Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
000-28323
Commission File Number
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(Exact name of registrant as specified in its charter)
NEVADA 98-0368586
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1620 CYPRESS GARDEN ROAD, MONCKS CORNER, SC 29461
(Address of principal executive offices) (Zip Code)
(843) 761-7955
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ X ] No [ ]
1
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
26,543,185 COMMON SHARES OUTSTANDING AS OF AUGUST 18, 2011
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.)
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
TABLE OF CONTENTS
Page
---------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4T. Controls and Procedures 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 27
Item 4. Removed and Reserved 27
Item 5. Other Information 27
Item 6. Exhibits 28
Signatures 28
3
PART I
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. All such adjustments are of a normal recurring
nature. Operating results for the six month period ended March 31, 2011, are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2011. For further information refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the nine months ended September 30, 2010.
Page
Interim Financial Statements 4
Interim Balance Sheets 5
Interim Statements of Operations 6
Interim Statements of Cash Flows 7
Notes to Interim Financial Statements 8
4
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
-----------------------------------------------
(A Development Stage Company)
INTERIM BALANCE SHEETS
(Stated in U.S. Dollars)
----------------------
March 31, September 30,
2011 2010
---------------- -----------------
ASSETS (Unaudited)
Current Assets
Cash $ 21 $ 10,448
-- ---------------- -- -----------------
TOTAL ASSETS $ 21 $ 10,448
== ================ == =================
LIABILITIES and STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued
liabilities $ 99,637 $ 71,613
Accounts payable - related
parties 31,165 24,880
Accrued payroll 120,000 -
Loan payable - related parties 156,894 51,023
Convertible notes - related party 405,558 161,956
-- ---------------- -- -----------------
TOTAL CURRENT LIABILITIES 813,254 309,472
STOCKHOLDERS' DEFICIT
Preferred stock, $0.10 par value
1,000,000 shares authorized, none issued - -
Common Stock
$0.001 par value, authorized 100,000,000
shares
Issued and outstanding 9,093,185 shares at
March 31, 2011 and 8,930,185 shares at
September 30, 2010 9,093 8,930
Additional paid in capital 3,830,134 3,797,697
Accumulated deficit during the development
stage (4,652,460) (4,105,651)
-- ---------------- -- -----------------
TOTAL STOCKHOLDERS' DEFICIT (813,233) (299,024)
-- ---------------- -- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 21 $ 10,448
== ================ == =================
SEE ACCOMPANYING NOTES TO INTERIM FINANCIAL STATEMENTS
5
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
For the three and six months ended March 31, 2011 and 2010 and
for the period December 15, 1998 (Date of Inception) to March 31, 2011
(Unaudited)
(Stated in U.S. Dollars)
----------------------
Three months Six Months December 15,
1998
(Date of
Ended March 31, Ended March 31, Inception)
To March 31,
2011 2010 2011 2010 2011
--------- ------- -------- -------- ----------
REVENUE
$ - $ - $ - $ - $ -
EXPENSES
General and
administrative 17,306 1,466 26,693 1,653 1,073,192
Professional fees 16,600 4,950 40,539 13,135 93,117
Salaries and
consulting 104,700 1,913 231,200 2,523 302,968
---------- ---------- ----------- ----------- ----------
NET INCOME (LOSS)
FROM OPERATIONS (138,606) (8,329) (298,432) (17,311) (1,469,277)
OTHER INCOME AND
EXPENSES
Interest expense (123,643) (1,545) (248,378) (6,194) (430,947)
---------- --------- ---------- ---------- ----------
(123,643) (1,545) (248,378) (6,194) (430,947)
Income(tax) benefit - - - - 2,235
---------- --------- ---------- -------- ---------
Net income (loss)
before discontinued
operations (262,249) (9,874) (546,810) (23,505) (1,897,989)
Discontinued operations
of subsidiary - - - - (2,754,471)
---------- --------- ---------- ---------- -----------
NET LOSS $ (262,249) $ (9,874) $ (546,810) $ (23,505) $ (4,652,460)
========== ========= =========== ========== =============
BASIC AND DILUTED
LOSS PER SHARE
$ (0.03) $ (0.00) $ (0.06) $ (0.00)
====== ======= ========== ==========
Basic and diluted weighted
average number
of shares 9,093,185 8,930,185 9,039,449 8,930,185
========== ========= ========== ===========
SEE ACCOMPANYING NOTES TO INTERIM FINANCIAL STATEMENTS
6
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
-----------------------------------------------
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
For the Six months ended March 31, 2011 and 2010 and
for the period December 15, 1998 (Date of Inception) to March 31, 2011
(Unaudited)
(Stated in U.S. Dollars)
----------------------
December 15, 1998
Six months ended (Date of Inception)
March 31, To March 31, 2011
2011 2010
-------- --------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for
the period $ (546,810) $ (23,505) $ (1,897,989)
Adjustment to reconcile net loss to cash used in
operating activities
Consulting fees
settled with
stock 24,000 - 32,250
Expenses paid with
stock 8,600 - 67,805
Stock-based compensation on
consulting services - - 4,054
Amortization of convertible
notes discount 221,512 368,781
Imputed interest on the
promissory notes 22,091 - 38,332
Changes in assets and liabilities:
Accounts payable and accrued
liabilities 148,024 (9,472) 218,083
Accounts payable - related
parties 6,285 25,202 31,165
------------ ----------- --------------------
Cash used in operating
activities - continued
operations (116,298) (7,775) (1,137,519)
Cash used in operating
activities - discontinued
operations - - (1,977,551)
----------- ----------- -------------------
NET CASH FLOWS USED IN
OPERATING ACTIVITIES (116,298) (7,775) (3,115,070)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used in investing activities
- continued operations - - -
Cash used in investing activities
- discontinued operations - - (708,390)
---------- ----------- -------------------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES - - (708,390)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on related
parties loan (10,000) - (10,000)
Proceeds from related
parties loan payable 115,871 7,775 609,918
Proceeds from issuance
of common stock - - 3,359,549
---------- ----------- -------------------
Cash provided by financing
activities - continued
operations 105,871 7,775 3,959,467
Cash used in financing
activities - discontinued
operations - - (135,986)
---------- ----------- -------------------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES 105,871 7,775 3,823,481
Net increase (decrease) in
cash and cash equivalents (10,427) - 21
Cash and cash equivalents
at beginning of period 10,448 - -
----------- ---------- -------------------
Cash and cash equivalents
at end of period $ 21 $ - $ 21
============ =========== ===================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for
Interest $ - $ - $ 21,981
============ =========== ===================
Income taxes $ - $ - $ -
============ =========== ===================
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING AND INVESTING
ACTIVITIES:
Convert loan payable -
related parties to
convertible notes $ - $ - $ 443,024
============ =========== ===================
SEE ACCOMPANYING NOTES TO INTERIM FINANCIAL STATEMENTS
7
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 1- BASIS OF PRESENTATION
a) Organization
The Company was incorporated under the laws of the State of Nevada on
February 19, 1986 with authorized common stock of 10,000,000 shares with
par value of $0.0025. On April 25,1998 the authorized common stock was
increased to 100,000,000 shares with a change in par value to $0.001 and
on February 9, 1999 the Company changed its name to IVision Group Ltd. On
April 15, 1998 the Company completed a reverse common stock split of two
shares of its outstanding stock for one share and on January 8, 1999 a
forward common stock split of one share of outstanding stock for four
shares. This report has been prepared showing after stock split shares
with a par value of $0.001 from inception. On January 27, 1999, the
Company acquired all of the outstanding stock of I Vision USA Inc. through
a stock for stock exchange in which the stockholders of I Vision USA Inc.
