The Tirex Corporation (TXMC)

[DueDillinger]

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of significant factors which have affected the Company's financial position and operations during the three month period ended March 31, 2003. This discussion also includes events which occurred subsequent to the end of the last quarter and contains both historical and forward-looking statements. When used in this discussion, the words "expect(s)", "feel(s)","believe(s)", "will", "may", "anticipate(s)" "intend(s)" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected.

As reported in the Company's Annual Report for the year ended June 30, 2003, recently filed on Form 10-KSB, the Company's TCS Tire Recycling System has been ready for market since March of 2000, although further refinements were made to the technology during the remainder of Fiscal 2001 and throughout Calendar 2002. Throughout that period the availability of funds necessary to permit developmental stage companies, such as ours, to make the transition to the commercial stage has been very restricted. The Company was late in filing its September 10-Q on a timely basis, which resulted in our stock being removed from the Bulletin Board to be shown as OTC-Other, in which category the "Bid" and "Ask" are not shown. The Company has recently taken steps to attempt to rectify this situation and hopes to be re-listed on the OTC Bulletin Board shortly.

On the business development side, entrepreneurial confidence in investing into new ventures, such as tire recycling, has continued to manifest significant strong uncertainty, and particularly on the part of financial backers to such projects. For the past year, the Company has been working with a Puerto Rican entrepreneur interested in purchasing a TCS-2, but having difficulty in finding an investor partner, necessary to complete his project financing package. To date, no appropriate investor partner has been found. Similarly, the Company was working with a Canadian entrepreneur interested in setting up a tire recycling facility in Quebec. However, during the first quarter of Fiscal 2003, this entrepreneur informed us that that the facility he would establish would not involve our technology, but rather a processing facility using hammer mills. Such equipment is easily available on the used equipment market, permitting him to reduce his capital cost outlay. However, they project initially conceived remains viable and we are working with a Montreal-based consulting firm to bring in investors to support a quebec-based facility. To date, no such investors have committed to any project. We remain hopeful that such investors will be found, but we cannot guarantee that this will occur.

Our Manufacturing Partner, Simpro S.p.A. of Turin. Italy, has received the desired support from public sources and from a technical university, Polytecnico, to proceed with the construction of a demonstration unit in Italy. Construction has begun and the demonstration unit will be operational toward the end of this fiscal year. While we will not receive any royalty on the construction of this unit, we will receive a royalty on crumb rubber sales resulting from production operations of this unit. We do not expect to see such royalties commence before the first quarter of Fiscal 2005, however.

Simpro is currently in active negotiations with Brazilian interests for the sale of one or more TCS Systems. We have been informed that this potential Brazilian customer does have the financial capability to undertake this project. Regardless, there cannot be any assurances that an unconditional sales contract will result from these negotiations, and as of the date of this report, no such contract had been concluded.. Simpro has also received a Letter of Intent respecting a TCS-1 to be located in Botswana, a copy of which was provided to us. While Simpro's current business practices would normally have had them undertake due diligence examinations with respect to this potential customer as a precursor to proceeding with negotiations, we have not received any documents from Simpro attesting to the financial capability of the Botswanan entrepreneur.

We continue to respond to information requests with respect to our TCS systems from numerous sources. While the volume of such requests would indicate continued significant interest in our technology, there can be no assurances that any of these requests will proceed to actual negotiations for a system sale, nor that any sales contracts would actually be concluded.

With the suspension of rubber crumb production operations in January of 2002 and the concurrent reduction of R&D activity, we have devoted all of our efforts to being able to conclude a sale of a TCS System and to the raising necessary funds to keep the Company operational until revenue from sales can be realized.

In February of 2001, we concluded a private financing with an investor group managed by a New York-based company. Under the terms of the Agreement, we drew down $750,000 of the available $5,000,000 amount. The initial $750,000 was provided in the form of a Convertible Note. We defaulted by not having an SB-2 Registration Statement declared effective within 150 days of the date of the Note. Following lengthy negotiations, we reached a Settlement Agreement with the investors on April 26, 2002 under which the Company agreed to a reimbursement schedule and provided three series of warrants, 500,000 each, exercisable at different prices to the investors. The lack of financial resources prevented us from being able to honor the reimbursement schedule, and thus we are currently in default with respect the Settlement Agreement. On March 5, 2003, the Investors sent to us by FAX, demand letters of payments due for each of the three investor funds involved in the initial transaction, these letters being dated February 25 and February 26, 2003, being the two-year anniversary date of their investment. The sum total due, including interest, penalties and fees, was listed as $1,408,648.53. The Company is not in a position to pay this sum. The Investors also requested that shares be issued to them to permit conversion of some of the debt due. To respond to this request, and given the lack of shares available for issuance, the Company cancelled financial consulting agreements, with the consent of the consultants, and thus obtained 4,000,000 shares which were re-issued to the Investors under the conversion request in May of 2003. In addition, the Investors continue to hold 8,344,811 collateral shares as of May 12, 2003. The Company is working with the Investors to establish those conditions, related to the development of the business, such that remaining cash sums can be paid over time.

In connection with the original requirement of our having an SB-2 Registration Statement declared effective within 150 days, as noted in the previous paragraph, the Company has withdrawn its filing.

Because of the lengthy delay preceding the commencement of commercial operations, particularly insofar as regards the sale and manufacturing of TCS Systems is concerned, we have had to, and in the foreseeable near future, will be forced to continue to cover a substantial part of our overhead costs from sources other than revenues from operations. Since relocating to our current premises, our monthly cash requirements have been reduced to negligible amounts. Most of the expenses listed on our Income Statement relate to salary accruals.

http://www.sec.gov/Archives/edgar/data/823072/000120445903000453/tirex.htm