U.S. SECURITIES AND EXCHANGE COMMISSION

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 December 31, 2006.

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

Commission File Number 33-17598-NY

THE TIREX CORPORATION

|Delaware                            | 22-2824362         
|----------------------------------- | -------------------
|(State or other jurisdiction
    of | (I.R.S. Employer   
|Incorporation or Organization)      | Identification No.)



(203) 522-3247 
(Issuer's telephone number, including area code)

PO Box 1000, Stratford Postal Office 
411 Barnum Ave. Cutoff 
Stratford CT USA 06614-9991(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 for each of the
issuer's classes of common equity, as of December 31, 2006 :249,895,892shares

Transitional Small Business Disclosure Format (check one):
Yes ___     No X

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The Tirex Corporation 
(A Development Stage Company)
TABLE OF CONTENTS

|                                                                                                                   |     
|------------------------------------------------------------------------------------------------------------------ | ----
|PART I - FINANCIAL
    INFORMATION                                                                                 |     
|                                                                                                                   |     
|Item 1 - Financial
    Statements(Unaudited)                                                                       | Page
|                                                                                                                   |     
|The Tirex Corporation and
    Subsidiaries Consolidated Balance Sheets as of December 31, 2006                     | 1   
|                                                                                                                   |     
|Consolidated Statements of
    Operations for the three and six month periods ended December 31, 2006 and
    2005 | 2   
|                                                                                                                   |     
|Consolidated Statements of Cash
    Flows for the three and six month periods ended December 31, 2006 and 2005     | 3   
|                                                                                                                   |     
|Notes to Financial Statements (Unaudited)                                                                          | 5   
|                                                                                                                   |     
|Item 2 -
    Management's Discussion and Analysis of Financial Condition and Results of
    Operations             | 12  
|                                                                                                                   |     
|Item 3  Controls
    and Procedures                                                                               | 17  
|                                                                                                                   |     
|PART II
    - OTHER
    INFORMATION                                                                                | 18  
|                                                                                                                   |     
|Item 1 - Legal
    Proceedings                                                                                     |     
|Item 2 - Changes in
    Securities and Use of Proceeds                                                             | 18  
|Item 3 - Defaults Upon
    Senior Securities                                                                       | 18  
|Item 4 - Submission of
    Matters to a Vote of Security Holders                                                   | 18  
|Item 5  Other
    Information                                                                                     | 18  
|Item 6 - Exhibits and
    Reports on Form 8-K                                                                      | 18  

The financial statements are unaudited. However, Management
of registrant believes that all necessary adjustments, including normal
recurring adjustments, have been reflected to present fairly the financial
position of registrant at December 31, 2006 and the results of its operations
and changes in its cash position for the three and six month periods ended
December 31, 2006 and 2005 and for the period from inception (July 15, 1987).
This quarterly statement has not been reviewed by an independent accountant.

---



Item 1 - Financial
    Statements(Unaudited)

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2006

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 2006
December 31,2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    -Accounts receivable
    
    
    -Notes receivable
    
    
    20,475Inventory
    
    
    73,322Research and Experimental Development tax credits
    receivable
    
    -93,797Property and equipment,salvage value
    
    
    50,000Other assetsInvestment, at cost
    
    
    89,50089,500$
    233,297LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current LiabilitiesAccounts payable and accrued liabilties
    $
    2,663,709Current portion of long-term debt
    
    78,0912,741,800Other liabilitiesLong-term deposits and notes
    
    
    217,500Government loans (net of current)
    
    -Capital lease obligations (net of current)
    
    -Convertible notes
    
    
    399,389Convertible notes
    
    
    195,556Convertible loans
    
    
    2,029,1352,841,5805,583,380Stockholders' Equity (Deficit)Common stock, $.001 par value, authorized250,000,000 shares, issued and outstanding249,895,892 shares (June 30, 2005 - 249,895,892
    shares)
    
    249,896Additional paid-in capital
    
    
    25,222,219Deficit accumulated during the development stage
    
    (30,207,341)Unrealized gain (loss) on foreign exchange
    
    (614,857)(5,350,083)$
    233,297

1

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Three months ended
    
    Six months ended
    Cumulative fromDecember-06
    December 05
    
    December 31
    March 26, 1993
    to2006
    
    2005
    
    2006
    
    2005
    
    December 31, 2006Revenues
    $
    -
    $
    -
    $
    -
    $
    -
    $
    1,354,088Cost of Sales
    
    -
    
    -
    
    -
    
    -
    
    1,031,075Gross profit
    
    -
    
    -
    
    -
    
    -
    
    323,013OperationsGeneral and administrative
    
    127,215
    
    138,950
    
    221,207
    
    265,776
    
    13,033,002Depreciation and amortization
    
    -
    
    -
    
    -
    
    -
    
    365,545Research and development
    
    -
    
    -
    
    -
    
    -
    
    15,396,966Total Expense
    
    127,215
    
    138,950
    
    221,207
    
    265,776
    
    28,795,513Income (loss) before other expenses
    
    (127,215)
    
    (138,950)
    
    (221,207)
    
    (265,776)
    
    (28,472,500)Other expenses (income)Interest expense
    
    11,699
    
    11,699
    
    23,397
    
    23,397
    
    968,980Interest income
    
    -
    
    -
    
    -
    
    -
    
    (45,443)Income from stock options
    
    -
    
    -
    
    -
    
    -
    
    (10,855)Loss on disposal of equipment
    
    -
    
    -
    
    -
    
    -
    
    4,54911,699
    
    11,699
    
    23,397
    
    23,397
    
    917,231Net income (loss)
    
    (138,914)
    
    (150,649)
    
    (244,604)
    
    (289,173)
    
    (29,389,731)Other comprehensive lossLoss (gain) on foreign exchange
    
    -
    
    -
    
    -
    
    -
    
    106,137Net income (loss) and comprehensive loss
    $
    (138,914)
    $
    (150,649)
    $
    (244,604)
    $
    (289,173)
    $
    (29,495,868)Basic and Diluted net loss and comprehensiveloss per common share
    $
    (0.00)
    $
    (0.00)
    $
    (0.00)
    $
    (0.00)
    $
    (0.32)Weighted average shares of commonstock outstanding
    
