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 six months ended - April 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25312
STARTECH ENVIRONMENTAL CORPORATION
(Exact name of registrant as specified in its charter)
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Colorado 84-1286576
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 June 12, 1998
------------------- ----------------------------
Common Stock - No Par 6,844,465
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STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Balance Sheet - April 30, 1998
and October 31, 1997 3
Statement of Operations for the quarters ended
April 30, 1998 and 1997 4
Statement of Cash Flows for the quarters ended
April 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
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2
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
APRIL 30, 1998 and 1997
ASSETS 1998 1997
Current Assets:
Cash and cash equivalents $ 452,419 $ 1,288,634
Accounts receivable 37,000
Inventory 100,000
Other current assets 81,191 32,661
----------- -----------
Total Current Assets 670,610 1,321,295
----------- -----------
Fixed assets:
Equipment 13,425
Accumulated depreciation 1,119
----------- -----------
Fixed assets - net 12,306
----------- -----------
Other Assets 48,497 100,000
----------- -----------
Total assets $ 731,413 1,421,295
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 95,024 $ 9,210
Investor deposits 700,102
Notes payable - short term 100,000 100,000
Other accrued expenses 25,750 41,762
----------- -----------
Total Current Liabilities $ 220,774 $ 857,074
=========== ===========
Stockholders' (deficit) 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:
6,844,465 at April 30, 1998 and
6,859,256 at April 30, 1997 2,598,606 1,627,262
Additional paid-in capital 300 300
Accumulated deficit (2,088,268) (1,063,341)
----------- -----------
Total Stockholders' equity 510,638 564,221
----------- -----------
Total liabilities and stockholder's equity $ 731,413 $ 1,421,295
=========== ===========
See notes to financial statements.
3
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<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS
Quarter Ended Quarter Ended Six Months Ended Six Months Ended
April 30, 1998 April 30, 1997 April 30, 1998 April 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 37,000 $ 10,000 $ 37,000 $ 10,000
Operating expenses
Selling expense 105,884 16,688 120,839 57,136
General and administrative expense 259,709 176,162 429,420 317,124
----------- ----------- ----------- -----------
Total operating expense 365,593 192,850 550,259 374,260
----------- ----------- ----------- -----------
Loss from operations (328,593) (182,849) (513,259) (364,260)
----------- ----------- ----------- -----------
Other income (expense):
Interest income 5,716 8,118 15,340 13,160
Interest expense (3,000) (2,250) (5,250) (4,500)
----------- ----------- ----------- -----------
Total other income (expense) 2,716 5,868 10,090 8,660
----------- ----------- ----------- -----------
Income tax expense 550
----------- ----------- ----------- -----------
Net loss ($ 325,877) ($ 176,982) ($ 503,169) ($ 356,150)
=========== =========== =========== ===========
Net loss per share ($ 0.05) ($ 0.03) ($ 0.07) ($ 0.06)
=========== =========== =========== ===========
Weighted average common
shares outstanding 6,844,465 6,859,256 6,933,759 6,354,815
=========== =========== =========== ===========
See notes to financial statement.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS
Quarter Ended Quarter Ended Six Months Ended Six Months Ended
April 30, 1998 April 30, 1997 April 30, 1998 April 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 325,877) ($ 176,982) ($ 503,169) ($ 356,150)
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 1,119 0 1,119 0
(Increase) decrease in accounts receivable (37,000) 0 (37,000) 0
(Increase) decrease in other current assets: (9,858) (16,525) (15,858) (21,810)
Increase (decrease) in current liabilities:
Accounts payable (1,295) (30,726) 27,857 (18,195)
Accrued expenses 2,618 8,250 4,855 10,500
----------- ----------- ----------- -----------
Net cash used in operating activities (367,703) (215,983) (522,196) (385,655)
----------- ----------- ----------- -----------
Cash flows from investing activities
Purchase of equipment (13,425) 0 (13,425) 0
----------- ----------- ----------- -----------
Net cash used by investing activities (13,425) 0 (13,425) 0
----------- ----------- ----------- -----------
Cash flows from financing activities:
Subscriptions to common stock 0 (258,273) 0 420,102
Proceeds from issuances of common stock net 0 973,428 0 973,428
----------- ----------- ----------- -----------
Net cash provided from financing activities 0 715,155 0 1,393,530
----------- ----------- ----------- -----------
Net Increase (decrease) in cash and cash equivalents (381,128) 499,172 (535,621) 1,007,876
Cash and cash equivalents at beginning of period 833,547 789,462 988,040 280,759
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 452,419 $ 1,288,634 $ 452,419 $ 1,288,634
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
Cash paid during the period for income taxes $ 303 $ 0 $ 1,792 $ 0
=========== =========== =========== ===========
Issuance of common stock for vendor advance $ 0 $ 100,000 $ 0 $ 100,000
=========== =========== =========== ===========
See note to financial statements
5
</TABLE>
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
STARTECH Environmental Corporation (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 weighted 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 and warrants, have been excluded from the weighted 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 April 30,
1998.
