U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended March 31, 1999

[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from____ to____

                       Commission File Number 33-17598-NY

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

          Delaware                                             22-2824362
 (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)

                                 (514) 933-2518
                (Issuer's telephone number, including area code)

                                   ----------

         (Former Name, Former Address and Former Fiscal Year, if Changed
                                Since Last Report

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of May 10, 1999: 87,428,779 shares

      Transitional Small Business Disclosure Format (check one): 

Yes ____   No __X__


                                       1
<PAGE>

                              The Tirex Corporation
                          (A Development Stage Company)
                          -----------------------------

                                TABLE OF CONTENTS

PART I

Item 1 - Financial Information (unaudited)                                  Page
                                                                            ----
         The Tirex Corporation and Subsidiaries
           Consolidated Balance Sheet as of
             March 31, 1999................................................... 3

         Consolidated Statements of Operations
           for the three and nine month periods
             ended March 31, 1999 and 1998.....................................4

         Consolidated Statements of Cash Flows
           for the nine-month periods
             ended March 31, 1999 and 1998.....................................5

         Notes to Financial Statements.........................................6

Item 2  Management's Discussion and Analysis of
          Financial Condition and Results of Operations.......................17

PART II

Item 1 - Legal Proceedings....................................................32
Item 2 - Changes in Securities and Use of Proceeds............................33
Item 3 - Defaults Upon Senior Securities......................................38
Item 6 - Exhibits and Reports on Form 8-K.....................................39

                                   ----------

         The financial statements are unaudited.  However, the management of the
issuer  believes  that all  necessary  adjustments  (which  include  only normal
recurring  adjustments)  have been  reflected  to present  fairly the  financial
position of registrant at March 31, 1999 and the results of its  operations  and
changes in its  financial  position for the three and nine month  periods  ended
March 31, 1999 and 1998 and for the period from inception (July 15, 1987).


                                       2
<PAGE>

                              The Tirex Corporation
                           A Development Stage Company

                           Consolidated Balance Sheet

                                         Assets        (Unaudited)   (audited)
                                                     March 31, 1999 June 30 1998
                                                     -------------- ------------
                                                            $            $
Current Assets                                              -            -
Cash and cash equivalents                                       0       398,971
Account receivables                                             0
Notes receivable                                          523,118       225,969
Sales taxes receivable                                     40,794       133,868
R&D tax credit receivable                                 639,737       855,818
Prepaid expenses and deposits                             531,671       618,266
                                                      -----------   -----------
                                                        1,735,320     2,232,892
Property and equipment, at cost, net of
  accumulated depreciation of $34,417                   1,983,306       977,288

Other assets
  Licence                                                  37,105
  Prepaids                                                144,000       445,677
  Organization costs net of accumulated amortization
     of $ 826                                                 515           536
  Deferred financing fees                                 117,431       158,255
                                                      -----------   -----------
                                                          299,051       604,468
                                                      -----------   -----------
                                                        4,017,677     3,814,648
                                                      ===========   ===========
                      Liabilities and Stockholders' Equity
Current liabilities
  Notes payable                                                         407,926
  Accrued liabilties                                    1,356,232     1,274,150
  Deposits payable                                         34,500       143,500
  Current portion of long-term debt                        34,120        34,118
                                                      -----------   -----------
                                                        1,424,852     1,859,694
Other liabilities
  Long term deposits                                      128,000
  Loan from investor                                       93,516
  Long-term debt (net of current portion                  555,639       465,894
  Convertible subordinated debentures
    long-term portion                                     935,000     1,035,000
                                                      -----------   -----------
                                                        1,712,155     1,500,894
                                                      -----------   -----------
                                                        3,137,007     3,360,588
                                                      -----------   -----------
Stockholders' equity
  Common stock,  $.001 par value, authorized
   120,000,000 shares, issued and outstanding
   86,392,080  shares                                      86,392        63,642
  Class A stock; .001 par value, authorized 5,000,000
   shares; issued and outstanding, 0 shares
  Additional paid-in capital                           13,601,332    10,258,116
Deficit accumulated during the development stage      (12,985,546)  (10,051,483)
Unrealized gain on foreign exchange                       178,492       183,785
                                                      -----------   -----------
                                                          880,670       454,060

                                                        4,017,677     3,814,648
                                                      ===========   ===========

                                       3
<PAGE>

                              The Tirex Corporation
                           A Development Stage Company
                      Consolidated Statement of Operations
                                   (unaudited)

<TABLE>
<CAPTION>
                                               Consolidated Statement              Consolidated Statement
                                                  of Operations                        of Operations 
                                          ------------------------------     -------------------------------        ---------------
                                                                                                                    Cumulative from
                                           Three months      Nine months      Three months       Nine months         March 26, 1993
                                              ended            ended             ended             ended             to March  31,
                                          March 31, 1999   March 31, 1999    March 31, 1998     March 31, 1998            1999
                                          -------------------------------    ---------------------------------       ---------------
                                              1999               1999             1998               1998               1999
                                              ----               ----             ----               ----               ----
                                               $                  $                 $                  $                  $
                                               -                  -                 -                  -                  -
<S>                                    <C>                 <C>                <C>                <C>               <C>      
Revenues                                          0            300,000            415,000            415,000          1,234,725
                                                                                                                   
Cost of Sales                                     0            130,676            248,082            248,082            941,518
                                        -----------        -----------        -----------        -----------        -----------
                                                                                                                   
Gross profit                                      0            169,324            166,918            166,918            293,207
                                        -----------        -----------        -----------        -----------        -----------
                                                                                                                   
Operations                                                                                                         
  General and administrative                590,150          2,484,964            470,774          1,388,287          5,441,274
  Depreciation and amortization             190,719            508,006                                 4,786            532,034
  Research and development                        0             13,590            581,093            939,949          6,059,690
                                        -----------        -----------        -----------        -----------        -----------     
Total Expense                               780,839          3,006,530          1,051,867          2,333,022         12,032,998
                                        -----------        -----------        -----------        -----------        -----------     
Loss before other income and expenses      (780,839)        (2,837,206)          (884,949)        (2,166,104)       (11,739,791)
                                        -----------        -----------        -----------        -----------        -----------     
Other income (expenses)                                                                                            
  Interest expense                          (24,835)           (78,932)            (6,545)           (10,243)          (142,938)
  Interest income                                 0                  0                  0                  0              2,540
  Income from stock options                       0                  0                  0                  0             10,855
  Loss on disposal of equipment                   0                  0                  0                  0             (2,240)
  Gain (Loss) on foreign exchange           103,777            (17,895)            18,833             34,186            (56,586)
                                        -----------        -----------        -----------        -----------        -----------    
                                             78,942            (96,827)            12,288             23,943           (188,369)
                                        -----------        -----------        -----------        -----------        -----------     
Net Loss                                   (701,927)        (2,934,063)          (872,661)        (2,142,161)       (11,928,160)
                                        ===========        ===========        ===========        ===========        ===========     
Net loss per common share                     (0.01)             (0.03)             (0.02)             (0.05)             (0.65)
                                        ===========        ===========        ===========        ===========        ===========     
Weighted average shares of common                                                                                  
  stock outstanding                      77,098,084         77,098,084         40,866,990         40,866,990         18,370,771
                                        -----------        -----------        -----------        -----------        -----------
</TABLE>


                                       4
<PAGE>

                             The Tirex Corporation
                           A Development Stage Company

                       Consolidated Statement of Cash Flows
                                   (Unaudited)

                                                         Nine  months ended
                                                              March 31,
                                                     ------------------------
                                                         1999         1998
                                                         ----         ----
Operating activities                                      $             $
                                                          -             -
Net  loss                                             2,934,063     2,142,161
                                                     ----------    ----------
Adjustments to reconcile net loss to net cash
  used in operating activities:
depreciation and amortization                           508,006         7,619
Proceeds from grants                                    698,438       478,780
stock issued in exchange for services                 1,115,125        403,049
stock issued in conversion and pmts                   1,348,502        85,575
Unrealized gain on foreign exchange                      98,484
Change in assets  & Liabilities
        increase in Notes receivable                   (297,149)      (30,000)
        decrease    Sales tax receivables                93,074         4,226
        increase in Tax credit receivable              (216,081)     (369,844)
        increase in Prepaid expenses                     86,595        (1,558)
        increase in Accrued expenses                    365,560       856,821
        increase in Loan payable                         64,685
        increase in Deposit payable                      19,000
        increase in Accounts receivables                             (115,000)
        increase in Loan  director                       93,516        10,881
                                                     ----------    ----------
        Total Adjustments                             3,977,725     1,330,549

