and it also identified  several  opportunities  for improvements in
the original design of the TCS-1 Plant, which the Company believes will increase
economy  and  efficiency  of its  operation.  The  required  modifications  were
completed in December 1998 with respect to a single fracturing mill and a single
freezing  tower  in  the  First  Production  Model.  Completion  of  the  second
fracturing mill and freezing tower to be installed therein is scheduled to occur
in  April  of  1999.  The  costs  of  the  foregoing  modifications,   including
engineering fees,  aggregated to a previously unbudgeted amount of approximately
$500,000,  approximately  $250,000  of which had been paid by the  Company as of
December 31, 1998.

      The Company is also currently involved in establishing  rubber mat molding
operations under the IM2 Agreement.  In connection  therewith,  the Company will
incur  additional  costs  and  expenses  in an  estimated  aggregate  amount  of
approximately   $925,000.   This  includes:   (i)  approximately   $325,000  for
modifications to the Company's Montreal facility, necessary to accommodate these
operations,  and  for  materials  handling  equipment;  and  (ii)  approximately
$600,000 to cover the costs of purchasing and  installing a complete  rubber mat
molding and  flocking  plant (see  "Existing  and  Proposed  Businesses  Product
Manufacturing and Sales of Rubber Crumb" and "Description of Property").

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


                                       25
<PAGE>

      The Company  believes that it will be possible to meet its immediate goals
of: (a)  commencing  full  scale  commercial  production  of TCS-1  Plants;  (b)
commencing  rubber  mat  molding  operations  under the IM2  Agreement;  and (c)
covering  its  overhead  expenses  until  sufficient  cash flow is  generated by
operations,  out of a combination of some or all of the following  sources:  (i)
funds on hand;  (ii)  expected  cash flow  from  sales of four  TCS-1  Plants to
ENERCON America  Distribution  Limited  ("Enercon") of  Westerville,  Ohio. (see
"Existing  and  Proposed   Businesses  -  Sales  and  Marketing  -  The  Enercon
Agreements");  (iii)  Canadian and Quebec  government  and  governmental  agency
grants, loans, and refundable tax credits; (iv) sale and lease back financing on
inventory and equipment owned by the Company;  (v) conventional asset based debt
financing against receivables and inventory; (vi) refund of all of the 15% sales
tax paid by the Company on all goods, and services  purchased in connection with
the Company's manufacturing activities;  (vii) subcontractor financing; (viii) a
research and  development  tax credit facility from the Bank of Montreal for the
1999 calendar year; and/or (ix) vendor financing by way of installment purchases
of  equipment.  However,  the  sufficiency  of such funds,  if the Company  does
receive  them,  will be  completely  dependent  upon the  TCS-1  Plant's  as yet
unproven  ability to  operate  without  significant  problems,  on a  long-term,
continuous, commercial basis.

      Assuming the Company is able to cover the costs necessary to: (i) complete
the second  fracturing  mill and  freezing  tower;  and (ii)  install a complete
rubber mat molding and flocking facility, from the sources described above, full
scale commercial  manufacture of TCS-1 Plants and rubber mat molding  operations
are presently expected to occur during March 1999. However, any failure or delay
in the Company's receipt of the required  financing would be directly  reflected
in a commensurate delay or failure in the commencement of commercial  operations
(see  "Existing and Proposed  Businesses - Equipment  Manufacturing  - The TCS-1
Plant", and "Existing and Proposed Businesses - Equipment  Manufacturing - Sales
and Marketing - The Enercon Contracts" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations").

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


                                       26
<PAGE>

production of the  TCS-1 Plant and its proposed product manufacturing and rubber
crumb sales operations on a level sufficient to sustain the Company for at least
the next twelve  months.  However,  given the early stage of  development of the
Company,  it should be noted that it is impossible at this time to estimate with
any certainty what the Company's  income from operations will be during the next
twelve  months and that there can be no assurance  that the Company will be able
to obtain outside  financing on a debt or equity basis on terms favorable to it,
if at all.  While  management  does  not  believe  that  it  will  be the  case,
prospective  investors  in the  Company  should  note  that if all of the  above
described  internal  and  external  sources  for  financing  should  fail  to be
sufficient,  the Company  could be required  to reduce its  operations,  seek an
acquisition  partner or sell  securities on terms that may be highly dilutive or
otherwise disadvantageous.

      In the past,  the Company has  experienced  operational  difficulties  and
delays of more than five years,  three of which years occurred during the tenure
of the current  management.  All such difficulties and delays were the result of
working  capital  constraints  and the Company may continue to  experience  such
problems in the future.  Should such problems continue or reoccur in the future,
they could have a material adverse effect on the Company's  business,  financial
condition and results of operations.  The working capital  constraints which the
Company  experienced  were the  result  of its being  undercapitalized  from the
outset and therefore without sufficient  resources to hire required personnel or
pay  vendors  of  products   and   services,   including   but  not  limited  to
subcontractors  needed to design  and  build the First  Production  Model of the
TCS-1  Plant.  The Company  estimates  that it required  financing  in excess of
$2,000,000 to complete the design,  development,  and  construction  of the said
First Production Model of its TCS-1 Plant plus funds to maintain finance-raising
activities.  The Company actively sought  financing under its former  management
from 1992  through  1994 and  continued  to do so under its  current  management
beginning in January 1995. It did not raise  sufficient  financing to design and
construct the First Production Model to the point where initial testing could be
commenced  until May 1998.  Lack of  sufficient  working  capital also  required
management,   who  worked  for  the  Company  for  no,  or  very  limited,  cash
compensation, to devote a substantial amount of their time and effort to raising
the  required  financing.  The  Company  estimates,  that  if it had  sufficient
financing in January of 1995 when members of current  management  commenced  its
search for funding, it might have been able to complete the design, development,
and  construction of the First  Production  Model by October 1996.  Instead,  it
required an additional  three years for the Company to raise sufficient funds to
meet its  initial  goals and  objectives.  The  absence  of  operations  and the
resultant lack of significant cash flow from 1995 until the present,  compounded
the  Company's  problems  because  even the  overhead  required to sustain  fund
raising activities had to be financed from outside sources. This further delayed
the Company's ability to devote  sufficient  resources to completing the design,
development, and construction of the First Production Model of the TCS-1. By way
of example, the First Production Model was scheduled for delivery by February of
1997.  Instead,  the  last of the  three  major  components  of such  model  was
completed in June of 1998 and, as discussed  above,  the First  Production Model
underwent extended testing and "debugging" procedures until December 1998.