    249,895,892
    
    249,895,892
    
    249,895,892
    
    249,895,892
    
    93,201,322

2

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months
    ended
    
    Six months
    ended
    Cumulative fromDecember 31
    
    December 31
    March 26, 1993
    to2006
    
    2005
    
    2006
    
    2005
    December 31,
    2006Cash flows from operating activities:Net income (loss)
    $
    (138,914)
    $
    (150,649)
    $
    (244,604)
    $
    (289,173)
    $
    (29,495,868)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortization
    
    -
    
    -
    
    -
    
    -
    
    364,304(Gain) loss on disposal and abandonment of assets
    
    -
    
    -
    
    -
    
    -
    
    2,005,498Stock issued in exchange for interest
    
    -
    
    -
    
    -
    
    -
    
    169,142Stock issued in exchange for services and expenses
    
    -
    
    -
    
    -
    
    -
    
    10,574,972Stock options issued in exchange for services
    
    -
    
    -
    
    -
    
    -
    
    3,083,390Unrealized (loss) gain on foreign exchange
    
    75,488
    
    202
    
    77,938
    
    (88,107)
    
    (614,877)Other non-cash items
    
    83,500
    
    55,000
    
    133,500
    
    110,000
    
    1,028,188Changes in assets and liabilities:(Increase) decrease in:Account receivable
    
    -
    
    -
    
    -
    
    -
    
    -Inventory
    
    -
    
    -
    
    -
    
    -
    
    (73,323)Sales tax receivable
    
    -
    
    -
    
    -
    
    -
    
    (36)Research and experimental development tax credits
    receivable
    
    -
    
    -
    
    -
    
    -
    
    -Other assets
    
    -
    
    -
    
    -
    
    -
    
    (10,120)(Decrease) increase in :Accounts payables and accrued liabilities
    
    (51,324)
    
    45,447
    
    (29,334)
    
    157,280
    
    2,379,912Accrued salaries
    
    31,250
    
    50,000
    
    62,500
    
    100,000
    
    635,652Due to stockholders
    
    -
    
    -
    
    -
    
    -
    
    5,000Net cash used in operating activities
    
    -
    
    -
    
    -
    
    (10,000)
    
    (9,948,166)Cash flow from investing activities:Increase in notes receivable
    
    -
    
    -
    
    -
    
    -
    
    (259,358)Reduction in notes receivable
    
    -
    
    -
    
    -
    
    -
    
    237,652Investment
    
    -
    
    -
    
    -
    
    -
    
    (89,500)Equipment
    
    -
    
    -
    
    -
    
    -
    
    (321,567)Equipment assembly costs
    
    -
    
    -
    
    -
    
    -
    
    (1,999,801)Organization cost
    
    -
    
    -
    
    -
    
    -
    
    6,700Reduction in security deposit
    
    -
    
    -
    
    -
    
    -
    
    (1,542)Net cash used in investing activities
    
    -
    
    -
    
    -
    
    -
    
    (2,427,416)Cash flow from financing activities:Loans from related parties
    
    
    
    
    
    
    
    
    
    4,354,835Deferred financing costs
    
    -
    
    -
    
    -
    
    -
    
    180,557Proceeds from deposits
    
    -
    
    -
    
    -
    
    -
    
    143,500Payments on notes payable
    
    -
    
    -
    
    -
    
    -
    
    (409,939)Proceeds from convertible notes
    
    -
    
    -
    
    -
    
    -
    
    754,999Proceeds from notes payable
    
    -
    
    -
    
    -
    
    10,000
    
    419,939Payments on lease obligations
    
    -
    
    -
    
    -
    
    -
    
    (86,380)Proceeds from issuance of convertible subordinated
    debentures
    
    -
    
    -
    
    -
    
    -
    
    1,035,000Proceeds from loan payable
    
    -
    
    -
    
    -
    
    -
    
    591,619Payments on loan payable
    
    -
    
    -
    
    -
    
    -
    
    (488,439)Proceeds from issuance of stock options
    
    -
    
    -
    
    -
    
    -
    
    20,000Proceeds from grants
    
    -
    
    -
    
    -
    
    -
    
    3,628,277Proceeds from issuance of common stock
    
    -
    
    -
    
    -
    
    -
    
    85,582Proceeds from additional paid-in capital
    
    -
    
    -
    
    -
    
    -
    
    2,145,775Net cash provided by financing activities
    
    -
    
    -
    
    -
    
    10,000
    
    12,375,325Net (decrease) increase in cash and cash
    equivalents
    
    -
    
    -
    
    -
    
    -
    
    (257)Cash and cash equivalents - beginning of
    period
    
    -
    
    -
    
    -
    
    -
    
    257Cash and cash equivalents - end of period
    $
    -
    $
    -
    $
    -
    $
    -
    $
    -

3

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
    
    
    Three months ended
    
    Cumulative fromDecember 31
    
    
    December 31
    
    March 26, 1993 to2006
    
    2005
    
    
    2006
    
    2005
    
    December 31, 2006Supplemental Disclosure of
    Non-Cash Activities:During the six months ended December 31, 2006 and
    December 31, 2005, the Companydid not issue common stock in recognition of the
    payment of debt. During the year endedJune 30, 2006, the Company did not issue common
    stock in recognition of the payment of debt.During the six months ended December 31, 2006 and
    December 31, 2005, the Companydid not issue common stock in exchange for
    services performed and expenses. During theyear ended June 30, 2006, the Company did not
    issue common stock in exchange forservices performed and expenses.Supplemental Disclosure of Cash
    Flow Information:Interest paid
    $
    -
    $
    -
    
    $
    -
    $
    -
    
    $
    232,748Income taxes paid
    $
    -
    $
    -
    
    $
    -
    $
    -
    
    $
    -

4

---

THE TIREX CORPORATION 
A DEVELOPMENT STAGE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2006
Note 1             
SUMMARY OF ACCOUNTING POLICIES