        Net cash operating Activities                 1,043,692      (811,612)
                                                     ----------    ----------
Investing Activities
        Property & equipment                         (1,006,018)      (28,956)
        licence                                         (37,105)     (157,618)
                                                     ----------    ----------
        Net cash investing activities                (1,043,123)     (186,574)

Financing activities
        Proceeds from notes payables                     71,070
        Repayment of notes payables                    (478,996)      (98,551)
        Proceeds from loan payable                       48,131       278,593
        Proceeds from deposits payable                                383,500
        Repayment of long term debt                     (89,745)
        Proceeds from issuance stocks & debentures       50,000       584,850
                                                     ----------    ----------
        Net cash financing activities                  (399,540)    1,148,392

                                                     ----------    ----------
        Net Decrease in cash                           (398,971)      150,206

        Cash beginning of period                        398,971       155,037
                                                     ----------    ----------
        Cash end of period                                    0       305,243
                                                     ==========    ==========


                                       5

<PAGE>

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

Notes to Consolidated Financial Statements

Note 1 - Summary of Accounting Policies

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

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

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

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


                                       6
<PAGE>

        appointed,  as an interim board of  directors,  Patrick  McLaren,  Gerge
        Fattell, and Edward Mihal (the "Interim Management"). It was the goal of
        the Interim  Management to find suitable  acquisition and/or development
        by the Company. On December 29, 1992, Edward Mihal resigned his position
        as an  officer  and a  director  of the  Company  and  Louis V. Muro was
        appointed  as an officer and director of the Company to fill the vacancy
        created thereby.


        Reorganization

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

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

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

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

        Developmental Stage

        As of March 31, 1999 the Company was still in the development  stage. Up
        to that date, the operations  had consisted  mainly of raising  capital,
        obtaining  financing,  developing  equipment,  obtaining  customers  and
        supplies,   installing   and  testing   equipment   and   administrative
        activities. In April of 1999, the Company commenced production of rubber
        crumb with  equipment  developed  and started the  production of welcome
        mats for the US market.


                                       7
<PAGE>

        Basis of Consolidation

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

        Cash and Cash  Equivalents  

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

        Property and Equipment

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

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

        Estimates

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

        Adoption of Statement of Accounting Standard No. 123

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

        Organization Costs

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

        Adoption of Statement of Accounting Standard No. 128

        In February 1997, the Financial Accounting Standards Board (FASB) issued
        Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  per
        Share" (SFAS 128).  SFAS 128 changes the  standards  for  computing  and
        presenting earnings per share (EPS) and supersedes Accounting Principles
        Board  Opinion No. 15,  "Earnings  per  Share."  SFAS 128  replaces  the
        presentation  of primary EPS with a  presentation  of basic EPS. It also
        requires dual  presentation  of basic and diluted EPS on the face of the
        income  statement for all entities with complex  capital  structures and
        requires a reconciliation  of the numerator and denominator of the basic
        EPS


                                       8
<PAGE>

        computation  to  the  numerator  and  denominator  of  the  diluted  EPS
        computation.  SFAS 128 is effective for financial  statements issued for
        periods ending after December 15, 1997, including interim periods.  This
        Statement requires restatement of all prior-period EPS data presented.

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

        Adoption of Statement of Accounting Standard No. 128

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

        The adoption of SFAS 128 had no effect on  previously  reported loss per
        share amounts for the year ended June 30, 1997. For the years ended June
        30, 1998 and 1997, primary loss per share was the same as basic loss per
        share and fully  diluted loss per share was the same as diluted loss per
        share.  A net loss was reported in 1998 and 1997,  and  accordingly,  in
        those  years  the  denominator   was  equal  to  the  weighted   average
        outstanding  shares with no  consideration  for outstanding  options and
        warrants to purchase shares of the Company's common stock, because to do
        so would have been  anti-dilutive.  Stock  options  for the  purchase of
        9,212,673 and 2,000,000 shares at June 30, 1998 and 1997,  respectively,
        and warrants  for the purchase of 2,000,000  shares at June 30, 1998 and
        1997 were not included in loss per share calculations,  because to do so
        would have been anti-dilutive.

        Fair Value of Financial Instruments

        The  carrying  amount  of the  Company's  financial  instruments,  which
        principally include cash, note receivable,  accounts payable and accrued
        expenses,  approximates  fair value due to the relatively short maturity
        of such instruments.

        The fair value of the Company's debt instruments are based on the amount
        of future cash flows  associated with each instrument  discounted  using
        the Company's  borrowing rate. At June 30, 1998 and 1997,  respectively,
        the  carrying  value of all  financial  instruments  was not  materially
        different from fair value.

        Income Taxes

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

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


                                       9
<PAGE>

        The  Company  has  research  and  development   investment  tax  credits
        receivable  from Canada and Quebec  amounting to $639,737  applicable to
        expenditures incurred between July 1, 1998 and March 31, 1999.

        Foreign Exchange

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

Note 2 - Going Concern

        As shown in the accompanying financial statements,  the Company incurred
        a net loss of $2,934,063 for the nine-month period ended March 31, 1999.

        In March 1993, the Company,  which was still in the  development  stage,
        developed a new Business  Plan.  As at March 31,  1999,  the Company was
        still  considered to be in the  development  stage. As of that date, the
        Company had  constructed a production  quality machine for the cryogenic
        disintegration  of used tires. At the beginning of the fourth quarter of
        the Company's Fiscal Year 1998-1999, the Company commenced production of
        rubber  crumb using its  technology  and  simultaneously  commenced  the
        production  of  welcome  mats for the US  market.  The  commencement  of
        production   of  rubber  crumb  using  the   Company's   patented   tire
        disintegration  technology  will permit the  evaluation of the long-term
        effectiveness of the Company's technology and will permit the Company to
        introduce  such  modifications  as are seen to be appropriate to enhance
        its  efficiency  and  reliability.  As of the date of this  Report,  the
        Company has not yet operated the machine on a long-term continuous basis
        and  is  thus  still  not  in a  position  to  ascertain  the  long-term
        commercial effectiveness of the machine. Fees generated from tipping and
        culling have so far been insufficient to fund the current  operations of
        the Company.  These factors  create an  uncertainty  about the Company's
        ability to continue as a going concern.  The financial statements do not
        include any adjustments that might be necessary if the Company is unable
        to continue as a going concern.

Note 3 - Financing Costs

        During the nine months ended March 31, 1999 the Company incurred $66,566
        in  connection   with  debt  financing  .  Amortization  of  capitalized
        financing  costs  capitalized  amounted  to $58,311  and this  figure is
        included in the figure of $508,006  for  depreciation  and  amortization
        applicable to capital assets, intangible assets and prepaid expenses for
        the nine-month period ended March 31, 1999.

Note 4 - Property and Equipment
         Financing Costs

        As of March 31, 1999 plant and equipment consisted of the following:

        Furniture, fixtures and equipment                          $ 100,328
        Leasehold improvements                                       152,917
        Construction in progress                                   1,695,644
                                                                  ----------
                                                                   1,948,889
        Less accumulated depreciation and amortization                34,417
                                                                  ----------
                                                                  $1,983,306
                                                                  ==========


                                       10
<PAGE>

        Depreciation and amortization  expense charged to operations was $34,417
        for the nine months ended March 31 1999.

