SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the nine month period ended - July 31, 1997
OR
[ ] 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 0-25312
STARTECH ENVIRONMENTAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1286576
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
79 Old Ridgefield Road Wilton, Connecticut 06897
-------------------------------------------------
(Address of principal executive offices) Zip Code
203/ 762-2499
--------------------------------------------------
(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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
---- ----
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Outstanding at September 10, 1997
------------------- ---------------------------------
Common Stock - No Par 7,063,552
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Unaudited Financial Statements
Balance Sheet - July 31, 1997 (unaudited)
and October 31, 1996 (audited) 3
Statement of Operations for the quarters and nine months
ended July 31, 1997 and 1996 ( unaudited) 4
Statement of Cash Flows for the nine months ended
July 31, 1997 and 1996 (unaudited) 5
Statement of Cash Flows for the three months ended
July 31, 1997 and 1996 (unaudited) 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
- --------- --
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
July 31, October 31,
ASSETS 1997 1996
----------- -----------
Current Assets:
Cash and cash equivalents $ 1,195,703 $ 125,714
Other current assets 37,961 24,071
Total Current Assets 1,233,664 149,785
Other Assets 100,000 100,000
----------- -----------
Total assets $ 1,333,664 $ 249,785
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20,393 $ 21,176
Accrued interest 16,500 8,250
Investor deposits 805,102
Notes payable - short term 100,000 100,000
Other accrued expenses 26,762
Total Current Liabilities 968,757 129,426
Stockholders' equity:
Preferred stock, no par value
10,000,000 shares authorized,
no shares issued or outstanding
Common stock, no par value,
800,000,000 shares authorized;
shares issued and outstanding:
6,889,193 at July 31, 1997 and
5,903,374 at July 31, 1996 1,634,962 517,512
Additional paid-in capital 300 300
Deficit accumulated during the
development stage (1,270,355) (397,453)
Total Stockholders' Equity 364,907 120,359
Total liabilities and stockholder's equity $ 1,333,664 $ 249,785
=========== ===========
See notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS (unaudited)
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
July 31,1997 July 31,1996 July 31,1997 July 31, 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue $ 0 $ 16,000 $ 10,000 $ 26,000
LESS: Operating expenses
Selling expense 26,406 8,057 83,542 54,381
General and Admin. exp 188,982 113,174 506,106 328,351
----------- ----------- ----------- -----------
Total S,G&A 215,388 121,231 589,648 382,732
Loss from operations (215,388) (105,231) (579,648) (356,732)
Other income (expense):
Interest income 9,574 2,037 22,734 2,427
Interest expense (1,500) (2,250) (6,000) (6,750)
----------- ----------- ----------- -----------
Total other income (expense) 8,074 (213) 16,734 (4,323)
Income tax expense 550
Net loss $ (207,314) $ (105,444) $ (583,464) $ (361,055)
=========== =========== =========== ===========
Net loss per share $ (.03) $ (.02) $ (.09) $ (.07)
=========== =========== =========== ===========
Average common
shares outstanding 6,889,193 5,794,700 6,859,256 5,345,650
=========== =========== =========== ===========
</TABLE>
See notes to financial statement.