CHANGE OF NAME
On July 11, 1997, the Company changed its name from Tirex
America, Inc. to The Tirex Corporation.
NATURE OF BUSINESS
The Tirex Corporation (the "Company") was incorporated under
the laws of the State of Delaware on August 19, 1987. The Company was originally
organized to provide comprehensive health care services, but due to its
inability to raise sufficient capital, was unable to implement its business
plan. The Company became inactive in November 1990.
REORGANIZATION
On March 26, 1993, the Company entered into an acquisition
agreement (the "Acquisition Agreement") with Louis V. Muro, currently an officer
and a director of the Company, and former Officers and Directors of the Company
(collectively the "Seller"), for the purchase of certain technology owned and
developed by the Seller (the "Technology") to be used to design, develop and
construct a prototype machine and thereafter a production quality machine for
the cryogenic disintegration of used tires. The Technology was conceptually
developed by the Seller prior to their affiliation or association with the
Company.
DEVELOPMENTAL STAGE
At December 31, 2006, the Company is still in the development
stage. The operations consist mainly of raising capital, obtaining financing,
developing equipment, obtaining customers and supplies, installing and testing
equipment and administrative activities.
BASIS OF CONSOLIDATION
The consolidated financial statements include the
consolidated accounts of The Tirex Corporation, Tirex Canada R&D Inc., The Tirex
Corporation Canada Inc., Tirex Advanced Products Quebec Inc. and Tirex
Acquisition Corp., all of these subsidiaries currently being dormant. Certain of
these companies have actually been de-registered by government authorities but
could easily be revived if circumstances would warrant such action. Tirex Canada
R&D Inc. is held 51% by two shareholders of the Company. The shares owned by
these shareholders are held in escrow by the Company's attorney and are
restricted from transfer thereby allowing for a full consolidation of this
Company. The Tirex Corporation Canada Inc., Tirex Advanced Products Quebec Inc.
and Tirex Acquisition Corp. are 100% held by the Company. All subsidiary
companies are dormant. All inter-company transactions and accounts have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all highly
liquid debt instruments purchased with a maturity of three months or less, were
deemed to be cash equivalents.
INVENTORY
The Company values inventory, which consists of finished
goods and equipment held for resale, at the lower of cost (first-in, first-out
method) or market.
5
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated
depreciation and provisions for write-downs. Depreciation is computed using the
straight-line method over the estimated useful lives of five years. No
depreciation is recorded for equipment written down to salvage value.
Repairs and maintenance costs are expensed as incurred while
additions and betterments are capitalized. The cost and related accumulated
depreciation of assets sold or retired are eliminated from the accounts and any
gains or losses are reflected in earnings.
INVESTMENT
An investment made by the Company, in which the Company owns
less than a 20% interest, is stated at cost value. The cost value approximates
the fair market value of the investment.
ESTIMATES
Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 123
In 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.
SFAS 123 encourages, but does not require, companies to record stock-based
Compensation and other costs paid by the issuance of stock at fair value. The
Company has chosen to account for stock-based compensation, stock issued for
non-employee services and stock issued to obtain assets or in exchange for
liabilities using the fair value method prescribed in SFAS 123. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
ADOPTION OF STATEMENT OF ACCOUNTING STANDARD NO. 128
In 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings per Share. SFAS 128 changes the
standards for computing and presenting earnings per share (EPS) and supersedes
Accounting Principles Board Opinion No. 15, Earnings per Share. SFAS 128
replaces the presentation of Primary EPS with a presentation of Basic EPS and
replaces the presentation of Fully Diluted EPS with a presentation of Diluted
EPS. It also requires dual presentation of Basic and Diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the Basic EPS
computation to the numerator and denominator of the Diluted EPS computation.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. SFAS 128 also requires restatement
of all prior-period EPS data presented.
As it relates to the Company, the principal differences
between the provisions of SFAS 128 and previous authoritative pronouncements are
the exclusion of common stock equivalents in the determination of Basic Earnings
Per Share and the market price at which common stock equivalents are calculated
in the Determination of Diluted Earnings Per Share.
A Basic Earnings per Share is computed using the weighted
average number of shares of common stock outstanding for the period. Diluted
Earnings per Share is computed using the weighted average number of shares of
common stock and dilutive common equivalent shares related to stock options and
warrants outstanding during the period.
The adoption of SFAS 128 had no effect on previously reported
loss per share amounts for the year ended June 30, 1997. For the years ended
June 30, 2005 and June 30, 2004, Primary Loss per Share was the same as Basic
Loss per Share and Fully Diluted Loss per Share was the same as Diluted Loss per
Share. A net loss was reported in 2004 and 2003, and accordingly, in those
years, the denominator for the Basic EPS calculation was equal to the weighted
average of outstanding shares with no consideration for outstanding options and
warrants to purchase shares of the Company's common stock because to do so would
have been anti-dilutive.
6
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments,
which principally include cash, note receivable, accounts payable and accrued
expenses, approximates fair value due to the relatively short maturity of such
instruments.
The fair values of the Company's debt instruments are based
on the amount of future cash flows associated with each instrument discounted
using the Company's borrowing rate. At December 31, 2006 and June 30, 2006,
respectively, the carrying value of all financial instruments was not materially
different from fair value.
INCOME TAXES
The Company has net operating loss carryovers of
approximately $30.5 million as of December 31, 2006, expiring through 2027.
However, based upon present Internal Revenue Service regulations governing the
utilization of net operating loss carryovers where the corporation has issued
substantial additional stock and there has been a change in control as defined
by the Internal Revenue Service regulations, a substantial portion of this loss
carryover may not be available to the Company.
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, Accounting for Income Taxes, effective July 1993.
SFAS No. 109 requires the establishment of a deferred tax asset for all
deductible temporary differences and operating loss carryforwards. Because of
the uncertainties discussed in Note 2, however, any deferred tax asset
established for utilization of the Company's tax loss carryforwards would
correspondingly require a valuation allowance of the same amount pursuant to
SFAS No. 109. Accordingly, no deferred tax asset is reflected in these financial
statements.
The Company does not currently have research and experimental
development tax credits receivable from the Canadian Federal government and the
Quebec Provincial government as at December 31, 2006.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries that operate
in a local currency environment are translated to U.S. dollars at exchange rates
in effect at the balance sheet date for monetary items and historical rates of
exchange for non-monetary items with the resulting translation adjustment
recorded directly to a separate component of shareholders' equity. Income and
expense accounts are translated at average exchange rates during the year.
Currency transaction gains or losses are recognized in current operations.
REVENUE RECOGNITION
Revenue from the sale of TCS Systems will be recognized when
the installed product is accepted by the Customer. All other revenue from other
products will be recognized when shipped to the customer.
7
Note 2              
GOING CONCERN