Note 5 - Notes Payable

        As of March 31, 1999, the company had no lines of credit  available from
        any banking institution.  The previous credit facility made available by
        the Bank of Montreal,  supported by a loan guarantee made available by a
        Quebec  Government  agency,  the Societe de developpement  industriel du
        Quebec(SDIQ),  to bridge finance scientific  research tax credits earned
        for the period ending June 30, 1998 was paid off in accordance  with the
        terms of the  agreement  with SDIQ on March 24, 1999.  While the company
        has  recorded  tax credit  receivables  in the amount of  $639,737 as of
        March 31,  1999,  no other  credit  facility had been put in place as of
        that  date to  bridge  finance  such  receivables.  In May of 1999,  the
        company did receive an offer for such financing from ScotiaBank  subject
        to the  availability  of a loan guarantee by the same Quebec  Government
        agency whose name was recently changed to Investissements  Quebec. As of
        the date of these financial statements,  this guarantee had not yet been
        accorded.  Should such guarantee be accorded, the available credit would
        be a maximum of Cdn$750,000 (approximately US$517,500) applicable to the
        tax credits for the  company's  year ending June 30, 1999,  and would be
        renewable  for the  subsequent  year.  This credit  facility  would bear
        interest  at  Canadian  prime  rate  plus  1.25%  . In  addition  to the
        guarantee  from  Investissements  Quebec,  the  note  would  be  further
        collateralized by limited personal  guarantees of certain officers,  the
        assets of Tirex Canada R&D Inc., and guaranteed by The Tirex Corporation
        Canada  Inc.,  which  guarantee  would be  supported  by a pledge of the
        assets of said company.

Note 6 - Long-Term Debt

--------------------------------------------------------------------------------
Canada Economic Development for Quebec Regions
(CEDQR)(formerly known as the Federal Office of Regional
Development - Quebec (FORD-Q)                                          1998
--------------------------------------------------------------------------------
Loan payable under the Industrial Recovery Program
For Southwest Montreal (IRPSWM) amounting to 20%
of certain eligible costs incurred  (maximum loan $500,000)
repayable in annual installments over a forty-eight month
period following completion of the project, unsecured and
non-interest bearing.  (If the Company defaults the loans
become interest bearing)                                          $  341,180
--------------------------------------------------------------------------------
Loans payable under the Program for the Development of
Quebec SME's based on 50% of approved eligible costs for
the preparation of market development studies in certain
regions.  Loans are unsecured and non-interest bearing.
(If the Copany defaults the loans become interest bearing).
--------------------------------------------------------------------------------
- Loan payable over five years  commencing                            64,823
  June 2000 due June 2004
--------------------------------------------------------------------------------
- Loan payable over five years, commencing                            60,187
  June 2001, due 2005
--------------------------------------------------------------------------------


                                       11
<PAGE>

--------------------------------------------------------------------------------
- Loan payable in amounts equal to 1% of the annual                      13,647
  sales in India through June 30, 2002
--------------------------------------------------------------------------------
- Loan payable in amounts equal to 1% of annual sales in                 13,647
  Spain through June 30, 2007
--------------------------------------------------------------------------------
- Loan payable in amounts equal to 11/2% of annual sales                 64,823
in Spain and Portugal through June 30, 2004
--------------------------------------------------------------------------------
                                                                      $ 558,307
--------------------------------------------------------------------------------
Less:    Current portion                                                 34,118
--------------------------------------------------------------------------------
                                                                      $ 524,189
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
            1999                                $34,118
--------------------------------------------------------------------------------
            2000                                 90,415
--------------------------------------------------------------------------------
            2001                                129,517
--------------------------------------------------------------------------------
            2002                                168,617
--------------------------------------------------------------------------------
            2003                                 32,581
--------------------------------------------------------------------------------
            Thereafter                           44,764
--------------------------------------------------------------------------------
                                               $500,012
--------------------------------------------------------------------------------

In March of 1999,  the Company  made a written  request to CEDQR to postpone the
first  repayment of  Cdn$50,000  (approximately  US$34,118)  for a period of six
months citing delays in the project  schedule which were partly caused by delays
at  sub-contractors  located in the region  affected by the ice storm of January
1998.  Following said ice storm, CEDQR appropriated for itself the discretionary
right to grant such delays. In those  circumstances  where delays were accorded,
no interest would be charged during the six-month extension period. In the event
the requested delay would be granted,  the forecast repayments would be adjusted
to take  into  account  the  actual  delays  accorded.  As of the  date of these
financial  statements,  no decision on the company's  request had been received.
The above schedule does not reflect any delays in the repayment schedule.


                                       12
<PAGE>

Note 7- Convertible Subordinated Debentures

        Convertible subordinated debentures consist of the following:

<TABLE>
<CAPTION>

                                    Type A                            Type B
                                    ------                            ------
<S>                                <C>                               <C>     
Balance as of                      $500,000                          $435,000
March 31, 1999

Interest Rate                         10%                               10%
Maturity               Earlier of (i) - the completion           Earlier of (i)- two years
                       of a public offering yielding             from the issue date or (ii) -
                       gross proceeds of not less than           the completion of a public              
                       $8,000,000,  (ii) - the  closing          offering of its securities by
                       on financing in excess of $4,500,000,     the Maker
                       (iii) - December 31, 1999

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

Conversion ratio       66% of the closing bid price              $0.20 per share
                       of the common stock as
                       reported by NASDAQ on
                       the trading day immediately
                       preceding the Company's
                       receipt of a notice of
                       conversion by a debenture
                       holder.

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

Note 8 - Related Party Transactions

        The  Company  entered  into  various  employment   agreements  with  the
        executive  officers  whereby the Company  will pay a total of $762,500 a
        year. All of the employment  agreements are multi-year in nature.  Since
        March 31, 1999, one officer  resigned from his position as such although
        he  continues to be employed by the Company in other  capacities  at the
        same salary.  As a result of the  foregoing,  the annual  commitment  in
        respect  of  officers  remuneration  has been  reduced to  $700,000.  In
        addition to the employment  services,  the officers agree not to compete
        with the Company for periods ranging from one to two years following the
        termination of employment. If


                                       13
<PAGE>

        an officer is terminated other than for cause or for "good reason",  the
        terminated  officer  will be paid up to twice the  amount of their  base
        salary for twelve months.

        Included in accrued expenses at March 31, 1999 is approximately  $29,000
        for salary to officers in compensation  for which the company intends to
        issue common stock.

        At March 31, 1999, the Company had a note  receivable from an officer in
        the amount of $74,405.  This note bears interest at an annual rate of 8%
        above prime through  September 1998 and 2% above prime through September
        1999 (the due date).

        At March 31, 1999,  an officer of the Company owed the company an amount
        of $21,564, which amount will be repaid prior to the end of fiscal year.

        At March 31, 1999 the Company had a note  receivable  for $30,000 from a
        Company in which a director  has a  financial  interest.  The note bears
        interest at prime plus 2% and is due on demand.

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

Note 9 - Common Stock

        During the nine months ended March 31, 1999,  the Company  issued common
        stock to  individuals  in exchange for services  performed and financial
        accommodations  totaling  $1,683,737.  Included  in  these  amounts  are
        payments to officers  and  Corporate  Counsel of the Company in exchange
        for financial accommodations and other services rendered without benefit
        of cash payment in the amount of $1,115,696. The dollar amounts assigned
        to such  transactions  have  been  recorded  at the  fair  value  of the
        services  received,  because the fair value of the services received was
        more evident than the fair value of the stock surrendered.

Note 10 - Stock Option

        On May 19, 1995, the Company sold to a director of the Company an option
        (the Hartley Option) to purchase 20,000 shares of Cumulative Convertible
        Preferred  Stock  at an  exercise  price of $10 per  share,  exercisable
        during the two year period  beginning  May 19, 1995,  and ending May 18,
        1997.  The  director  paid  $20,000  for the  option.  The  terms of the
        Preferred  Stock  purchasable  under the option call for cumulative cash
        dividends at a rate of $1.20 per share and conversion into shares of the
        Company's common stock at a conversion rate equal to one preferred share
        (and all  accumulated  and unpaid  dividends  thereon) for the number of
        shares of the Company's  stock  purchasable  for $10 at a price equal to
        30% of the  market  price  of  such  common  stock  as at  the  date  of
        conversion. The number of shares purchasable under the Hartley Option at
        a price of $10 per share can be increased if, at the conversion  rate in
        effect on the effective date,  20,000  preferred  shares are convertible
        into fewer than 2,000,000 common shares.  The conversion to common stock
        ratio varies  depending on when the conversion is made. At May 29, 1997,
        the exercise period was extended until May 18, 1999.

Compensatory Common Stock Options

        Under a stock option agreement with Continental  General Tire (CGT), CGT
        was granted an option to purchase up to 10% of the total  common  shares
        of the Company,  which percentage would be calculated after the option's
        having been  exercised.  As of May 10, 1999,  the Company had 87,428,779
        shares  outstanding,  which  would  entitle  CGT to  purchase  9,714,309
        shares.  Under  the  terms  of the  option  agreement,  such  shares  so
        purchased  would  have a  market  value  as of May  10,  1999  equal  to
        approximately $1,313,834.  The weighted average exercise price as of May
        10, 1999 is equal to $0.0617.


