Exhibit 99.7

 

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

CONSOLIDATED FINANCIAL STATEMENTS

 

 

SEPTEMBER 30, 2015

 

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2015

 

		September 30,				June 30,
		2015				2015
ASSETS
Other assets
Patents		$	1			$	1
Total Other Assets			1				1
Total Assets		$	1			$	1
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilties		$	2,343,684			$	2,339,973
Accrued liabilties - related parties			525,605				525,605
Convertible notes - non-related parties			448,146				429,086
Derivative liability			—				—
Total Current Liabilities			3,317,435				3,294,664
Total Liabilities			3,317,435				3,294,664
Stockholders' Equity (Deficit)
Preferred stock,  $.005 par value, authorized
25,000,000 Series A shares, issued and outstanding
25,000,000 Series A shares (June 30, 2014 - 25,000,000 shares)			125,000				125,000
Common stock,  $.001 par value, authorized
3,000,000,000 shares, issued and outstanding
2,885,755,714 shares (June 30, 2014 - 2,885,755,714 shares)			2,885,756				2,885,756
Common stock payable			29,691				29,691
Additional paid-in capital			28,082,681				28,082,681
Deficit accumulated prior to entering development stage			(1,057,356	)			(1,057,356	)
Deficit accumulated during the development stage			(32,866,825	)			(32,844,054	)
Unrealized loss on foreign exchange			(516,381	)			(516,381	)
			(3,317,434	)			(3,294,663	)
Total Liabilities and Stockholders' Equity (Deficit)		$	1			$	1

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

		Three months ended								Cumulative from
		Sept. 30								March 26, 1993 to
		2015				2014				Sept. 30, 2015
Revenues		$	—			$	—			$	1,354,088
Cost of Sales			—				—				1,031,075
Gross profit			—				—				323,013
Operations
General and administrative			19,060				20,240				17,881,918
Depreciation and amortization			—				—				340,545
Research and development			—				—				15,396,966
Total Expense			19,060				20,240				33,619,429
Income (loss) before other expenses			(19,060	)			(20,240	)			(33,296,416	)
Other expenses (income)
Interest expense			3,711				21,684				1,601,019
Accretion expense			—				—				750,000
Interest income			—				—				(45,443	)
Income from stock options			—				—				(10,855	)
Impairment of fixed assets			—								50,000
Loss (gain) on change in derivative liability			—								(750,000	)
Loss (gain) on settlement of debt			—				—				(2,134,998	)
Loss on disposal of equipment			—				—				4,549
Total Other expenses (income)			3,711				21,684				(535,728	)
Provision for income taxes			—				—				—
Net income (loss)			(22,771	)			(41,924	)			(32,760,688	)
Other comprehensive loss
Loss (gain) on foreign exchange			—				—				106,137
Net income (loss) and comprehensive income (loss)		$	(22,771	)		$	(41,924	)		$	(32,866,825	)
Basic net income (loss) and comprehensive
income (loss) per share - basic		$	(0.00	)		$	(0.00	)
Basic net income (loss) and comprehensive
income (loss) per share - diluted		$	(0.00	)		$	(0.00	)
Weighted average number of shares - basic			2,885,755,714				2,885,755,714
Weighted average number of shares - diluted			2,885,755,714				2,885,755,714

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

 

