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, 2000
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
15 Old Danbury Road, Suite 203
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 9, 2000
------------------- ----------------------------
Common Stock - No Par 7,558,278
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STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Balance Sheet - January 31, 2000
and 1999 3
Statement of Operations for the quarters ended
January 31, 2000 and 1999 4
Statement of Cash Flows for the quarters ended
January 31, 2000 and 1999 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 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 10
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2
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
January 31, January 31,
ASSETS 2000 1999
----------- -----------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 6,409,171 $ 539,328
Accounts Receivable 835,066 1,063,438
Inventory 24,347 330,385
Other current assets 44,146 22,869
----------- -----------
Total Current Assets $ 7,312,730 1,956,020
Property & Equipment 651,645 18,346
Other Assets 49,625 136,200
----------- -----------
$ 8,014,000 $ 2,110,566
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 195,574 $ 1,235,329
Notes payable - short term 0 100,000
Capital Lease 15,775 0
Other accrued expenses 242,287 109,174
----------- -----------
Total Current Liabilities $ 453,636 $ 1,444,503
Stockholders' (deficit) equity:
Preferred stock, no par value
10,000,000 shares authorized,
668,998 shares issued and outstanding $ 5,526,530 $ 0
Common stock, no par value,
800,000,000 shares authorized;
shares issued and outstanding:
7,516,454 at January 31, 2000 and
6,845,965 at January 31, 1999 5,816,631 2,708,524
Additional paid-in capital 300 300
Accumulated deficit Net Income (loss) (3,783,097) (2,042,761)
----------- -----------
Total Stockholders' (deficit) equity $ 7,560,364 $ 666,063
$ 8,014,000 $ 2,110,566
=========== ===========
See notes to financial statements
3
</TABLE>
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STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS
Quarter Ended Quarter Ended
January 31, 2000 January 31, 1999
---------------- ----------------
Revenue $ 598,000 $ 1,048,246
Cost of Sales 239,007 785,569
----------- -----------
Gross Profit $ 358,993 $ 262,677
Operating Expenses
Selling expense 123,114 39,585
General and administrative expense 566,898 234,408
----------- -----------
Total Operating Expense 690,012 273,993
Gain(Loss) from Operations $ (331,019) $ (11,316)
Other income (expense):
Interest income 47,634 16,955
Other income 3,500 0
----------- -----------
Total other income (expense) 51,134 16,955
Income tax expense 1,750 250
----------- -----------
Net Income(Loss) $ (281,635) $ 5,389
=========== ===========
Net Gain(Loss) per share $ (0.04) $ 0.00
=========== ===========
Weighted average common
shares outstanding 7,304,058 6,857,196
=========== ===========
See notes to financial statements
4
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STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS
Quarter Ended Quarter Ended
January 31, 2000 January 31, 1999
---------------- ----------------
Cash flows from operating activities:
Net Income (Loss) $ (281,635) $ 5,389
Depreciation 1,226 1,226
(Increase) decrease in Accts. Rec'v (323,001) (170,965)
(Increase) decrease in Inventory (24,347) 322,070
(Increase) decrease in other current assets (35,241) (21,503)
(Increase) decrease in other assets 172,560 0
Increase(Decrease) in Accounts Payable (85,000) 200,556
Increase (Decrease) in Accrued Expense 179,178 80,174
----------- -----------
Net cash used in operating activities $ (396,260) $ 416,947
Cash flows used in investing activities:
Purchase of Equipment (395,000) 0
Purchase of Furniture&Fixtures (91,088) 0
Leasehold Improvements (31,401) 0
Patents 0 (3,000)
Stock Offering 0 (31,086)
----------- -----------
Net cash used by Investing activities $ (517,489) $ (34,086)
Cash flows from financing activities:
Proceeds from Common Stock Issuance 10,000 0
Preferred Stock Issuance 149,121 0
Proceeds from additional paid-in capital 1,815,622 0
Preferred Stock Dividend (148,104) 0
----------- -----------
Net cash provided by financing activities $ 1,826,640 $ 0
Net increase (decrease) in cash $ 912,891 $ 382,861
Cash at beginning of period $ 5,496,280 $ 156,467
Cash and cash equivalents at end of period $ 6,409,171 $ 539,328
See note to financial statements
5
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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 the recovery, recycling, reduction and remediation of hazardous
and nonhazardous waste materials.
