SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
COMMISSION FILE NUMBER 1-9190
STARTRONIX INTERNATIONAL INC
(Exact name of registrant as specified in its charter)
DELAWARE 91-1263272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7700 IRVINE CENTER DRIVE, SUITE 510
IRVINE, CALIFORNIA 92618
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (949) 727-7420
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
1034 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 No X.
-----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT DECEMBER 31, 1998
Common stock, $0.001 par value 47,216,393
<PAGE>
STARTRONIX INTERNATIONAL INC
INDEX
PAGE NO.
PART I Financial Information
Condensed consolidated balance sheets at
December 31, 1998(unaudited) and June 30, 1998 3
Condensed consolidated statements of loss
(unaudited) - three and six month periods ended
December 31, 1998 and 1997 4
Condensed consolidated statements of cash flow
(unaudited) - six month periods ended December 31,
1998 and 1997 5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial
conditions and results of operations 8
PART II Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of
Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 9
<PAGE>
PART I - FINANCIAL INFORMATION
STARTRONIX INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1998 June 30, 1998*
-------------- ----------------
(Unaudited)
ASSETS
Deposit $ 56,500 $ 56,500
-------------- ----------------
Total Assets $ 56,500 $ 56,500
============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable - trade $ 2,091,161 $ 2,091,161
Due to Related Parties 719,719 719,719
Due to Officers and Directors 277,058 277,058
Accrued Expenses 1,857,635 1,822,926
Related Party Notes Payable 400,000 400,000
-------------- ----------------
Total Current Liabilities 5,345,573 5,310,864
Commitments and Contingencies
Stockholders' Equity (Deficit)
Preferred Stock, $.01 Par value, 10,000,000 authorized:
Series "C" Convertible Preferred Stock, $.01 Par value
65,000 shares issued and outstanding at
June 30, 1998 and December 31, 1998 650 650
Common Stock, $.001 Par value, 50,000,000 shares authorized;
47,216,393 shares issued and outstanding at
June 30, 1998 and December 31, 1998 47,216 47,216
Additional Paid In Capital 23,504,319 23,504,319
Accumulated Deficit (28,841,258) (28,806,549)
------------- ----------------
Total Stockholders' Equity (Deficit) (5,289,073) (5,254,364)
-------------- ----------------
Total Liabilities and Shareholder's Equity (Deficit) $ 56,500 $ 56,500
============== ================
* Condensed from audited financial statements
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
STARTRONIX INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3 months ended 6 months ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---------------- -------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Sales $ 0 $ 0 $ 0 $ 0
---------------- -------------- -------------- ------------
Operating Expenses:
Professional Services and Consulting 0 33,770 0 109,047
Other Selling, General and Administrative 311 96,714 19,709 612,465
---------------- -------------- -------------- ------------
Total Operating Expenses 311 130,484 19,709 721,512
---------------- --------------- -------------- ------------
Operating Loss (311) (130,484) (19,709) (721,512)
---------------- -------------- -------------- ------------
Other (income) Expense:
Interest Expense 7,500 7,500 15,000 15,000
---------------- -------------- -------------- ------------
Total Other (income) Expense 7,500 7,500 15,000 15,000
---------------- -------------- -------------- ------------
Net Loss $ (7,811) $ (137,984) $ (34,709) $ (736,512)
================ =============== ============= ============
Net Loss Per Share $ (0.00) $ (0.00) $ (0.00) $ (0.02)
================ ============= ============== =============
Weighted Average Shares Outstanding 47,216,393 47,446,463 47,216,393 43,376,087
================ ============== ============== ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
STARTRONIX INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
December 31,
------------------
1998 1997
------------------ ---------
(Unaudited) (Unaudited)
Cash used in operating activities $ 0 $ (7,975)
Cash used in investing activities 0 0
Cash used in financing activities 0 (3,000)
----------------- -----------
Net increase (decrease) in cash 0 (10,975)
Cash, beginning of period 0 10,975
------------------ ---------
Cash, end of period $ 0 $ 0
================== ==========
Supplemental Information: No amounts were paid for interest or taxes during the periods.
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
STARTRONIX INTERNATIONAL INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
----------------------
Prior to fiscal 1997, StarTronix International Inc. (the Company) was a
development stage entity. Developed exclusively for the Company, the StarScreen
is a combination telephone and Internet access portal. The Company obtained
Federal Communications Commission ("FCC") approval for the StarScreen, its
primary product, in January 1997. To minimize costs, the Company outsourced its
manufacturing. Immediately after obtaining FCC approval, the Company initiated
sales through its wholly owned subsidiary, StarTronix, Inc.
StarTronix International utilizes network marketing to sell its products.
The Company solicits individuals to be independent distributors to sell the
StarScreen and to solicit other individuals to become distributors. To become a
distributor, an individual must purchase a "Starter Kit" which contains
marketing material that describes the products available and explains the
distributor's compensation package. Distributors do not earn commission on
sales of starter kits; however, they do earn commission on sales of the
products. Additionally, they earn commission when any of their downstream
distributors sell products.
Because of the Company's inability to secure adequate resources March 1997,
the Company suspended its normal operating activity and focused its efforts on
the search for equity financing. The Company is in the process of reviving
operations and expects to be fully operational by fiscal 2000.
2. GOING CONCERN
--------------
The Company began sales of its primary product, the StarScreen,in January
1997; however, because of higher than expected upfront costs, the Company found
itself with insufficient financing to continue as a going concern. In March
1997, the Company was unable to meet its commitment to purchase StarScreen
inventory and forfeited the deposits it had placed with its manufacturer, Golden
Source Electronics Ltd., which is recorded as a loss in the accompanying
financial statements. Also in March 1997, the Company negotiated settlements
with some of its vendors, laid-off its employees, wrote-off all its assets,
abandoned its lease and suspended all operations except for the search for
additional financing.
