FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended - October 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
15 Old Danbury Road, Suite 203
Wilton, Connecticut 06897-2525
------------------------------------------------
(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 (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [ x ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of January 24, 2000, 7,474,950 shares of no par value common stock were
outstanding. The aggregate market value of shares held by non-affiliates as of
January 24, 2000 was $25,850,746 based on the closing bid price of the common
stock on that date.
Documents incorporated by reference and the Part of the Form 10-K into which the
document is incorporated are as follows: Registrant's definitive proxy statement
for its 2000 Annual Meeting of Stockholders, which will be filed with the
Securities and Exchange Commission on or before February 28, 2000.
1
<PAGE>
PART I
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10K contains forward looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward looking statements involve risks, uncertainties and
assumptions as described from time to time in registration statements, annual
reports, and other periodic reports and filings of the Company filed with the
Securities and Exchange Commission. All statements, other than statements of
historical facts, which address the Company's expectations of sources of capital
or which express the Company's expectation for the future with respect to
financial performance or operating strategies, including statements with respect
to year 2000 compliance, can be identified as forward looking statements. As a
result, there can be no assurance that the Company's future results will not be
materially different from those described herein as "believed," "anticipated,"
"estimated" or "expected," which reflect the current views of the Company with
respect to future events. We caution readers that these forward-looking
statements speak only as of the date hereof. The Company hereby expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any such statements to reflect any change in the Company's
expectations or any change in events, conditions or circumstances on which such
statement is based.
ITEM 1 - BUSINESS:
- ------------------
Background
The Company's activities during the four fiscal years, November 1, 1992 to
October 31, 1995, when it was known as Kapalua Acquisitions, Inc., 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 Corporation, a Connecticut corporation,
and then changed its name to Startech Environmental Corp. Startech designed
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 manufacturing equipment to recover,
recycle, reduce and remediate hazardous and nonhazardous waste materials. From
that time to the date 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 ConverterTM
("PWC(TM)") systems for the recycling, resource recovery, reduction and
remediation of hazardous and nonhazardous organic and inorganic materials and
wastes including low level 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 experienced. Depending on the waste processed,
the principal commodities produced by the system are a synthetic gas called
(PCG(TM))Plasma Converted Gas(TM), metals, and an obsidian like inert silicate
stone. The (PCG(TM)) can be used as a chemical feed stock to produce polymers
and other common industrial products, as a fuel to produce electricity, 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.
2
<PAGE>
Marketing and Manufacturing
The Company's long-term strategy is to achieve broad market acceptance of the
PWC as an advantageous process of relieving the waste remediation problems of
the private sector and government. The Company is targeting the hazardous and
toxic waste industry as its initial market. The Company anticipates it will
initially manufacture on-site, factory packaged, transportable, and skid mounted
PWCs. The Company believes that once there is a broad installed base of its
product in the above markets, waste generators in other market segments are
likely to be attracted to the PWC. However, there can be no assurance that the
PWC will achieve any significant market acceptance. Any one system will allow
the customer to dispose of between four tons and fifty tons of waste per day.
However, multiple systems may be installed in a facility, thus processing
greater than fifty tons per day. As of the date of this filing, a four hundred
(400) pound per hour industrial size PWC is available for demonstration.
The Company does not intend to operate PWCs. The Company intends to manufacture
its PWCs and sell or rent/lease the PWCs to customers. As of the date hereof,
the Company has entered into agreements with several customers and expects to be
manufacturing against those contracts in the first fiscal quarter of 2000. The
Company has a manufacturing agreement with Bauer Howden Inc., in Avon,
Connecticut.
Employees
As of October 31, 1999 the Company had eight employees, including four with
engineering degrees, one with a law degree, and another with a Masters of
Business Administration degree. The Company also hires contract engineers for
particular projects on an as needed basis. All of the Company's key employees
have entered into agreements with the Company requiring them not to disclose the
Company's proprietary information, and assigning to the Company all rights to
inventions made during their employment and prohibiting them from competing with
the Company. Management of the Company expects to hire additional employees
throughout 2000.