      3. History of Losses and Accumulated  Deficit. The Company has experienced
operating  losses in each fiscal period since its  formation in 1987,  including
the period since the 1993 inception of its tire  recycling  business plan. As at
June 30,  1998,  the Company had a deficit  accumulated  since  formation in the
aggregate approximate amount of $10,051,483,  approximately  $8,994,127 of which
was accumulated since the 1993 inception of the Company's present business plan.
The Company expects to incur  additional  operating  losses through at least the
end of the fiscal year ending June 30, 1999 and possibly thereafter (see, above,
Risk  Factor  No. 1  "Development  Stage  Company:  No  Assurance  as to  Future
Profitable  Operations").   Since  its  inception,  the  Company  has  generated
extremely  limited  revenues from operations (see  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations").


                                       27
<PAGE>

      4. Going Concern Assumption. The Company's independent auditors' report on
the Company's  financial  statements for the years ended June 30, 1997 and 1998,
contains an explanatory  paragraph  indicating that: (i) the Company is still in
the  development  stage;  (ii) it  cannot  be  determined  at this time that the
Company's  tire  disintegration  technology  will be  developed  to a productive
stage;  and (iii)  the  Company's  uncertainty  as to its  productivity  and its
ability to raise sufficient capital raise substantial doubt about its ability to
continue as a going concern. In addition, the Company had an accumulated deficit
of  $10,051,483  as at June 30,  1998.  The  Company  will  require  substantial
additional  funds  in the  future,  and  there  can  be no  assurance  that  any
independent  auditors' report on the Company's future financial  statements will
not include a similar  explanatory  paragraph  if the Company is unable to raise
sufficient  funds or generate  sufficient cash from operations to cover the cost
of its  operations.  The existence of the  explanatory  paragraph may materially
adversely  affect the  Company's  relationship  with  prospective  customers and
suppliers,  and therefore could have a material  adverse effect on the Company's
business, financial condition and results of operations.

      5. No  Guarantee of Product  Acceptance  in Market.  The first  production
model of the TCS-1  Plant was  completed  in May of 1998 and is  expected  to be
ready for commercial production,  on a complete "turn-key" basis, in March 1999.
Consequently, there is not yet any history of commercial operations of the TCS-1
Plant.  There can be no  assurance  that the TCS-1 Plant will be accepted in the
market  for  tire  disintegration  equipment.  Moreover,  the  Company's  market
research has focused on the potential demand for the TCS-1 Plant, and the rubber
crumb it is  designed  to  produce,  to the  exclusion  of  other  types of tire
disintegration  equipment.  Therefore,  the Company is not able to estimate with
any assurance the potential  demand for the TCS-1 Plant, if any. There can be no
assurance that sufficient  market  penetration can be achieved so that projected
production  levels  of the TCS-1  Plant  will be  absorbed  by the  market  (see
"Existing and Proposed Businesses-Sales and Marketing").

      6. Dilutive and Other Adverse Effects of Presently Outstanding Debentures,
Warrants,  and Options.  As of February 12, 1999, there were outstanding options
and warrants pursuant to which the Company is obligated to sell common stock, as
follows:

      (a)   2,000,000 common stock purchase  warrants (the "Type A Warrants") to
            purchase a like number of shares of the Company's common stock at an
            exercise price of $.001 per share, the resale of all of which shares
            are included in the Registration Statement.

      (b)   10% convertible Type A Debentures in the aggregate  principal amount
            of $500,000, with principal and interest convertible, in whole or in
            part,  into shares of the  Company's  common  stock at a  conversion
            ratio equal to a percentage  ranging  between 67.5% and 61.5% of the
            closing bid price of the Company's  common stock on the trading date
            immediately  preceding the date of the Company's receipt of a notice
            of conversion  from a holder of the Type A Debentures.  Accordingly,
            if, on February 16, 1999, all of the principal  amount,  but none of
            the interest,  due on the Type A Debentures  had been converted into
            common  stock  (based on the market  price of the common stock as at
            February  12,  1999),  a total of  4,357,298  shares of common stock
            would have been issued in respect of such conversion.  The resale of
            all of which shares would be included in the Registration Statement.
            To the extent  that the  interest  portion of the  Debenture  is not
            converted, all accrued interest will be payable in cash.

      (c)   10% convertible Type B Debentures in the aggregate  principal amount
            of $535,000, with principal and interest convertible, in whole or in
            part,  into shares of the  Company's  common  stock at a  conversion
            ratio of one share for every $.20 of principal amount and


                                       28
<PAGE>

            interest earned thereon from the date of issuance.  If the principal
            amount of all of the Type B Debentures,  but not the interest,  were
            converted,   the  aggregate  number  of  shares  issuable  would  be
            2,675,000,  the  resale  of all which  shares  are  included  in the
            Registration  Statement.  To the extent that the interest portion of
            the Type B Debenture is not converted,  all accrued interest will be
            payable in cash.

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

      (e)   (i) options to purchase,  on or before March 31, 1999,  an aggregate
            of 250,000  shares,  at an exercise  price of $.1875 per share;  and
            (ii) options to purchase,  on or before June 30, 1999,  an aggregate
            of 250,000 shares,  at an exercise price of $.28 per share.  Each of
            the  above  described  options  are held  among  three  individuals,
            including  Sharon Sanzaro (the spouse of Louis  Sanzaro,  an officer
            and director of the Company),  who hold such options as designees or
            assignees of  Ocean/Venture  III, Inc., a company  controlled by Mr.
            Sanzaro.   These  options  were  granted  in  consideration  of  the
            agreements of  Ocean/Venture  III, Inc. given on March 31, 1996, and
            June 30, 1996 to extend the  maturity  date of certain  indebtedness
            which the Company owed to Ocean/Venture  III, Inc. for periods which
            ranged from 90 to 120 days from each of such dates.

