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EX-32 - TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.trie10qa12312010amend321.txt
EX-31 - TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.trie10qa12312010amend3111.txt
EX-31 - TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.trie10qa12312010amend3112.txt
EX-32 - TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC.trie10qa12312010amend322.txt

                                 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 DECEMBER 31, 2010

[ ]  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 GARDENS RD, 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 19 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 Item 4T. Controls and Procedures 24 PART II - OTHER INFORMATION Item 1. Legal Proceedings 24 Item 1A. Risk Factors 25 Item 2. Unregistered Sales of Equity Securities and Use of 25 Proceeds Item 3. Defaults Upon Senior Securities 25 Item 4. Removed and Reserved 25 Item 5. Other Information 25 Item 6. Exhibits 26 Signatures 26 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 three month period ended December 31, 2010, 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 7-8 Notes to Interim Financial Statements 9 4
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. ----------------------------------------------- (A Development Stage Company) INTERIM BALANCE SHEETS (Stated in U.S. Dollars) ---------------------- December 31, September 30, 2010 2010 ------------- ------------- ASSETS (Unaudited) Current Assets Cash $673 $ 10,448 Prepaid Expenses 2,400 - ------------- ------------- TOTAL ASSETS 3,073 $ 10,448 ============= ============= LIABILITIES and STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable and accrued liabilities 80,666 $ 71,613 Accounts payable - related parties 16,401 24,880 Accrued payroll 22,500 - Loan payable - related parties 149,394 51,023 Convertible notes - related party 285,096 161,956 ------------- ------------- TOTAL CURRENT LIABILITIES 554,057 309,472 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 December 31, 2010 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 (4,390,211) (4,105,651) ------------- ------------- TOTAL STOCKHOLDERS' DEFICIT (550,984) (299,024) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 3,073 $ 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 months ended December 31, 2010 and 2009 and for the period December 15, 1998 (Date of Inception) to December 31, 2010 (Unaudited) (Stated in U.S. Dollars) ---------------------- Three months December 15, 1998 (Date of Inception) Ended December 31, to 2010 2009 December 31, 2010 --------- --------- ------------------ REVENUE $ - $ - $ - EXPENSES General and administrative 9,387 187 1,055,886 Professional fees 23,939 8,185 76,517 Salaries and consulting 126,500 610 198,268 --------- --------- --------------- NET INCOME (LOSS) FROM OPERATIONS (159,826) (8,982) (1,330,671) OTHER INCOME AND EXPENSES Interest expense (124,735) (4,649) (307,304) --------- --------- --------------- (124,735) (4,649) (307,304) Income( tax) benefit - - 2,235 --------- --------- --------------- Net income (loss) before discontinued operations (284,561) (13,631) (1,635,740) Discontinued operations of - - 2,754,471) subsidiary --------- --------- --------------- NET LOSS $(284,561) $(13,631) $ (4,390,211) ========= ========= =============== BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.00) ========= ========= Basic and diluted weighted average number of shares 8,983,337 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 three months ended December 31, 2010 and 2009 and for the period December 15, 1998 (Date of Inception) to December 31, 2010 (Unaudited) (Stated in U.S. Dollars) ---------------------- December 15, 1998 Three months ended (Date of Inception) December 31, To December 31, 2010 2010 2009 --------- --------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period $(284,561) $(13,631) $ (1,635,740) 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 111,973 259,242 Imputed interest on the promissory notes 11,167 - 27,408 Changes in assets and liabilities: Prepaid expenses (2,400) (2,400) Accounts payable and accrued liabilities 31,554 5,856 101,613 Accounts payable - related parties (8,479) - 16,401 --------- --------- ------------------ Cash used in operating activities - continued operations (108,146) (7,775) (1,129,367) Cash used in operating activities - discontinued operations - - 1,977,551) --------- --------- ------------------ NET CASH FLOWS USED IN OPERATING ACTIVITIES (108,146) (7,775) (3,106,918) 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) 7
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. ----------------------------------------------- (A Development Stage Company) INTERIM STATEMENTS OF CASH FLOWS For the three months ended December 31, 2010 and 2009 and for the period December 15, 1998 (Date of Inception) to December 31, 2010 (Unaudited) (Stated in U.S. Dollars) ---------------------- (continued) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from related parties loan payable 98,371 7,775 592,418 Proceeds from issuance of common stock - - 3,359,549 --------- --------- ------------------ Cash provided by financing activities - continued operations 98,371 7,775 3,951,967 Cash used in financing activities - discontinued operations - - (135,986) --------- --------- ------------------ CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 98,371 7,775 3,815,981 Net increase (decrease) in cash and cash equivalents (9,775) - 673 Cash and cash equivalents at beginning of period 10,448 - - --------- --------- ------------------ Cash and cash equivalents at end of period $ 673 $ - $ 673 ========= ========= =============== 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 8