received 8,000,000 common shares of the Company in exchange for all of the
stock of I Vision USA Inc. I Vision USA Inc. was organized in the state of
Delaware on December 15, 1998 and had purchased all of the outstanding
stock of I Vision Integral Inc. which was organized in Canada during March
1998. I Vision USA Inc. and I Vision Integral Inc. were organized for the
purpose of conducting electronic commerce on the World Wide Web. For
reporting purposes, the acquisition was treated as an acquisition of the
Company by I Vision USA Inc. (reverse acquisition) and a recapitalization
of I Vision USA Inc. The historical financial statements prior to January
27, 1999 are those of I Vision USA Inc. and its subsidiary I Vision
Integral Inc. During September 1999, the Company acquired all of the
outstanding stock of La Societe De Services, Bergeron Conseils Et
Realisation Inc., and Ixiem Production Inc. by the issuance of 234,000
shares of its common stock and a promissory note of $150,000 CDN. This
debt was settled for stock and the companies have since been discontinued
or abandoned.
The financial statements shown in this report include the accounts of the
Company as outlined in the notes above. These financial statements are
presented from the inception date of December 15, 1998 which was the date
of incorporation of I Vision U.S.A, Inc. as this company was the last
operating entity.
During fiscal year 2003, the Company and its subsidiaries ceased
operations and on April 1, 2004, the Company divested itself of all of its
subsidiaries by way of a divestiture agreement whereby the Company
transferred all of the shares of the subsidiaries in exchange for the
assumption of all of the outstanding debt of the subsidiaries. The impact
of these divestitures on the balance sheet of the Company was to
substantially reduce the outstanding liabilities.
On December 21, 2006, the Company issued a total of 500,000 post split
common shares pursuant to a debt settlement agreement between the Company
and Mr. Antonio Care. This issuance of shares effected a change in control
of the Company.
On February 8, 2007, the Company effected a reverse split of its shares of
common stock on the basis of 1 new share for every 100 shares held at the
time of the reverse split. Concurrent with the reverse split of its shares
the Company changed its name to Tire International Environmental Solutions
Inc.
On March 13, 2007, the Company issued a total of 4,900,000 common shares
at a deemed price of $0.001 per share in settlement of a total of $49,000
in related party debt. The related party required the shares be issued to
a total of 14 stockholders.
On December 7, 2007, the Company issued a total of 2,805,000 common shares
at a deemed price of $0.001 per common share in settlement of a total of
$28,050 in related party debt. The related party required the shares be
issued to a total of 14 stockholders.
8
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A Development Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
On December 1, 2010, the Company entered into a three-month term
consulting contract with HAWK Associates Inc. ("HAWK"), an investor
relations and consulting firm. HAWK provides investor relations, finical
media relations and other appropriate consulting and advisory services. In
consideration for such services, HAWK: (i) is paid a retainer fee per
month; and (ii) was paid a one-time cash setup fee of $2,000. For the
three month period, HAWK accepted as payment the following:(i) $2,000 in
cash payment per month and (ii) 6,000 shares per month of restricted Rule
144 stock, priced at the closing price of the stock on the effective date
of the contract. On December 1, the Company paid $4,000 representing the
first months cash requirement and the set up fee and issued a total of
18,000 shares of restricted common stock of the Company valued at $3,600.
On December 1, 2010, the Company entered into a consulting contract with
Aquiline Group Inc. ("AQUILINE"), a full service public relations and
consulting firm dedicated to the peak performance of private and public
companies. AQUILINE was to provide services for consulting, business
advisory, shareholder information and public/investor relations. In
consideration for such services, AQUILINE: was paid a retainer fee of
$50,000; and (ii) was issued a total of 120,000 shares of restricted
common stock of the Company. On January 10, 2011 the Company terminated
the AQUILINE consulting contract for lack of performance. The shares
issued were valued at $24,000.
On December 1, 2010 the Company changed its stock transfer agent to Island
Stock Transfer ("Island") and as a payment in lieu of cash issued 25,000
shares of restricted common stock. Island provides stock transfer agent
and related services to the Company. The shares issued were valued at
$5,000.
9
The Company has been seeking acquisitions since it discontinued
operations. During 2010 the Company determined it would focus its effort
in the tire recycling and recycled rubber finished product manufacturing
industry. During the current fiscal year the Company has taken several
steps to further this business objective and as a result the Company
expects to emerge from inactive to operating status in the third fiscal
quarter.
The Company has negotiated an exclusive license agreement with Tonmik a
manufacturer of recycled rubber finished products in China for sale to big
box retailers to manufacture the Tonmik Product Line in the United States;
has signed a Joint Venture Agreement providing the required technology and
equity capital with an Italian manufacturer of tire recycling and recycled
rubber molding equipment; has applied for $30 million of State of South
Carolina JEDA Bonds; has negotiated a purchase agreement to acquire a 22
acre tire recycling facility in South Carolina with the required
infrastructure to operate the Company's business including a 100,000
square foot manufacturing plant, has negotiated a stock for stock purchase
agreement to acquire two South Carolina companies with the required
federal, state and local permits to operate in South Carolina and the tire
recycling equipment needed to manufacture the Company's new product lines;
and has retained the services of Guggenheim Securities, to assist it in
raising the debt financing for the South Carolina facility. In connection
with the South Carolina operation the Company has applied for a series of
South Carolina and Berkeley County real estate, personal property, sales
and income tax incentives and job training and grants to locate its United
States operations in Berkeley County, South Carolina which the Company
expects will provide the Company reimbursement for costs of up to $1
million and reduce or eliminate real estate, personal property, sales and
income taxes by over $4 million over the life of the project. The Company
is also working to supply the South Carolina manufacturing operations with
scrap tires from various locations in the United States and Canada. These
suppliers will use truck, local South Carolina port facilities and an on
site rail spur to deliver the raw material. All of these agreements are
further described in Note 8.
The Company as of March 31, 2011 is an inactive shell company, but is
expected to become an operating company upon the commencement of
operations in South Carolina during the third fiscal quarter. To
facilitate the commencement of operations the Company in April, 2011
formed a wholly owned subsidiary, Tonmik Import/Export Solutions, Inc.