																										Deficit				Deficit
																										Accumulated				Accumulated				Unrealized				Total
																		Common				Additional				Prior to Entering				During				gain (loss)				Stockholders'
		Common Stock								Preferred Stock								Stock				Paid-in				Developmental				Developmental				on foreign				Equity
		Shares				Amount				Shares				Amount				Payable				Capital				Stage				Stage				exchange				(Deficit)
Balance June 30, 1992			3,383,050				3,383				—				—				—				194,980				(1,057,356	)			—			$	—				(858,993	)
Stock issued for reorganization			18,650,000				18,650																76,155																94,805
Stock issued for services			100,000				100																(100	)
Stock issued in exchange for Warrants			363,656				364																(364	)
Forgiveness of debt																							728,023																728,023
Net loss and comprehensive loss																															(165,296	)							(165,296	)
Balance June 30, 1993			22,496,706				22,497				—				—				—				998,694				(1,057,356	)			(165,296	)			—				(201,461	)
Stock issued			2,000				2																(2	)															—
Stock issued for services																																							—
Exchange for Debt																							149,170																149,170
Payments received for stock previously issued																							237,430																237,430
Net loss and comprehensive loss																															(179,296	)							(179,296	)
Balance June 30, 1994			22,498,706				22,499				—				—				—				1,385,292				(1,057,356	)			(344,592	)			—				5,843
Revision of common stock			(11,900,000	)			(11,900	)															11,900																—
Stock issued for services			5,592,857				5,592																513,908																519,500
Exchange for Debt			200,000				200																24,300																24,500
Issuance of common stock previously issued			402,857				401																21,915																22,316
Net loss and comprehensive loss																															(575,771	)							(575,771	)
Balance June 30, 1995			16,794,420				16,792				—				—				—				1,957,315				(1,057,356	)			(920,363	)			—				(3,612	)
Stock issued			3,975,662				5,090																846,612																851,702
Exchange for Debt			391,857				392																29,008																29,400
Issuance of common stock			710,833				710																80,161																80,871
Net loss and comprehensive loss																															(1,127,044	)							(1,127,044	)
Balance June 30, 1996			21,872,772				22,984				—				—				—				2,913,096				(1,057,356	)			(2,047,407	)			—				(168,683	)
Stock issued for options																							912,838																912,838
Stock issued for services			5,067,912				3,955																690,234																694,189
Stock in Exchange for Debt			251,382				252																43,965																44,217
Issuance of common stock			10,257,936				10,259																335,132																345,391
Grants received																							408,597																408,597
Net loss and comprehensive loss																															(2,376,279	)							(2,376,279	)
Balance June 30, 1997			37,450,002				37,450				—				—				—				5,303,862				(1,057,356	)			(4,423,686	)			—				(139,730	)
Stock issued for options																							948,500																948,500
Stock issued for services			4,396,466				4,396																922,180																926,576
Issuance of common stock			21,795,000				21,796																1,176,755																1,198,551
Stock options issued and outstanding																							1,236,913																1,236,913
Grants received																							669,906																669,906
Unrealized foreign exchange																																			183,785				183,785
Net loss and comprehensive loss																															(4,570,441	)							(4,570,441	)
Balance June 30, 1998			63,641,468				63,642				—				—				—				10,258,116				(1,057,356	)			(8,994,127	)			183,785				454,060
Stock issued for options			2,234,567				2,235																38,765																41,000
Stock issued for services			24,200,439				24,200																2,735,544																2,759,744
Shares issued in exchange for debt			3,787,947				3,788																340,164																343,952
Conversion of debentures			2,816,966				2,817																290,102																292,919
Issuance of common stock			677,966				678																49,322																50,000
Stock options issued and outstanding																							385,600																385,600
Grants received																							1,057,742																1,057,742
Unrealized foreign exchange																																			(29,142	)			(29,142	)
Net loss and comprehensive loss																															(4,909,879	)							(4,909,879	)
Balance June 30, 1999			97,359,353				97,360				—				—				—				15,155,355				(1,057,356	)			(13,904,006	)			154,643				445,996
Stock issued for options			5,327,486				5,327																381,600																386,927
Stock issued for services			28,873,210				28,873																2,217,758																2,246,631
Shares issued in exchange for debt			7,342,055				7,342																382,556																389,898
Conversion of debentures			12,010,073				12,010																815,796																827,806
Issuance of common stock			221,000				221																16,039																16,260
Grants received																							395,683																395,683
Unrealized foreign exchange																																			5,789				5,789
Net loss and comprehensive loss																															(5,548,829	)							(5,548,829	)
Balance June 30, 2000			151,133,177				151,133				—				—				—				19,364,787				(1,057,356	)			(19,452,835	)			160,432				(833,839	)
Stock issued for services			7,375,483				7,375																864,840																872,215
Stock issued for options			5,378,507				5,379																506,998																512,377
Shares issued in exchange for debt			11,646,312				11,646																1,547,455																1,559,101
Conversion of debentures			100,000				100																19,900																20,000
Issuance of common stock			732,929				733																39,427																40,160
Unrealized foreign exchange																																			(340,661	)			(340,661	)
Grants issued																							249,294																249,294
Net loss and comprehensive loss																															(3,242,572	)							(3,242,572	)
Balance June 30, 2001 (Restated)			176,366,408				176,366				—				—				—				22,592,701				(1,057,356	)			(22,695,407	)			(180,229	)			(1,163,925	)
Stock issued for services			18,466,162				18,466																314,859																333,325
Shares issued in exchange for debt			24,075,502				24,076																1,649,442																1,673,518
Issuance of common stock			5,849,487				5,850																61,897																67,747
Interest expense on convertible note discount																							3,403																3,403
Unrealized foreign exchange																																			(19,940	)			(19,940	)
Net loss and comprehensive loss																															(4,089,933	)							(4,089,933	)
Balance June 30, 2002 (Restated)			224,757,559				224,758				—				—				—				24,622,302				(1,057,356	)			(26,785,340	)			(200,169	)			(3,195,805	)
Stock issued for services			5,455,000				5,455																130,920																136,375
Shares issued in exchange for debt			15,400,000				15,400																441,183																456,583
Issuance of common stock			4,283,333				4,283																31,217																35,500
Interest expense on convertible note discount																							999																999
Unrealized foreign exchange																																			(182,365	)			(182,365	)
Net loss and comprehensive loss																															(2,417,261	)							(2,417,261	)
Balance June 30, 2003 (Restated)			249,895,892				249,896				—				—				—				25,226,621				(1,057,356	)			(29,202,601	)			(382,534	)			(5,165,974	)
Interest expense on convertible note discount																							1,000																1,000
Unrealized foreign exchange																																			(30,325	)			(30,325	)
Net loss and comprehensive loss																															(427,966	)							(427,966	)
Balance June 30, 2004 (Restated)			249,895,892				249,896				—				—				—				25,227,621				(1,057,356	)			(29,630,567	)			(412,859	)			(5,623,265	)
Unrealized foreign exchange																																			(63,448	)			(63,448	)
Net loss and comprehensive loss																															(7,717,592	)							(7,717,592	)
Balance June 30, 2005 (Restated)			249,895,892				249,896				—				—				—				25,227,621				(1,057,356	)			(37,348,159	)			(476,307	)			(13,404,305	)
Unrealized foreign exchange																																			(78,596	)			(78,596	)
Net income and comprehensive income																															2,624,041								2,624,041
Balance June 30, 2006 (Restated)			249,895,892				249,896				—				—				—				25,227,621				(1,057,356	)			(34,724,118	)			(554,903	)			(10,858,860	)