                                       14
<PAGE>

Note 12 - Acquisition by Merger of RPM Incorporated

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

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

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

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

Note 13 - Government Assistance

        The  Company  receives  financial  assistance  from  Revenue  Canada and
        Revenue  Quebec in the form of scientific  research tax credits.  During
        the year  ended  June  30,  1998,  the  Company  received  approximately
        $670,000  which  has  been  recorded  as paid  in  capital.  During  the
        nine-month period ended March 31, 1999,and pursuant to government audit,
        the company received a total of Cdn$1,118,051 (approximately US$760,000)
        from Revenue  Canada and Revenu Quebec in respect of tax credits for the
        year ended June 30, 1998.

Note 14 - Commitments

        The Company  leases office space under an agreement for a term from July
        1, 1997 to June 30, 2000.  The Company has an option to renew this lease
        for an additional two years.  However, in April 1999, management decided
        to consolidate its office space at the factory location and will attempt
        to sub-let  the office  space to be  abandoned.  The  renewal  option is
        unlikely  to be  exercised.  Minimum  rentals  in each of the next three
        years is as follows:

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


                                       15
<PAGE>

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

                                                            Amount
                                                            ------
              June 30, 1999                                $108,880
              June 30, 2000                                 176,900
              June 30, 2001                                 204,100
              June 30, 2002                                 204,100
              June 30, 2003                                 170,100
                                                           --------
              TOTAL                                        $864,000
                                                           ========
              

        Rental  expense for the year ended June 30, 1998 amounted to $55,532 and
        for the nine-month period ended March 31, 1999 amounted to approximately
        $69,000.


Note 15 - Subsequent Event

        During  the  subsequent  period  from  March 31,  1999 to May 13,  1999,
        holders of  convertible  debentures  converted an amount of $68,400 into
        common shares of the company in addition to the $100,000 converted prior
        to March 31, 1999.

Note 16 - Other Options and Warrants

        Note 10 addresses  the Hartley and CGT options that are  outstanding  at
        March 31, 1999. The Company also has warrants and options outstanding to
        purchase  4,485,295  shares of common stock,  which warrants and options
        expire at various future dates. These rights can be exercised at various
        rates from $0.001 through $0.50

                                       16
<PAGE>

ITEM 2 - 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 three and nine month  periods ended March 31, 1999.  This  discussion
also includes  events which  occurred  subsequent to the end of such quarter 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.

      The Company is in the very early stages of the  business of  manufacturing
its patented cryogenic scrap tire recycling  equipment (the "TCS-1 Plant") which
it intends to market as well as to use in its own operations. In March 1999, the
Company  commenced  operations in a second  business  segment,  which  presently
involves the partial ownership,  and the operation,  of the TCS-1 Plant which is
installed at the Company's Montreal facility and the production of molded rubber
welcome mats out of the recycled  rubber crumb produced  thereby.  The Company's
longer  term  business  plan for this  segment  includes  the direct or indirect
ownership of additional  TCS-1 Plants,  on exclusive or joint venture bases, and
the establishment of additional rubber product manufacturing plants.

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.  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


                                       17
<PAGE>

      In  addition,  from July 1, 1998 through  March 31, 1999,  the Company has
also received  approximately  $1,506,000  from various other sources (other than
operations) including:  (i) an aggregate of $300,000,  received in December 1998
and January 1999,  from sale and lease back financing on inventory and equipment
(subsequent  to the period  covered by this Report,  in April 1999,  the Company
received an additional amount of approximately  $62,400 from sale and lease back
financing on inventory and equipment);  (ii) approximately $927,000, received in
September 1998 and January,  February and March 1999 from Canadian  research and
development tax credit refunds;  (iii) approximately  $214,000,  received,  from
time to time, from officers,  directors,  and employees,  by way of loans to the
Company  (such loans  being  repaid by the  issuance of shares of the  Company's
common stock at a discount of 50% of the then current  market  price);  and (iv)
approximately $65,000, received in February and March 1999, in refunds 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.  The  foregoing  have
provided  adequate  funding to accomplish  the  following:  (i) cover all of the
Company's  costs related to the first  production  model of the TCS-1 Plant (the
"Production Model"), including previously unanticipated modifications identified
during testing; (ii) proceed with renovations of the Company's new manufacturing
and  assembly  facility  which  have  brought it into full  compliance  with all
applicable  provincial  and  municipal  regulations  except for the purchase and
installation of a sprinkler  system which will cost  approximately  $100,000 and
for which the Company expects to be able to obtain sale and leaseback financing;
(iii)  cover the  Company's  overhead  costs and  expenses;  and (iv)  cover the
initial costs of establishing and commencing  operations in the Company's second
business segment  involving the operation of a TCS-1 Plant and the production of
molded rubber floor mats including  capital  investments in molding and flocking
equipment.

      The  Company  expects  that  these same  funding  sources,  together  with
anticipated cash flow from rubber mat molding operations,  which were started in
April 1999,  vendor  financing,  and  conventional  asset  based debt  financing
against receivables and inventory will continue to provide sufficient capital to
cover overhead and maintain and expand molding  operations.  The Company is also
ready to begin full scale,  commercial  manufacture of TCS-1 Plants. Its present
plans do not  require it to obtain any outside  financing  to do so, but instead
require only partial prepayments from the purchasers of such Plants. The Company
will not  manufacture  any  TCS-1  Plants  for  purchasers  unless  and until it
receives the  prepayments  necessary to fund such  manufacture.  Therefore,  any
failure or delay,  on the part of the persons  who have  placed  orders with the
Company  for TCS-1  Plants,  to obtain the  required  financing  to effect  such
purchases, will be directly reflected in a commensurate delay or failure, on the
Company's part, to begin TCS-1 Plant manufacturing operations.

      Absent  adequate  revenues from  operations  during the phase-in period of
commercial operations,  the Company will remain dependent on the outside sources
described above to meet its requirements and to continue operating.  Whether the
funds, which the Company obtains,  from any of such sources,  will be sufficient
to enable the Company to reach a profitable operating


                                       18
<PAGE>

stage,  will be entirely  dependent upon: (i) the amount of such financing which
the Company is actually  able to raise;  (ii) the ability of  prospective  TCS-1
Plant purchasers to obtain  financing;  (iii) the as yet unproven ability of the
TCS-1  Plant to operate  successfully  on a  continuous,  long-term,  commercial
basis;  (iv)  ability  of  prospective  purchasers  of TCS-1  Plants  to  obtain
financing  to effect  their  projected  purchases;  and (v) the  ability  of the
proposed  rubber mat molding  facility to operate  profitably  While the Company
believes it that it will  successfully  fulfill all of the  foregoing  criteria,
there can be no assurance  with any  certainty  that this will,  in fact, be the
case. The failure to do so would have a material adverse effect on the Company's
ability to continue  to operate.  The  Company's  more long term future  capital
requirements will depend upon numerous factors, including the amount of revenues
generated  from  operations,  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 factors  discussed above and
the Company's ability,  over the long-term,  to successfully market TCS-1 Plants
and finished products made from recycled rubber crumb.