10
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
b) Basis of presentation
On November 3, 2010, the Board of Directors of the Company, by quorum,
approved a change of the fiscal year end from December 31 to September 30
effective as of November 3, 2010. The change was made to align its fiscal
periods more closely with the seasonality of its business and improve
comparability with industry peers.
c) Going Concern
As of March 31, 2011, the Company has an accumulated deficit of
$4,652,460. The Company has remained in the development stage due to its
lack of business operations. During 2010 the Company decided to pursue the
development of a fully integrated tire recycling and recycled rubber
finished product manufacturing business. During 2011 the Company has
identified a location in South Carolina and has applied for a series of
state and local grants and real estate, personal property, sales and
income tax abatements. If such applications are accepted the Company will
move forward with its business plan in South Carolina and will be
operational in the Company's third fiscal quarter. The Company has also
negotiated a series of agreements to acquire the facilities and equipment
necessary to carry out its business plan. While the negotiated agreements
provide the Company with a portion of the required capital through the
issuance of the Company's common stock, it will need to complete the bond
issue or an alternative debt issue to pursue its business plan. At the
time of this report the Company has only received some of the required
approvals from the South Carolina agencies, therefore, the Company can not
complete the negotiated agreements and has not completed the additional
capital agreements required to be in full operations. These factors create
an uncertainty about the Company's ability to continue as a going concern.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Revenue Recognition
Revenues are recognized in accordance with applicable accounting
standards under which product revenues (or service revenues) are
recognized when persuasive evidence of an arrangement exists, delivery
has occurred (or service has been performed), the sales price is fixed
and determinable and collectability is reasonably assured.
b) Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with
original maturities of less than three months to be cash equivalents.
c) Comprehensive Income
Since 1999, the Company adopted ASC 220, "Comprehensive Income", for the
reporting of comprehensive income and its components.
d) Income Taxes
Income taxes are computed using the asset and liability method. Under
this method, deferred income tax assets and liabilities are determined
based on the differences between the financial and tax bases of assets
and liabilities and are measured using the currently enacted tax rates
and laws. ASC 740 requires recording a valuation allowance against
deferred tax assets if based on the weight of available evidence, it is
more likely than not that some or all of its deferred tax assets will
not be realized.
e) Depreciation and Amortization
Property and equipment are stated at cost. Depreciation is calculated on
a diminishing balance basis over the estimated useful lives of the
assets, generally five to thirty years. Trademarks and patents are
depreciated on a straight-line basis over a period of twenty years.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized.
11
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
f) Estimates and Assumptions
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were assumed in preparing the financial statements.
g) Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net loss
available to common stockholders by the weighted average number of
shares outstanding during the period. Diluted net income (loss) per
share is computed using the weighted average number of common shares and
common equivalent shares outstanding during the period. Common
equivalent shares consist of shares issuable upon the exercise of stock
warrants.
h) Allowance for Doubtful Accounts
The Company provides an allowance for uncollectible accounts. The
allowance is based upon management's periodic analysis of receivables,
evaluation of current economic conditions and other pertinent factors.
Ultimate losses may vary from current estimates and, as additions to the
allowance become necessary, they are charged against earnings in the
period they become known. Losses are charged and recoveries are credited
to the allowance.
i) Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets using
future undiscounted cash flows attributed to such asset. The company
recognizes impairment of long-lived assets in the event the net book
value of such assets exceeds the future undiscounted cash flows
attributable to such assets.
j) Advertising Costs
The Company recognizes advertising expense on the cost of communication
advertising in the period in which the advertising space or airtime is
used. There were no advertising costs for the six months ended March 31,
2011 and 2010.
k) Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist primarily of cash and
accounts receivable. Cash is deposited with high credit, quality
financial institutions. Accounts receivable are typically unsecured and
are derived from revenues earned from customers located throughout the
United States. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses;
historically, such losses have been within management's expectations.
l) Fair Value of Financial Instruments
The Company's financial instruments, including cash, accounts
receivable, accounts payable, notes payable and long-term obligations
are carried at cost, which approximates their fair value because of the
short-term maturity of these instruments.
12
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 3 - NEW ACCOUNTING STANDARDS
Recent Accounting Pronouncements
We have reviewed recent accounting pronouncements and determined they will have
no present or future impact on our business.
NOTE 4 - RELATED PARTIES TRANSACTIONS
I. Stockholder loans:
On June 12, 2010, pursuant to a letter of default on accounts payable owed
to a Director and Officer of the Company, the Company restructured its
related party outstanding accounts payable totaling $443,024 as of March
31, 2010. The accounts payable was restructured to a one year, 10%
interest bearing convertible promissory note ('Note") dated June 1, 2010
and due on May 31, 2011. The conversion price of the Note is $0.01. As of
June 12, 2010, using the guidance provided in ASC 470-20-25, we evaluated
the Note and concluded that the convertible promissory note has an
embedded beneficial conversion feature. The embedded beneficial conversion
feature was valued and had been recognized as additional paid-in-capital
by allocating a portion of the proceeds equal to the intrinsic value of
the feature. The resulting discount on the Note is amortized to interest
expense using the effective interest method over the life of the Note.
The carrying value and terms of the Note is as following:
March 31, 2011
Face value due May 31, 2011 $ 443,024
Less: Unamortized discount (74,243)
------------------
Carrying value: $ 368,781
During the six months ended March 31, 2011, the Company accrued interest
of $36,777 related to the Note. An amount of $405,558 is reflected on the
Company's balance sheets as Convertible note - related parties including
the carrying value of $368,781 disclosed above, as well as accrued
interest to March 31, 2011 totaling $36,777.
As of March 31, 2011 Mr. Antonio Care, an officer and Director of the
Company, had outstanding loans to the Company in the amount of $40,023.
The loans bear 10% interest and are due on demand.
During the six months ended March 31, 2011, the Company received operating
funds from two of our shareholders in the amount of $76,191 creating a
balance of loan at March 31, 2011 of $87,191. The loans bear 10% interest
and are due on demand. During the six month period ended March 31, 2011,
the Company paid the principal in the amount of $10,000.
During the six months ended March 31, 2011, the Company received operating
funds from Tonmik which is wholly owned by Antonio Care, the Company's
Chief Executive Officer in the amount of $29,680. The loans bear 10%
interest and are due on demand.
13
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 4-RELATED PARTIES TRANSACTIONS (CONTINUED)
II. Consulting Services and Employment Contacts
On April 16, 2010, Mr. Dean Petkanas joined the Board of Directors of the
Company and on June 11, 2010, Mr. Dean Petkanas was appointed Interim
Chief Operating Officer and Acting Chief Financial Officer of the Company.
During the two month period from April 1, 2010 to May 31, 2010, Mr.
Petkanas was paid consulting fees of $10,000 and issued 150,000
unregistered non-qualifying common stock options that can be exercised
during the next 5 years at $.30 per share. On June 12, 2010, the Company
entered into an engagement agreement (the "Engagement") with Mr. Petkanas.
This Engagement became effective on June 1, 2010.
On December 8, 2010, Mr. Petkanas, informed the Board of Directors that he
was resigning. As part of a settlement Mr. Petkanas received from the
Company $15,453 comprised of consulting fees of $15,000 owed to him
pursuant to his contract and reimbursed expense in the amount of $453.