As reported in the accompanying financial statements, the
Company incurred a net loss of $220,572 for the year ended June 30, 2006 and a
net loss of $244,604 for the six months ended December 31, 2006.
In March 1993, the Company had begun its developmental stage
with a new business plan. As of March 2000, the Company had developed a
production quality prototype of its patented system for the disintegration of
scrap tires, but nonetheless continued its research and development efforts to
improve the machine's performance and to permit greater flexibility in design
for specific customer applications. Due to the Companys lack of working capital
during the year ended June 30, 2002, all rubber crumb production was suspended
and research and development efforts have been hampered. Pending receipt of
funding from operations, government assistance, loans or equity financing, crumb
rubber production and previous research and development efforts will not be
resumed. While the Company has engaged the process of marketing the TCS System
to numerous potential clients since the beginning of the fiscal year commencing
July 1, 2000, as of December 31, 2006, the Company had not yet consummated an
unconditional purchase order for a TCS System.
The Company is dependent on the success of its marketing of
its TCS Systems, and/or raising funds through equity sales, bank or investor
loans, governmental grants or a combination of these, to continue as a going
concern. The Company's uncertainty as to its ability to generate revenue and its
ability to raise sufficient capital, raise substantial doubt about the entity's
ability to continue as a going concern. The financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
Note 3             
PROPERTY AND EQUIPMENT

As at December 31, 2006, plant and equipment consisted of the following:

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

Depreciation and amortization expense charged to operations
for the year ended June 30, 2006 was zero. Depreciation and amortization expense
charged to operations for the six months ended December 31, 2006 and December
31, 2005 was zero.

Note 4             
GOVERNMENT LOANS

Canada Economic Development

Loans payable under the Program for the Development of Quebec
SMEs based on 50% of approved eligible costs for the preparation of market
development studies in certain regions. Loans are unsecured and non-interest
bearing. (If the Company defaults, the loans become interest bearing at the rate
of 8%).

|Loan repayable over
    five years commencing June 30, 2000 and ending |   |       
|---------------------------------------------------------------------- | - | ------
|June 30, 2004                                                          | $ | 34,300
|Loan repayable over
    five years commencing June 30, 2001 and ending |   |       
|June 30, 2005                                                          |   | 43,791
|                                                                       |   | 78,091
|Less: Current portion                                                  |   | 78,091
|Long-term portion                                                      | $ | NIL   
|                                                                       |   |       
|Principal repayments
    are as follows:                               |   |       
|June 30                                                                |   | Amount
|                                                                       |   |       
|2007                                                                   | $ | 78,091

8

---



Note 5             
CAPITAL LEASE OBLIGATIONS

The Company leased certain manufacturing equipment under
agreements classified as capital leases. The cost and the accumulated
amortization for such equipment as of December 31, 2006 and June 30, 2006 was
$62,400 and $62,400, respectively. The equipment under capital leases has been
included in property and equipment on the balance sheet. The Company is in
arrears on payment of these leases but default has not been declared. The lease
expired on June 30, 2004. The leased equipment is not part of the Companys TCS
System prototype.

Note 6             
CONVERTIBLE SUBORDINATED DEBENTURES

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

Note 7             
CONVERTIBLE NOTES

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

|Balance
    at December 31, 2006 | $399,389                                                                                                                                                                                                                                                                                      
|-------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |                                                                                                                                                                                                                                                                                               
|Interest
    rate                | 8%,
    payable quarterly, commencing                                                                                                                                                                                                                                                         
|                                 | June 30,
    2001                                                                                                                                                                                                                                                                             
|                                 |                                                                                                                                                                                                                                                                                               
|Issue
    date                   | February
    26, 2001                                                                                                                                                                                                                                                                         
|                                 |                                                                                                                                                                                                                                                                                               
|Maturity
    date                | February
    26, 2003                                                                                                                                                                                                                                                                         
|                                 |                                                                                                                                                                                                                                                                                               
|Redemption rights                | If not
    converted, the holder may require the Company to redeem at any time after
    maturity for the principal amount pus interest.                                                                                                                                                      
|                                 |                                                                                                                                                                                                                                                                                               
|Conversion ratio                 | Lower of
    (i)  80% of the average of the three lowest closing bid prices for the
    thirty trading days prior to the issue date, which equals $.073, or
    (ii)  80% of the average of the three lowest closing bid prices for the
    sixty trading days prior to the conversion date.

|                          |                                                                                                                                                                                                                             
|------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Common
    stock warrants | The
    Convertible Notes carried an option to purchase Common stock warrants at the
    rate of one Warrant for each $1.25 of purchase price. The exercise price on
    the first tranche of $ 750,000 is $ .077 per share.
|                          |                                                                                                                                                                                                                             

Certain current and previous Directors and Officers of the
Company have pledged approximately 12,000,000 of their personal shares of Common
Stock of the Company as security for the Convertible Notes until such time as
the Company files with the Securities and Exchange Commission a Registration
Statement on Form SB-2, to register common stock and warrants issuable upon the
conversion of the notes, no later than 150 days after the issue date of the
Convertible Notes. This deadline was not met and, as such, the investors served
a notice of default to the Company on July 19, 2001. The Registration Statement
was never declared effective by the Securities and Exchange Commission and was
eventually withdrawn. Thus, the Convertible Notes cannot be converted to Common
Stock nor may the Common Stock warrants be exercised. On April 24, 2002 the
Company entered into a Settlement Agreement with the Note holders. The Company
was forced to default on this Settlement Agreement. Accordingly, the terms of
the Convertible Notes have become effective once again. Approximately two-thirds
of the collateral shares provided to the investors were the property of former
Tirex Director, Louis A, Sanzaro, now deceased. While we have not confirmed the
disposition of the liabilities of our company toward the estate of Mr. Sanzaro,
the company intends to act in accordance with the testament of Mr. Sanzaro.

9

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Note 8             
CONVERTIBLE NOTES

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

|Balance
    at December 31, 2006 | $ 185,556                                                                                                                                                                                                                  
|-------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |                                                                                                                                                                                                                            
|Interest
    rate                | 8%                                                                                                                                                                                                                         
|                                 |                                                                                                                                                                                                                            
|Issue
    date                   | July 19th, 2000                                                                                                                                                                                                            
|                                 |                                                                                                                                                                                                                            
|Maturity
    date                | January 19th, 2002                                                                                                                                                                                                         
|                                 |                                                                                                                                                                                                                            
|Redemption rights                | If not
    converted, the holder may require the Company to redeem at any time after
    maturity for the principal amount plus interest.                                                                                  
|                                 |                                                                                                                                                                                                                            
|Conversion ratio                 | Not
    convertible prior to July 19th, 2001, at 20% discount to market
    between July 19th, 2001 and January 19th, 2002 or at
    25% to market if held to maturity, to a maximum of not more than 2,500,000
    shares.