      (f)   an option,  held by a former  outside  director of the  Company,  to
            purchase 20,000 shares of convertible  preferred stock at a price of
            $10 per share (the "Preferred Option"). If purchased, such preferred
            stock will be convertible  into shares of the Company's common stock
            at a conversion  ratio equal to the number of shares of common stock
            purchasable  for the purchase price of each preferred share ($10) at
            30% of the average market price of the Company's common stock during
            the five trading days  immediately  prior to the date of  conversion
            provided,  however,  that  should the total  number of shares of the
            Preferred  Stock which can be purchased  pursuant to the Option,  be
            convertible  into fewer than two million  (2,000,000)  shares of the
            Company's  Common  Stock,  the number of shares of  Preferred  Stock
            purchasable  under the Option,  at the exercise price of ten dollars
            per  preferred  share,  will  be  increased  to  such  number  as is
            convertible  to 2,000,000.  If the shares of  convertible  preferred
            stock had been converted  into shares of the Company's  common stock
            as at February 16, 1999, a total of 3,836,930 shares would have been
            issued in  respect  of such  conversion.  For a  discussion  in more
            detail  of the  terms  of  this  option  and the  purchase  thereof,
            reference   is   made  to   "Certain   Relationships   and   Related
            Transactions"  under the caption,  "Extension of Exercise  Period of
            Option Held by John G. Hartley", below; and

      (g)   the CGT  Option to  purchase  a number of shares  equal,  on a fully
            diluted  basis,  to 10% of the total issued and  outstanding  common
            stock of the Company, at an exercise price equal to $.1195 per share
            with respect to 969,365 shares and at an exercise price with respect
            to the  balance of the shares  equal to fifty  percent  (50%) of the
            average of the final bid and ask  prices of the common  stock of the
            Company, as quoted in the OTC Bulletin


                                       29
<PAGE>

            Board during the ten business days  preceding the exercise  date. If
            all of the other  presently  outstanding  debentures,  options,  and
            warrants were  exercised,  as described  above,  the total number of
            shares of common stock of the Company issued and  outstanding  would
            be  91,699,663,  prior to the  exercise of the CGT Option,  in which
            case,  the  number  of shares  subject  to the CGT  Option  would be
            10,188,851,  the resale of all of which  shares would be included in
            the Registration Statement.

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


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

      Since  January  of 1995,  the  Company  has  issued a total of  32,756,186
shares,  constituting 41.94% of the issued and outstanding shares of the Company
in lieu of cash compensation due under employment and consulting agreements with
its  executive  officers,  employees,  and  corporate  counsel and in additional
compensation by way of directors shares and stock bonuses.  In addition,  during
that period,  the Company issued 12,888,243 shares,  constituting  approximately
16.5% of the issued and  outstanding  common stock of the Company to  affiliated
and non-affiliated  consultants and  subcontractors  for consulting  services of
various  types.  For as long as the Company has  insufficient  cash resources to
meet its obligations to its officers,  counsel, and outside vendors, the Company
will,  to the extent  possible,  continue to issue shares of its common stock at
negotiated or arbitrary discounts. In addition, the Company intends to submit to
its shareholders, proposals to adopt three stock option plans for the benefit of
its employees (See Risk Factor No. 9 "Possible  Voting Control by Management and
Corporate  Counsel"  and Risk Factor No. 27 "Adverse  Effects of Proposals to Be
Presented at Annual Shareholders Meeting: Anti-Takeover Provisions,  Limitations
on Shareholders  Voting Rights, and Stock Bonuses to Management",  "Management -
Executive Compensation",  "Management - Security Ownership of Certain Beneficial
Owners and Management", and "Certain Relationships and Related Transactions").


                                       30
<PAGE>

      8.  Possible  Depressive  Effect on Price of Securities of Future Sales of
Common Stock.  The resale of 11,952,857 of the  78,095,141  common shares of the
Company, issued and outstanding as of February 4, 1999, has been included in the
Registration  Statement.  11,760,000  of such  shares  will be freely  tradeable
commencing  on the  effective  date of the  Registration  Statement  or,  if the
holders thereof shall choose to withdraw the  registration of such shares,  they
will be  tradeable  under Rule 144  commencing  May 11,  1999.  The resale of an
estimated  21,220,449  shares  issuable  upon  the  exercise  or  conversion  of
presently outstanding options,  warrants, and debentures have also been included
in the  Registration  Statement and will be freely  tradeable upon the later of:
(i) the effective date of the  Registration  Statement;  or (ii) their issuance.
Alternatively,  if the holders of the  convertible  debentures  and some of such
warrants  (but  not  the  options)  shall  choose  to  withdraw  them  from  the
Registration   Statement,   they  will  become   tradeable  under  Rule  144  on
commencement  dates  ranging from  January 7, 1999 to May 11, 1999.  The sale or
other disposition of much of the currently outstanding shares of common stock is
restricted by the Securities Act. Unless such sales are registered, these shares
may only be sold in compliance  with Rule 144  promulgated  under the Securities
Act or some other  exemption from  registration  thereunder.  Rule 144 provides,
among other matters,  that if certain  information  concerning the operating and
financial  affairs of the Company is publicly  available,  persons who have held
restricted  securities  for a period  of one year  may  thereafter  sell in each
subsequent  three month  period up to that  number of such  shares  equal to one
percent of the Company's total issued and outstanding  common stock. The sale or
availability  for sale of  substantial  amounts  of common  stock in the  public
market  after  the  offering  being  made by the  Registration  Statement  could
adversely affect the prevailing  market price for the Company's common stock and
could impair the Company's ability to raise additional  capital through the sale
of its equity securities.

      9. Possible Voting Control by Management and Corporate  Counsel:  Possible
Depressive  Effect on Market  Prices.  As of  February  4, 1999,  the  Company's
officers and directors were the beneficial  owners of an aggregate of 29,391,199
shares,  constituting  approximately 37.16% of the Company's  outstanding common
stock.  The Company intends to hold the 1999 annual meeting of its  shareholders
prior to the end of the current  fiscal  year.  (See Risk Factor No. 27 "Adverse
Effects  of  Proposals  to  Be   Presented  at  Annual   Shareholders   Meeting:
Anti-Takeover  Provisions,  Limitations on Shareholders Voting Rights, and Stock
Bonuses to Management").  In addition to the proposals  discussed in Risk Factor
No. 27, the Board of Directors  has proposed that the  shareholders  approve the
adoption of three stock option plans. If adopted, two of these plans will be for
the benefit of all of the Company's employees,  but management and key employees
are  expected  to be the  principal  beneficiaries  thereof.  The third of these
proposed  plans,  is  intended  to be  specifically  for the purpose of awarding
options for the purchase of shares of common stock at a nominal  exercise  price
of $.001 per share,  to key  employees  and members of  management in respect of
certain  specified  performance  achievements  attained or to be attained by the
Company due to their efforts.