      As noted above, in the nine month period ended March 31, 1999, the Company
received funds from sources other than operations,  as described above. This was
true also  during the fiscal  years ended June 30, 1997 and 1998 and the interim
nine-month  period  ended March 31, 1998 when the  Company  received  funds from
Quebec and Canadian  government grants,  loans, loan guarantees,  and refundable
tax credits,  which were granted for, and used to,  complete the  development of
the TCS-1 Plant and begin the international  marketing of such plants.  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.  Insofar as tax
credits for scientific research and experimental development are concerned, such
credits are  offered by both the  governments  of Canada and of Quebec.  The tax
credits are calculated as a percentage of research and development  expenditures
deemed eligible by the Revenue  Departments of each government.  The percentages
vary according to the size of the company  (defined  according to the asset base
and revenues  generated by the  company),  the  residency of the majority of the
voting  control and other  factors.  In the case of both the  provincial and the
federal  governments,  where the  amount  of the tax  credit  exceeds  other tax
liabilities,  such as taxes on income  and on  capital,  and  subject to certain
other  conditions which a company meets, the amount of any difference is paid to
the company, thus the term,  "Refundable Tax Credits". The effective rate of the
credit  varies from one company to another as a function of a number of factors,
not least of which are: (i) the nature of the costs being  claimed such as labor
costs  versus  non-labor  costs (the  credit for labor  costs is higher than for
non-labor  costs);  and  (ii)  the  proportion  of  expenditures  which  can  be
attributed to research and development but which are not deemed eligible for the
tax  credits by their  nature.  Insofar as the  Company  is  concerned,  the tax
credits  have  varied  from  approximately  25%  to 30% of  total  research  and
development  expenditures,   including  certain  types  of  expenditures  deemed
ineligible for tax credits. During the last three fiscal years, 


                                       19
<PAGE>

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.  During the nine-month period ended
March 31, 1999, the Company borrowed an additional  Cdn.$108,770  (approximately
US$76,139)  under the BOM Tax  Credit  Loan.  As at June 30,  1998 and March 31,
1999,  respectively,  the outstanding balance payable on the BOM Tax Credit Loan
was Cdn$597,820  (approximately  US$418,474) and $0. 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 bore  interest,  from
the date the funds were drawn down until the date that the outstanding principal
and all accrued and unpaid interest thereon was repaid,  at an annual rate equal
to  the  Bank  of  Montreal  Prime  Rate  (which,   


                                       20
<PAGE>

for reasons of inter-bank  competition,  was usually  equivalent to the Canadian
Prime  Rate) plus  1.25%.  Interest  on the  outstanding  balance of the BOM Tax
Credit Loan was due and payable  monthly.  The outstanding  principal amount was
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 nine-month interim period
ended March 31, 1999,  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:


                                       21
<PAGE>

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
     Period        Amount of R&D      Amount of R&D        Amount of Tax     Amount Borrowed      Amount of         Cumulative
R&D Expenses Were  Expenditures       Expenditures       Credits Estimated  Against Estimated     Tax Credit    Outstanding Balance
    Incurred         Incurred         Eligible for        by BOM and SDI       Tax Credits         Received      of 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$1,362,210           (3)                  (4)           Cdn$108,770(1)    Cdn$1,363,568          -0-
July 1, 1998 to                                                                                      (5)
March 31, 1999
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes to this table appear on the following page.


                                       22
<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 at March 31,  1999,  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,
      subsequent  to the period  covered  by this  Report,  on May 7, 1999,  the
      Company  received  an offer of  renewable  financing  against  tax  credit
      receivables  from  ScotiaBank  (the  "ScotiaBank  Tax Credit  Loan") for a
      maximum amount of Cdn $750,000 (approximately US $517,500),  per year, for
      two years,  subject to a loan guarantee to be provided by  Investissements
      Quebec,  formerly  known as the SDI.  The  ScotiaBank  Tax Credit  Loan is
      similar to the BOM Tax Credit Loan.  In addition to the loan  guarantee by
      Investissements  Quebec,  the  ScotiaBank  Tax Credit Loan will be further
      secured by a lien on the assets of Tirex  Canada  R&D Inc.,  an  unlimited
      guarantee of The Tirex Corporation  Canada Inc. which guarantee is secured
      by a lien in the amount of Cdn $1,500,000 (approximately US $1,035,000) on
      all present and future movable  property of The Tirex  Corporation  Canada
      Inc. plus a personal guarantee by two directors of the Company.

(4)   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. 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  


                                       23
<PAGE>

      ended June 30, 1997 and 1998. The SDI Loan  Guarantee  Program is still in
      existence,  however,  and is being relied upon by the Company to guarantee
      new  loans  which  may be made to the  Company  by  ScotiaBank  and  other
      Canadian lending institutions.  Accordingly, (as noted above in footnote 3
      to this table),  the Company  intends to utilize the ScotiaBank Tax Credit
      Loan in the same  manner  that it  utilized  the BOM Tax Credit  Loan,  to
      finance certain research and development  expenditures made after June 30,
      1998.

(5)   Tax credits in the amount of Cdn $245,517  received by the Company  during
      the period,  July 1, 1998 through December 31, 1998, were  attributable to
      research  and  development  expenditures  made by the  Company  during the
      fiscal  year  ended  June  30,   1997.   Tax  credits  in  the  amount  of
      Cdn$1,118,051, received by the Company during the three month period ended
      March 31, 1999 were attributable to research and development  expenditures
      made by the Company  during the fiscal year ended June 30, 1998.  Parts of
      these tax credit payments were used to repay the remaining  balance due on
      the BOM Tax Credit Loan.

      During the last three fiscal years and the nine month interim period ended
March 31, 1999, 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.


                                       24
<PAGE>

      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                      $163,498
Fiscal 1998                    $253,248                      $167,802

      Under the terms of the CEDQR Loan,  repayment was originally  scheduled to
commence  twelve  months from the date CEDQR  declared that the project had 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                       $ 34,118
March 31, 2000                $100,000                       $ 68,236
March 31, 2001                $150,000                       $102,354
March 31, 2002                $200,000                       $136,472
                           
      Because of the limited cash resources  presently available to the Company,
as of April 30, 1999, it had not paid the loan repayment scheduled for March 31,
1999. Under the terms of the CEDQR Loan, there is no penalty for failure to make
a scheduled  payment  other than a charge of  interest on overdue  payments at a
rate  established by regulation  under the Financial  Administration  Act on the
date of the first  contribution  payment  made by the  Minister  in charge.  The
applicable  interest  rate on overdue  payments  under this loan is the Canadian
prime rate + 3%.  Notwithstanding  the foregoing,  in March of 1999, the Company
made a written  request to CEDQR to postpone the due date of the first repayment
of Cdn  $50,000  (approximately  US $34,118)  for a period of six months  citing
delays  in the  project  schedule  which  were  caused  in  part  by  delays  by
sub-contractors  located  in the  Montreal  region  affected  by an ice storm in
January of 1998.  Following such ice storm,  CEDQR  appropriated  for itself the
discretionary  right to grant  such  extensions.  In those  circumstances  where
payment  extensions  are granted,  no interest is charged  during the  extension
period.  As of the date of this report, no decision on the Company's request had
been received.

      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


                                       25
<PAGE>

June 30, 1997.  The terms of the grant  provided  that the Company would receive
the balance of $25,000  Canadian  (approximately  $17,500 U.S.) when the Company
filed a final report  following the  completion of the project.  This amount was
received by the Company in April 1999.

      3. The Company 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 March 31, 1999 and the repayment terms of each loan.


                                       26
<PAGE>

<TABLE>
<CAPTION>

===================================================================================================================================
                                                      Amount of Funds
                                                        Received By
                                                       Company as of
                                        Maximum Amount    March 31,                                                        Rate of
                                           of Loan          1999                                                           Interest
           Nature of Project                                                            Repayment Terms
                                                                   =====================================================
                                                                                                      Amount of Payment
                                                                               Date Due
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>       <C>                             <C>                      <C>
Market Research  Feasibility  Study for  Cdn $20,000          Cdn   At the end of any fiscal year    1% of gross annual      None
Iberian Peninsula                                         $20,000      in which the Company has     revenue from sales in
                                                                     revenues from sales of TCS-1          Iberia

                                                                   Plants in the Iberian Peninsula

-----------------------------------------------------------------------------------------------------------------------------------
Market Research  Feasibility  Study for  Cdn $20,000          Cdn   At the end of any fiscal year    1% of gross annual      None
India                                                     $20,000      in which the Company has     revenue from sales in
                                                                     revenues from sales of TCS-1           India

                                                                           Plants in India

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


                                       27
<PAGE>

      As at March 31,  1999,  the Company  had total  assets of  $4,017,677,  as
compared to $3,814,648 as at the end of the last fiscal year (June 30, 1998) and
$2,293,331  as at March 31,  1998.  Management  attributes  the changes in total
assets at March 31, 1999 as  compared  to June 30, 1998 (an overall  increase of
$203,029) principally to the following:

      (i)   an  increase  in the amount of  $1,006,018  in  Property,  Plant and
            Equipment  from the June 30,  1998  balance of $977,288 to the March
            31, 1999 balance of $1,983,306;

      (ii)  an increase in the amount of $297,149 in Notes  Receivable  from the
            June 30, 1998  balance of $225,969 to the March 31, 1999  balance of
            $523,118;

      (iii) a decrease in the amount of $216,031 in Research &  Development  Tax
            Credit Receivables from the June 30, 1998 balance of $855,818 to the
            March 31, 1999  balance of $639,737 as  collection  of the June 30th
            balance receivable  outpaced the creation of new amounts receivable;
            and

      (iv)  a decrease in the amount of $301,677  in Prepaid  Expenses  from the
            June 30, 1998  balance of $445,677 to the March 31, 1999  balance of
            $144,000.