During the first quarter of Fiscal 2006, the Company
completed a private placement with two investors having a total aggregate value
of US$10,000, one for $2,500 and the other for $7,500. Insofar as the Company
does not have enough common shares available for issuance, the investors agreed
to accept that the investment would be in the form of non-interest-bearing convertible debt with no fixed terms of repayment. When an
adequate number of common shares become available, these investors will be able
to convert their loans at a price of US$0.005 per share. Any conversion would be
proportionally adjusted in the event of stock splits or reverse splits. In
consideration of the agreed upon conversion price, prior to any possible
adjustments, the company would issue 2,000,000 common shares. Until such time of
any conversion, the US$10,000 is recorded as a liability on the Companys
Balance Sheet.

Over the twelve months ended June 30, 2006, the expenses of
our company have been funded by a series of loans made by a significant number
of individuals investing modest amounts each totaling approximately US$60,700
through Tirex President, John L. Threshie Jr. During the six months ended
December 31, 2006 a further amount of US$36,000 was secured by Mr. Threshie
under substantially the same terms. Insofar as the funds were lent to Mr.
Threshie rather than to Tirex directly, with Mr. Threshie then paying personally
the expenses of Tirex, which expenses have been duly recorded in our accounts
offset by a liability to Mr. Threshie, the liability on our books is still
listed as being toward Mr. Threshie. Thus no direct liability toward these
investors is on our books. Insofar as Tirex does not have shares to issue at
this time, these investors, fully cognizant of our situation and so documented
in writing, have accepted that their investment is being made via Mr. Threshie
and represents a convertible debt, the conversion of which can occur once Tirex
will have shares available for issuance. This debt is convertible at fixed
prices rather than as a discount to market. To June 30, 2006, approximately
13,140,000 shares were involved, and a further 8,200,000 shares would be
required as a result of the borrowings during the six months ended December 31,
2006, these numbers being before any adjustments to our share authorization
structure which would cause a proportionate adjustment to the number of shares
actually issuable.

In addition to the above liability for shares, Tirex is
liable for the replacement of 11,986,315 shares which were delivered as
collateral by Tirex Directors, Threshie, Muro and Sanzaro (recently deceased)
for the $750,000 of convertible debt contracted for in 2001, which shares were
sold by the debt holders.

Note 9             
RELATED PARTY TRANSACTIONS

Convertible loans include amounts primarily due to Directors,
Officers and employees. Historically, such amounts due have been repaid through
the issuance of stock. At December 31, 2006 and June 30, 2006, the balances
owing to Directors and Officers was $2,121,929 and $1,959,429, respectively.
These amounts are without interest or terms of repayment.

Long-term deposits and notes included an amount of $118,500
at December 31, 2006, which is payable to Ocean Tire Recycling & Processing Co.,
Inc., a company previously owned by a former Director of the Company, Louis A.
Sanzaro, recently deceased. We expect that the Executor of the estate of Mr.
Sanzaro will contact us with respect to the disposition of our liabilities
toward the estate of Mr. Sanzaro.

Note 10           
COMMON STOCK

During the six months ended December 31, 2006 and December
31, 2005 and the year ended June 30, 2006, the Company did not issue any common
stock in exchange for services performed.

During the year ended June 30, 2004, an Officer of the
Company exercised stock options pursuant to a services agreement. The exercise
of these stock options entitled the Officer to 1,500,000 common shares of the
Company on a cash-less basis. The Company does not have sufficient authorized
and unissued shares available at September 30, 2006 for issuance of this stock
and as such, the amount attributable to these shares has been recorded as part
of the balances owing to Directors and Officers included in Convertible loans.

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

As at December 31, 2006, the Company had 249,895,892 Common shares issued and
outstanding, versus its authorization of 250,000,000 shares.

10

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Note 11           
CONVERTIBLE DEBT

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

Note 12           
GOVERNMENT ASSISTANCE

The Company is eligible for and has made claims for tax
credits related to scientific research and experimental development expenditures
made in Canada. These amounts, under Canadian Federal and Provincial tax law in
conjunction with its annual tax return filings, need not be offset against taxes
otherwise payable to become refundable to the Company at the end of its fiscal
year. As such, during the year ended June 30, 2003, the Company received
approximately $246,970, which was recorded as an increase in stockholders
equity paid-in capital. During the years ended June 30, 2004 and June 30, 2005
and the three month period ended September 30, 2005, the Company did not make
any additional claims for tax credits as it was not eligible to do so and, as
such, the Company did not record any additional tax credits receivable. The
previous receivable balance in respect of tax credits from these governments
went from $246,970 as of June 30, 2002 to zero as of June 30, 2003 and remained
as such as of June 30, 2004, June 30, 2005, June 30, 2006 and December 31, 2006.

Note 13           
COMMITMENTS

Rental expense for the year ended June 30, 2006 amounted to
$6,392. Rental expense for the six months ended December 31, 2006 and September
30, 2005 amounted to zero and $6,392, respectively.

At December 31, 2006, the Company was in arrears of rent,
including interest and related charges, in the approximate amount of $560,000. A
settlement agreement with the former landlord is in place under the terms of
which the Company would pay to the former landlord the sum of $140,000 from the
proceeds to the Company of revenues from each of the first four sales of TCS
Systems.

Note 14           
LITIGATION

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

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

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

Note 15           
ACCUMULATED OTHER COMPREHENSIVE INCOME

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

11

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND PLAN OF OPERATIONS
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 six month periods ended December 31, 2006. This
discussion also includes events which occurred subsequent to the end of the last
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.
In March 2000, we announced that our tire recycling
technology prototype was ready for replication and commercialization. The
intellectual property owned by Tirex comprises the patented fracturing mill
(both US and Canadian patents). Additionally, the process of using super-cooled
air rather than liquid nitrogen to freeze the tire chips to the "glass point"
which permits the effective separation of the components of the tires, at a
significant cost saving, is integrated with the fracturing mill and the Tirex
designed freezing chamber is a proprietary process. This process and the
intellectual property of the system is recognized in the Manufacturing License
Agreement we have with Simpro www.simpro.it.
Our patent renewals for both the USA and Canada have both been completed.