Unrealized foreign exchange																																			(44,174	)			(44,174	)
Net loss and comprehensive loss																															(115,963	)							(115,963	)
Balance June 30, 2007 (Restated)			249,895,892				249,896				—				—				—				25,227,621				(1,057,356	)			(34,840,081	)			(599,077	)			(11,018,997	)
Common stock issued for settlement			20,000,000				20,000																124,000																144,000
Common stock issued for services			22,100,000				22,100																130,500																152,600
Preferred stock issued											3,000,000				15,000								271,000																286,000
Stock options granted																							24,000																24,000
Imputed interest																							28,344																28,344
Unrealized foreign exchange																																			(5,895	)			(5,895	)
Net income and comprehensive income																															2,882,338								2,882,338
Balance June 30, 2008 (Restated)			291,995,892				291,996				3,000,000				15,000				—				25,805,465				(1,057,356	)			(31,957,743	)			(604,972	)			(7,507,610	)
Common stock issued for liability settlements			191,750,000				191,750																96,340																288,090
Common stock issued for services			64,900,000				64,900																83,589																148,489
Common stock issued for debt conversion			50,140,000				50,140																171,310																221,450
Common stock issued to related parties			513,206,324				513,206												43,500				503,089																1,059,795
Stock options exercised on a cashless basis			7,500,000				7,500																(7,500	)															—
Preferred stock issued											12,000,000				60,000								115,000																175,000
Stock options granted																							30,000																30,000
Derivative financial instruments																																							—
Unrealized foreign exchange																																			145,332				145,332
Net income and comprehensive income																															458,013								458,013
Balance June 30, 2009			1,119,492,216				1,119,492				15,000,000				75,000				43,500				26,797,293				(1,057,356	)			(31,499,730	)			(459,640	)			(4,981,441	)
Common stock issued for liability settlements			95,000,000				95,000																134,098																229,098
Common stock issued for services			93,500,000				193,500																311,950																505,450
Common stock issued for debt conversion			76,291,429				76,292																(192	)															76,100
Common stock issued to related parties			489,716,111				389,716												(13,809	)			536,950																912,857
Stock options exercised on a cashless basis			3,000,000				3,000																(3,000	)															—
Preferred stock issued																																							—
Stock options granted																							7,200																7,200
Derivative financial instruments																																							—
Unrealized foreign exchange																																			(87,519	)			(87,519	)
Net income and comprehensive income																															(1,353,596	)							(1,353,596	)
Balance June 30, 2010			1,876,999,756				1,877,000				15,000,000				75,000				29,691				27,784,299				(1,057,356	)			(32,853,326	)			(547,159	)			(4,691,851	)
Common stock issued for liability settlements			424,833,575				424,833																(170,258	)															254,575
Common stock issued for services			50,000,000				50,000																(30,000	)															20,000
Common stock issued for debt conversion			106,666,669				106,667																(54,033	)															52,634
Common stock issued to related parties			35,000,000				35,000																(20,500	)															14,500
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											10,000,000				50,000								102,000																152,000
Stock options granted																							2,374																2,374
Derivative financial instruments																																							—
Unrealized foreign exchange																																			(77,013	)			(77,013	)
Net loss and comprehensive loss																															(775,087	)							(775,087	)
Balance June 30, 2011			2,493,500,000				2,493,500				25,000,000				125,000				29,691				27,613,882				(1,057,356	)			(33,628,413	)			(624,172	)			(5,047,868	)
Common stock issued for liability settlements			—				—																—																—
Common stock issued for services			101,000,000				101,000																303,600																404,600
Common stock issued for debt conversion			211,255,714				211,256																126,754																338,010
Common stock issued to related parties			15,000,000				15,000																9,000																24,000
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											—				—								2,374																2,374
Stock options granted																							32,693																32,693
Derivative financial instruments																																							—
Unrealized foreign exchange																																			66,302				66,302
Net income and comprehensive income																															(409,071	)							(409,071	)
Balance June 30, 2012			2,820,755,714				2,820,756				25,000,000				125,000				29,691				28,088,303				(1,057,356	)			(34,037,484	)			(557,870	)			(4,588,961	)
Common stock issued for liability settlements			—				—																—																—
Common stock issued for services			25,000,000				25,000																—																25,000
Common stock issued for debt conversion			—				—																—																(0	)
Common stock issued to related parties			40,000,000				40,000																(8,000	)															32,000
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											—				—								—																—
Stock options granted																							2,378																2,378
Derivative financial instruments																																							—
Unrealized foreign exchange																																			41,489				41,489
Net loss and comprehensive loss																															(1,527,476	)							(1,527,476	)
Balance June 30, 2013			2,885,755,714				2,885,756				25,000,000				125,000				29,691				28,082,681				(1,057,356	)			(35,564,960	)			(516,381	)			(6,015,569	)
Common stock issued for liability settlements			—				—																—																—
Common stock issued for services			—				—																—																—
Common stock issued for debt conversion			—				—																—																—
Common stock issued to related parties			—				—																—																—
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											—				—								—																—
Stock options granted																							—																—
Derivative financial instruments																																							—
Unrealized foreign exchange																																			—				—
Net income and comprehensive income																															2,852,181								2,852,181
Balance June 30, 2014			2,885,755,714				2,885,756				25,000,000				125,000				29,691				28,082,681				(1,057,356	)			(32,712,779	)			(516,381	)			(3,163,388	)
Common stock issued for liability settlements			—				—																—																—
Common stock issued for services			—				—																—																—
Common stock issued for debt conversion			—				—																—																—
Common stock issued to related parties			—				—																—																—
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											—				—								—																—
Stock options granted																							—																—
Derivative financial instruments																																							—
Unrealized foreign exchange																																			—				—
Net loss and comprehensive loss																															(131,275	)							(131,275	)
Balance June 30, 2015			2,885,755,714				2,885,756				25,000,000				125,000				29,691				28,082,681				(1,057,356	)			(32,844,054	)			(516,381	)			(3,294,663	)
Common stock issued for liability settlements			—				—																—																—
Common stock issued for services			—				—																—																—
Common stock issued for debt conversion			—				—																—																—
Common stock issued to related parties			—				—																—																—
Stock options exercised on a cashless basis			—				—																—																—
Preferred stock issued											—				—								—																—
Stock options granted																							—																—
Derivative financial instruments																																							—
Unrealized foreign exchange																																			—				—
Net loss and comprehensive loss																															(22,771	)							(22,771	)
Balance September 30, 2015			2,885,755,714				2,885,756				25,000,000				125,000				29,691				28,082,681				(1,057,356	)			(32,866,825	)			(516,381	)			(3,317,434	)