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A Development Stage Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 (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. 9
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A Development Stage Company) NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 (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) will be paid a retainer fee per month; (ii) will be paid a one-time cash setup fee of $2,000; and HAWK will accept as payment per month for their retainer fee the following: (i) $2,000 in cash payment and (ii) 6,000 shares 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 in cash and issued a total of 18,000 shares of restricted common stock of the Company for cash consideration 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: (i) will be paid a retainer fee of $50,000 per month; and (ii) will issue a total of 120,000 shares of restricted common stock of the Company per quarter. The term of the contract began on December 1, 2010 and ending December 15, 2010 when services were minimized from December 18, 2010 and resumed on January 3, 2011 in observation of national holidays. The contract will continue and renew quarterly until terminated in accordance with certain terms. On December 1, 2010 the Company paid $50,000 in cash and 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. The Company has taken several steps to further this business objective including signing a purchase agreement to acquire all of the equity securities of Tonmik Import Export Solutions, Inc., a manufacturer of recycled rubber finished products in China for sale to big box retailers further described in Note 8 and signing a Joint Venture Agreement with an Italian manufacturer of tire recycling and recycled rubber molding equipment further described in Note 8. The Company has also retained the services of Guggenheim Securities, LLC as described in Note 8 to assist it in evaluating facilities in New Jersey, Pennsylvania and South Carolina for locating its new business venture and in raising debt and equity financing for the selected facility. The Company ended its consulting services arrangements with three prior advisors to work exclusively with Guggenheim and to focus on the current opportunities and as a result has in the three months ended December 31, 2010 expensed $99,000 in consulting fees. The Company as of December 31, 2010 is an inactive shell company, but will become an operating company upon the completion of the Tonmik acquisition or the commencement of operations in New Jersey, Pennsylvania or South Carolina. 10
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 (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 December 31, 2010, the Company has an accumulated deficit of $4,390,211 and remains in the development stage due to its lack of business operations. The Company has entered into a Joint Venture agreement and a Purchase Agreement to acquire Tonmik Import Export Solutions, Inc. The Company has decided to pursue the development of a fully integrated tire recycling and recycled rubber finished product manufacturing business. It will need to raise substantial capital to pursue its business plan, complete its joint venture agreement and the acquisition of Tonmik. At the time of this report no capital has been raised for 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 seven 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 THREE MONTHS ENDED DECEMBER 31, 2010 (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 three months ended December 31, 2010 and 2009. 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 THREE MONTHS ENDED DECEMBER 31, 2010 (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: December 31, 2010 Face value due May 31, 2011 $ 443,024 Less: Unamortized discount (183,782) --- ------------------ Carrying value: $ 259,242 During the three months ended December 31, 2010, the Company accrued interest of $25,854 related to the Note. An amount of $285,096 is reflected on the Company's balance sheets as Convertible note - related parties including the carrying value of $259,242 disclosed above, as well as accrued interest to December 31, 2010 totaling $25,854. As of December 31, 2010 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. As of December 31, 2010, the Company accrued interest in the amount of $2,432. During the three months ended December 31, 2010, the Company received operating funds from two of our shareholders in the amount of $76,191 creating a balance of loan at December 31, 2010 of $87,191. The loans bear 10% interest and are due on demand. As of December 31, 2010, the Company accrued interest in the amount of $722. During the three month period ended December 31, 2010, the Company paid the principal in the amount of $10,000. During December 31, 2010, the Company received operating funds from Tonmik which is wholly owned by Antonio Care, the Company's Chief Executive Officer in the amount of $22,180. 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 THREE MONTHS ENDED DECEMBER 31, 2010 (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 June 1, 2010, Mr. Petkanas invoiced, and was paid, consulting fees by the Company in the amount of $10,000 and 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 and expired on September 30, 2010. On December 8, 2010, Mr. Dean Petkanas, Interim Chief Operating Officer and Acting Chief Financial Officer of the Company, informed the Board of Directors of the Company 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. 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. 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. 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. 14