Since the March 2000 announcement respecting the commercial
availability of its TCS-1 model, Tirex has worked to complete the design of the
TCS-2, the version of the technology which processes two million tires per year,
and has worked with its manufacturing partner, Simpro S.p.A. of Turin, Italy, to
refine the technology and to create the possibility of auxiliary crumb rubber
processing to permit the production of much finer mesh crumb rubber than the
initial technology delivers. These refinements, at no significant additional
cost to customers, allow for access to higher-value crumb rubber markets which
some customers desire.

Concurrent with the continued technological refinement of our
technology, our primary objective has been to conclude a first purchase and
sales agreement of a TCS System. In this regard, Tirex has responded to requests
for information and has engaged in negotiations with potential customers
throughout the world. Simultaneously, our manufacturing partner, Simpro, which
also has a non-exclusive marketing accreditation, has been actively negotiating
with numerous potential customers, most recently with customers based in the
Middle East and with British interests who would install one or more systems in
the Middle East. With respect to this latter contact, the process has been
slower than what Management would have preferred, but Management recognizes that
the TCS element of this industrial development initiative represents but a
fraction of the total and thus the timing of the conclusion of the agreement is
constrained by other negotiations with which we have no interest. Tirex has been
developing a customer based in New York State who has expressed a substantial
interest in acquiring a TCS-2 for installation in that state. This customer has
represented to us that he has adequate financing to support this project.

In the context of the information being provided to potential
customers, we point out to these persons or entities that the original TCS-1
prototype located in Montreal has been disassembled and that the patented
fracturing mill is currently physically located in Italy for reference in
research and development purposes. These customers are also provided copies of
videotapes which include, among other things, a visual demonstration of the
prototype actually in use. In addition, these customers are provided with
documentation as to the various accreditations and attestations as to the
effectiveness of the TCS technology, this documentation coming entirely from
independent sources, including private sector engineering firms, public sector
government agencies and internationally-accredited technical universities.
Customers are also offered the free-of-charge possibility to obtain tailor-made
pro-forma financial forecasts for their specific region, based on an adjustable
financial model created by our Chief Financial Officer, which allows for the
input of local economic costing of goods and services, local taxation
conditions, and various loan and depreciation scenarios. Despite this important
quantity of substantiation of the effectiveness of the TCS technology and the
substantial offers of assistance in the development of the business plans for
these customers, the conclusion of the first purchase and sales agreement has
proven elusive. Our manufacturing partner, Simpro, has succeeded in putting into
place a limited performance guarantee with respect to the installations which it
would accomplish, and this performance guarantee, backed by a major
international insurance company, is offered to potential customers. Even with
performance guarantees, conclusion of an agreement has been difficult. While
negotiations on several fronts have progressed to an advanced stage, as of
December 31, 2006, no unconditional contracts had been concluded.

12

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Management attributes this difficulty in concluding a sale
primarily to the lack of a long-term track record of the system and to the lack
of a demonstration unit to establish the visual confirmation for customers that
the technology actually works as represented. While the video of the prototype
creates interest, it would appear that, by itself, it cannot replace the visual
impact of a functioning fracturing mill. The approximate installed cost of a
TCS-2 is 5,500,000 Euros (currently approximately US$7.15 million) which is a
lot of money for most entrepreneurs or their financial backers for unproven
long-term technology. The project is not limited to the acquisition cost of the
TCS. There also infrastructure costs, set-up period losses and an opening
working capital requirement. Depending somewhat on the location, we consider
that the entrepreneur is facing a total investment cost of approximately US$9
million.

During the second quarter, as the Tirex head office and more
specifically Mr. Threshie, relocated to Connecticut, Tirex engaged several new
commissioned representatives from New York and Connecticut, each with extensive
marketing and business development backgrounds. The most active opportunities on
which Tirex and Simpro have worked during the first and second quarters of
Fiscal 2007, and on which efforts continue, include projects for the Middle
East, the United Kingdom, Malaysia, Russia, Italy and New York State. It has
been represented to either Tirex or Simpro that these projects have done their
due diligence and either all or a major part of their funding requirement is
feasible. Management has not been able to verify the accuracy of such
representations and is thus not in a position to assert that TCS System sales
contracts will be concluded.

As noted, these opportunities may not conclude in definitive
agreements. Until there is a commercial system in operation, and regardless of
Management's optimism, there can be no assurance that these opportunities will
actually result in unconditional sales contracts.

Tirex continues to be listed on the Internet Recycling
Exchange, combined with our web site, www.tirex.tcs.com,
and Mr. Threshies network, it continues to generate interest on a global basis.
What appears to be quite clear is the desire to acquire new technologies to
replace existing technologies which are either being phased out by evolving
government regulations or which are not economically viable in the absence of
tire recycling subsidies. Furthermore, government subsidies and focus, as is the
case in New York, are towards technologies that can produce higher value added
recycled products.

The finalizing of the License Agreement with Simpro means
that the gross revenues from sales will be recorded on Simpro's books, not in
the books of Tirex. The amount remitted back to Tirex will take the form of a
royalty and will be accounted for as such. Regardless of the contract structure
and the accounting effects which result, generally accepted accounting
principles in effect in the USA have the effect that the revenues to Tirex
resulting from such transactions will not be recognizable until the systems will
have been accepted by the customers. Given the time line required to
manufacture, install and have accepted these systems, it is impossible that any
revenues would become recognizable, from the point of view of US Generally
Accepted Accounting Principles, during our fiscal year which will end June 30,
2007. While the Company will benefit from the periodic cash inflows resulting
from progress payments during the next approximately ten months, the royalty
will, in fact, not have been earned until the systems are accepted by the
customers.

13

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As a result of this period preceding the commencement of
commercial operations, we have had to cover our overhead costs from sources
other than from commercial revenues. We expect that some portion of our future
overhead costs, which may be significant, will continue to be covered from
sources other than commercial revenues. Since March of 2003, our monthly
our-of-pocket cash costs have been reduced to inconsequential amounts, and thus
our requirement to find financial resources to fund operations is minimal. Our
greatest expense, from an accounting standpoint, is for salaries. These salaries
have not been paid for over four years, but rather set up as payables and
represent by far the greatest proportion of our current liabilities. Our cash
flow deficit condition will continue until such time as the Company will start
generating revenues from the sale of TCS Systems. Until we can succeed in
securing an unconditional sales contract for the sale of one or more systems
employing our technology, the company will not be engaging any significant
financial commitments and will not be engaging in any significant research and
development activities nor increasing employment.