 

See Notes to Consolidated Financial Statements

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Three months ended								Cumulative from
		Sept. 30								March 26, 1993 to
		2015				2014				Sept. 30, 2015
Cash flows from operating activities:
Net  income (loss)		$	(22,771	)		$	(41,924	)		$	(32,866,825	)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization			—				—				340,545
Imputed interest			—				—				28,344
Accretion expense			—				—				750,000
Impairment of fixed assets			—				—				50,000
(Gain) loss on disposal and abandonment of assets			—				—				2,005,498
(Gain) loss on settlement of debt			—				—				(2,134,998	)
Loss on issuance of preferred stock			—				—				386,000
Common stock issued in exchange for services and expenses			—				—				11,895,699
Stock options issued in exchange for services			—				—				3,184,409
Change in derivative liability			—				—				(750,000	)
											—
Changes in assets and liabilities:											—
(Increase) decrease in:											—
Inventory			—				—				(73,323	)
Sales tax receivable			—				—				(36	)
Other assets			—				—				(10,120	)
(Decrease) increase in :											—
Accounts payable and accrued liabilities			3,711				21,684				4,305,475
Accrued liabilities - related parties			—				—				2,751,580
Net cash used in operating activities			(19,060	)			(20,240	)			(10,137,752	)
Cash flow from investing activities:
Increase in notes receivable			—				—				(259,358	)
Reduction in notes receivable			—				—				237,652
Investment			—				—				(89,500	)
Equipment			—				—				(321,567	)
Equipment assembly costs			—				—				(1,999,801	)
Organization cost			—				—				6,700
Reduction in security deposit			—				—				(1,542	)
Net cash used in investing activities			—				—				(2,427,416	)
Cash flow from financing activities:
Loans from related parties											4,354,835
Deferred financing costs			—				—				180,557
Due to stockholders			—				—				5,000
Proceeds from deposits			—				—				143,500
Payments on notes payable			—				—				(409,939	)
Proceeds from convertible notes			—				—				754,999
Proceeds from notes payable			—				—				409,939
Payments on lease obligations			—				—				(86,380	)
Proceeds from issuance of convertible subordinated debentures			—				—				1,035,000
Proceeds from private investors			19,060				20,240				600,825
Proceeds from loan payable			—				—				591,619
Payments on loan payable			—				—				(488,439	)
Proceeds from issuance of stock options			—				—				20,000
Proceeds from grants			—				—				3,628,277
Proceeds from issuance of common stock			—				—				85,582
Proceeds from additional paid-in capital			—				—				2,145,775
Net cash provided by financing activities			19,060				20,240				12,971,150
Effect of Exchange rate changes on cash and cash equivalents			—				—				(406,239	)
Net (decrease) increase in cash and cash equivalents			—				—				405,982
Cash and cash equivalents -  beginning of period			—				—				257
Cash and cash equivalents - end of period		$	—			$	—			$	—

 

		Three months ended
		Sept. 30
		2015				2014
Non-Cash Financing and Investing Activities:
Issuance of common stock for exercise of stock options			—				—
Issuance of common stock for the settlement of accounts
payable and accrued liabilities			—				—
Issuance of common stock for the settlement of accrued
liabilities - related parties			—				—
Common stock to be issued to related parties for
accrued expenses			29,691				29,691
Issuance of common stock for the settlement of convertible
notes - related parties			—				—
Issuance of common stock for the settlement of convertible
notes - non-related parties			—				—
Supplemental Disclosures - Cash paid for:
Interest			—				—
Income taxes			—				—

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

NOTE 1      BACKGROUND

 

NATURE OF BUSINESS

 

The Incorporation began August 19, 1987 as Concord Industries, Inc. It 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. Then it merged with Stopwatch, Inc. in 1989.

 

REORGANIZATION

On March 26, 1993, it entered into an acquisition agreement (the "Acquisition Agreement") and became Tirex America, Inc. (the Company) with Louis V. Muro as its principle, currently an officer and a director of the Company, and former Officers and Directors (collectively the "Seller"), for the purchase of a 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. On March 26, 1993, the Company entered the development stage.

 

CHANGE OF NAME

On July 11, 1997, the Company changed its name from Tirex America, Inc. to The Tirex Corporation.

 

DEVELOPMENT STAGE

At September 30, 2015, 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.