Competition
The Company regards Aerospetiale Ltd., Mitsubishi and Retech Incorporated as
companies having potentially competing technologies. These companies have more
assets and are substantially larger than the Company and, therefore, could
offer, should they choose, substantial competition. Also, these competitors have
greater name recognition and more extensive customer bases that could be
leveraged, thereby gaining market share or product acceptance to the Company's
detriment. There can be no assurance that either existing or new competitors
will not develop products that are superior to or that otherwise achieve greater
market acceptance than the Company's products. The Company believes that its
product capabilities combined with management's waste industry experience will
allow the Company to be a leader in this rapidly expanding and evolving field.
Proprietary Rights and Licenses and Intellectual Property
The Company's success depends, in part, on preserving its trade secrets and
operating without infringing the proprietary rights of third parties. The
Company will also rely upon its ability to enjoy and obtain protection for its
products and technologies under the United States and foreign patent laws,
copyright laws and other intellectual property laws. There can be no assurance
that any issued, acquired or licensed patent will afford adequate protection to
the Company or will not be challenged, invalidated, infringed or circumvented.
Furthermore, there can be no assurance that the Company's activities will not
infringe patents owned by others.
The Company also relies heavily upon trade secrets and proprietary know-how,
which it protects, in part, by confidentiality agreements and non-competition
agreements with its employees, prospective customers, distributors,
representatives, and other contract partners. However, there can be no assurance
3
<PAGE>
ITEM 1 - BUSINESS: (CONTINUED)
- -----------------
that the Company's confidentiality agreements and non-compete agreements will
not be breached or that the Company would have adequate remedies for any breach.
There can be no assurance that the Company's trade secrets will not otherwise
become known or be independently discovered by competitors.
The Company also relies upon copyright, trademark and service mark protections
for various purposes in the implementation of its marketing strategy. There can
be no assurance that these copyrights, trademarks and service marks will not be
challenged, invalidated, infringed or circumvented.
Offices
The Company's offices are located at 15 Old Danbury Road, Suite 203, Wilton,
Connecticut, 06897, the telephone number is 203/762-2499, facsimile
203/761-0839, Email [email protected] and its web site is www.startech.net.
ITEM 2 - PROPERTIES:
- --------------------
The Company's offices are located at 15 Old Danbury Road, Suite 203, Wilton,
Connecticut 06897-2525 where it leases 5,800 square feet of office space from CD
Station, LLC as landlord. The lease provides for monthly payments of $ 14,017,
increasing annually to December 2004, when the lease expires. There is an option
for the Company to extend the lease for a five (5) year term with the Landlord
having the right to cancel the lease after two (2) years of the extended term if
the buildings main tenant, The Common Fund, requires the additional space for
their corporate offices.
ITEM 3 - LEGAL PROCEEDINGS:
- ---------------------------
The Company and certain officers, both in their capacity as officers and
personally, are defendants in litigation brought in Bridgeport, Connecticut, USA
Federal Court, in February 1998 by John Easton of Canada. The complaint demands
payment of 475,000 shares of the Company's common stock for commissions and/or
fees for services rendered to the Company to acquire the funds needed to
consummate the reverse acquisition, that occurred on November 17, 1995, of
Startech Corporation by Kapalua Acquisitions, Incorporated (since renamed to
Startech Environmental Corporation). The proceedings are in their preliminary
discovery stage. The Company will vigorously contest the matter. In addition to
its own defense, the Company will file a counter claim at the appropriate stage
against Mr. Easton for his actions and those of his agents at or around the time
of the reverse acquisition. Shortly after the above action was filed, an
additional action was commenced against the Company by Mr. Easton's two sons,
Dexter Easton and Spencer Easton, for the Company's refusal to lift a
restrictive legend on stock issued to his two sons for alleged services rendered
at the time of the reverse acquisition. The two actions were joined as they
arise from the same fact pattern and transaction. It is impossible to predict
the outcome of either case at this stage.
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.