In 1999, the President successfully negotiated a consulting contract with
Western Global Telecommunications, Inc. to upgrade the StarScreen to current
technological standards, to add certain new features to attract a wider customer
base, and to secure a manufacturer to supply the product. Between August 1999
and June 2000, the Company has raised approximately $1 million in cash and
received approximately $250,000 in services for common stock; the Company has
negotiated employment contracts with the Chairman, the President, and the CFO,
in addition to employment contracts with officers of its wholly owned
subsidiary, StarTronix.com.
Additionally, the Company has developed a business plan and is currently
talking with various vendors, manufacturers, and fulfillment houses to provide
services to manufacture, supply, and fulfill orders for an upgraded StarScreen.
FCC approval for the upgrades is in process. The management of StarTronix.com
has begun to develop market awareness for the re-launch of the improved
StarScreen and expects to begin enlisting independent distributors by October
2000. The Chairman and President are meeting with various existing and
potential investors and expect sufficient commitments so that the Company may
continue as a going concern. Additionally, management has rejected certain
offers with the belief that the deals they are currently negotiating will better
fit the Company's business plan. However, the Company has minimal capital
resources presently available to meet obligations that are normally required by
similar companies, and with which to carry out its planned activities. And, the
Company does not have "firm" commitments for financing. These factors raise
doubt about the Company's ability to continue as a going concern. While
management believes actions currently being taken to obtain financing provide
the opportunity for the Company to continue as a going concern, there is no
assurance that the Company will be successful in doing so.
<PAGE>
The accompanying consolidated financial statements have been prepared on a
going concern basis that contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
continues to rely on its capital raising efforts to fund continuing operations.
These conditions raise substantial doubt as to the Company's ability to continue
as a going concern. The accompanying consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount of liabilities that might be necessary if
the Company is unable to continue as a going concern.
<PAGE>
STARTRONIX INTERNATIONAL INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
THREE MONTH PERIOD ENDING DECEMBER 31, 1998 AND 1997
Sales for the three month period ended December 31, 1998 were zero, as
compared to zero for the three month period ended December 31, 1997, due to the
suspension of operations by management of the Company effective March 31, 1997.
During the three month period ended December 31, 1998, the Company incurred
operating expenses of $311 resulting in an operating loss of $311, compared with
$130,484 and $130,484, respectively, for the three months ended December 31,
1997. This represents a decrease of 99% in both instances.
As a result of the above, the Company incurred a net loss of $7,811 for the
three month period ended December 31, 1998 as compared to $137,984 for the three
month period ended December 31, 1997, a decrease of 94%.
SIX MONTH PERIOD ENDING DECEMBER 31, 1998
Sales for the six month period ended December 31, 1998 were zero, as
compared to zero for the six month period ended December 31, 1997, due to the
suspension of operations by management of the Company effective March 31, 1997.
During the six month period ended December 31, 1998, the Company incurred
operating expenses of $19,709, resulting in an operating loss of $19,709,
compared with $721,512 and $721,512, respectively, for the six months ended
December 31, 1997. This represents a decrease of 97% in both instances.
As a result of the above, the Company incurred a net loss of $34,709 for the six
month period ended December 31, 1998 as compared to $736,512 for the six month
period ended December 31, 1997, a decrease of 95%.
LIQUIDITY AND CAPITAL RESOURCES AT DECEMBER 31, 1998
During the six months ended December 31, 1998, and as described more fully
above, the Company's net loss was equal to $34,709.
Cash at December 31, 1998 was zero, as it was at June 30, 1998. As a
result of the Company's suspension of operations on March 31, 1997, there were
no other assets except for a deposit in the amount of $56,500.
As a result of the above, total assets at December 31, 1997 were $56,500 as
compared to $56,500 at June 30, 1998.
Current liabilities increased from $5,310,864 at June 30, 1998 to
$5,345,573 at December 31, 1998, an increase of 1%.
As a result of the above, the deficit in total stockholders' equity
increased from $5,254,364 at June 30, 1998 to $5,289,073 at December 31, 1998.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Subsequent to the Company suspending the conversion of the Series "C"
Preferred Stock, a shareholder group filed an action against the Company in the
United States District Court in New York. The shareholders sought to compel the
Company to resume conversion of the Series "C" Preferred Stock or, in the
alternative, to rescind the subscription agreement and recover the shareholders'
original investment in the amount of $1,337,500.
In December 1996, a second shareholder group filed an action against the
Company in the United States District Court in California. The shareholders
sought to compel the Company to resume conversion of the Series "C" Preferred
Stock or, in the alternative, to rescind the subscription agreement and recover
the shareholders' original investment in the amount of $2,367,500, plus interest
and punitive damages.
In August 1997, the Company reached a settlement with all but two of the
Series "C" shareholders wherein the Company honored the holders' conversions.
In August 1999 and May 2000 a settlement was reached with the final two
shareholders who converted their Series "C" Preferred Stock into 1,250,000 and
2,000,000 shares of common stock, respectively.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UNDER SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5 OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
<PAGE>
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 authorized.
Dated: August 2, 2000 STARTRONIX INTERNATIONAL INC
/s/ Greg Gilbert
_______________________________
By: Greg Gilbert
Its: President
Dated: August 2, 2000 /s/ Robert Hart
______________________________
By: Robert Hart