The information furnished is unaudited and reflects all adjustments (consisting
of only normal recurring 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, 1997 which are included in the
Company's annual report on form 10-K. The results of operations for the quarter
ended April 30, 1998 do not necessarily indicate the results expected for the
full year.
Note 2. Equity Transactions
During the quarter ended April 30, 1998, there were a total of 23,544 shares of
S-8 stock issued to vendors for services rendered.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
- ---------------------
1998 vs 1997
- ------------
In 1998 the Company earned $37,000 in revenue for professional services. In 1997
the Company earned $10,000 in revenue for professional services. Operating
expenses were $365,593 in the quarter ended April 30, 1998 ($550,259 for six
months) compared with $192,850 in the quarter and $374,260 for the six 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 Incorporated which culminated in the acquisition
of Startech on November 17, 1995.
Liquidity and Capital Resources
- -------------------------------
Registrant is and will continue to be dependent upon capital contributions from
shareholders or outside investors for its operating capital. The Registrant's
capital resource requirements for future periods will increase due to increased
manufacturing, marketing and administrative demands. These needs are anticipated
to be met from operations of the Registrant's normal business activity and the
sales backlog.
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
7
<PAGE>
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.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
The company and it's Officers, individually and personally, except Leonard V.
Knap, are defendants in litigation brought in Bridgeport, Connecticut, USA
Federal Court, in February 1998 by John Easton of Canada. The complaint demands
payment for commissions and/or fees for services rendered to acquire the funds
needed to consumate the reverse acquisition, that occured on November 17,1995,
of Startech Corporation by Kapalua Acquisitions, Incorporated. 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. The company will file a
counter claim against Mr. Easton.
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.
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 no 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.
8
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the first half 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. - (by reference)
(a) Exhibits.
Exhibit 10.6 Private Placement Memorandum dated March 17, 1997.
(b) Reports.
No reports on FORM 8-K were filed during the quarter being
reported.
9
<PAGE>
SIGNATURE
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.
STARTECH ENVIRONMENTAL CORPORATION
Date: June 15, 1998 By: /s/ John D. Watts
------------- -------------------------------------
John D. Watts
Vice President, Chief Finance Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 452,419
<SECURITIES> 0
<RECEIVABLES> 37,000
<ALLOWANCES> 0
<INVENTORY> 100,000
<CURRENT-ASSETS> 670,610
<PP&E> 13,425
<DEPRECIATION> 1,119
<TOTAL-ASSETS> 731,413
<CURRENT-LIABILITIES> 220,774
<BONDS> 0
0
0
<COMMON> 2,598,906
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 731,413
<SALES> 37,000
<TOTAL-REVENUES> 37,000
<CGS> 0
<TOTAL-COSTS> 328,593
<OTHER-EXPENSES> (5,716)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> (325,877)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (325,877)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> 0
</TABLE>