      Management  attributes  the  changes in total  assets at March 31, 1999 as
compared to March 31, 1998 (an overall  increase of  $1,724,346)  principally to
the following:

      (i)   an  increase  in the amount of  $1,027,903  in  Property,  Plant and
            Equipment  from the March 31, 1998  balance of $955,403 to the March
            31, 1999 balance of $1,983,306;

      (ii)  an increase in the amount of $530,113 in Prepaid  Expenses  from the
            March 31, 1998  balance of $1,558 to the March 31,  1999  balance of
            $531,671; and

      (iii) an increase in the amount of $483,389 in Notes  Receivable  from the
            March 31, 1998  balance of $39,729 to the March 31, 1999  balance of
            $523,118.

      As at March 31, 1999,  the Company had total  liabilities  of  $3,137,007,
reflecting an decrease of $223,581 over total  liabilities of $3,360,588 at June
30, 1998 (the end of the last  fiscal  year),  and an  increase of $44,630  over
total  liabilities  of  $3,092,377  on March  31,  1998.  The  changes  in total
liabilities  at March 31,  1998 as compared to March 31,  1999,  were  primarily
attributable  to events  which  occurred  during the nine months ended March 31,
1999.  Management  attributes the changes in total liabilities at March 31, 1999
when compared to June 30, 1998 (an overall decrease of $223,581), principally to
the following:


                                       28
<PAGE>

      (i)   a decrease in the amount of $407,926 in Notes  Payable from the June
            30, 1998 balance of $407,926 to the March 31, 1999 balance of $0;

      (ii)  a decrease  in the amount of $100,000  in  Convertible  Subordinated
            Debentures from the June 30, 1998 balance of $1,035,000 to the March
            31, 1999  balance of  $935,000,  resulting  from the  conversion  of
            certain of such debentures into equity;

      (iii) an increase in the amount of $82,082 in Accrued Liabilities from the
            June 30, 1998 balance of $1,274,150 to the March 31, 1999 balance of
            $1,356,232;

      (iv)  an increase in the amount of $93,516 in Loans  Payable from the June
            30, 1998 balance of $0 to the March 31, 1999 balance of $93,516; and

      (v)   an increase in the amount of $89,745 in Long Term Debt from the June
            30,  1998  balance  of  $465,894  to the March 31,  1999  balance of
            $555,639.

      The changes in Deposits Payable in the Current  Liabilities section of the
Balance  Sheet and  similarly  in the Other  Liabilities  section of the Balance
Sheet  represents  a  reclassification  only and  reflects  the fact that  these
deposits will not be realized within the next twelve months.

      Reflecting the  foregoing,  the financial  statements  indicate that as at
March 31, 1999, the Company had a working capital surplus  (current assets minus
current liabilities) of $310,468,  reflecting a decrease of $62,730 over working
capital of $373,198 at June 30, 1998, and an increase of $1,717,296 over working
capital at March 31,  1998,  when the Company had a working  capital  deficit of
($1,406,828). Almost all of the changes in net working capital at March 31, 1999
when compared to March 31, 1998 are attributable to the three month period ended
June 30,  1998.  The  primary  causes of the  aggregate  increase in net working
capital at March 31, 1998 when compared to net working  capital at June 30, 1998
were:

      (i)   an increase in the current portion of Prepaid Expenses in the amount
            of $616,708  from the March 31,  1998  balance of $1,558 to the June
            30,  1998  balance of  $618,266.  As at June 30,  1998,  the current
            portion of  Prepaid  Expenses  related  almost  entirely  to prepaid
            consulting  agreements,  compensation  under which  consisted of the
            issuance  of stock  and  stock  options.  An  additional  amount  of
            $445,667  relating  to  such  prepaid  consulting  agreements,   was
            included in Other Assets at June 30, 1998;

      (ii)  a decrease in Loans Payable in the amount of $479,138 from the March
            31,  1998  balance of  $479,138  to the zero  balance as at June 30,
            1998; and

      (iii) an increase in Notes  Receivable  in the amount of $186,240 from the
            March 31, 1998  balance of $39,729 to the June 30,  1998  balance of
            $225,969.

                                       29
<PAGE>

 Results of Operations

      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 certain  air-plant  equipment  of the First  Production  Model of the
TCS-1 Plant.  During the  nine-month  period  ended March 31, 1999,  it received
revenues of  $300,000  from the sale of a single  fracturing  mill and a cooling
tower of the First  Production  Model.  The Company is  presently  manufacturing
molded  rubber  welcome  mats  under  a  contract  with  IM2  Merchandising  and
Manufacturing, Inc. ("IM2"), in Quebec. Pursuant to the IM2/Tirex Agreement, the
Company  acts as IM2's  exclusive  supplier of rubber  welcome  mats and related
products  molded out of rubber crumb ("IM2  Products").  Under the minimum sales
goals  set  by  IM2,  the  Company  could  anticipate  generating  approximately
$19,800,000 in revenues over the next five years, with approximately  $1,100,000
of such amount generated during the next twelve months. However,  initial orders
from IM2 are currently  exceeding  first-year contract minimums resulting in the
Company now  anticipating  sales of over one million mats during the next twelve
months,  with anticipated  revenues of approximately  $3.15 per mat, which could
bring revenues during the next twelve months to approximately  $3,150,000,  with
projected  first-year  earnings under the IM2 contract of  $1,400,000.  However,
unless and until the Company  successfully  develops and  commences  TCS-1 Plant
manufacturing  and sales  operations  and/or  expands  its  rubber  mat  molding
operations,  it will  continue to generate  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
operating expenses of $701,927 and $3,103,387,  respectively,  for the three and
nine-month  periods ended March 31, 1999.  These  amounts  reflect a decrease of
$337,652 from the  analogous  three month period ended March 31, 1998 when total
operating  expenses  were  $1,039,579  and an  increase  of  $794,308  over  the
analogous nine month period ended March 31, 1998 when total  operating  expenses
amounted to $2,309,079.

      With  respect  to the  variations  in  total  operating  expenses  for the
nine-month periods ended March 31, 1998 and 1999, depreciation and amortization,
particularly  amortization of prepaid  consulting fees, was a major factor.  For
the  three  and  nine-month  periods  ended  March 31,  1999,  depreciation  and
amortization  amounted to $190,719  and $508,006  respectively,  versus zero and
$4,786 for the analogous  periods in 1998,  providing  increases of $190,719 and
$503,220  respectively.  Salaries and professional fees amounted to $224,366 and
$1,354,558 for the three and nine-month  periods ended March 31, 1999 versus the
analogous three and nine-month  periods for 1998 when these figures  amounted to
$273,366 and $790,591 respectively,  thus showing a decrease for the three-month
period  ended March 31,  1999 in the amount of $49,000  but an increase  for the
nine-month  period  ended March 31, 1999 in the amount of  $563,967.  Consulting
fees and  signing  bonuses  for the  three-month  period  ended  March 31,  1999
amounted to $242,497  versus  $9,385 for the  analogous  period  ended March 31,
1998, reflecting an increase of $233,112.  For the nine-month period ended March
31,  1999,  consulting  fees and signing  bonuses  amounted  to 


                                       30
<PAGE>

$672,276  versus  $79,571  for the  nine-month  period  ended  March  31,  1998,
reflecting an increase of $592,705.

      From  inception  (July 15, 1987) through  March 31, 1999,  the Company has
incurred a cumulative net loss of $12,985,546,  $2,934,063 of which was incurred
during the nine months ended March 31, 1999.  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.