On December 1, 2010, the Company entered into an employment agreement with
Mr. Antonio Care, a Chief Executive Officer of the Company. In
consideration of his performance of duties and responsibilities, the
Company will pay Mr. Care a base salary of $10,000 per month and an
allowance of up to $333 per month for the purpose of leasing, owning and
/or maintaining a vehicle for use in connection with the services for the
Company. As of March 31, 2011 Mr. Care was due $40,000 in accrued salary.
On December 1, 2010, the Company entered into an employment agreement with
Mr. Marco Alfonsi, a Chief Operating Officer of the Company. In
consideration of his performance of duties and responsibilities, the
Company shall pay to Mr. Alfonsi a base salary of $10,000 per month and an
allowance of up to $333 per month for the purpose of leasing, owning and
/or maintaining a vehicle for use in connection with the services for the
Company. As of March 31, 2011 Mr. Alfonsi was due $40,000 in accrued
salary.
On December 1, 2010, the Company entered into an employment agreement with
Mr. Cosimo Care, a Marketing Director and Manager of IT of the Company. In
consideration of his performance of duties and responsibilities, the
Company shall pay to Mr. Care a base salary of $2,500 per month and an
allowance of up to $333 per month for the purpose of leasing, owning and
/or maintaining a vehicle for use in connection with the services for the
Company. As of March 31, 2011 Mr. Care was due $10,000 in accrued salary.
On December 1, 2010, the Company entered into an employment agreement with
Mr. Martin Sergi, a Chief Financial Officer of the Company. In
consideration of his performance of duties and responsibilities, the
Company shall pay to Mr. Sergi a base salary of $10,000 per month and an
allowance of up to $333 per month for the purpose of leasing, owning and
/or maintaining a vehicle for use in connection with the services for the
Company. On December 1, 2010, the Company paid $10,000 in cash pursuant to
the contract. As of March 31, 2011 Mr. Sergi was due $30,000 in accrued
salary.
14
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 5-COMMON STOCK
The Company is authorized to issue 100,000,000 shares of $.001 par value common
stock.
On February 8, 2007, the Company effected a 100 for 1 reverse stock split. All
share and per share amounts have been restated to reflect the split as if it had
occurred at the beginning of the earliest period presented.
On April 1, 2008, the Company issued a total of 141,000 common shares in
settlement of $8,250 of outstanding debt relating to consulting fees for fiscal
2007 which were invoiced from the consultants during fiscal 2008.
On April 25, 2008 the Company issued a total of 150,000 shares to officers and
directors as compensation for officers' and directors' fees of $1,500 for fiscal
2008.
On December 1, 2010, the Company entered into a three-month term consulting
contract with HAWK Associates Inc. ("HAWK"), an investor relations and
consulting firm. HAWK provides investor relations, finical media relations and
other appropriate consulting and advisory services. In consideration for such
services, HAWK: (i) is paid a retainer fee per month; and (ii) was paid a
one-time cash setup fee of $2,000. For the three month period, HAWK accepted as
payment the following: (i) $2,000 in cash payment per month and (ii) 6,000
shares per month of restricted Rule 144 stock, priced at the closing price of
the stock on the effective date of the contract. On December 1, the Company paid
$4,000 representing the first months cash requirement and the set up fee and
issued a total of 18,000 shares of restricted common stock of the Company valued
at $3,600.
On December 1, 2010, the Company entered into a consulting contract with
Aquiline Group Inc. ("AQUILINE"), a full service public relations and
consulting firm dedicated to the peak performance of private and public
companies. AQUILINE was to provide services for consulting, business advisory,
shareholder information and public/investor relations. In consideration for such
services, AQUILINE: was paid a retainer fee of $50,000; and (ii) was issued a
total of 120,000 shares of restricted common stock of the Company. On January
10, 2011 the Company terminated the AQUILINE consulting contract for lack of
performance. The shares issued were valued at $24,000.
On December 1, 2010 the Company changed its stock transfer agent to Island Stock
Transfer ("Island") and as a payment in lieu of cash issued 25,000 shares of
restricted common stock. Island provides stock transfer agent and related
services to the Company. The shares issued were valued at $5,000.
As of September 30, 2010 and March 31, 2011 the Company had 8,930,185 and
9,093,185 shares of common stock outstanding, respectively.
15
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 6-STOCK OPTION
As discussed in Note 4 above, effective June 1, 2010, the Company granted One
Hundred and Fifty Thousand (150,000) shares of common stock of the Company with
exercise price equal to Thirty cents ($.30) per common shares and expiring in
five (5) years from the date of issue of the Agreement. Under ASC 718, the grant
date fair value of the options, which has been determined based upon the value
of the Company's shares on the grant date using the Black Sholes method and
which was expensed. The Company has recognized stock-based expense as consulting
fee of $4,054 with respect to the vested portion at September 30, 2010.
The following table summarized information on the Company's option:
Weighted Average
Number Granted Date Fair Value
Unvested, at December 31, 2009 - $ -
Granted 150,000 0.03
Vested 150,000
---------- --------------------------
Unvested, at September 30, 2010 - $ -
========== ==========================
NOTE 7-INCOME TAXES
No provision was made for federal income tax, since the Company had a
significant net operating loss. Net operating loss carryforwards may be used to
reduce taxable income through the year 2030. The availability of the Company's
net operating loss carryforwards are subject to limitation if there is a 50% or
more change in the ownership of the Company's stock, and may be subject to other
limitations under the Internal Revenue Code. The Company has recorded a 100%
valuation allowance for the deferred tax asset due to the uncertainty of its
realization.
The components of the net deferred tax asset are summarized below for the years
ended September 30, 2010 and March 31, 2011:
March 31, September 30,
2011 2010
Deferred tax asset $ 455,782 $ 264,399
Less: valuation allowance (455,782) (264,399)
--------------- --------------
$ - $ -
Net deferred tax assets
=============== ==============
The net operating loss carryforward as of September 30, 2010 for federal and
state income tax purposes was approximately $755,425. The carryforwards begin to
expire in fiscal year 2019. Deferred tax assets have been reduced by a valuation
allowance because of uncertainties as to future recognition of taxable income to
assure realization. The net change in the valuation allowance for the year ended
September 30, 2010 was $88,795 and for the six months ended March 31, 2010 was
$191,383. The figures reflect those of the Company only, as all previously
operating subsidiaries are now divested.
The Company adopted the provisions of uncertain tax positions as addressed in
ASC 740-10-65-1 on January 1, 2007. As a result of the implementation of ASC
740, the Company recognized approximately no increase in the liability for
unrecognized tax benefits.
16
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Effective June 16, 2010, the Company has signed a Joint Venture Agreement (the
"Agreement") with Tires SpA. ("TIRES"), an Italian manufacturer of heavy
industrial processing and recycling equipment. Under the terms of the Agreement,
as part of a purchase order by the Company the terms of which are detailed
below, the Company will own fifty percent (50%) of the TIRES U.S. patent pending
for the TIRES state-of-the-art tire recycling plant, which patent covers the
method and installation of recycling of used tires for conversion into finished
products (the "Waste to Value Technology") for the North American market. The
Agreement between the Company and TIRES calls for a payment of (euro)11,100,000
($14,476,000 million USD), of which (euro)7,700,000 ($10,041,900 USD) is to be
paid by way of cash and the remaining balance of (euro)3,400,000 shall be paid
via the issuance of common shares of the Company. For the purpose of
calculating the issuance price of the shares, the parties have agreed to a Euro
to USD rate of 1.2 bringing the amount due to $4,080,000 in USD. The parties
have further agreed to issue the shares at a deemed price of $0.50 per share.
