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 quarterly period ended - January 31, 1999
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)
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 March 10, 1999
------------------- -----------------------------
Common Stock - No Par 6,845,965
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STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Balance Sheet - January 31, 1999
and 1998 3
Statement of Operations for the quarters ended
January 31, 1999 and 1998 4
Statement of Cash Flows for the quarters ended
January 31, 1999 and 1998 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 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 10
- ---------
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
January 31, January 31,
ASSETS 1999 1998
----------- -----------
Current Assets:
Cash and cash equivalents $ 539,328 $ 833,547
Accounts Receivable 1,063,438 0
Inventory 330,385 100,000
Other current assets 22,869 71,333
----------- -----------
Total Current Assets 1,956,020 1,004,880
Fixed Assets-Net 18,346 0
Other Assets 136,200 48,497
----------- -----------
$ 2,110,566 $ 1,053,377
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,235,329 $ 93,730
Notes payable - short term 100,000 100,000
Other accrued expenses 109,174 23,132
----------- -----------
Total Current Liabilities 1,444,503 216,862
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:
6,845,965 at January 31, 1999 and
7,013,552 at January 31, 1998 2,708,524 2,598,606
Additional paid-in capital 300 300
Accumulated deficit Net Income (loss) (2,042,761) (1,762,391)
----------- -----------
Total Stockholders' (deficit) equity 666,063 836,515
$ 2,110,566 $ 1,053,377
=========== ===========
See notes to financial statements
3
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STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS
Quarter Ended Quarter Ended
January 31, January 31,
1999 1998
---- ----
Revenue $ 1,048,246 $ 0
Cost of Sales 785,569 0
----------- -----------
Gross Profit 262,677 0
Operating Expenses
Selling expense 39,585 14,955
General and administrative expense 234,408 169,711
----------- -----------
Total Operating Expense 273,993 184,666
Gain(Loss) from Operations (11,316) (184,666)
Other income (expense):
Interest income 16,955 9,624
Interest expense 0 (2,250)
----------- -----------
Total other income (expense) 16,955 7,374
Income tax expense 250 0
----------- -----------
Net Income(Loss) $ 5,389 ($ 177,292)
=========== ===========
Net Gain(Loss) per share $ 0.00 $ (0.03)
===========
Weighted average common
shares outstanding 6,857,196 7,013,552
=========== ===========
See notes to financial statements
4
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS
Quarter Quarter
Ended Ended
January 31, January 31,
1999 1998
---- ----
Cash flows from operating activities:
Net Income (Loss) $ 5,389 ($177,292)
Depreciation 1,226 0
(Increase) decrease in Accts. Rec'v (170,965) 0
(Increase) decrease in Inventory 322,070 0
(Increase) decrease in other current assets (21,503) (6,000)
Increase(Decrease) in Current Liabilities:
Accounts payable 200,556 26,562
Accrued expenses 80,174 2,237
--------- ---------
Net cash used in operating activities 416,947 (154,493)
Cash flows from investing activities:
Patents (3,000) 0
Stock Offering (31,086) 0
--------- ---------
Net cash used by Investing activities (34,086) 0
Net increase (decrease) in cash $ 382,861 $(154,493)
Cash at beginning of period $ 156,467 $ 988,040
Cash and cash equivalents at end of period $ 539,328 $ 833,547
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 0 $ 0
========= =========
Cash paid during the period for income taxes $ 250 $ 1,489
========= =========
See note to financial statements
5
<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 profit (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 profit (loss) for the period ending
January 31, 1999.
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, 1998 which are included in the
Company's annual report on form 10-K for the period ended October 31, 1998. The
results of operations for the quarter ended January 31, 1999 are not necessarily
indicative of the results to be expected for the full year.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
- ---------------------
For the first three months of 1999 the company generated $ 1,048,246 in revenues
for professional services, consulting and customer system design as compared to
$ 0 for the same period last year. Operating expenses of $273,993 consisted of
outlays for outside consulting services, selling, demonstration and general and
administrative purposes compared to $184,666 in the prior period. Net income was
a positive $5,389 for the first three months of 1999 as compared with a net loss
of $177,292 for the same period last year.
The Registrant was incorporated under the laws of the State of Colorado in May
1991. During fiscal 1996, 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 primarily by fees earned from its Alliance Partner,
Burns & Roe, stock sales, and consulting fees. The Registrant is and will
continue to be dependent upon the deposits from the sale of equipment, equipment
sales, the sale of stock, loans and/or capital contributions from majority
shareholders or outside investors. 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.
Background
- ----------
The Registrant's activities during the four fiscal years, November 1, 1992 to
October 31, 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 the common stock of Startech
Incorporated ("Startech"), a corporation incorporated and organized under the
laws of the State of Connecticut. Startech designs and manufactures machinery to
recover, recycle, reduce and remediate hazardous and nonhazardous waste
materials.
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 recovering, recycling, reduction and
remediation of hazardous and nonhazardous waste materials. From that time to the
time of this filing, the Company has maintained only this focus.
7
<PAGE>
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.
8
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
The company and its 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 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.
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 Company does not believe there is any merit to the
claim and will vigorously contest the matter.
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 and 10K dated
October 31, 1998.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the first quarter of the fiscal year covered by
this report to a vote of security holders.
9
<PAGE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None were filed for the quarter ended January 31, 1999.
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: March 10, 1999 By: /S/ John D. Watts
-------------- -------------------------------------
John D. Watts
Vice President, Chief Finance Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 539,328
<SECURITIES> 0
<RECEIVABLES> 1,063,438
<ALLOWANCES> 0
<INVENTORY> 330,385
<CURRENT-ASSETS> 1,956,220
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,110,566
<CURRENT-LIABILITIES> 1,444,503
<BONDS> 0
0
0
<COMMON> 2,708,524
<OTHER-SE> (2,042,461)
<TOTAL-LIABILITY-AND-EQUITY> 2,110,566
<SALES> 1,048,246
<TOTAL-REVENUES> 1,048,246
<CGS> 785,569
<TOTAL-COSTS> 273,993
<OTHER-EXPENSES> (16,955)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 250
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,389
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