 

NOTE 2      GOING CONCERN

 

The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

 

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 September 30, 2015, the Company had not yet consummated an unconditional purchase order for a TCS System. As a result, the Company expects to continue to incur operating losses and may not have enough capital to grow its business in the future or continue as a going concern. The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations. As a result, operations in the near future are expected to continue to use working capital. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result if the Company is unable to continue as a going concern.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

To successfully grow the business, the Company must decrease its cash outflows, improve its cash position and succeed in its ability to raise additional capital through a combination of primarily public or private equity offerings or strategic alliances. The Company is also dependent on the success of its marketing of its TCS Systems. 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 Company is currently in the process of trying to obtain additional financing for its current operations and consummate an initial sale of its TCS Systems.

 

As reported in the accompanying financial statements, the Company incurred a net loss of $22,771 for the three months ended September 30, 2015 and incurred a net loss of $131,275 for the year ended June 30, 2015 and a net gain of $2,852,181 for the year ended June 30, 2014.

 

NOTE 3      SUMMARY OF ACCOUNTING POLICIES

 

This summary of significant accounting policies is provided to assist the reader in understanding the Company’s financial statements. The financial statements and notes thereto are the representations of the Company’s management. The Company’s management is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.

 

BASIS OF PRESENTATION

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. Dollars. The Company’s fiscal year-end is June 30.

 

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, substantively for recording purposes, 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 material inter-company transactions and accounts have been eliminated in consolidation.

 

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments, with a maturity of three months or less, to be cash equivalents. There were no cash equivalents as of September 30, 2015 and June 30, 2015.

 

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and provisions for write-downs. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets which is generally five years for machinery and equipment.

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Maintenance and repair 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.

 

The Company has taken depreciation and impairment charges over the years on its machinery and equipment bringing its carrying value to $0.

 

INTANGIBLE ASSETS

Intangible assets are carried at the purchased cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally from fifteen to twenty years.

 

ESTIMATES

The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding and, when dilutive, potential shares from stock options, stock warrants to purchase common stock using the treasury method and conversions of outstanding debt using the “if converted” method. A net loss was reported for the three months ended September 30, 2015 and for the year ended June 30, 2015, and accordingly, for those periods, the denominator for the Basic EPS calculation was equal to the weighted average of outstanding shares with no consideration for outstanding stock options, share awards and warrants to purchase shares of the Company's common stock because to do so would have been anti-dilutive. A net gain was reported for the year ended June 30, 2014 but Diluted EPS was not materially different from Basic EPS.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company accounts for its financial instruments in accordance with ASC Topic 825, which requires the disclosure of fair value information about financial instruments when it is practicable to estimate that value. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, inventory, accounts payable, accrued liabilities and convertible notes. The estimated fair value of cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities and other short-term liabilities approximate their carrying amounts due to the short-term nature of these instruments. The fair value of related party transactions is not determinable due to their related party nature. The carrying value of the convertible notes also approximates fair value since their terms are similar to those in the lending market for comparable loans with comparable risks. None of these instruments are held for trading purposes.

 

FAIR VALUE MEASUREMENTS

In accordance with the authoritative guidance on fair value measurements and disclosure under U.S. GAAP, the Company determines fair value using a fair value hierarchy that distinguishes between market participant assumptions developed based on market data (observable inputs) obtained from sources independent of the reporting entity, and a reporting entity’s own assumptions (unobservable inputs) about market participant assumptions developed based on the best information available in the circumstances and expands disclosure about fair value measurements.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in the Company’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date, essentially the exit price.

 

The levels of fair value hierarchy are as follows:

 

·

Level one – Quoted market prices in active markets for identical assets or liabilities;

·

Level two – Inputs other than level one inputs that are either directly or indirectly observable; and

·

Level three – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

 

Level 1 investments are valued based on quoted market prices in active markets. Level 2 investments are valued based on quoted prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

 

A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. The Company evaluates its hierarchy disclosures each quarter.

 

INCOME TAXES

The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized in the future.

 

The Company has net operating loss carryforwards of approximately $32.7 million as of June 30, 2015, expiring through 2035, that may be offset against future taxable income. Because of the uncertainties discussed in Note 2, however, any deferred tax asset established for utilization of the Company's tax-loss carryforwards correspondingly requires a valuation allowance of the same amount. The Company had no uncertain tax positions at September 30, 2015 or June 30, 2015.

 

Utilization of net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as well as state and foreign provisions. These ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income and tax, respectively. Subsequent ownership changes could further affect the limitation in future years. These annual limitation provisions may result in the expiration of certain net operating losses and credits before utilization.

 

DERIVATIVE INSTRUMENTS

 

The Company does not enter into derivative contracts for purposes of risk management or speculation. However, from time to time, the Company enters into contracts, namely convertible notes, that are not considered derivative financial instruments in their entirety, but that include embedded derivative features.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

In accordance with FASB ASC Topic 815-15, Embedded Derivatives, and guidance provided by the SEC Staff, the Company accounts for these embedded features as a derivative liability at fair value, and the unrealized changes in the values of these derivatives are recorded in the statement of operations as gain or loss on derivatives.

 

FOREIGN CURRENCY TRANSLATION

 

a)       Reporting Currency

The Company's functional and reporting currency is the United States dollar. Accordingly, the consolidated financial statements are converted into the reporting currency (the U.S. dollar) using the current rate method. Under this method, the consolidated financial statements are converted into U.S. dollars as follows: assets and liabilities are converted at the exchange rate in effect at the date of the balance sheet, and revenue and expenses are converted using the average exchange rate for the period. All gains and losses resulting from the conversion of the consolidated financial statements into the reporting currency are included in other comprehensive income or loss for the period and accumulated in a separate component of stockholders’ equity as accumulated other comprehensive income or loss.

