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 months ended - July 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 September 13, 1999
------------------- ---------------------------------
Common Stock - No Par 6,903,257
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STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Balance Sheet - July 31, 1999
and July 31, 1998 3
Statement of Operations for the quarters ended
July 31, 1999 and 1998 4
Statement of Cash Flows for the quarters ended
July 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 8
Item 2. Changes in Securities 8
Item 3. Defaults Upon Senior Securities 9
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
- ---------
2
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
July 31, July 31,
ASSETS 1999 1998
----------- -----------
Current Assets:
Cash and cash equivalents $ 2,520,435 $ 282,957
Accounts Receivable 479,978 399,469
Inventory 100,000 165,353
Other current assets 32,028 96,599
----------- -----------
Total Current Assets 3,132,441 944,378
Fixed Assets -Net 20,968 15,930
Other Assets 19,010 0
----------- -----------
$ 3,172,418 $ 960,308
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 352,381 $ 319,913
Notes payable - short term 850,000 100,000
Other accrued expenses 51,266 28,000
----------- -----------
Total Current Liabilities $ 1,253,647 $ 447,913
Stockholders' (deficit) equity:
Preferred stock, no par value
10,000,000 shares authorized,
shares issued and outstanding
190,730 at July 31, 1999 1,907,300 0
Common stock, no par value,
800,000,000 shares authorized;
shares issued and outstanding:
6,900,857 at July 31, 1999 and
6,844,465 at July 31, 1998 2,709,524 2,598,606
Additional paid-in capital 49,250 300
Accumulated deficit Net Income (loss) (2,747,303) (2,086,512)
----------- -----------
Total Stockholders' (deficit) equity 1,918,771 512,394
$ 3,172,418 $ 960,308
=========== ===========
See notes to financial statements
3
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<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
July 31, 1999 July 31, 1998 July 31, 1999 July 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 591,092 $ 448,972 $ 2,236,873 $ 485,972
Cost of Sales 533,066 208,997 1,846,692 208,997
----------- ----------- ----------- -----------
Gross Profit 58,026 239,975 390,181 276,975
Operating Expenses
Selling expense 64,586 5,807 122,833 126,646
General and administrative expense 426,039 236,146 983,452 665,566
----------- ----------- ----------- -----------
Total Operating Expense 490,625 241,953 1,106,285 792,212
Gain(Loss) from Operations (432,599) (1,978) (716,104) (515,237)
Other income (expense):
Interest income 10,121 5,985 34,775 21,325
Interest expense 0 (2,250) 0 (7500)
Preferred Dividend expense (16,016) 0 (16,016) 0
----------- ----------- ----------- -----------
Total other income (expense) (5,895) 3,735 18,759 13,825
Income tax expense 1,857 0 2,107 0
----------- ----------- ----------- -----------
Net Income (Loss) ($ 440,350) $ 1,757 ($ 699,452) ($ 501,412)
=========== =========== =========== ===========
Net Gain (Loss) per share $ (0.06) $ 0.00 $ (0.10) $ (0.07)
Weighted average common
shares outstanding 6,891,309 6,872,661 6,873,411 6,845,215
=========== =========== =========== ===========
See notes to financial statements
4
</TABLE>
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<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS
Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
July 31, 1999 July 31, 1998 July 31, 1999 July 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income (Loss) ($ 440,349) $ 1,757 ($ 699,453) $ (501,412)
Depreciation 1,227 1,226 3,680 2,345
(Increase) decrease in Accts. Rec'v 118,183 (362,469) 412,495 (399,469)
(Increase) decrease in Inventory 128,288 (65,353) 552,454 (65,353)
(Increase) decrease in other assets 122,031 33,089 47,368 17,231
Increase (Decrease) in Current Liabilities:
Accounts payable 41,968 224,889 (682,393) 252,746
Notes Payable-Short Term 0 0 750,000 0
Accrued expenses 18,266 2,250 22,268 7,105
----------- ----------- ----------- -----------
Net cash used in operating activities (10,387) (164,611) 406,419 (686,807)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of Equipment 0 (4,851) 0 (18,276)
Preferred Offering 1,891,540 0 1,957,550 0
----------- ----------- ----------- -----------
Net cash used by Investing activities 1,891,540 (4,851) 1,957,550 (18,276)
----------- ----------- ----------- -----------
Net increase (decrease) in cash $ 1,881,153 $ (169,462) $ 2,363,969 $ (705,083)
Cash at beginning of period $ 639,283 $ 452,419 $ 156,467 $ 988,040
Cash and cash equivalents at end of period $ 2,520,436 $ 282,957 $ 2,520,436 $ 282,957
See note to financial statements
5
</TABLE>
<PAGE>
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 profit (loss) by the
weighted average number of common shares outstanding during the period. Common
share equivalents, which consist of stock that 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 ended
July 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. The results of operations for the quarter
ended July 31, 1999 do not necessarily indicate the results expected for the
full year.
Note 2. Equity Transactions
On April 20, 1999 the company initiated a $15 million Convertible Preferred
Private Placement Offering. As of July 31, 1999 the company has received
$1,907,300 which has met the $1 million minimum subscription requirement. In
addition the company has received, during this reporting period, $49,250 in
warrant monies which were applicable to a previous Private Placement.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
- ---------------------
1999 vs 1998
- ------------
As of July 31, 1999 the Company has earned $2,236,873 in revenue for
professional services and equipment sales primarily to the Unites States
Government (Department of the Army). In 1998 the Company earned $485,972 in
revenue for professional services. Operating expenses were $394,526 in the
quarter ended July 31, 1999 ($1,010,186 for nine months) compared with $241,953
in the quarter and $792,212 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 from 1991 to 1995. During fiscal 1995, the Registrant
entered into negotiations with Startech Corporation that 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, outside investors and bank loans for its operating capital. The
Registrant's capital resource requirements have increased due to increased
manufacturing, marketing and administrative demands. These needs were met from
operations of the Registrant's normal business activity, sales backlog and the
April 20, 1999 Preferred Private Placement offering.
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.
7
<PAGE>
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.
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 complaint demands
payment for commissions and/or fees for services rendered to acquire the funds
needed to consummate the reverse acquisition, that occurred 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. 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.
8
<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 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 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.
None
(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: September 14, 1999 By: /S/ Joseph F. Longo
------------------ -----------------------
Joseph F. Longo
President
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> 9-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-END> JUL-31-1999
<CASH> 2,520,435
<SECURITIES> 0
<RECEIVABLES> 479,978
<ALLOWANCES> 0
<INVENTORY> 100,000
<CURRENT-ASSETS> 3,132,441
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,172,418
<CURRENT-LIABILITIES> 1,253,647
<BONDS> 0
0
1,907,300
<COMMON> 2,709,524
<OTHER-SE> (2,747,303)
<TOTAL-LIABILITY-AND-EQUITY> 3,172,418
<SALES> 591,092
<TOTAL-REVENUES> 591,092
<CGS> 533,066
<TOTAL-COSTS> 490,625
<OTHER-EXPENSES> 5,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 1,857
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (440,350)
<EPS-BASIC> (.06)
<EPS-DILUTED> 0
</TABLE>