                                       31
<PAGE>

                                     PART II

                                OTHER INFORMATION

Item 1 - Legal Proceedings

      The Company is the defendant in an action, commenced on February 18, 1999,
in the Orange County  Superior Court,  State of North Carolina,  entitled "Laura
Gabiger  vs. The Tirex  Corporation".  This  action  arises out of a  consulting
agreement,  dated June 18, 1997,  between the Company and Dr. Laura Gabiger (the
"Gabiger Agreement").  The Gabiger Agreement provided for a term of three years,
commencing  on July 1, 1997,  and  compensation  at the  annual  rate of $96,000
during  the first two years and at an annual  rate of  $58,000  during the third
year.  The  Agreement  provided  further  that  thirty  percent  (30%)  of  such
compensation  would be paid in cash and seventy  percent  (70%) would be paid in
shares of the Company's common stock. On July 7, 1997, the Company issued to Dr.
Gabiger  263,529 shares of its common stock,  which covered the Company's  stock
compensation  obligations for the entire first year of the Gabiger Agreement. In
addition,  between  October 1997 and June 1998,  the Company paid Dr.  Gabiger a
total of $28,800,  representing the full amount of cash  compensation due to her
for that period.

      The complaint  alleges that the Company breached its consulting  agreement
with Ms. Gabiger by failing to pay compensation due thereunder and seeks damages
in the amount of $221,202,  with interest from the date of the alleged  breached
on June 8, 1998 plus legal costs. On April 21, 1999, the Company filed an answer
and  counterclaim  denying  the  plaintiff's  claims of breach of  contract  and
counterclaiming for fraud, breach of contract, and unjust enrichment on the part
of Ms. Gabiger. The Company's  counterclaims are based upon its allegations that
Ms.  Gabiger  induced  the  Company to enter into the  consulting  agreement  by
falsely  representing  that she had expertise and experience in researching  and
securing governmental support in the form of grants and other public programs to
finance certain specified activities of the Company,  that she utterly failed to
perform any of her duties under the consulting  agreement in accordance with her
representations, and that she was, therefore, unjustly enriched in the amount of
$28,800 in cash and 263,529 shares of the Company's  common stock. The Company's
counterclaim seeks relief consisting of: (i) compensatory  damages in the amount
of $28,800 and cancellation of the stock certificate issued to plaintiff; (ii) a
declaratory  judgment that the  consulting  agreement is of no force and effect;
(iii) punitive damages; and (iv) interest and legal costs.

      On April 21, 1999 the Company  removed  this case to the Federal  District
Court by  filing  a Notice  of  Removal.  During  the  first  week of May  1999,
plaintiff filed a motion to remand back to State court in North  Carolina.  This
motion is presently pending and the Company will resist it vigorously. It is the
Company's  position that this case is  completely  without merit and the Company
intends to vigorously  defend it and to pursue its  counterclaims for the return
of monies and stock paid to Ms. Gabiger in advance.


                                       32
<PAGE>

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

Item 2 - Changes in Securities and Use of Proceeds

Recent Sales of Unregistered Securities

      During the fiscal  quarter  ended March 31,  1999,  the  Company  made the
following sales of its common stock, $.001 par value, per share ("Common Stock")
without  registration  under  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"). The following sets forth  information  respecting the dates,
purchasers,  and  consideration  involved  in such  sales  and the bases for the
Company's claim that all such sales were exempt from the registration provisions
of Section 5 of the Securities Act by reason of Section 4(2) thereof.

Sales to Executive Officers,  Legal Counsel and Employees in Respect of Services
Rendered, Unreimbursed Expenses and Employment Agreements

      During the  quarter  ended March 31,  1999,  the  Company  authorized  the
following  stock  issuances  to  its  executive  officers,  legal  counsel,  and
employees  in  consideration  of  unpaid  salaries,  services  rendered,  and/or
unreimbursed  expenses,  due and owing to them under or in connection with their
respective employment agreements with the Company:

      1. On March  30,  1999,  in  consideration  of unpaid  executive  services
rendered  to,  and  unreimbursed  expenditures  made for and on behalf  of,  the
Company  during the five and one-half  month  period  ended March 15, 1999,  the
Company  authorized the issuance of an aggregate of 3,495,473  shares to five of
its executive  officers and its in-house  corporate counsel at a per share price
of approximately  $.0882083.  $.0882083 represents 50% of the average of the bid
and ask price for the Company's common stock, as traded in the  over-the-counter
market and reported in the  electronic  bulletin  board of the NASD,  during the
said five and one-half month period.  The following  table sets forth the number
of shares issued to each of the identified parties with respect to such five and
one-half month period and the basis therefor:


                                       33
<PAGE>

                              Amount of Unpaid
                              Salary and Unreimbursed            No. Of
Employee                      Expenses Owed                      Shares Issued
--------                      -------------                      -------------
Terence C. Byrne              US $ 75,685                        858,030
                                                         
Louis V. Muro                 US $ 36,843                        417,676
                                                         
John L. Threshie, Jr.         US $3,027                           34,320
                                                         
Louis Sanzaro                 US $80,711(1)                      914,259
                                                         
Frances Katz Levine           US $85,575(2)                      970,143
                                                         
Jean Frechette                US $26,555                         301,045
                                                        
      2. On March  30,  1999,  in  consideration  of unpaid  executive  services
rendered to the Company during the two and one-half month period ended March 15,
1999, the Company  authorized the issuance of 201,145 shares of its common stock
to Michael Ash, the Company's  secretary,  treasurer and chief financial officer
at a per share price of approximately .0978263,  representing 50% of the average
of the bid and ask  price  for the  Company's  common  stock,  as  traded in the
over-the-counter  market and reported in the  electronic  bulletin  board of the
NASD,  during the said two and one-half  month period.  The 201,145  shares were
issued with respect to $26,042 in unpaid salary.

      3.  During  the  period  May 1998  through  November  1998 and the  period
December 1998 through February 5, 1999 Ocean Utility Contracting Inc. ("Ocean"),
a  corporation  controlled  by  Louis  Sanzaro,  incurred  certain  reimbursable
expenses on behalf of the Company in the  respective  amounts of $28,072.17  and
$19,293.73 or $47,365.90 on an aggregated basis. In connection therewith,  Ocean
agreed to  accept,  in lieu of cash  reimbursement,  unregistered  shares of the
Company's  common  stock valued at 50% of the average bid and ask prices of such
common stock on the dates on which the respective  invoices were submitted.  The
average bid and ask price of this corporation's  common stock as at December 15,
1998 and February  16, 1999 were $.335 and  $.17875,  50% of which is $.1675 and
$.089375 respectively.  Consequently,  on March 31, 1999, the Company authorized
the issuance of 167,595 shares and 215,874 shares, 
--------------
    (1) Includes $503 of documented, unreimbursed cash disbursements.

    (2) Includes $36,825 of documented, unreimbursed cash disbursements.


                                       34
<PAGE>

respectively,  or an aggregate of 383,469 shares to Louis Sanzaro,  the assignee
of Ocean.

      4. On March 25, 1999 the Company  authorized  the issuance of an aggregate
of 143,561  shares of its common  stock to John Carr,  a former  employee of the
Company's  subsidiary,  Tirex  Canada R&D Inc.  ("Tirex  R&D")  with  respect to
compensation owed to Mr. Carr pursuant to his June 17, 1998 employment agreement
with Tirex R&D.  100,000 of such shares  represented  a signing  bonus under the
employment  agreement.  The balance of 43,561 shares were issued with respect to
$6,643 owed to Mr. Carr under the employment agreement. These 43,561 were issued
at a price of  approximately  $.1525 per share,  which represents the average of
the bid and ask price for the Company's common stock as at March 22, 1999.

      5. As of  February  26,  1999  the  Company  authorized  the  issuance  of
1,000,000  shares of its common stock to Michael Ash, the  Company's  secretary,
treasurer and chief financial officer.  These shares were issued to Mr. Ash as a
singing bonus under his January 4, 1999 employment agreement with the Company.

      6. On February  17, 1999 the Company  authorized  the  issuance of 146,296
shares of its common  stock to Scott  Rapfogel,  the  Company's  Assistant  U.S.
Corporate and Securities  Counsel, in lieu of $12,500 in salary due to him under
his  employment  agreement  with  the  Company.  Pursuant  to the  terms of such
employment agreement,  the shares were valued at 50% of the average high ask and
low bid price of the Company's stock during the five month period ended December
31, 1998 or $.0854434 per share.

      7. On March 31, 1999 the Company authorized the issuance of 500,000 shares
of its  common  stock  to Scott  Rapfogel,  its  Assistant  U.S.  Corporate  and
Securities  Counsel  as a  bonus.  Such  issuance  was made to Mr.  Rapfogel  in
recognition of his valuable  services to the Company and in recognition that the
salary  being paid to him  pursuant  to his  employment  agreement  is not of an
amount  commensurate  with that of an attorney  with his level of expertise  and
experience.