4
<PAGE>
<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS (unaudited)
Nine Months Ended Nine Months Ended
July 31, 1997 July 31, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (563,464) $ (361,055)
(Increase) decrease in current assets: (27,110) (24,071)
Increase (decrease) in current liabilities:
Accounts payable (7,012) 1,253
Accrued expenses 6,000 6,750
----------- -----------
Net cash used in operating activities (591,586) (377,123)
----------- -----------
Cash Flows from financing activities:
Subscriptions to common stock 525,102
Proceeds from issuances of
common stock, net 981,418 417,812
----------- -----------
Net cash provided from financing activities 1,506,520 417,812
----------- -----------
Net decrease in cash and cash equivalents 914,934 40,689
Cash and cash equivalents at beginning
of period 280,769 85,025
Cash and cash equivalents at end of period $ 1,195,703 $ 125,714
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 0 $ 0
Issuance of common stock for vendor advance $ 0 $ 100,000
See notes to financial statements
5
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS (unaudited)
Three Months Ended Three Months Ended
July 31, 1997 July 31, 1996
------------- -------------
Cash flows from operating activities:
Net loss $ (207,314) $ (105,444)
(Increase) decrease in current assets: (5,300) (19,350)
Increase (decrease) in current liabilities:
Accounts payable 11,193 133
Accrued expenses (4,500) 2,250
----------- -----------
Net cash used in operating activities (205,921) (122,411)
----------- -----------
Cash Flows from financing activities:
Subscriptions to Common Stock 105,000
Proceeds from issuance of common stock, net 7,990
Net cash provided from financing activities 112,990 8,374
------------ -----------
Net decrease in cash and cash equivalents 92,931 114,064
Cash and cash equivalents at beginning
of period 1,288,634 239,778
Cash and cash equivalents at end of period $ 1,195,703 $ 125,714
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 0 $ 0
Issuance of common stock for vendor advance $ 0 $ 100,000
See notes to financial statements
6
</TABLE>
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
STARTECH Environmental Coloration (the "Company") is engaged in the
commercialization and continued development of an innovative processing
technology for recycling industrial wastes.
Net loss per share is determined by dividing net loss by the average number of
common shares outstanding during the period. Common share equivalents, which
consist of stock which may be issuable upon exercise of outstanding stock
options or warrants, have been excluded from the average number of common shares
since their effect is anti-dilutive.
Certain reclassifications have been made for consistent presentation. The
reclassifications have no effect on the net loss for the period ended July 31,
1997.
The information furnished is unaudited and reflects all adjustments (consisting
of only normal recurring and insignificant adjustments) which, in the opinion of
management, are necessary for a fair presentation of the financial position and
results of operations for the interim periods. The accompanying financial
statements should be read in conjunction with the Company's financial statements
and related footnotes for the year ended October 31, 1996 which are included in
the Company's annual report on form 10-K. The results of operations for the nine
months ended July 31, 1997 do not necessarily indicate the results to be
expected for the full year.
Note 2. Equity Transactions
During the quarter ended July 31, 1997, the second phase of the Private
Placement of August 28, 1996 was closed. The total investment in the second
phase of the Private Placement was $835,513 representing 119,359 shares at seven
dollars ($7.00) per share. All the investors in the Private Placement were
informed in the investment memorandum that, regardless of securities law, their
shares are restricted for a period of two (2) years; unless relevant securities
law(s) are changed to require for a longer extension.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
- ---------------------
1997 vs 1996
- ------------
For the first nine months of 1997 the Company earned $10,000 and for the same
period in 1996 the Company earned $26,000 in revenue for professional services.
Operating expenses were $215,388 in the quarter ended July 31, 1997 and $589,648
for nine months ended July 31, 1997 compared with $121,231 in the quarter and
$382,732 for the nine months a year ago. The nature of the operating expenses
continue to be primarily for selling, demonstration and general and
administrative purposes.
The Registrant was incorporated under the laws of the State of Colorado in May
1991 and has been dormant since 1991. During fiscal 1995, the Registrant entered
into negotiations with Startech Corporation ("Startech")which culminated in the
acquisition of Startech on November 17, 1995.
Liquidity and Capital Resources
- -------------------------------
Liquidity has been provided by sales, stock sales, advances from investors and
majority shareholders or notes payable to other third parties. The Registrant is
and will continue to be dependent upon sales, loans and/or capital contributions
from shareholders or outside investors and the distribution of S-8 shares to
vendors for the payment of goods and services. The payment to vendors in the
form of S-8 shares reduces the cash outlay of the company. The Registrant's
capital resource requirements for future periods will increase and future needs
are anticipated to be met from operations of the Registrant's business activity.
Background
- ----------
The Registrant's activities during the past three fiscal years (November 1, 1992
to November 16, 1995) consisted primarily of investigating possible business
opportunities.
On November 17, 1995, the Company completed the acquisition of all of the issued
and outstanding shares of common stock of Startech Corporation, a corporation
organized under the laws of the State of Connecticut which engineers,
manufacturers and markets Plasma Waste ConverterTM ("PWC") systems to recover,
recycle, reduce and remediate hazardous and nonhazardous waste materials.