 

b)       Foreign Currency Transactions

Transactions denominated in currencies other than the functional currency are converted into U.S. dollars using the exchange rate in effect at the date of the transaction or the average rate for the period in the case of recurring revenue and expense transactions. Monetary assets and liabilities are revalued into the functional currency at each balance sheet date using the exchange rate in effect at that date, with any resulting exchange gains or losses being credited or charged to the statement of operations. Non-monetary assets and liabilities are recorded in the functional currency using the exchange rate in effect at the date of the transaction and are not revalued for subsequent changes in exchange rates.

 

STOCK BASED COMPENSATION

The Company estimates the fair value of share-based payment awards made to employees and directors, including stock options, restricted stock and employee stock purchases related to employee stock purchase plans, on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense ratably over the requisite service periods. The Company uses the Black-Scholes option pricing model to determine the fair value of the stock-based compensation that it grants to employees and non-employees. The Company is required to make certain assumptions in connection with this determination, the most important of which involves the calculation of volatility with respect to the price of its common stock. The computation of volatility is intended to produce a volatility value that is representative of the Company’s expectations about the future volatility of the price of its common stock over an expected term. The Company used its share price history to determine volatility and cannot predict how the price of its common shares of common stock will react on the open market in the future. As a result, the volatility value that the Company calculated may differ from the future volatility of the price of its shares of common stock.

 

CASHLESS EXERCISE OF STOCK OPTIONS

The Company issued stock options to directors to purchase common stock where the holder is entitled to exercise the stock options on a cashless basis. The Company accounts for the issuance of common stock on the cashless exercise of stock options on a net basis.

 

REVENUE RECOGNITION

The Company will generally recognize revenue from the sale of TCS Systems using the percentage-of-completion method when persuasive evidence of an arrangement exists, the fee is fixed or determinable and collectability is probable. The percentage-of-completion method will also require management to make certain estimates and assumptions that will affect the reported amounts of revenues and expenses.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

All other revenue from other products will be recognized when shipped to the customer. The Company has recognized a small amount of revenue since entering the development stage.

 

Note 4      PROPERTY AND EQUIPMENT

 

As at September 30, 2015 and June 30, 2015, plant and equipment consisted of the following:

 

Furniture, fixtures and equipment		$	149,516
Manufacturing equipment			87,400
Subtotal			236,916
Less: Accumulated depreciation and amortization			236,916
Total		$	0

 

Depreciation and amortization expense charged to operations for the three months ended September 30, 2015 and 2014 was $0 and $0, respectively, and for the years ended June 30, 2015 and 2014 was $0 and $0, respectively.

 

NOTE 5      PATENTS

 

The Company’s technology is patent protected in the United States. Patent maintenance fees are current. The valuation on the Balance Sheet reflects recognition of valid patents and does not attempt to establish the true commercial value.

 

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.

 

NOTE 7      CONVERTIBLE NOTES

 

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

 

Balance at September 30, 2015 and June 30, 2015	$ 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	As stated in the note agreement, it is 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. The note holder subsequently amended the agreement to provide for a conversion price of $0.33 per share.

 

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

NOTE 8      CONVERTIBLE NOTES - PRIVATE INVESTORS

 

Commencing in Fiscal year 2006, certain expenses of the Company have been funded by a series of non-interest bearing convertible notes with no specific terms of repayment made by a significant number of private individuals investing modest amounts. The total dollars received from these private investors up to September 30, 2015 is U.S.$590,825. These private investors, fully cognizant of the Company’s situation, accepted that their investments were being made and represented by a convertible debt, the conversion of which could occur only once the Company would have shares available for issuance. These debts are convertible at fixed prices rather than as a discount to market and range from $.0002 to $.005 per share.

 

				Dollars				Shares to
				received				be issued
	Year ended June 30, 2006				60,700				13,140,000
	Year ended June 30, 2007				54,000				12,900,000
	Year ended June 30, 2008				77,100				21,700,000
	Year ended June 30, 2009				47,300				38,371,429
	Year ended June 30, 2010				64,300				87,520,000
	Year ended June 30, 2011				103,335				412,569,048
	Year ended June 30, 2012				14,250				142,500,000
	Year ended June 30, 2013				41,220				103,888,745
	Year ended June 30, 2014				65,020				137,290,000
	Year ended June 30, 2015				44,540				181,466,665
	Three months ended September 30, 2015				19,060				75,799,999
					590,825

 

 

The balance owing to private investors awaiting conversion to common shares at September 30, 2015 and June 30, 2015 was $197,090 and $178,030, respectively, and the amount of shares remaining to be issued was 730,945,409 and 655,145,410, respectively.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

NOTE 9      RELATED PARTY TRANSACTIONS

 

Accrued liabilities include amounts primarily due to Directors, Officers and employees. Historically, such amounts due have been repaid through the issuance of stock. At September 30, 2015 and June 30, 2015, the balances owing to Directors and Officers was $525,605 and $525,605, respectively. These amounts are without interest or terms of repayment. On August 1, 2011, the Company authorized the issuance of 100,066,256 stock options in exchange for $1,000,663 of accrued unpaid salaries and consulting fees owed to Directors and Officers of the Company.