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

      The  concentration  of ownership by the  Company's  officers and directors
may,  along with other  "anti-takeover"  measures  which the Board of  Directors
plans to submit to the shareholders, discourage potential acquirors from seeking
control of the Company through the purchase of Common Stock, and this


                                       31
<PAGE>

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

      10.  Proposed  Reverse  Split:   Possible  Negative  Effect  on  Value  of
Securities.  As of  February  4,  1999,  there  were  78,095,141  shares  of the
Company's common stock issued and outstanding.  While the Company considers that
it would be highly  unlikely  if all of the  currently  outstanding  options and
warrants were to be exercised and all of the  currently  outstanding  debentures
were to be converted  with respect to the principal  amount of such  debentures,
there could be up to 103,887,814  shares of common stock issued and outstanding.
On August 13, 1997,  the Company  received a Letter of Intent from H.J.  Meyers,
Inc.  (the  "Meyers  Letter of Intent"),  a  broker-dealer  registered  with the
National  Association of Securities  Dealers,  Inc., for the  underwriting  of a
proposed public offering.  On or about September 16, 1998, however, H. J. Meyers
abruptly  ceased  doing  business.  The Company  intends to endeavor to effect a
public offering of its securities and is presently in negotiations  with another
potential underwriter. The Meyers Letter of Intent had required that the Company
have not more than ten million  (10,000,000)  shares of common  stock issued and
outstanding prior to the proposed public offering. The Company believes that any
potential  underwriter  for a public  offering of the Company's  securities will
require that the Company  effect a reverse  split to reduce the number of shares
of its common stock issued and outstanding because the total number of shares of
common stock currently  outstanding is  disproportionately  large in relation to
the  Company's  level of sales,  net  income and net  worth.  Additionally,  the
Company's  common stock has had a low market  value per share in recent  months,
which  may,  the  Company  believes,  tend to reduce  stockbroker  and  investor
interest in the  Company.  Further,  the Company  believes  that the current per
share price of the Company's common stock may limit the effective  marketability
of the Company's  common stock because of the reluctance of many brokerage firms
and institutional investors to recommend lower-priced stocks to their clients or
to hold them in their own portfolios. In light of the above, the Company intends
to call a  meeting  of its  shareholders  and to submit  to them a  proposal  to
reverse split the number of shares of common stock issued and  outstanding  at a
ratio of one post-split share for every five pre-split shares, or at some other,
possibly  higher,  ratio,  as the board of directors  shall agree is in the best
interests of the Company and its  shareholders.  Based upon the number of shares
issued and  outstanding  as of February 4, 1999,  and assuming  that the Reverse
Split is approved by the  shareholders  and  effected at a  one-for-five  ratio,
there will be a decrease in the number of outstanding  shares of common stock of
the   Company  to   approximately   15,619,028   shares.   Because  of  standard
anti-dilution  clauses or market price sensitive  exercise or conversion  prices
contained in all presently outstanding  convertible  debentures,  warrants,  and
options,  such  reverse  split  would also affect the number of shares of common
stock  issuable upon  conversion or exercise of such  debentures,  warrants,  or
options.  Negotiations  with  potential  underwriters  may result in a different
reverse-split ratio or even a second reverse split.

      The  Company  believes  that a decrease  in the number of shares of common
stock  outstanding  may increase  the trading  price and  marketability  of such
shares.  However,  the market price of the Company's common stock should also be
expected to reflect Company performance and other factors,  some of which may be
unrelated  to the  number of shares  outstanding.  Accordingly,  there can be no
assurance that the market price of the Common Stock after the Reverse Split will
actually  increase in an amount  proportionate  to the decrease in the number of
outstanding  shares.  The Reverse Split may leave  stockholders with one or more
"odd lots" of the Company's  stock,  i.e. stock holdings in amounts of less than
100 shares.  These shares may be more  difficult  to sell,  or require a greater
commission per share to sell, than shares in lots of 100.


                                       32
<PAGE>

      Upon the  effectiveness  of the  Reverse  Split,  if it is approved by the
Shareholders, the presently issued certificates shall be deemed to represent the
number of shares equal to the number of pre-split shares originally  represented
by such certificate divided by the ratio of the reverse split, and rounded up to
the  next  full  number.  EXAMPLE:  if  the  reverse  split  is  effected  at  a
one-for-five  ratio,  a  certificate  which  originally  represented  an  10,523
pre-split  shares would be deemed to represent 10,523 divided by five (2,104.6),
rounded up to the next full  number,  i.e.,  2,105  shares.  Thus no  fractional
shares of common stock will result from the reverse  split (see "Risk Factor No.
6,  Dilutive  and Other  Adverse  Effects of Presently  Outstanding  Debentures,
Warrants and Options").

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

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

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


                                       33
<PAGE>

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

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

      13.  International  Sales and Operations.  The Company plans to market the
TCS-1  Plant in Europe and India  during the 1999  calendar  year,  and in other
areas  throughout the world as  opportunities  arise.  There can however,  be no
assurances  that the  TCS-1  Plant  will be  successfully  marketed  or that any
anticipated  international  sales of TCS-1 Plants will take place.  In addition,
the Company may enter into joint  ventures  with  purchasers of TCS-1 Plants for
the purpose of engaging in the business of operating tire  recycling  businesses
equipped  with  TCS-1  Plants.  To  the  extent  that  the  Company  engages  in
international  sales  and/or  operations,  it will be subject  to various  risks
associated therewith, including but not limited to changes in tariff rates, lack
of reliability and availability of qualified labor, and instability of political
climate or economic environment. In addition, the value of any capital equipment
owned by such joint  ventures  and any  operating  lease or  equipment  purchase
financing payments received by the Company,  may, under certain  conditions,  be
valued  or paid  in  non-U.S.  currencies,  all of  which  will  be  subject  to
independent  fluctuating  exchange rates with the U.S.  dollar which may have an
adverse  affect on the  Company's  revenues or asset values in terms of the U.S.
dollar.