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, 2000.
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, 1999 which are included in the
Company's annual report on form 10-K for the period ended October 31, 1999. The
results of operations for the quarter ended January 31, 2000 are not necessarily
indicative of the results to be expected for the full year.
Note 2. Equity Transactions
The company received $1,860,050 in warrant monies applicable to a previous
private placement dated December 31, 1996. The company issued 531,126 common
stock shares.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Result of Operations
- --------------------
For the three months ended January 31, 2000, the Company reported revenues from
operations of $598,000, compared to $1,048,246 for the three months ended
January 31, 1999.
The Company's selling and administrative expenses of $690,012 were comprised of
operating costs, salaries and moving expenses. The increase in operating
expenses was primarily the result of increased personnel expenses incurred by
the Company in building its infrastructure, assembling a team of engineers and
other professionals preparing its technologies for sale, and moving expenses
associated with our new expanded corporate headquarters located at 15 Old
Danbury Road, Suite 203, Wilton, CT 06897. The move was completed on December
15, 1999. As a result of these activities, the Company had a first quarter loss
of $281,635, a decrease from an operating profit of $5,389 for the same period
1999.
Dividend expenses of $148,104 was declared during the first quarter 2000
relating to the Series A 8.00% Cumulative Preferred Stock.
Liquidity and Capital Resource
- ------------------------------
Net cash used by operating activities of ($396,360) related primarily to the
Company's $281,635 net loss for the 1st quarter. The Company however had a net
working capital surplus of $6,409,171, an increase of $5,869,843 from January
31, 1999. The increase in the working capital was principally the result of an
increase in financing activities through the warrants that were exercised at
$3.50 per share and the recent convertible preferred that was issued on October
20, 1999.
The Company believes its existing cash, together with projected cash flows from
operations and the availability of future equity and debt offerings, will be
sufficient to meet the Company's cash requirements in 2000.
7
<PAGE>
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.
General
- -------
Startech is an environmental technology corporation engaged in the
commercialization and continued development of its Plasma Waste Converter(TM)
(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
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PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
The company and certain of its officers, and past officers, individually and
corporately, are defendants in litigation brought in Bridgeport, Connecticut,
USA Federal Court in February 1998 by John Easton of Canada. The proceedings are
still in the discovery stage. The company will vigorously contest the matter.
The company intends to file a counter claim against Mr. Easton in the matter.
On December 19, 1997 the Company brought suit in Federal Court, District of
Connecticut, seeking a preliminary injunction to enforce a Non-disclosure and
Non-compete provisions within four Distributorship Agreements executed by David
Ivey in his personal capacity and in his capacity as a corporate officer for
these four companies. The Company believed that Mr. Ivey had plans to use the
information provided by the Company to him in his capacity as a Distributor to
gain knowledge of the Company's confidential information. After being sued by
the Company, Mr. Ivey has now filed a counterclaim claiming that the Company
misrepresented certain material facts surrounding its technology and its ability
to produce its product. While the Company is confident that it will prevail on
the merits and believes that the claims by Mr. Ivey are vexatious in nature,
there can be no guarantee of success until the case is resolved. The claims made
by both parties have been referred for binding arbitration before the American
Arbitration Association. The action is in its preliminary stages of those
proceedings. At the present time there is an agreement between the parties to
withdraw the action with prejudice without costs to either side. That agreement
is pending court approval and the company expects it to be approved.
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, 1999.
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.
9
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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.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None were filed for the quarter ended January 31, 2000.
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 14, 2000 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> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 6,409,171
<SECURITIES> 0
<RECEIVABLES> 835,066
<ALLOWANCES> 0
<INVENTORY> 24,347
<CURRENT-ASSETS> 7,312,730
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,014,000
<CURRENT-LIABILITIES> 453,636
<BONDS> 0
0
5,526,530
<COMMON> 5,816,631
<OTHER-SE> (3,782,797)
<TOTAL-LIABILITY-AND-EQUITY> 8,014,000
<SALES> 598,000
<TOTAL-REVENUES> 598,000
<CGS> 239,007
<TOTAL-COSTS> 690,012
<OTHER-EXPENSES> (47,634)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 1,750
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (281,635)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