 

Notes payable at June 30, 2008 included an amount of $162,500 which was payable to Ocean Tire Recycling & Processing Co., Inc., a company previously owned by a former Director of the Company, Louis A. Sanzaro, and now deceased. The Company negotiated a Settlement Agreement with the family of Louis A. Sanzaro with respect to this note, lease obligations and other expenses paid by Mr. Sanzaro, under which the Company would issue a total of 50,000,000 shares. 34,249,800 million shares were issued during the quarter ended September 30, 2008 and the remaining 15,750,200 shares will be issued in the future. A common stock payable of $43,500 was recorded for the remaining 15,750,200 shares to be issued in the future. During the year ended June 30, 2010, an additional 5,000,000 shares were issued reducing the common stock payable by $13,810.

 

 

 

Note 10      COMMON STOCK

 

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. On February 11, 2008, the Company's Board of Directors 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 250,000,000 shares to 1,000,000,000 shares. On May 7, 2009, the Company's Board of Directors 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 1,000,000,000 shares to 1,500,000,000 shares. On February 17, 2010, the Company's Board of Directors 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 1,500,000,000 shares to 2,000,000,000 shares. On December 6, 2010, the Company's Board of Directors 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 2,000,000,000 shares to 2,500,000,000 shares.

 

As at September 30, 2015, the Company had 2,885,755,714 Common shares issued and outstanding.

 

During the three months ended September 30, 2015, the Company did not issue any common shares.

 

During the year ended June 30, 2015, the Company did not issue any common shares.

 

During the year ended June 30, 2014, the Company did not issue any common shares.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

Note 11      PREFERRED STOCK

 

On June 19, 2008, the Company’s Board of Directors approved an amended Certificate of Designation with respect to the authorization and issuance of up to 3,000,000 Series A Preferred shares, an increase from the 1,000,000 shares of Series A Preferred stock that were authorized to be issued in the Certificate of Designation of Series A Preferred stock passed by the Board of Directors on May 12, 2008. No cash dividends shall be paid with respect to the shares of Series A Preferred stock. The Series A Preferred stock shall give its holders the right to 100 votes per share on any matter properly before the shareholders for a vote. The voting rights of the Series A Preferred stock shall be subject to all splits and each share will be convertible into 5 shares of Common stock upon the earlier of: (i) the holders’ election or (ii) January 8, 2009. The holders of all shares of Series A Preferred stock shall not be subject to any non-cash distributions to holders of shares of Common stock, including without limitation, stock dividends, stock splits and securities issued in a recapitalization. In the event of liquidation or winding up of the Corporation, the holders of the Series A Preferred stock will be entitled to receive, prior and in preference to the holders of the Common stock, an amount up to but not greater than the original purchase price per share of Series A Preferred stock, notwithstanding the par value of the Series A Preferred stock. These three million Series A Preferred Shares were issued to three Directors and Officers in June 2008. The value assigned to this issuance is $286,000, based on an estimate of the fair market value on the issuance date. The fair market value is calculated as the greater of (i) the converted value to common stock at a ratio of 1:5 and, (ii) the value of the voting rights. These shares as a group represent a controlling voting interest. The fair market value also takes into account this control premium. The control premium is based on publicly traded companies or comparable entities which have been recently acquired in arm’s-length transactions. The preferred shares were issued to settle accrued liabilities to the Directors and Officers in the amount of $15,000. A loss on issuance of these preferred shares was recognized in the income statement in the amount of $271,000.

 

On March 31, 2009, the Company’s Board of Directors approved an amended Certificate of Designation with respect to the authorization and issuance of up to 15,000,000 Series A Preferred shares, an increase from the 3,000,000 shares of Series A Preferred stock that were authorized to be issued in the Certificate of Designation of Series A Preferred stock passed by the Board of Directors on May 12, 2008. No cash dividends shall be paid with respect to the shares of Series A Preferred stock. The Series A Preferred stock shall give its holders the right to 100 votes per share on any matter properly before the shareholders for a vote. The voting rights of the Series A Preferred stock shall be subject to all splits and each share will be convertible into 5 shares of Common stock upon the earlier of: (i) the holders’ election or (ii) January 8, 2009. The holders of all shares of Series A Preferred stock shall not be subject to any non-cash distributions to holders of shares of Common stock, including without limitation, stock dividends, stock splits and securities issued in a recapitalization. In the event of liquidation or winding up of the Corporation, the holders of the Series A Preferred stock will be entitled to receive, prior and in preference to the holders of the Common stock, an amount up to but not greater than the original purchase price per share of Series A Preferred stock, notwithstanding the par value of the Series A Preferred stock. These twelve million Series A Preferred Shares were issued to three Officers of the Company. The value assigned to this issuance is $175,000, based on an estimate of the fair market value on the issuance date. The fair market value is calculated as the greater of (i) the converted value to common stock at a ratio of 1:5 and, (ii) the value of the voting rights. These shares as a group represent a controlling voting interest. The fair market value also takes into account this control premium. The control premium is based on publicly traded companies or comparable entities which have been recently acquired in arm’s-length transactions. The preferred shares were issued to settle accrued liabilities to the Directors and Officers in the amount of $60,000. A loss on issuance of these preferred shares was recognized in the income statement in the amount of $115,000.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

 