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 (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.(the "HAWK), an investor relations and consulting firm. HAWK will provide investor relations, finical media relations and other appropriate consulting and advisory services. In consideration for such services, the Company: (i) will be paid a retainer fee per month; (ii) will be paid a one-time cash setup fee of $2,000; and HAWK will accept payment of 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. 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 was to provide services for consulting, business advisory, shareholder information and public/investor relations. In consideration for such services, AQUILINE:(i) will be paid a retainer fee of $50,000 per month; and (ii) be issued a total of 120,000 shares of restricted common stock of the Company per quarter. The term of the contract began on December 1, 2010 and ending December 15,2010 when services was minimized from December 18, 2010 and resumed on January 3, 2011 in observation of national holidays. The contract was to continue and renew quarterly until terminated in accordance with certain terms. On December 1, 2010 the Company paid $50,000 in cash and 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 $5,000. As of September 30, 2010 and December 31, 2010 the Company had 8,930,185 and 9,093,185 shares of common stock outstanding, respectively. 15
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS NOTE 6 - STOCK OPTION As discussed in Note 4 above, effective June 1, 2010, the Company granted One Hundred and Fifty Thousand (150,000) shares of common stock of the Company with exercise price equal to Thirty cents ($.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 December 31, 2009: December 31, September 30, 2010 2010 Deferred tax asset $ 324,805 $ 264,399 Less: valuation allowance (324,805) (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 three months ended December 31, 2010 was $60,406. The figures reflect those of the Company only, as all subsidiaries are now divested. The Company adopted the provisions of uncertain tax positions as addressed in ASC 740-10-65-1on 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 THREE MONTHS ENDED DECEMBER 31, 2010 (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: (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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. NOTE 9 - RECLASSIFICATION During the three months ended December 31, 2010, the Company reclassified certain items on the financial statements in the column showing December 15, 1998 (Date of Inception) to December 31, 2010 to conform to the presentation in the December 31, 2010 financial statements. 17
TIRE INTERNATIONAL ENVIRONMENTAL SOLUTIONS INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2010 (Unaudited) NOTE 10 - SUBSEQUENT EVENTS On January 10, 2011 the Company terminated its relationship with Aquiline due to Aquiline's failure to perform the required consulting services under the consulting services agreement. The Company expensed $74,000 during the three months ended December 31, 2010 as a result of the termination. The Company will pursue recovery of payments and stock issued to Aquiline due to lack of performance. On January 18, 2011 the Company completed a Purchase Agreement with Antonio Care, the Company's Chief Executive Officer. Under the Agreement, the Company is acquiring all of the outstanding stock of Tonmik Import/Export Solutions, Inc ("Tonmik") in exchange for the Company's $1.7 million cash flow note. 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. The note is payable in quarterly installments of interest at 10% per annum and principal to the extent of 50% of Tonmik's free cash flow after all of its operating, debt and any new equipment costs are satisfied with a final installment due on December 31, 2015. The purchase of the Tonmik shares will be completed upon the delivery of the Tonmik December 31, 2010 audited financial statements,certificates of corporate good standing and the delivery of all of the Tonmik shares. Upon completion of the acquisition of Tonmik the Company will become an operating company. Tonmik reported unaudited operating results for the nine months ended September 30, 2010 of $2.7 million in revenue and $442,000 in Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and audited operating results of $1.1 million in revenue and $207,000 in EBITDA is for year ended December 31, 2009. 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 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 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 three months ended December 31, 2010. 18
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. 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. 19