8
<PAGE>
On November 18, 1995, the Board of Directors of the Company unanimously approved
a change of business purpose of the Company from one seeking an acquisition
candidate to one engaged in the business of manufacturing equipment that
recovers, recycles, reduces and remediates hazardous and nonhazardous waste
materials.
General
- -------
Startech is an environmental technology corporation engaged in the
commercialization and continued development of its Plasma Waste ConverterTM
("PWC") systems for the recycling, resource recovery, reduction and remediation
of hazardous and nonhazardous organic and inorganic materials and wastes
including radioactive wastes.
The Startech Plasma Waste Converter is a closed-loop recycling system that
converts materials formerly regarded as hazardous wastes into useful commodity
products. The hazardous waste can be organic and inorganic, in the form of a
gas, liquid, and solids or any combination thereof. Waste volume reductions
higher than 300 to 1 have been demonstrated. Depending on the waste processed,
the principal commodities produced by the system are a synthetic gas called PCG
(Plasma Converted Gas)TM, metals, and an obsidian-like inert silicate stone. The
PCG can be used as a chemical feed stock to produce polymers and other common
industrial products, as a fuel to produce electricity, as a fuel source for fuel
cells, as a heating plant fuel to reduce the cost and reliance on fossil fuels,
and in desalinization applications to produce fresh water for irrigation and
drinking. The metals can be employed in the metallurgical industry. The stone
silicates can be employed in the abrasives industry, and as an aggregate
material for construction industry applications.
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
The company is a defendant in litigation brought in Denver, Colorado District
Court by Delphina, Ltd. in January 1997. The complaint demands the removal of a
restrictive legend on shares purchased by Delphina, Ltd. in 1995 and 1996. The
company has moved the matter to the Federal Courts from the District of Colorado
and Delphina, Ltd. has moved to remand. Out of court negotiations are in their
final stages and it appears likely that an amicable settlement is near. The
company does not believe there is any merit to the claim and will vigorously
contest the matter if an out of court settlement cannot be agreed upon by the
parties.
The company is a defendant in litigation brought in the Ontario Court of
Justice, Ontario, Canada, and was served notification of the complaint in August
1997. The complaint is a result of a third party action against one of the
company's shareholders. The third party, a stock brokerage, failed to follow
standard practice to verify a restrictive legend on the shareholder's stock
certificate; thus sold the shares and had to purchase them back at a loss. The
brokerage firm is seeking retribution for the loss from the shareholder and the
shareholder is seeking indemnification and/or contribution from the company. The
proceedings are in their preliminary stages. The company does not believe there
is any merit to the claim and will vigorously contest the matter.
No legal proceedings are known to be contemplated by governmental authorities.
ITEM 2. CHANGE IN SECURITIES.
No constituent instruments defining the rights of the holders of any class of
registered securities of the Registrant have been materially modified. No rights
evidenced by any class of registered securities have been materially limited or
qualified by the issuance or modification of any other class of securities.
There are no working capital restrictions or other limitations upon the payment
of dividends except as reported in the Registrant's FORM 10.
10
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There have been no defaults in the payment of principal interest, a sinking or
purchase fund installments, or any other default not cured within thirty days,
with respect to any indebtedness of the Registrant or any of its significant
subsidiaries exceeding five percent (5%) of the total assets of the Registrant
and its consolidated subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the first nine months of the fiscal year
covered by this report to a vote of security holders.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None
(b) Reports.
No reports on Form 8-K were filed for the quarter ended July 31,
1997.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1933, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARTECH ENVIRONMENTAL CORPORATION
----------------------------------
Date: September 15, 1997 By: /S/ John D. Watts
------------------ ------------------------------------
John D. Watts
Executive Vice President of Finance
and Administration
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 1,195,703
<SECURITIES> 0
<RECEIVABLES> 100,000
<ALLOWANCES> 0
<INVENTORY> 37,961
<CURRENT-ASSETS> 1,333,664
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,333,664
<CURRENT-LIABILITIES> 968,757
<BONDS> 0
0
0
<COMMON> 1,634,962
<OTHER-SE> (1,270,055)
<TOTAL-LIABILITY-AND-EQUITY> 1,333,664
<SALES> 10,000
<TOTAL-REVENUES> 10,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 589,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,734
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583,464)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