      8. On March 31, 1999 the Company authorized the issuance of 649,576 shares
of its common stock to Alan Crossley,  the Company's Director of European Market
Development with respect to approximately  60,751 remaining due to Mr. Crossley,
pursuant to his employment  agreement  with the Company,  for the period July 1,
1998 through March 31, 1998 in connection with salary and unreimbursed expenses.
The shares  issued  were  valued at 50% of the average of the bid and ask prices
for the Company's common stock during the period when such salary was earned and
such expenses were incurred. Accordingly, the effective sale price was $.0935241
per share.


                                       35
<PAGE>

Issuance of Stock for Consulting Services

      On March 31, 1999 the Company  authorized  the issuance of 58,818  shares,
132,  335 shares,  and 144,050  shares to Hydroco  Inc.  ("Hydroco")  (including
assignees thereof),  3003892 Canada Inc. ("3003892 Canada"), and Michael Dublois
Consultants Inc. ("MDCI"),  respectively,  in connection with various consulting
services  provided  to the  Company by each of such  entities.  The  issuance to
Hydroco was made in consideration of Hydroco's  agreement to convert $6,470 owed
to it by the Company  into shares of the  Company's  common  stock valued at the
negotiated  price of $.11 per share.  The issuance to 3003892 Canada was made in
consideration of 3003892 Canada's agreement to convert $18,196 owed to it by the
Company  into shares of the  Company's  common stock valued at $.1375 per share.
Such price  represents  the  average of the bid and ask price for the  Company's
common stock on September  23, 1998,  the date upon which  3003892  Canada first
invoiced the Company for the services  giving rise to the debt.  The issuance to
MDCI was made in consideration of MDCI's agreement to convert $17,286 owed to it
by the Company  into shares of the  Company's  common  stock  valued at $.12 per
share.  Such  price  represents  the  average  of the bid and ask  price for the
Company's  common  stock on November  10,  1998,  the date upon which MDCI first
invoiced the Company for services giving rise to the debt.

Issuance of Stock for Amendment of Agreement
  and Partial Waiver of License Fee

      On March 31, 1999, the Company authorized the issuance of 88,235 shares to
David  Sinclair,  as  assignee  of IM2  Merchandising  &  Manufacturing  Inc. in
consideration  for  IM2's  agreement  to  amend  a  certain  Exclusive  Dealings
Agreement, of December 1998, between IM2 and the Company to, among other things,
waive:  (i) certain  manufacturing  capacity  deadlines  which the Company would
otherwise  have been  obligated to meet; and (ii) the payment of the Cdn $17,000
balance of a license  fee  payable  under such  agreement.  The number of shares
issued represents the negotiated price of US $15,000 paid by the Company for the
aforesaid  amendment  and waiver of the Cdn $17,000  payable to IM2.  The shares
issued in lieu of payment  of US $15,000 in cash were  valued at $.17 per share,
which  reflected the average of the bid and ask prices of the  Company's  common
stock on March 24, 1999.

Issuance of Stock for Legal Office Rent

      On March 31, 1999,  the Company  authorized the issuance of 137,215 shares
of its common stock to Frances Katz Levine,  the  Company's  U.S.  Corporate and
Securities  Counsel,  in lieu of $12,000 owed to Ms. Levine for office rent with
respect to the period  October 1, 1998 through  March 31, 1999.  The shares were
valued at 50% of the average of the ask and bid prices 


                                       36
<PAGE>

of the  Company's  common  stock  during the period the office  rental fees were
payable  ($.1749078  per  share,  50% of which is  $.0874539).  Effective  as of
October 1, 1998, the Company entered into a rental fee agreement with Ms. Levine
which  provided  for a rental fee in the amount of $2,000 per month for: (i) the
full-time,  exclusive use of two offices which serve  exclusively as offices for
the  Company's  in-house  counsel and two  part-time  secretaries;  and (ii) the
part-time use of other space for record  storage and  conference  room purposes.
From  January of 1995  until  October 1, 1998,  Ms.  Levine had  provided  these
facilities and all utilities, free of charge to the Company.

Issuance of Stock in Connection with Debenture Conversion

      On March 31, 1999, the Company  authorized the issuance of an aggregate of
561,235 shares of its common stock to Mark Bruce,  the holder of two Convertible
Type B Debentures in the aggregate principal amount of $100,000. 225,000 of such
shares were issued to Al  Pietrangelo,  an assignee of Mr. Bruce.  In accordance
with the terms of the Debenture, the $100,000 principal amount of the Debentures
and  the  $12,247  in  interest  due on the  Debentures,  through  the  date  of
conversion,  were converted into shares of the Company's  common stock valued at
$.20 per share.

Issuance in Respect of Conversion of Debt to Equity

      On March 31, 1999,  the Company  authorized the issuance of 677,966 shares
of its common stock to Bartholomew  International  Investments Ltd. ("BIIL"),  a
corporation  owned by the  Bartholomew  Trust.  Terence C.  Byrne,  Registrant's
chairman and chief executive officer, and his spouse are the beneficiaries under
the  Bartholomew  Trust.  These  shares  were  issued in  consideration  for the
conversion of US$50,000 owed to Mr. Byrne in connection  with a $50,000 March 4,
1999 loan by Mr.  Byrne to enable  the  Company  to  purchase  certain  flocking
equipment required by the Company for its molding  operations.  The terms of the
conversion  required Mr. Byrne to forego any interest on, and  repayment in cash
of, the aforesaid debt and to accept in full satisfaction thereof,  unregistered
shares  of the  Company's  common  stock  valued at fifty  percent  (50%) of the
average  of the high ask and low bid  prices  of such  stock,  as  traded in the
over-the-counter  market and quoted in the OTC Electronic  Bulletin Board on the
conversion date.  Pursuant to the foregoing,  these shares were valued at 50% of
the average of the closing bid and ask price for the  Company's  common stock on
March 29, 1999, (50% of $.1475 or $.07325 per share).


                                       37
<PAGE>

Basis for Section 4(2) Exemption Claimed

      With respect to all sales and other issuances of securities as hereinabove
described,  which the Company  claims to have been exempt from the  registration
requirements  of  Section 5 of the  Securities  Act by reason  of  Section  4(2)
thereof :

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

      (ii)  The persons who  acquired  these  securities  were current or former
            executive officers,  directors,  employees,  or consultants,  all of
            whom are sophisticated investors; Such persons had continuing 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.

      (iii) 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.

Item 3 - Defaults Upon Senior Securities

During the period  January 7, 1998 through May 11, 1998,  the Company  issued an
aggregate of $535,000 of convertible,  subordinated  debentures bearing interest
at the rate of 10% which are due two (2) years  from their  respective  dates of
issuance.  As at March 31, 1999, $100,000 of these debentures had been converted
into shares of the Company's common stock. Interest on the outstanding principal
amount of the debentures is due and payable semi-annually  commencing six months
from the issuance date of such debentures. As at March 31, 1999, the Company was
in  arrears  on  interest  payments  accrued  on these  debentures  since  their
issuances,  in the  aggregate  amount of  $39,000,  and  intends to pay all such
interest as soon as the resources therefor are available.


                                       38
<PAGE>

Item 6 - Exhibits and Reports on Form 8-K

      (a) No Exhibits are being filed herewith:

      (b) One Current  Report on Forms 8-K was filed  during the  quarter  ended
March 31, 1998. Such Current Report, dated March 17, 1999, reported,  under Item
5 thereof, on an agreement in principle,  by the Company to acquire 80.6% of Les
Caoutchoucs Enviromax Inc. a/k/a Enviromax Rubber Inc., a manufacturer of rubber
products molded out of recycled rubber.

                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the  undersigned  thereunto
duly authorized.


                                      THE TIREX CORPORATION

Date: May 18, 1999                    By     /s/ Terence C. Byrne
                                        -------------------------
                                         Terence C. Byrne, Chairman of
                                         the Board of Directors
                                         and Chief Executive Officer

Date: May 18, 1999                    By     /s/ Michael Ash
                                        --------------------
                                         Michael Ash, Treasurer and
                                         Chief Accounting and Financial Officer


                                       39