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 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) will be paid a retainer fee per month; (ii) will be paid a one-time cash setup fee of $2,000; and HAWK will accept payment of the monthly retainer fee as follows:(i) $2,000 in cash payment and (ii) 6,000 shares 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 in cash and issued a total of 18,000 shares of restricted common stock of the Company for cash consideration 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 & public companies. AQUILINE was to provide services for consulting, business advisory, shareholder information and public/investor relations. In consideration for such services, AQUILINE:(i) was to be paid a retainer fee of $50,000 per month; and (ii) was to be issued a total of 120,000 shares of restricted common stock of the Company per quarter. The term of the contract began on December 1, 2010 and ending December 15, 2010 when services were minimized from December 18, 2010 and resumed on January 3, 2011 in observation of national holidays. The contract was to continue and renew quarterly until terminated in accordance with certain terms. On December 1, 2010 the Company paid $50,000 in cash and 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. 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 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. The Company has taken several steps to further this business objective including signing a purchase agreement to acquire all of the equity securities of Tonmik Import Export Solutions, Inc., a manufacturer of recycled rubber finished products in China for sale to big box retailers and signing a Joint Venture Agreement with an Italian manufacturer of tire recycling and recycled rubber 20
molding equipment. The Company has also retained the services of Guggenheim Securities, LLC as to assist it in evaluating facilities in New Jersey, Pennsylvania and South Carolina for locating its new business venture and in raising debt and equity financing for the selected facility. The Company ended its consulting services arrangements with three prior advisors to work exclusively with Guggenheim and to focus on the current opportunities and as a result has in the three months ended December 31, 2010 expensed $99,000 in consulting fees. The Company as of December 31, 2010 is an inactive shell company, but will become an operating company upon the completion of the Tonmik acquisition or the commencement of operations in New Jersey, Pennsylvania or South Carolina. 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: (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; (euro)o 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; 22
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. The Company will be seeking land on which to construct the plant as required under the agreement. LIQUIDITY AND CAPITAL RESOURCES As of December 31,2010,the Company had limited cash. Management estimates it will need $35,000,000 over the next nine 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 December 31, 2010 and 2009: The Company had no revenues for the three month periods ended December 31, 2010 and 2009. 23
Total expenses for the three month period ended December 31, 2010 were $159,826 as compared to $8,892 for the three months ended December 31, 2009. The increase in expenses was mainly related to an increase in salaries of $32,500 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 in analyzing proposed Projects in New Jersey, Pennsylvania and South Carolina and an increase in interest from $4,649 (2009) to $124,735 (2010). 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 December 31, 2010 the interest charge associated with this convertible note included the amortization of $111,973 and accrued interest of $11,167. Additional accrued interest of $1,599 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 December 31, 2010 and 2009 was $.03 and $.00, respectively. 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 December 31, 2010. 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 December 31,2010, 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. A judgment in Canada was entered against the Company, Tonmik and Mr. Care to record the obligations under the settlement. 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. 24
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. 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. On December 8, 2010, Mr. Dean Petkanas, Interim Chief Operating Officer and Acting Chief Financial Officer of the Company, informed the Board of Directors of the Company that he was resigning as Interim Chief Operating Officer and Acting Chief Financial Officer effective December 8, 2010 after the Board did not renew his agreement. As part of the settlement Mr. Petkanas received $15,452.71 with respect to the consulting fees of $15,000 owing to him pursuant to his contract and reimbursement expense in the amount of $452.71. 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 25
ITEM 6. EXHIBITS -------------------------------------------------------------------------------- 31.1 Section 302 Certification - Principal Executive Filed herewith Officer ................................................................................ ................................................................................ 31.2 Section 302 Certification - Principal Financial Filed herewith Officer ................................................................................ ................................................................................ 32.1 Certification Pursuant to 18 U.S.C. Section 1350 Filed herewith as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ................................................................................ ................................................................................ 32.2 Certification Pursuant to 18 U.S.C. Section 1350 Filed herewith 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 26