Over the twelve months ended June 30, 2006, the expenses of
our company have been funded by a series of loans made by a significant number
of individuals investing modest amounts totaling approximately US$60,000 each
through Tirex President, John L. Threshie Jr. During Fiscal 2006, the amount was
US$60,700 and implied a future transfer of shares by Mr. Threshie totalling
13,140,000 shares (assuming no reverse splits which would cause a proportional
adjustment.) To the extent that the cash borrowed was utilized for legitimate
and documentable corporate expenses such as filing fees, we will have to
reimburse Mr. Threshie for these shares. During the three months ended September
30, 2006 a further amount of US$3,500 was secured by Mr. Threshie under
substantially the same terms and would involve 700,000 shares. During the second
quarter, a further $32,500 was obtained by Mr. Threshie under substantially the
same terms and would involve 7,500,000 shares. In January 2007, the month
following the period covered by this report, Mr.Threshie obtained a further
$5,500 which would involve 2,200,000 shares. These share implications represent
maximum amounts. To the extent that part of the cash borrowed by Mr. Threshie
would be considered for personal expenses, the share issuances attributable to
company expenses would be reclassified to salary. However, Mr. Threshie not
having been paid any salary for four years, some shares could be issued to Mr.
Threshie to cover his position, but such shares would be accounted for as a
reduction of the salary current payable to Mr. Threshie. Insofar as the funds
were lent to Mr. Threshie rather than to Tirex directly, with Mr. Threshie then
paying personally the expenses of Tirex, which expenses have been duly recorded
in our accounts offset by a liability to Mr. Threshie, the liability on our
books is still listed as being toward Mr. Threshie. Thus no direct liability
toward these investors is on our books.

Insofar as Tirex does not have shares to issue at this time,
these investors, fully cognizant of our situation and so documented in writing,
have accepted that their investment is being made via Mr. Threshie and
represents a convertible debt, the conversion of which can occur once Tirex will
have shares available for issuance. This debt is convertible at fixed prices
rather than as a discount to market. To June 30, 2006, approximately 13,140,000
million shares were involved, and a further 8,200,000 shares would be required
as a result of the first two quarter borrowings, these numbers being before any
adjustments to our share authorization structure which would cause a
proportionate adjustment to the number of shares actually issuable. The Company
is also liable to Tirex Director, Louis V. Muro in the amount of CA$75,000
(approximately US$64,000) in respect of his having repaid personally a loan made
to the company contracted out a couple of years ago.

14

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In addition to the above liability for shares, Tirex is
liable for the replacement of 11,986,315 shares which were delivered as
collateral by Tirex Directors, Threshie, Muro and Sanzaro (recently deceased)
for the $750,000 of convertible debt contracted for in 2001, which shares were
sold by the debt holders.

We will require a modification to our share authorization in
order to be able to satisfy the obligation to issue new shares. Once shares will
become available for issuance, the amounts due to Mr. Threshie, Mr. Muro and the
estate of Mr. Sanzaro will be will be satisfied. With respect to a portion of
the shares issuable to Mr. Threshie, these shares will be transferred by him to
and thence to the indirect investors noted above.

Since August 2005, the office rent of Tirex has been assumed
by Mr. Threshie. Until mid August 2006, this amount was CA$1,500 per month. This
amount was accrued as a liability to Mr. Threshie on our books since last
August. For a period of three weeks from mid-August to early September 2006, Mr.
Threshie and the Tirex office was lodged personally by Tirex CFO, Michael Ash,
who has provided these premises at a discounted rate of CA$1,000 for the
three-week period in question. Effective the week following Labor Day, the Tirex
Head Office was relocated to Stratford, Connecticut where office and operational
expenses are relatively nominal.

During the first quarter of Fiscal 2007, Tirex completed the
negotiation of the employment agreements with respect to Tirex CEO and
President, John L. Threshie Jr,, Tirex Vice President Engineering and Research
and Development, Louis V. Muro and Tirex Secretary-Treasurer and Chief Financial
Officer, Michael Ash, although the final versions have not yet been ratified.
Under the terms of these agreements, Mr. Threshies salary would be augmented to
US$150,000 retroactive to July 1, 2002 while Mr. Muros salary would be reduced
retroactively to July 1, 2002 to US$75,000. The salary of Mr. Ash would remain
unchanged at US$100,000. Also under the terms of the agreements, Mr. Threshie
would receive an option to acquire 3,000,000 shares of the corporation at the
beginning of each year of his three-year agreement, the effective inception date
being July 1 2004. Similarly, Mr. Muro would receive options to purchase
1,000,000 shares per year. Mr. Muros employment would also be effective July 1,
2004. Other than for the number of shares involved, Mr. Muros options proposed
agreement would be identical to that of Mr. Threshie. As for Mr. Ash, his
three-year employment agreement would be effective January 1, 2004 and would
provide for him to acquire 2,000,000 shares of Tirex in each of the three years
of his contract. In all cases, the exercise window would be three years. These
options could be exercised on a cashless basis and are described in more detail
elsewhere in this report Tirex does not currently have an adequate share
authorization to satisfy any exercises under these options, and, in fact,

In February of 2001, we concluded a private financing with an
investor group. Under the terms of the Agreement, we had the contractual right
to require the Investor to purchase up to US$5,000,000 of put notes. We drew
down US$750,000 of this amount and used the proceeds of this financing toward
legal and consulting fees due, normal operating expenses such as payroll, rent
and taxes and the acquisition of equipment for our prototype TCS-1 Plant. In
July of 2001, the Company entered into a technical default with respect to the
Agreement by not having an SB-2 Registration Statement declared effective by the
SEC. After several months of negotiations, the Company entered into a Settlement
Agreement with the Investor Group which provided for a cash pay down of the
amount owed, including interest and penalties over a period of approximately two
years starting with the date the Settlement Agreement was signed, the right of
the Investor Group to continue to be able to sell up to 600,000 collateral and
Rule 144 shares per month and the issuance of three series of warrants, 500,000
each, exercisable at prices of one cent, five cents and ten cents over a three
year period. This Settlement Agreement was announced in April of 2002, and
details of the terms of the Agreement are filed as an Exhibit to this Report.
The Company, in the absence of having completed its first sales of TCS Systems
according to our expectations, was unable to generate the cash flow necessary to
pay down the Convertible Note in accordance with the terms of the Settlement
Agreement. Thus, the Company once again finds itself in a position of default.
Numerous recourses are available to the holders of the Convertible Notes, but to
date, these recourses have not been exercised. Such recourses can be exercised
at any time and the fact that they have not been exercised so far does not
preclude their being exercised now or in the future. The Company has kept the
Convertible Note holders apprised of its efforts to sell TCS Systems and thus
restart the repayments on the Convertible Notes. The collateral shares provided
by the directors, totaling approximately 11,986,000 shares, have been sold by
the investors.