On February 16, 2010, the Company’s Board of Directors approved an amended Certificate of Designation with respect to the authorization and issuance of up to 25,000,000 Series A Preferred shares, an increase from the 15,000,000 shares of Series A Preferred stock that were authorized to be issued in the Certificate of Designation of Series A Preferred stock passed by the Board of Directors on March 31, 2009. No cash dividends shall be paid with respect to the shares of Series A Preferred stock. The Series A Preferred stock shall give its holders the right to 100 votes per share on any matter properly before the shareholders for a vote. The voting rights of the Series A Preferred stock shall be subject to all splits and each share will be convertible into 5 shares of Common stock upon the earlier of: (i) the holders’ election or (ii) January 8, 2009. The holders of all shares of Series A Preferred stock shall not be subject to any non-cash distributions to holders of shares of Common stock, including without limitation, stock dividends, stock splits and securities issued in a recapitalization. In the event of liquidation or winding up of the Corporation, the holders of the Series A Preferred stock will be entitled to receive, prior and in preference to the holders of the Common stock, an amount up to but not greater than the original purchase price per share of Series A Preferred stock, notwithstanding the par value of the Series A Preferred stock. On December 6, 2010, the Company’s Board of Directors approved an amended Certificate of Designation with respect to the issuance of 10,000,000 Series A Preferred shares. These ten million Series A Preferred Shares were issued to two Officers of the Company. The value assigned to this issuance is $152,000, based on an estimate of the fair market value on the issuance date. The fair market value is calculated as the greater of (i) the converted value to common stock at a ratio of 1:5 and, (ii) the value of the voting rights. These shares as a group represent a controlling voting interest. The fair market value also takes into account this control premium. The control premium is based on publicly traded companies or comparable entities which have been recently acquired in arm’s-length transactions. The preferred shares were issued to settle accrued liabilities to the Directors and Officers in the amount of $50,000. A loss on issuance of these preferred shares was recognized in the income statement in the amount of $102,000.

 

As at September 30, 2015, the Company had 25,000,000 Series A preferred shares issued and outstanding.

 

Note 12      STOCK OPTIONS

 

a)       Stock Options

Under executive employment agreements with Tirex, its three officers, John Threshie, Lou Muro and Michael Ash have been granted stock options for each of the fiscal years June 30, 2011, 2012 and 2013.

1) John L. Threshie Jr., President

3,000,000 stock options at the beginning of the fiscal years 2011, 2012 and 2013. The stock options are exercisable within three years of the date of issue of the stock options. The exercise price of the stock options are as follows:

Year 1 – Lesser of $.20 or 50% of market

Year 2 – Lesser of $.40 or 50% of market

Year 3 – Lesser of $.50 or 50% of market

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

2) Michael D.A. Ash, Secretary-Treasurer & Chief Financial Officer

2,000,000 stock options at the beginning of the fiscal years 2011, 2012 and 2013. The stock options are exercisable within three years of the date of issue of the stock options. The exercise price of the stock options are as follows:

Year 1 – Lesser of $.20 or 50% of market.

Year 2 – Lesser of $.40 or 50% of market.

Year 3 – Lesser of $.50 or 50% of market.

3) Louis V. Muro, Vice President - Engineering

2,000,000 stock options at the beginning of the fiscal years 2011, 2012 and 2013. The stock options are exercisable within three years of the date of issue of the stock options. The exercise price of the stock options are as follows:

Year 1 – Lesser of $.20 or 50% of market.

Year 2 – Lesser of $.40 or 50% of market.

Year 3 – Lesser of $.50 or 50% of market.

Also, on August 1, 2011, the Company authorized the issuance of 100,066,256 stock options in exchange for $1,000,663 of accrued unpaid salaries and consulting fees owed to Directors and Officers of the Company. The stock options (i) fully vest upon issuance, (ii) have an exercise price of $0.01, (iii) expire within 5 years of the date of issuance, (iv) are exercisable for cash or on a cashless basis, at the option of the holder, and (v) are subject to any and all future recapitalizations of the issued and outstanding capital stock of the Company on a pro forma basis.

THE TIREX CORPORATION

A DEVELOPMENT STAGE COMPANY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2015

A summary of the changes in the Company’s common share stock options is presented below:

		September 30, 2015								June 30, 2015
		Number				Weighted				Number				Weighted
		of Stock				Average Exercise				of Stock				Average Exercise
		Options				Price ($)				Options				Price ($)
Balance at beginning of the year			127,066,256				0.001				127,066,256				0.001
Granted			—				—				—				0.001
Exercised			—				—				—				—
Forfeited			—				—				—				—
Balance at end of the year			127,066,256				0.001				127,066,256				0.001

 

The fair value of the options issued during the year was measured at the date of grant using the Black-Scholes option pricing model with the following weigthed-average assumptions:

 

		Year ended
		June 30,
		2012				2011
Risk - free interest rate			1.32%				1.80%
Expected volatility			251				261.5
Expected life of stocks options (in years)			2.5				2.5
Assumed dividends			None				None

 

 

The Company recognized compensation expense related to stock options for the three months ended September 30, 2015 and 2014 of $0 and $0, respectively, and for the years ended June 30, 2015 and 2014 of $0 and $0, respectively.

 

Note 13      RENTAL EXPENSE AND COMMITMENTS

 

Rental expense for the three months ended September 30, 2015 and 2014 was $0 and $0, respectively, and for the years ended June 30, 2015 and 2014 amounted to $0 and $0, respectively.

 

As at September 30, 2015, the Company does not have any outstanding lease commitments or minimum annual rental payments and sub-lease income.

Note 14      LITIGATION

 

An action was instituted by Plaintiffs, an individual and a corporation, in March 2001, in a Canadian court alleging a breach of contract and claims damages of approximately $795,000 representing expenses and an additional approximate amount of $5,411,000 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 $99,000 is due and owing for the manufacture and delivery of tire disintegrators. The Company has prepared its defense and a cross claim of $100,000 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.