      14. Protection of Tirex Proprietary Technology and Potential Infringement.
The success of the Company's  proposed business depends in part upon its ability
to protect its  proprietary  technology  and the proposed TCS-1 Plant which will
utilize  such  technology.  On April 7, 1998,  the  Company  was issued a United
States patent on its Cryogenic Tire Disintegration Process and Apparatus (Patent
No. 5,735,471).  This patent will expire on December 18, 2016. In November 1998,
the Company filed this patent with the Canadian  Patent  Office.  The Company is
presently  unable to state how long the  Canadian  review  will take.  While the
Company  expects  a  Canadian  patent  to be  granted,  it is unable to give any
assurance that this will in fact be the case. Prior to obtaining its patent, the
Company  relied  on  trade  secrets,   proprietary  know-how  and  technological
innovation to develop its technology and the designs and  specifications for the
TCS-1 Plant. Except where the terms of their employment agreements would make it
redundant  or, in the sole  discretion  of  management,  it is  determined  that
because of the  non-technical  nature of their duties,  such  agreements are not
necessary or  appropriate,  the Company  has,  and will  continue to, enter into
confidentiality  and  invention  assignment  agreements  with all  employees and
consultants  which  limit  access to, and  disclosure  or use of, the  Company's
proprietary technology. There can be no assurance, however, that the steps taken
by the  Company to deter  misappropriation  or third  party  development  of its
technology and/or processes will be adequate, that others will not independently
develop  similar  technology  and/or  processes  or  that  secrecy  will  not be
breached. In addition, although


                                       34
<PAGE>

the Company  believes that its technology has been  independently  developed and
does not infringe on the proprietary rights of others, there can be no assurance
that the  Company's  technology  does not and will not so infringe or that third
parties will not assert  infringement  claims against the Company in the future.
Moreover,  there can be no assurance that the Company will have the resources to
defend its Patent by bringing patent  infringement or other  proprietary  rights
actions.

      15. Limited  Public Market:  Company Not Eligible for Inclusion on NASDAQ.
To date  there  has been only a  limited  and  sporadic  public  market  for the
Company's  common stock.  There can be no assurance  that an active and reliable
public market will develop or, if developed, that such market will be sustained.
Purchasers  of  shares of  common  stock of the  Company  may,  therefore,  have
difficulty  in  reselling  such  shares.  As a  result,  investors  may  find it
impossible to liquidate their investment in the Company should they desire to do
so. The  Company's  common  stock is  currently  traded in the  over-the-counter
market and quoted on the OTC  Bulletin  Board.  The Company  intends to apply to
have its common stock  approved for quotation on the Nasdaq  SmallCap  Market at
such time, in the future,  that it meets the requirements  for inclusion.  As at
the date hereof, however, the Company is not eligible for inclusion in NASDAQ or
for  listing  on  any  national  stock  exchange.  All  companies  applying  and
authorized  for  NASDAQ are  required  to have not less than  $4,000,000  in net
tangible  assets,  a public  float(2)  with a market value of not less than five
million  dollars,  and a minimum bid of price of $4.00 per share. At the present
time,  the  Company is unable to state  when,  if ever,  it will meet the Nasdaq
application standards.  Unless the Company is able to increase its net worth and
market valuation  substantially,  either through the accumulation of surplus out
of earned income or successful  capital raising  financing  activities,  it will
never be able to meet the eligibility requirements of NASDAQ. In addition, it is
likely that the Company, which, as of February 4, 1999, had 78,095,141 shares of
common stock issued and outstanding,  will have to effect a reverse split of its
issued and outstanding stock, in order to meet the minimum bid price requirement
(see,  also, Risk Factor No. 6 "Dilutive and Other Adverse Effects of Debentures
and Warrants and Presently Outstanding Option").  Moreover,  even if the Company
meets the minimum  requirements  to apply for  inclusion in The Nasdaq  SmallCap
Market,  there  can be no  assurance,  that  approval  will be  received  or, if
received,  that the Company will meet the requirements for continued  listing on
the Nasdaq SmallCap  Market.  Further,  Nasdaq reserves the right to withdraw or
terminate a listing on the Nasdaq SmallCap Market at any time and for any reason
in its  discretion.  If the Company is unable to obtain or to maintain a listing
on the Nasdaq SmallCap Market,  quotations, if any, for "bid" and "asked" prices
of the common stock would be available  only on the OTC Bulletin Board where the
common  stock is  currently  quoted or in the  "pink  sheets"  published  by the
National Quotation Bureau, Inc. This can result in an investor's finding it more
difficult  to  dispose  of or to obtain  accurate  quotations  of prices for the
common  stock  than would be the case if the  common  stock  were  quoted on the
Nasdaq  SmallCap  Market.  Irrespective  of whether  or not the common  stock is
included in the Nasdaq  SmallCap  system,  there is no assurance that the public
market for the common stock will become more active or liquid in the future.  In
that regard,  prospective purchasers should consider that this offering is being
made without the underwriting  arrangements typically found in a public offering
of  securities.  Such  arrangements  generally  provide  for the  issuer  of the
securities to sell the securities to an underwriter  which,  in turn,  sells the
securities to its customers and other members of the public at a fixed  offering
price,  with the result that the  underwriter  has a continuing  interest in the
market for such  securities  following  the  offering.  In order to qualify  for
listing on a national stock exchange, similar minimum criteria respecting, among
other things, the Company's net worth and/or income from operation must be met.

------------
(2)   "Public  float"  is  defined  as  shares  that  are not held  directly  or
      indirectly  by any  officer  or  director  of the  issuer and by any other
      person  who is the  beneficial  owner of more than 10 percent of the total
      shares outstanding.


                                       35
<PAGE>

      Accordingly, market transactions in the Company's common stock are subject
to the "Penny Stock Rules" of the Securities and Exchange Act of 1934, which are
discussed in more detail,  below,  under "Risk Factor No. 16.  Applicability  of
Penny Stock Rules to Broker-Dealer  Sales of Company Common Stock".  These rules
could  make it  difficult  to trade  the  common  stock of the  Company  because
compliance  with them can delay and/or preclude  certain  trading  transactions.
This could  have an adverse  effect on the  ability of an  investor  to sell any
shares of the Company's common stock.