Therefore the Company will be required to issue a total of 8,160,000 shares of
common stock to TIRES. The payment schedule was as follows:
o (euro)1,000,000 ($1,304,140 USD) and the issuance of a total of
1,140,000 shares of common stock of the Company to be paid by July 30,
2010, on the same date of the delivery of the first module of the
"Refiner Full" plant;
o (euro)1,000,000 ($1,304,140 USD) and the issuance of a total of
1,140,000 shares of common stock of the Company to be paid by November
30, 2010, on the same date of delivery of the second module of the
"Refiner Full" plant;
o (euro)1,000,000 ($1,304,140 USD) and the issuance of a total of
1,140,000 shares of common stock of the Company to be paid by December
31, 2010, on the same date of delivery of the third module of the
"Refiner Full" plant;
o (euro)1,000,000 ($1,304,140 USD) and the issuance of a total of
1,140,000 shares of common stock of the Company to be paid by January
31, 2011, on the same date of delivery of the fourth and last module
of the "Refiner Full" plant;
o (euro)925,000 ($1,206,330 USD) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by February 28, 2011,
on the on the same date of delivery of the first module of the
"Quadruple Rubber Tiles" plant;
o (euro)925,000 ($1,206,330 USD) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011, on
the on the same date of delivery of the second module of the "Quadruple
Rubber Tiles" plant;
o (euro)925,000 ($1,206,330 USD) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011, on
the on the same date of delivery of the third module of the "Quadruple
Rubber Tiles" plant;
o (euro)925,000 ($1,206,330 USD) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011, on
the on the same date of delivery of the fourth and last module of the
"Quadruple Rubber Tiles" plant;
Upon the issuance of the first shares to TIRES, TIRES shall have the right to
appoint a representative to the Board of Directors of the Company.
According to the agreement between the parties, if the initial payment was not
made by July 30, 2010, the contract will be null and void. The Company
negotiated with several potential funders but was not be able to make the
payment date of July 30, 2010. Currently, there is an amended agreement
extending the payment date to June 16, 2011.
On January 18, 2011, the Company completed a Purchase Agreement with Antonio
Care, the Company's Chief Executive Officer. Under the Agreement, the Company
subject to certain conditions is acquiring all of the outstanding stock of
Tonmik Import/Export Solutions, Inc ("Tonmik"). Tonmik is a Montreal based
distributor of recycled rubber products to big box retailers that are currently
manufactured using purchased recycled crumb rubber at its facility in China.
Tonmik has been operating its Chinese manufacturing facility for 6 years. The
Company expects to develop a fully integrated scrap-tire-to-finished product
business capitalizing on the consumer demand for Tonmik finished product order
flow that could not be met with the Tonmik Chinese facilities.
17
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2011
(Unaudited)
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On February 10, 2011, the Company completed an Investment Banking Engagement
Agreement with Stone & Youngberg, LLC ("Stone"). Under the Agreement, the
Company has retained Stone to act as sole manager for the anticipated debt
financing for the Company's new US tire recycling and finished product
manufacturing project (the "Project"). Compensation under the Agreement is based
on the successful completion by Stone of a privately placed corporate obligation
non-rated debt financing with net proceeds of $20 million for the Project. On
March 31, 2011, the Company terminated this agreement to sign a similar
agreement with another Investment Banker.
On March 17, 2011, the Company entered into an Investment Banking Engagement
Agreement with Guggenheim Securities, LLC ("Guggenheim"). Under the Agreement,
the Company has retained Guggenheim to act as sole manager for the anticipated
debt financing for the Company's new US tire recycling and finished product
manufacturing project (the "Project"). Compensation under the Agreement is based
on the successful completion by Guggenheim of a privately placed corporate
obligation non-rated debt financing with net proceeds of $20 million for the
Project. The debt financing may qualify for tax exempt status in the Project
state. The Company is evaluating proposed Projects with Guggenheim in New
Jersey, Pennsylvania and South Carolina to determine the most suitable host
facility for the Company's tire recycling and finished product manufacturing
business. The Company, as part of the Project, is arranging for $10 million in
new equity capital to support the debt financing. The Company will also pay
Guggenheim for expenses incurred under the Agreement.
On March 31, 2011, the Company terminated a December 14, 2010 Financial Advisory
and Investment Banking Engagement Agreement with CIM Securities, LLC of
Centennial, Colorado ("CIM"). Under the agreement, the Company had retained CIM
to provide the Company financial advisory services in its effort to raise
capital, identify Merger and Acquisition targets and negotiate license
agreements. Compensation under the agreement was based on the successful
completion by the Company of privately placed capital financings, mergers,
acquisitions or licensing agreements for which CIM provided financial advisory
services. The Company has paid CIM a non-refundable deposit of $25,000 against
fees and expenses incurred under the agreement. The deposit was expensed during
the six months ended March 31, 2011.
NOTE 9 - RECLASSIFICATION
During the six months ended March 31, 2011, the Company reclassified certain
items on the financial statements in the column showing December 15, 1998 (Date
of Inception) to March 31, 2011 to conform to the presentation in the March 31,
2011 financial statements.
NOTE 10 - SUBSEQUENT EVENTS
During April 2011, the Company has negotiated an exclusive license agreement
with Tonmik, a manufacturer of recycled rubber finished products in China for
sale to big box retailers to manufacture the Tonmik Product Line in the United
States and in China, which will allow the Company to begin operations during the
third fiscal quarter. The Company, on April 2011 formed a wholly owned
subsidiary, Tonmik Import/Export Solutions, Inc. which in May 2011 will begin
operations at the South Carolina facility.
During April 2011 the Company met with its Italian Joint Venture partner to
amend its agreement for the South Carolina project specific requirements. The
required manufacturing technology and a portion of the equity capital required
for the South Carolina project is being supplied by an Italian manufacturer of
tire recycling and recycled rubber molding equipment.
18
During April 2011 the Company has applied to for $30 million of State of South
Carolina JEDA Bonds. The Company has retained the services of Guggenheim
Securities, to assist it in raising the debt financing for the South Carolina
facility.
During April 2011 the Company has negotiated a purchase agreement to acquire a
22 acre tire recycling facility in South Carolina with the required
infrastructure to operate the Company's business including a 100,000 square foot
manufacturing plant.
During April 2011 the Company has negotiated a stock for stock purchase
agreement to acquire two South Carolina companies with the required federal,
state and local permits to operate in South Carolina and the tire recycling
equipment needed to manufacture the Company's new product lines.
In connection with the South Carolina operation the Company has applied for a
series of South Carolina and Berkeley County real estate, personal property,
sales and income tax incentives and job training and grants to locate its United
States operations in Berkeley County, South Carolina which the Company expects
will provide reimbursement the Company reimbursement for costs of up to $1
million and reduce or eliminate real estate, personal property, sales and income
taxes by over $4 million over the life of the project.