15

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Because of the lengthy delay preceding the commencement of
commercial operations, we have historically had to cover our overhead costs from
sources other than from commercial revenues. We expect that some portion of our
future overhead costs, which may be significant, will continue to be covered
from sources other than commercial revenues. Since March of 2003, our monthly
our-of-pocket cash costs have been reduced to relatively inconsequential
amounts, and thus our requirement to find financial resources to fund operations
has been minimal. Our greatest expense, from an accounting standpoint, is for
salaries. These salaries have not actually been paid for over four years, but
rather set up as payables. Our cash flow deficit condition will continue until
such time as the Company will start generating revenues from the sale of TCS
Systems. Until we can succeed in securing an unconditional sales contract for
the sale of one or more systems employing our technology, the company will not
be engaging any significant financial commitments and will not be engaging in
any significant research and development activities nor increasing employment.

Liquidity and Capital Resources

As of December 31, 2006, the Company had total assets of
$233,297 as compared to $233,297 at December 31, 2005 reflecting no change, and
also no change versus total assets at June 30, 2006. There were no changes in
the value of individual assets, representing Notes Receivable, Inventory,

As of December 31, 2006, the Company had total liabilities of
$5,583,380 as compared to $5,411,475 at December 31, 2005, reflecting an
increase of $171,905, and reflecting an increase of $166,667 versus total
liabilities as at June 30, 2006, which total amounted to $5,416,713. The
increase in total liabilities from December 31, 2005 to December 31, 2006 is
primarily attributable to an increase of $153,405 in Accounts Payable and
Accrued Liabilities and by an increase of $18,500 in Convertible Loans. The
increase in total liabilities from June 30, 2006 to December 31, 2006 is
primarily attributable to a decrease of $29,333 in Accounts Payable and Accrued
Liabilities and to an increase of $196,000 in Convertible Loans.

Reflecting the foregoing, the financial statements indicate
that as at December 31, 2006, the Company had a working capital deficit (current
assets minus current liabilities) of $2,648,003 compared to a working capital
deficit of $2,494,598 as at December 31, 2005, reflecting an increase of
$153,405. The working capital deficit of $2,648,003 as at December 31, 2006
compares to a working capital deficit of $2,677,336 as at June 30, 2006,
reflecting an decrease of $29,333.

The financial statements which are included in this report
reflect total operations and other expenses of $244,604 for the six month period
ended December 31, 2006 versus $289,173 for the comparative six month period
ended December 31, 2005, reflecting an decrease of $44,569. The Company has
ceased Research and Development activities thereby resulting in a significant
decrease in personnel expenses and other Research and Development expenses
compared with prior periods.

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

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

From inception (July 15, 1987) through December 31, 2006, the
Company has incurred a cumulative net loss of $30,553,224. Approximately
$1,057,356 of such cumulative net loss was incurred prior to the inception of
the Companys present business plan, in connection with the Companys
discontinued proposed health care business and was due primarily to the
expending of costs associated with the unsuccessful attempt to establish such
health care business. The Company never commenced the proposed health care
operations and therefore, generated no revenues therefrom.

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Item 3 - Controls and Procedures

The Company's management, with the participation of its Chief
Executive Officer, who is the Company's principal executive officer, and its
Chief Financial Officer, who is the Company's principal financial officer, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of December 31, 2006. Based upon that evaluation, the Chief Executive Officer
and the Chief Financial Officer have concluded that the Company's disclosure
controls and procedures are effective in alerting them in a timely manner to
material information relating to The Tirex Corporation, including its
consolidated subsidiaries, required to be included in this report and the other
reports that the Company files or submits under the Securities Exchange Act of
1934. During the first quarter of fiscal 2007, there have been no changes in the
Company's internal control over financial reporting that have materially
affected, or that are reasonably likely to materially affect, its internal
control over financial reporting.

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PART II: OTHER INFORMATION

Item 1:

Item 1 - Legal Proceedings

We are presently a party in the following legal proceedings,
the status of which has not changed since the Company filed its Annual Report on
Form 10-KSB for Fiscal 2006.

IM(2) Merchandising and Manufacturing, Inc and David B.
Sinclair v. The Tirex Corporation, Tirex Corporation Canada, Inc., et al.

Lefebvre Frères Limited v. The Tirex Corporation

Tri-Steel Industries Inc. v. The Tirex Corporation

No director, officer, or affiliate of the Company, or any
associate of any of them, is a party to or has a material interest in any
proceeding adverse to us.

Item 2: - Unregistered Sales of Equity Securities and Use
of Proceeds

None

Item 3 - Defaults Upon Senior Securities

Other than defaults previously reported on in prior periods,
there were no other defaults upon senior securities.

Item 4 - Submission of Matters to a Vote of Security
Holders

During the six-month period ended December 31, 2006, there
were no submissions of matters to a vote of Security Holders.

Item 5  Other Information

There have been no material changes in the way in which
shareholders may nominate directors.

Item 6 - Exhibits and Reports on Form 8-K

Exhibits Exhibit 31.1 Certification of Form 10-Q filing by the Chief Executive Officer
Exhibit 31.2 Certification of Form 10-Q filing by the Chief Financial Officer
Exhibit 32.1 Certification Pursuant to the Sarbanes-Oxley Act by the Chief
Executive Officer Exhibit 32.2 Certification Pursuant to the Sarbanes-Oxley Act by the Chief
Financial Officer

No Reports on Form 8-K were filed during the period covered
by this report

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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: February 6, 2007 | By | /s/ John L. Threshie,jr.                  
|                       |    | John L. Threshie, Jr. President           
|                       |    |                                           
|                       |    |                                           
|Date: February 6, 2007 | By | /s/ Michael Ash                           
|                       |    | Michael Ash, Treasurer and                
|                       |    | Chief Accounting and
    Financial Officer





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