      16. Applicability of "Penny Stock Rules" to Broker-Dealer Sales of Company
Common Stock.  As discussed  above,  at the present time,  the Company's  common
stock  is not  listed  on The  Nasdaq  SmallCap  Stock  Market  or on any  stock
exchange.  Although  dealer prices for the Company's  common stock are listed on
the OTC  Bulletin  Board,  trading  has been  sporadic  and  limited  since such
quotations first appeared on April 4, 1994. See "Market Information".

      The  Securities  Enforcement  and Penny Stock Reform Act of 1990  requires
special  disclosure  relating to the market for penny stocks in connection  with
trades in any stock defined as a "penny stock". Commission regulations generally
define a penny stock to be an equity  security  that has a market  price of less
than $5.00 per share and is not listed on The Nasdaq  SmallCap Stock Market or a
major stock exchange.  These regulations subject all broker-dealer  transactions
involving  such  securities to the special "Penny Stock Rules" set forth in Rule
15g-9 of the Securities Exchange Act of 1934 (the "34 Act"). It may be necessary
for the Selling  Shareholders and the Underlying  Share Selling  Shareholders to
utilize the services of broker-dealers  who are members of the NASD. The current
market price of the  Company's  common stock is  substantially  less than $5 per
share and such stock can, for at least for the foreseeable  future,  be expected
to continue to trade in the over-the-counter  market at a per share market price
of  substantially  less than $5 (see  "Market  Information").  Accordingly,  any
broker-dealer  sales of the Company's  shares will be subject to the Penny Stock
Rules.  These Rules affect the ability of  broker-dealers  to sell the Company's
securities and also may affect the ability of purchasers of the Company's common
stock to sell their shares in the secondary market, if such a market should ever
develop.

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

      17.  Management's  Lack of Industry  Experience.  Although  Management has
significant  general business and engineering  experience,  potential  investors
should be aware  that no member of  management  has been  directly  involved  in
administering a tire disintegration, recycling, or tire disintegration equipment
manufacturing,  business, except for Mr. Sanzaro, who has more than twenty years
of experience in the recycling  business  (excluding  tires) (see  "Management -
Directors and Executive Officers").


                                       36
<PAGE>

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

      19.  Regulatory  and  Environmental  Considerations.  The Company does not
expect  that its  equipment  manufacturing  operations  will be  subject  to any
unusual  or  burdensome  governmental  regulations.   However,  the  Company  is
presently  in the  process of making  arrangements  to own the First  Production
Model of the TCS Plant and to operate it as a "Tirex  Advanced  Products  Plant"
for the purpose of selling rubber crumb produced by operation of the TCS-1 Plant
and manufacturing  finished products,  made wholly or partially from such rubber
crumb (see "Existing and Proposed Businesses - Proposed TCS- 1 Plant Operations:
Sales of Rubber Crumb and Manufacture and Sale of Finished Products").  The TCS-
1 Plant is a "closed  loop" system which does not use any  chemicals,  solvents,
gases or other substances,  which could result in emissions of any kind from the
operation  of the Plant  and to the best of the  Company's  knowledge,  will not
result in the emission of air  pollution,  the disposal of combustion  residues,
the storage of hazardous  substances  (as is the case with other tire  recycling
processes such as pyrolysis),  or the production of any  significant  amounts of
solid waste which would have to be landfilled. However, the operation of a TCS-1
Plant will  involve,  to varying  degrees and for varying  periods of time,  the
storage of scrap tires which, with their size, volume and composition,  can pose
serious  environmental  problems.  While the Company  does not believe that such
storage will normally involve quantities of tires so large or storage periods so
extensive as to constitute the  "stockpiling" of scrap tires, it should be noted
that  stockpiling,  should it occur,  could  constitute a  particularly  serious
environmental  problem.  Among the numerous problems relating to scrap tires, is
that when stockpiled above ground, tires create serious fire, public health, and
environmental  hazards ranging from fires, which generate large and dense clouds
of black smoke and are  extremely  difficult to  extinguish,  to the creation of
vast breeding grounds for mosquitoes and vermin.

      As a result,  many states have either  passed or have pending  legislation
regarding  discarded  tires including  legislation  limiting the storage of used
tires to specifically designated areas. The Company and other operators of TCS-1
Plants will therefore be subject to various local,  state,  and federal laws and
regulations including,  without limitation,  regulations  promulgated by federal
and state environmental,  health, and labor agencies. Establishing and operating
a TCS-1 Plant for tire  recycling will require  numerous  permits and compliance
with  environmental  and  other  government  regulations,  on  the  part  of the
Company's  customers,  both in the  United  States  and Canada and in most other
foreign countries. The process of obtaining required regulatory approvals may be
lengthy and  expensive  for both the Company and for its TCS-1 Plant  customers.
Moreover,  regulatory approvals, if granted, may include significant limitations
on either the Company's or its  customer's  operations.  The EPA and  comparable
state and local regulatory agencies actively enforce  environmental  regulations
and  conduct  periodic  inspections  to  determine  compliance  with  government
regulations. Failure to comply with applicable regulatory


                                       37
<PAGE>

requirements can result in, among other things, fines, suspensions of approvals,
seizure  or  recall  of   products,   operating   restrictions,   and   criminal
prosecutions.