The Company is also working to supply the South Carolina manufacturing
operations with scrap tires from various locations in the United States and
Canada. These suppliers will use truck, local South Carolina port facilities and
an on site rail spur to deliver the raw material.
The Company has evaluated subsequent events from the balance sheet date through
the date of issue of these financial statements and has determined there are no
additional events to disclose.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATION
FORWARD-LOOKING STATEMENTS
This current report contains forward-looking statements relating to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "should", "intends",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential", or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors which may cause our or our industry's
actual results, levels of activity or performance to be materially different
from any future results, levels of activity or performance expressed or implied
by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity or performance. You should not place undue reliance on these
statements, which speak only as of the date that they were made. These
cautionary statements should be considered with any written or oral
forward-looking statements that we may issue in the future. Except as required
by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results, later events or circumstances or to reflect the
occurrence of unanticipated events.
In this report unless otherwise specified, all dollar amounts are expressed in
United States dollars and all references to "common shares" refer to the common
shares of our capital stock.
The management's discussion and analysis of our financial condition and results
of operations are based upon our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America ("GAAP").
As used in this current report and unless otherwise indicated, the terms "we",
"us", the "Company" and "Tire" refer to Tire International Environmental
Solutions Inc.
GENERAL OVERVIEW
GENERAL DEVELOPMENT OF BUSINESS
Tire International Environmental Solutions Inc. (the "Company" "we", "us", "our"
and "Tire") was incorporated under the laws of the State of Nevada on February
19, 1986 as Engle Mining Co., Inc. On January 27, 1999 the Company acquired all
of the outstanding stock of I Vision USA Inc. through a stock for stock exchange
in which the stockholders of I Vision USA Inc. received 8,000,000 common shares
of the Company in exchange for all of the stock of I Vision USA Inc. I Vision
USA Inc. was organized in the state of Delaware on December 15, 1998 and had
purchased all of the outstanding stock of I Vision Integral Inc. which was
organized in Canada during March 1998. I Vision USA Inc. and I Vision Integral
Inc. were organized for the purpose of conducting electronic commerce on the
World Wide Web. For reporting purposes, the acquisition is treated as an
acquisition of the Company by I Vision USA Inc. (reverse acquisition) and a
recapitalization of I Vision USA Inc. During September 1999, the Company
acquired all of the outstanding stock of La Societe De Services, Bergeron
Conseils Et Realisation Inc., and Ixiem Production Inc. by the issuance of
234,000 shares of its common stock and a promissory note of $150,000 CDN. This
debt was settled for stock and the companies have since been discontinued or
abandoned.
During fiscal year 2003, the Company and its subsidiaries ceased operations and
on April 1, 2004, the Company divested itself of all of its subsidiaries by way
of a divestiture agreement whereby the Company transferred all of the shares of
the subsidiaries in exchange for the assumption of all of the outstanding debt
of the subsidiaries.
On December 21, 2006, the Company issued a total of 500,000 post split common
shares pursuant to a debt settlement agreement between the Company and Mr.
Antonio Care. This issuance of shares effected a change in control of the
Company.
20
On February 8, 2007, the Company effected a reverse split of its shares of
common stock on the basis of 1 new share for every 100 shares held at the time
of the reverse split. Concurrent with the reverse split of its shares the
Company changed its name to Tire International Environmental Solutions Inc.
On March 13, 2007, the Company issued a total of 4,900,000 common shares at a
deemed price of $0.001 per shares in settlement of a total of $49,000 in related
party debt. The related party required the shares be issued to a total of 14
stockholders.
On December 7, 2007, the Company issued a total of 2,805,000 common shares at a
deemed price of $0.001 per common share in settlement of a total of $28,050 in
related party debt. The related party required the shares be issued to a total
of 14 stockholders.
During April 2008, the Company issued aggregate 291,000 shares of common stock
valued at $9,750 in consideration for consulting services, director's fee and
officer's fee.
On June 12, 2010, pursuant to a letter of default on accounts payable owed to a
director and officer of the Company, the Company restructured its related party
outstanding accounts payable totaling $443,024 as of March 31, 2010. The
accounts payable was restructured to a one year, 10% interest bearing
convertible promissory note ('Note") dated June 1, 2010 and due on May 31, 2011.
The notes are convertible to shares of common stock at the price of $0.01 per
common share. The conversion of this note may effect a change in control of the
Company.
On December 1, 2010, the Company entered into a three-month term consulting
contract with HAWK Associates Inc. ("HAWK"), an investor relations and
consulting firm. HAWK provides investor relations, finical media relations and
other appropriate consulting and advisory services. In consideration for such
services, HAWK: (i) is paid a retainer fee per month; and (ii) was paid a
one-time cash setup fee of $2,000. For the three month period, HAWK accepted as
payment the following: (i) $2,000 in cash payment per month and (ii) 6,000
shares per month of restricted Rule 144 stock, priced at the closing price of
the stock on the effective date of the contract. On December 1, the Company paid
$4,000 representing the first months cash requirement and the set up fee and
issued a total of 18,000 shares of restricted common stock of the Company valued
at $3,600.
On December 1, 2010, the Company entered into a consulting contract with
Aquiline Group Inc. ("AQUILINE"), a full service public relations and
consulting firm dedicated to the peak performance of private and public
companies. AQUILINE was to provide services for consulting, business advisory,
shareholder information and public/investor relations. In consideration for such
services, AQUILINE: was paid a retainer fee of $50,000; and (ii) was issued a
total of 120,000 shares of restricted common stock of the Company. On January
10, 2011 the Company terminated the AQUILINE consulting contract for lack of
performance. The shares issued were valued at $24,000.
On December 1, 2010 the Company changed its stock transfer agent to Island Stock
Transfer ("Island") and as a payment in lieu of cash issued 25,000 shares of
restricted common stock. Island provides stock transfer agent and related
services to the Company. The shares issued were valued at $5,000.
The Company has been seeking acquisitions since it discontinued operations.
During 2010 the Company determined it would focus its effort in the tire
recycling and recycled rubber finished product manufacturing industry. During
the current fiscal year the Company has taken several steps to further this
business objective and as a result the Company expects to emerge from inactive
to operating status in the third fiscal quarter.
21
The Company has negotiated an exclusive license agreement with Tonmik a
manufacturer of recycled rubber finished products in China for sale to big box
retailers to manufacture the Tonmik Product Line in the United States; has
signed a Joint Venture Agreement providing the required technology and equity
capital with an Italian manufacturer of tire recycling and recycled rubber
molding equipment; has applied for $30 million of State of South Carolina JEDA
Bonds; has negotiated a purchase agreement to acquire a 22 acre tire recycling
facility in South Carolina with the required infrastructure to operate the
Company's business including a 100,000 square foot manufacturing plant, has
negotiated a stock for stock purchase agreement to acquire two South Carolina
companies with the required federal, state and local permits to operate in South
Carolina and the tire recycling equipment needed to manufacture the Company's
new product lines; and has retained the services of Guggenheim Securities, to
assist it in raising the debt financing for the South Carolina facility.
