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 MARCH 31, 1999
[ ] 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 MARCH 31, 1997
Common stock, $0.001 par value 38,988,785
<PAGE>
STARTRONIX INTERNATIONAL INC
INDEX
PAGE NO.
PART I Financial Information
Condensed consolidated balance sheets at
March 31, 1999 (unaudited) and June 30, 1998 3
Condensed consolidated statements of loss
(unaudited) - three and nine month periods ended
March 31, 1999 and 1998 4
Condensed consolidated statements of cash flow
(unaudited) - nine month periods ended March 31,
1999 and 1998 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 10
<PAGE>
PART I - FINANCIAL INFORMATION
STARTRONIX INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
March 31,1999 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 0 277,058
Accrued Expenses, Including Interest 1,865,135 1,822,926
Related Party Notes Payable 400,000 400,000
--------------- ----------------
Total Current Liabilities 5,076,015 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 March 31, 1999 650 650
Preferred Stock, $.01 Par value, 9,250,00 authorized:
Series "D" Convertible Preferred Stock, $.01 Par value
9,000,001 shares issued and outstanding at March 31, 1999 90,000 0
Common Stock, $.001 Par value, 50,000,000 shares authorized;
47,216,393 and 38,988,785 shares issued and outstanding
at June 30, 1998 and March 31, 1999 38,988 47,216
Additional Paid In Capital 23,504,319 23,504,319
Accumulated Deficit (28,653,472) (28,806,549)
------------ ----------------
Total Stockholders' Equity (Deficit) (5,019,515) (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>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- -------------------
1999 1998 1999 1998
-------------------- ------------------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Sales $ 0 $ 0 $ 0 $ 0
-------------------- ------------------- ------------ ------------
Operating Expenses:
Professional Services and Consulting 0 8,057 0 117,104
Salary Expenses 0 0 0 4,914
Other Selling, General and Administrative 81,772 0 101,481 607,551
-------------------- ------------------- ------------ ------------
Total Operating Expenses 81,772 8,057 101,481 729,569
-------------------- ------------------- ------------ ------------
Operating Loss (81,772) (8,057) (101,481) (729,569)
-------------------- ------------------- ------------ ------------
Other (income) Expense:
Interest Expense 7,500 7,500 22,500 22,500
Gain on Settlement Due to Officers and Directors (277,058) 0 (277,058) 0
------------------- ------------------ ------------- -----------
Total Other (income) Expense (269,558) 7,500 (254,558) 22,500
-------------------- ------------------- ------------ ------------
Net (Income) Loss $ 187,786 $ (15,557) $ 153,077 $ (752,069)
===================== ================== ============= ===========
Net (Income) Loss Per Share $ 0.00 $ 0.00 $ 0.00 $ (0.02)
===================== ================== ============= ===========
Weighted Average Shares Outstanding 46,485,050 47,216,393 46,976,141 44,637,501
===================== ================== ============ ===========
</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>
Nine Months Ended
March 31,
-------------------
1999 1998
------------------- ------------
(Unaudited) (Unaudited)
Cash used in operating activities $ 8,228 $ (7,975)
Cash used in investing activities 0 0
Cash provided by financing activities (8,228) (3,000)
------------------- ---------
Net increase (decrease) in cash 0 (10,975)
Cash, beginning of period 0 10,975
------------------- ---------
Cash, end of period $ 0 $ 0
===================== ==========
</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.
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 able 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. During the quarter ended March 31, 1999, the
Company began to revive operations which were suspended in March 31, 1997.
THREE MONTH PERIOD ENDING MARCH 31, 1999 AND 1998
Sales for the three month period ended March 31, 1999 were zero, as
compared to zero for the three month period ended March 31, 1998, due to the
suspension of operations by management of the Company effective March 31, 1997.
During the three month period ended March 31, 1999, the Company incurred
operating expenses of $81,772, resulting in an operating loss of $81,772,
compared with $8,057 and $8,057, respectively, for the three months ended March
31, 1998. This represents a ten fold increase in both instances.
During the three month period ended March 31, 1999, the Company had other
income of $269,558. There was a gain on settlement due to officers and
directors of $277,058, which represents a waiver of past due salary and expenses
due to some of the officers of the Company, including $144,000 to the current
President, Greg Gilbert.
As a result of the above, the Company had net income of $187,786 for the
three month period ended March 31, 1999 as compared to a net loss of $15,557 for
the three month period ended March 31, 1998.
NINE MONTH PERIOD ENDING MARCH 31, 1999 AND 1998
Sales for the nine month periods ended March 31, 1999 and 1998 were zero
due to the suspension of operations by management of the Company effective March
31, 1997.
During the nine month period ended March 31, 1999, the Company incurred
operating expenses of $101,481, resulting in an operating loss of $101,481,
compared with $729,569 and $729,569, respectively, for the nine months ended
March 31, 1998. This represents a decrease of over 87% in both instances. The
operating expenses for the current period include other selling, general and
administrative expenses of $101,481, which consists primarily of general
overhead expenses as the Company begins to revive operations.
During the nine month period ended March 31, 1999, the Company had other
income of $254,558, primarily due to a $277,058 gain which represents a waiver
of past due salary and expenses due to some of the officers of the Company,
including $144,000 to the current President, Greg Gilbert. The gain was offset
by interest expense of $22,500.
As a result of the above, the Company had net income of $153,077 for the nine
month period ended March 31, 1999 as compared to a net loss of $752,069 for the
nine month period ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES AT MARCH 31, 1999
During the nine months ended March 31, 1998, and as described more fully
above, the Company's net income was equal to $153,077. The Company's cash
position was zero at both the beginning and end of the period.
Cash at March 31, 1999 and June 30, 1998 was zero. 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 March 31, 1999 were $56,500 and
the same at June 30, 1998.
<PAGE>
Current liabilities decreased from $5,310,864 at June 30, 1998 to
$5,076,015 at March 31, 1999, an decrease of 4% due primarily to the waiver of
past due salary and expenses due to some of the officers of the Company,
including $144,000 to the current President, Greg Gilbert.
As a result of the above, the deficit in total stockholders' equity
decreased from $5,254,364 at June 30, 1998 to $5,019,515 at March 31, 1999.
<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
In March 1999, an aggregate of 8,227,608 shares of common stock, which were
previously issued as a "pool" for the settlement of the lawsuit with the holders
of the Company's Series "C" Convertible Preferred Stock, were retired.
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