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

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

      20. Production and Supply. The Company intends to begin  manufacturing the
TCS-1 Plant on a commercial  basis in March 1999. In connection  therewith,  the
Company  will be  dependent  on  arrangements  with its  subcontractors  for the
manufacture and assembly of the principal components incorporated into the TCS-1
Plant (see Existing & Proposed Businesses "Agreements With Subcontractors").  It
will therefore be substantially  dependent on the ability of such subcontractors
to satisfy  performance and quality  specifications  and to dedicate  sufficient
production  capacity for all TCS-1 Plant scheduled  delivery dates.  The Company
believes  that  all of  its  subcontractors  have  the  requisite  manufacturing
capabilities  and the  willingness  to  dedicate  sufficient  amounts  of  their
manufacturing  capacity to the Company to meet all TCS-1 Plant  delivery  dates,
currently  scheduled  or  expected  to be  scheduled  within the next two years.
However,  no  assurance  can be  given  that  this  will in fact be the case and
failure  on the part of the  Company's  subcontractors  in these  regards  would
adversely  affect the Company's  ability to manufacture and deliver TCS-1 Plants
on a timely  and  competitive  basis.  In such event the  Company  would have to
replace or supplement its present subcontractors. There can be no assurance that
should it be  necessary  to do so,  the  Company  would be able to find  capable
replacements for its subcontractors on a timely basis and on terms beneficial to
the Company,  if at all; The Company's  inability to do so would have a material
adverse effect on its business (see Existing & Proposed BusinesseS:  "Production
and Supply").


                                       38
<PAGE>

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

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

      22.  Competition.  Although  management believes that the Tirex Technology
has distinct  advantages over other existing tire  disintegration  methods,  the
Company will face competition from other equipment manufacturers,  virtually all
of whom will be larger than the Company, and will have substantially more assets
and resources than the Company.  Management  intends to meet such competition by
developing  technological  innovations  which  will  make the TCS-1  Plant  more
economical  and efficient  than other tire  disintegration  methods  although no
assurance can be given that this will prove to be the case.  (see  "Existing and
Proposed Businesses - Competition").

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

      24. No Dividends and None  Anticipated.  The Company has not paid any cash
dividends,  nor does it contemplate or anticipate  paying any dividends upon its
common stock in the foreseeable future.


                                       39
<PAGE>

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

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

      27.  Adverse  Effects of Proposals to Be Presented at Annual  Shareholders
Meeting:  Anti-Takeover  Provisions,  Limitations on Shareholders Voting Rights,
and Stock  Bonuses to  Management.  The Company  intends to hold the 1999 annual
meeting of its  shareholders  prior to the end of the current fiscal year.  This
will be the first meeting of the  Shareholders  ever called by the Company.  The
Board of Directors has proposed that the Company's  Certificate of Incorporation
should be  amended  and  restated  to contain  provisions  that may make it more
difficult  to  acquire  control  of  the  Company  by  means  of  tender  offer,
over-the-counter  purchases,  a proxy  fight,  or  otherwise.  If adopted by the
required vote of the Company's  shareholders,  the amendments will include:  (i)
the addition of a "fair price"  provision to the  Certificate  of  Incorporation
that  regulates  business  combinations  with any  person or group  beneficially
owning fifteen percent (15%) or more of the Company's common stock,  including a
voting  requirement  of  seventy-five  percent  (75%) of the voting power of all
outstanding  voting shares of the Company (excluding shares held by such fifteen
percent (15%) stockholder or group of stockholders) for a business  combination,
unless the business  combination is approved by a majority of the members of the
Board of  Directors  who have held  office  since  prior to the date of the 1999
annual meeting (the "Continuing  Directors") or satisfies  certain minimum price
and  procedural   requirements;   (ii)  the  addition  to  the   Certificate  of
Incorporation  of a provision  granting  authority  to the Board of Directors to
adopt one or more shareholder rights plans, rights agreements, or other forms of
"poison pills" in the future without  further  shareholder  approval,  (iii) the
addition to the  Certificate of  Incorporation  of a provision  classifying  the
Board of Directors into three classes;  (iv) the addition to the  Certificate of
Incorporation of a seventy-five percent


                                       40
<PAGE>

(75%)  voting  requirement  for any  stockholder  action to be taken by  written
consent;  (v) an amendment to the  Certificate  of  Incorporation  requiring the
affirmative vote of the holders of seventy-five percent (75%) of the outstanding
voting  stock to amend,  alter and repeal the  By-laws and to allow the Board of
Directors to amend,  alter or repeal the By-laws  without  stockholder  consent;
(vi) the addition to the Certificate of Incorporation of a provision electing to
be governed by the provisions of Section 203 of the Delaware General Corporation
Law  which,  under  certain  circumstances,  imposes  restrictions  on  proposed
business  combinations  between a company and an interested  stockholder of such
company;  (vii) the addition of a seventy-five  percent (75%) voting requirement
in order to amend,  alter or repeal the  foregoing  proposed  amendments  to the
Certificate of Incorporation; (viii) an amendment to the By-laws eliminating the
ability of stockholders to call a special meeting;  and (ix) the addition to the
By-laws of a provision requiring that stockholders  submit director  nominations
and other business to be considered at meetings of stockholders at least 90 days
in advance of any such meeting of stockholders.  The proposed amendments are not
being  submitted  to the  shareholders  in response to any effort,  of which the
Company is aware, to accumulate the Company's  common stock or to obtain control
of the Company.

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

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

      Purchasers of the Company's  shares should note that such  amendments,  if
adopted,  will  result in there being  special  requirements  for  supermajority
shareholder  approval of any subsequent business combination and the possibility
that  after  an  acquiror  (for  purposes  of this  discussion,  an  "Interested
Shareholder")  purchases a certain  percentage of the Company's common stock, it
will be forced to pay a higher  price to other  Company  shareholders  in such a
business  combination.  This would  likely would make it more costly for a third
party to acquire  control of the  Company.  Thus,  the proposed  amendments  may
decrease the likelihood of a tender offer for less than all of the shares of the
common stock of the Company,  which may adversely affect stockholders who desire
to participate in such a tender offer. In certain cases, the proposed fair price
amendment's   minimum  price  provisions,   while  providing  objective  pricing
criteria,  could be arbitrary  and not  indicative  of value.  In  addition,  an
Interested  Stockholder may be unable, as a practical matter, to comply with all
of the procedural  requirements.  In these  circumstances,  unless an Interested
Stockholder  were able to obtain  special  stockholder  approval  of a  proposed
Business  Combination,  it would be forced either to negotiate with the Board of
Directors on terms


                                       41
<PAGE>

acceptable  to the Board or to abandon the proposed  business  combination.  The
proposed  amendments  also would give veto power to minority  stockholders  with
respect  to a proposed  Business  Combination  that is opposed by a majority  of
Continuing  Directors  but  that  is  desired  by a  majority  of the  Company's
stockholders unless the minimum pricing and procedural requirements were met. If
members of the Company's current  management and principal  shareholders were to
maintain their current stock ownership, they would have the ability to block the
requisite  vote.  In  addition,  the  proposed  amendments  may tend to insulate
incumbent  directors  against  the  possibility  of  removal  in the  event of a
takeover attempt because only the Continuing  Directors would have the authority
to reduce  to a simple  majority  or  eliminate  the  special  stockholder  vote
required for a particular Business Combination.