In connection with the South Carolina operation the Company has applied for a
series of South Carolina and Berkeley County real estate, personal property,
sales and income tax incentives and job training and grants to locate its United
States operations in Berkeley County, South Carolina which the Company expects
will provide reimbursement the Company reimbursement for costs of up to $1
million and reduce or eliminate real estate, personal property, sales and income
taxes by over $4 million over the life of the project. The Company is also
working to supply the South Carolina manufacturing operations with scrap tires
from various locations in the United States and Canada. These suppliers will use
truck, local South Carolina port facilities and an on site rail spur to deliver
the raw material.
The Company as of March 31, 2011 is an inactive shell company, but is expected
to become an operating company upon the commencement of operations in South
Carolina during the third fiscal quarter. To facilitate the commencement of
operations the Company in April 2011 formed a wholly owned subsidiary, Tonmik
Import/Export Solutions, Inc.
22
During the period covered by this report, the Company determined to seek
opportunities in the tire recycling business, having identified a technology
that management believes is the next generation of tire recycling equipment for
removal of harmful waste tire stockpiles and the production of finely crafted
value added products, both of which are much needed in the fast growing green
technology and tire recycling industry. In furtherance of this business
decision, the Company has entered into a Joint Venture Agreement (the
"Agreement") with TIRES SpA ("TIRES"), an Italian manufacturer of heavy
industrial processing and recycling equipment. Effective June 16, 2010, the
Company has signed a Joint Venture Agreement (the "Agreement") with Tires SpA
("TIRES"), an Italian manufacturer of heavy industrial processing and recycling
equipment. Under the terms of the Agreement, as part of a purchase order by the
Company the terms of which are detailed below, the Company will own fifty
percent (50%) of the TIRES U.S. patent pending for the TIRES state-of-the-art
tire recycling plant, which patent covers the method and installation of
recycling of used tires for conversion into finished products (the "Waste to
Value Technology") for the North American market. The Agreement between the
Company and TIRES calls for a payment of (euro)11,100,000 ($14,476,000 million
USD), of which (euro)7,700,000 ($10,041,900 USD) is to be paid by way of cash
and the remaining balance of (euro)3,400,000 shall be paid via the issuance of
common shares of the Company. For the purpose of calculating the issuance price
of the shares, the parties have agreed to a Euro to USD rate of 1.2 bringing the
amount due to $4,080,000 in USD. The parties have further agreed to issue the
shares at a deemed price of $0.50 per share. Therefore the Company will be
required to issue a total of 8,160,000 shares of common stock to TIRES. The
payment schedule is as follows:
o (euro) 1,000,000 ($1,304,140) and the issuance of a total of 1,140,000
shares of common stock of the Company to be paid by July 30, 2010, on
the same date of the delivery of the first module of the "Refiner Full"
plant;
o (euro) 1,000,000 ($1,304,140) and the issuance of a total of 1,140,000
shares of common stock of the Company to be paid by November 30,
2010, on the same date of delivery of the second module of the
"Refiner Full" plant;
o (euro) 1,000,000 ($1,304,140) and the issuance of a total of 1,140,000
shares of common stock of the Company to be
paid by December 31, 2010, on the same date of delivery of the third
module of the "Refiner Full" plant;
o (euro) 1,000,000 ($1,304,140) and the issuance of a total of 1,140,000
shares of common stock of the Company to be paid by January 31, 2011,
on the same date of delivery of the fourth and last module of the
"Refiner Full" plant;
o (euro) 925,000 ($1,206,330) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by February 28, 2011,
on the on the same date of delivery of the first module of the
"Quadruple Rubber Tiles" plant;
o (euro) 925,000 ($1,206,330) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011,
on the on the same date of delivery of the second module of the
"Quadruple Rubber Tiles" plant;
o (euro) 925,000 ($1,206,330) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011,
on the on the same date of delivery of the third module of the
"Quadruple Rubber Tiles" plant;
o (euro) 925,000 ($1,206,330) and the issuance of a total of 900,000
shares of common stock of the Company to be paid by March 31, 2011,
on the on the same date of delivery of the fourth module of the
"Quadruple Rubber Tiles" plant;
The above amounts reflected in USD for the payment of this joint venture
agreement are subject to change dependent upon the fluctuation of the exchange
rates between the Euro and the U.S. dollar. Upon the issuance of the first
shares to TIRES, TIRES shall have the right to appoint a representative to the
Board of Directors of the Company. The issuance of shares to TIRES may effect a
change in control of the Company, dependent upon whether Mr. Care has converted
his shares under his convertible note and whether all of the shares as required
under the above contract with TIRES are issued.
According to the agreement between the parties, if the initial payment is not
made by July 30, 2010, the contract will be null and void. The Company
negotiated with several potential funders but was not be able to make the
payment on July 30, 2010. Currently, there is a verbal agreement to extend the
payment date to June 16, 2011.
23
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2011,the Company had limited cash. Management estimates it will
need $35,000,000 over the next six month period to meet its current business
plan and to close on the joint venture agreement. The funds will be expended as
follows:
o $30,000,000 to finalize the purchase or lease of land, building and
improvements required to develop its the tire recycling and recycled
rubber finished product manufacturing facility, equip the facility
with the required recycling and manufacturing equipment which may
include all cash payments to be made under the Joint Venture Agreement
with TIRES and the costs of financing,
o $5,000,000 for general working capital which will include as yet
undetermined amount of management fees, general and administration
expenses including legal, accounting and audit.
Management is currently attempting to raise funds by way of either equity or
loans. The Company has entered into Investment Banking Agreements to assist in
the raising of the required debt and equity.
On February 10, 2011 the Company completed an Investment Banking Engagement
Agreement with Guggenheim Securities, LLC ("Guggenheim"). Under the Agreement,
the Company has retained Guggenheim to act as sole manager for the anticipated
debt financing for the Company's new US tire recycling and finished product
manufacturing project (the "Project"). Compensation under the Agreement is based
on the successful completion by Stone of a privately placed corporate obligation
non-rated debt financing with net proceeds of $20 million for the Project. The
debt financing may qualify for tax exempt status in the Project state. The
Company is evaluating proposed Projects with Guggenheim in New Jersey,
Pennsylvania and South Carolina to determine the most suitable host facility for
the Company's tire recycling and finished product manufacturing business. The
Company, as part of the Project, is arranging for $10 million in new equity
capital to support the debt financing. The Company will also pay Guggenheim for
expenses incurred under the Agreement.
At this time there are no commitments for funding and it cannot be known whether
they will be successful in raising any funds to allow them to finalize the joint
venture agreement and pursue their business plan. Should they not be successful,
the Company would again be seeking acquisition opportunities and would revert
back to shell company status. Management believes that the funds required to
maintain minimal operations of regulatory filings will be available by way of
loans from related parties, however, there is not a legal obligation for either
management or stockholders to provide additional future funding. Should they
fail to provide financing, the Company has not identified any alternative
sources. Consequently, there is substantial doubt about the Company's ability to
continue as a going concern.
RESULTS OF OPERATIONS
Comparison of the three month periods ended March 31, 2011 and 2010:
The Company had no revenues for the three month periods ended March 31, 2011 and
2010.
Total expenses for the three month period ended March 31, 2011 were $262,249 as
compared to $9,874 for the three months ended March 31, 2010. The increase in
expenses was mainly related to an increase in salaries of $104,700 as executives
have been brought into the Company to focus on the development of the Company's
proposed tire recycling and recycled rubber finished product manufacturing
business and an increase in interest from $1,545 for the three months ended
March 31, 2010 to $123,643 for the three months ended March 31, 2011. The
increase in interest was primarily due to the conversion of a non-interest
bearing loan payable to a convertible promissory note bearing interest at 10%
per annum. During the three months ended March 31, 2011 the interest charge
associated with this convertible note included the amortization of $109,539 and
accrued interest of $10,924. Additional accrued interest of $3,176 was recorded
as a result of a series of related party loans from the Company's Chief
Executive Officer and two shareholders. The Company expects to convert from
shell status to an operating company during the current fiscal year as it enters
the tire recycling and recycled rubber finished product manufacturing business,
but will continue to incur losses during the start up and construction period of
it new facilities through the year ended September 30, 2011.
Loss per share for the three months ended March 31, 2011 and 2010 was $.03 and
$.00, respectively
24
RESULTS OF OPERATIONS (CONTINUED)
Comparison of the six month periods ended March 31, 2011 and 2010:
The Company had no revenues for the six month periods ended March 31, 2011 and
2010.
Total expenses for the six month period ended March 31, 2011 were $546,810 as
compared to $23,505 for the six months ended March 31, 2010. The increase in
expenses was mainly related to an increase in salaries of $137,200 as executives
have been brought into the Company to focus on the development of the Company's
proposed tire recycling and recycled rubber finished product manufacturing
business and currently expensed consulting fees of $99,000 resulting from the
termination of non performing investment banking consultants to allow the
Company to work exclusively with Guggenheim Securities, LLC to provide
investment banking services for the South Carolina project and an increase in
interest from $6,194 for the six months ended March 31, 2010 to $248,378 for the
six months ended March 31, 2011. The increase in interest was primarily due to
the conversion of a non-interest bearing loan payable to a convertible
promissory note bearing interest at 10% per annum. During the six months ended
March 31, 2011 the interest charge associated with this convertible note
included the amortization of $221,512 and accrued interest of $22,091.
Additional accrued interest of $4,775 was recorded as a result of a series of
related party loans from the Company's Chief Executive Officer and two
shareholders. The Company expects to convert from shell status to an operating
company during the current fiscal year as it enters the tire recycling and
recycled rubber finished product manufacturing business, but will continue to
incur losses during the start up and construction period of it new facilities
through the year ended September 30, 2011.
Loss per share for the six months ended March 31, 2011 and 2010 was $.06 and
$.00, respectively.
25
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company and is not required to provide this
information.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures as of March 31, 2011. Based
on this evaluation, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures are not effective
in alerting them on a timely basis to material information relating to our
Company required to be included in our reports filed or submitted under the
Exchange Act due to insufficient staffing.
CHANGES IN INTERNAL CONTROLS
There were no changes (including corrective actions with regard to deficiencies
or material weaknesses) in our internal controls over financial reporting that
occurred during the quarter ended March 31, 2011, that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting. Staff will be added to ensure effective internal controls
and procedures by the Company's year end.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, Tonmik, and Mr. Antonio Care entered into a settlement agreement
with a company and Tonmik creditor requiring the Company, Tonmik and Mr. Care to
pay $25,000 on or before March 15, 2011. As of March 31, 2011 $15,000 was paid
and $10,000 remains outstanding.
The Company is not a party to any other legal proceedings and is not aware of
any other pending legal proceedings as of the date of this Form 10-Q.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this
information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On December 1, 2010, the Company entered into a three-month term consulting
contract with HAWK Associates Inc. ("HAWK"), an investor relations and
consulting firm. HAWK provides investor relations, financial media relations and
other appropriate consulting and advisory services. In consideration for such
services, HAWK: (i) will be paid a retainer fee of $8,000 per month; (ii) will
be paid a one-time cash setup fee of $2,000; and HAWK will accept the monthly
retainer fee as follows: (i) $2,000 in cash payment and (ii) 6,000 shares of
restricted 144 stock, priced at the closing price of the stock on the effective
date of the contract. On December 1, the Company paid $4,000 in cash and issued
a total of 18,000 shares of restricted common stock of the Company for cash
consideration valued at $3,600.
26
On December 1, 2010 the Company changed its stock transfer agent to Island Stock
Transfer ("Island") and, as a payment in lieu of cash, issued 25,000 shares of
restricted common stock. Island provides stock transfer agent and related
services to the Company.
On December 1, 2010, the Company entered into a consulting contract with
Aquiline Group Inc. ("AQUILINE"), a full service public relations and consulting
firm dedicated to the peak performance of private & public companies. AQUILINE
is expected to provide services for consulting, business advisory, shareholder
information and public/investor relations. In consideration for such services,
the Company: (i) paid a retainer fee of $50,000; (ii) issued a total of 120,000
shares of restricted common stock of the Company per quarter; and (iii) the term
of the contract shall be for the period beginning December 1, 2010 and ending
December 15, 2010, services were minimized from December 18, 2010 and resumed
January 3, 2011 in observation of national holidays. The contract shall continue
and renew quarterly until terminated in accordance with certain terms. On
December 1, the Company paid $50,000 in cash and issued a total of 120,000
shares of restricted common stock of the Company. This agreement was terminated
by the Company for non-performance by AQUILINE on January 10, 2011.
There were no other unregistered securities sold or issued by the Company
without the registration of these securities under the Securities Act of 1933 in
reliance on exemptions from such registration requirements, within the period
covered by this report, which have not been previously included in a Quarterly
Report on Form 10-Q or a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION
None
27
ITEM 6. EXHIBITS
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31.1 :Section 302 Certification :Filed herewith
:- Principal Executive Officer :
--------------------------------------------------------------------------------
31.2 :Section 302 Certification :Filed herewith
:- Principal Financial Officer :
--------------------------------------------------------------------------------
32.1 :Certification Pursuant to 18 :Filed herewith
:U.S.C. Section 1350 as adopted :
:pursuant to Section 906 of the :
:Sarbanes-Oxley Act of 2002 :
--------------------------------------------------------------------------------
32.2 :Certification Pursuant to 18 :Filed herewith
:U.S.C. Section 1350 as adopted :
:pursuant to Section 906 of the :
:Sarbanes-Oxley Act of 2002 :
--------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIRE INTERNATIONAL ENVIRONMENTAL
SOLUTIONS INC.
DATE: August 18, 2011 By: /S/ ANTONIO CARE
-----------------------------------------
Name: Antonio Care
Title: President, Principal Executive
Officer
DATE: August 18, 2011 By: /S/ MARTIN SERGI
-----------------------------------------
Name: Martin Sergi
Title: Principal Financial Officer
and Principal Accounting
Officer
2