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

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

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


                                       42
<PAGE>

                                    PART III

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

Directors, Executive Officers and Significant Employees

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


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

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

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

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

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

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

   John G. Hartley       51   Director                         February 21, 1995

   Henry Meier           42   Director                         February 11, 1999

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

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


                                       43
<PAGE>

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

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

Family Relationships

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

Business Experience

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

      TERENCE C. BYRNE. Mr. Byrne joined the Company on January 18, 1995 and has
served as chief  executive  officer and director of the Company since such date.
From January 18, 1995 through  February 11, 1999, Mr. Byrne served as president,
treasurer,  and chief  financial  and  accounting  officer  of the  Company.  On
February 11, 1999,  Mr. Byrne was appointed  chairman of the board of directors.
He has also  served  as the  chairman  of the board of  directors  and the chief
executive officer of The Tirex Corporation Canada Inc. and Tirex Canada R&D Inc.
since  June  1998 and May 1995  respectively.  He holds a  Bachelor's  degree in
Economics from Villanova University in Philadelphia. Mr. Byrne has been


                                       44
<PAGE>

the controlling  shareholder and an officer and director of Bartholemew & Byrne,
Inc., a consulting firm  specializing in corporate  finance and general business
consulting,  since its founding in January  1993.  From  September  1992 through
August 1993, he directed European  marketing and business  development for Pacer
Plants  Corporation,  a  public  company  engaged  in the  business  of  systems
engineering for high tech  industries.  From July 1989 to August 1992, Mr. Byrne
served as president of Digital  Optronics  Corporation,  a public company which,
until August 1992, was engaged in the business of manufacturing digital optronic
measuring  devices,  (principally) for the defense industry.  From November 1988
(prior to being acquired by Digital  Optronics) until March 1992, Mr. Byrne also
served  as  president  and  a  director  of  Byrne  Industries,  Inc.("BII"),  a
wholly-owned  subsidiary of Digital  Optronics,  Inc. BII was, until the drastic
down-turn  in the  defense  industry  in  March  of  1991,  in the  business  of
manufacturing   electronic  defense  equipment  as  a  sub-contractor  to  major
multi-billion dollar defense industry companies, such as Lockheed Aviation.

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

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

      LOUIS  SANZARO.  Mr.  Sanzaro  has been a director  of the  Company  since
January  1997 and a director of The Tirex  Corporation  Canada  Inc.  since June
1998.  He served as a consultant  to the Company from January 1, 1997 until June
1998,  when he was appointed Vice  President of Operations  and Chief  Operating
Officer (see,  below,  "Certain  Relationships  and Related  Transactions").  On
February 11, 1999, Mr. Sanzaro  resigned as vice president of operations and was
appointed  to the position of president  of the  Company.  Mr.  Sanzaro  holds a
degree in marketing from Marquette University. In 1997, he was


                                       45
<PAGE>

named  "Recycler  of the Year" for the State of New Jersey and was also  awarded
the  distinction  of being named  "Recycling  Processor  of the Decade" by Ocean
County,  New Jersey.  He is the President and a member of the Board of Directors
of the nation-wide, Construction Material Recycling Association. Since 1986, Mr.
Sanzaro has served as President and CEO of Ocean County Recycling  Center,  Inc.
("Ocean County Recycling"),  in Tom's River, New Jersey.  Ocean County Recycling
is in the business of  remanufacturing  construction  and demolition  debris for
reuse as a substitute for virgin materials in the construction and road building
industries.  In addition,  since 1989,  Mr. Sanzaro has served as Vice President
and COO of Ocean Utility Contracting Co., Inc., a New Jersey the Company engaged
in the  installation  of sewer and water main pipelines and the  construction of
new roadway infrastructure.  From 1973 until 1990, Mr. Sanzaro was the President
and CEO of J and L Excavating and  Contracting  Co., Inc., a company  engaged in
the  construction  of  residential,   commercial,   industrial,  and  government
building.  Mr.  Sanzaro was a member of the Board of Directors of the New Jersey
state-wide Utility Transportation.

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

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

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

   
      JEAN FRECHETTE. Mr. Frechette has served as the president, chief operating
officer and a director  of the  Company's  wholly  owned  subsidiary,  The Tirex
Corporation Canada, Inc., since August 17, 1998. Mr. Frechette holds degrees and
certificates in business management, commercialization,  market development, and
distribution.  Before  joining the government of Quebec in 1990 he served in the
private
    


                                       46
<PAGE>

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

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.


                                       47
<PAGE>

                                   SIGNATURES

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

                                                           THE TIREX CORPORATION

                                                       By   /s/ Terence C. Byrne
                                                            --------------------

Date: March 24, 1999                     Terence C. Byrne, Chairman of the Board
                                        of Directors and Chief Executive Officer

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

SIGNATURES                            TITLE                            Date
                                   
Principal Executive Officer:       

  /s/ Terence C. Byrne                                            March 24, 1999
------------------------------
   Terence C. Byrne                Chairman of the Board
                                   of Directors and Chief
                                   Executive Officer

Principal Financial and
Accounting Officer:

  /s/ Michael D.A. Ash                                            March 24, 1999
-----------------------------
   Michael D.A. Ash                Secretary, Treasurer,
                                   and Chief Financial and
                                   Accounting Officer

A Majority of the Board 
of Directors:

  /s/ Terence C. Byrne                                            March 24, 1999
-----------------------------                                              
   Terence C. Byrne                Director

  /s/ Louis Sanzaro                                               March 24, 1999
-----------------------------                                             
   Louis Sanzaro                   Director

  /s/ Louis V. Muro                                               March 24, 1999
-----------------------------
   Louis V. Muro                   Director

  /s/ Henry Meier                                                 March 24, 1999
-----------------------------                                                 
   Henry Meier                     Director