4
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
- -------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth (4th)
quarter of the year covered by this report.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS:
- --------------------------------------------------------------------------------
(a) Market Information
The Company's securities are traded over-the-counter on the Bulletin Board
operated by the National Association of Securities Dealers, Inc. under the
symbol STHK ( OTCBB:STHK). The table shows the high and low bid of Registrant's
Common Stock during the last two fiscal years. Quotations reflect interdealer
prices without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Bid
---
Quarter Ended High Low Average
------------- ----------------------- -------
<S> <C> <C> <C>
January 31, 2000 (through January 24, 2000) $ 8.12 $ 5.12 $ 6.45
October 31, 1999 $ 8.56 $ 5.25 $ 6.39
July 31, 1999 $ 9.71 $ 6.00 $ 8.57
April 30, 1999 $ 7.12 $ 5.00 $ 6.04
January 31, 1999 $ 8.62 $ 4.62 $ 6.95
October 31, 1998 $ 7.75 $ 3.25 $ 5.32
July 31, 1998 $ 11.25 $ 5.00 $ 8.35
April 30, 1998 $ 11.75 $ 5.00 $ 7.82
January 31, 1998 $ 9.75 $ 4.84 $ 7.68
</TABLE>
(b) Holders
-------
As of January 24, 2000, there were 591 holders of the Company's Common Stock.
This number does not include those beneficial owners whose securities are held
in street name.
(c) Dividends
---------
The Company has never paid a cash dividend on its Common Stock and has no
present intention to declare or pay cash dividends on the Common Stock in the
foreseeable future. The Registrant intends to retain any earnings, which it may
realize in the future to finance its operations. The Company paid a five percent
(5%) stock dividend in November of 1996. On September 30, 1999 the Company
declared a dividend of $16,016 on its Convertible Preferred Stock to be paid in
additional Convertible Preferred shares. Future dividends on common stock, if
any, will depend on earnings, financing requirements and other factors.
5
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA:
- ---------------------------------
The selected financial data set forth below for the five years ended October 31,
1999 is derived from the Company's audited financial statements. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7
and "Financial Statements And Supplementary Data" included in Item 8 which are
incorporated herein by reference. The acquisition of Startech Corporation by the
Registrant occurred on November 17, 1995. The financial information reflects the
operations of both companies combined for all the periods presented.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 2,268,964 $ 1,088,782 $ 10,000 $ 26,000 $ 0
Loss from operations 1,346,399 473,733 897,855 664,424 36,698
Other income (expense) 68,071 14,664 20,497 ( 5,569) 0
Net loss 1,289,192 463,051 877,908 670,493 36,698
Earnings per share of weighted
average shares of common
stock outstanding (0.19) ( 0.07) (0.12) (0.12) ( 0.04)
Weighted-average number of
shares of common stock
outstanding 6,875,999 6,887,736 6,695,316 5,482,268 996,500
Total assets 6,374,818 1,824,448 1,201,870 391,610 85,025
Total liabilities 359,458 1,163,774 188,063 444,667 121,423
Long-term obligations 7,718 0 0 0 0
Cash dividends per share
of common stock 0 0 0 0 0
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
- --------------------------------------------------------------------------------
Results of Operations
1999 vs 1998
During the fiscal year ended October 31, 1999, the Company had revenues of
$2,268,964 from system sales, system design, and professional services, compared
to $1,088,782 for the 1998 fiscal year. The majority of these revenues were
derived from one major customer, Burns and Roe Enterprises, Inc. Operating
expenses of $1,477,104 for fiscal 1999 consisted mainly of expenditures for
outside consulting services, marketing, selling, demonstration and general and
administrative purposes compared to $1,116,293 for the 1998 fiscal year.
6
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS: (CONTINUED)
- --------------------------------------------------------------------------------
1998 vs 1997
During fiscal year 1998, the Company had revenues of $1,088,782 for professional
services, consulting and customer system design and $23,664 in offset billings,
compared to $10,000 and $29,497, respectively, in the same period for fiscal
year 1997. Approximately 91 percent of the 1998 revenues were derived from one
major customer, Burns and Roe Enterprises, Inc. Operating expenses of $1,116,293
in fiscal year 1998 consisted of outlays for outside consulting services,
selling, demonstration and general and administrative purposes compared to
$907,855 in the same period for fiscal 1997. The Company is no longer considered
to be in the development stage, as revenues from shipments and services
performed began to be recognized in fiscal year 1998.
1997 vs 1996
During fiscal year 1997, the Company earned $10,000 in revenues for professional
services and $29,497 in offset billings. Operating expenses of $907,855 in
fiscal year 1997 consisted primarily of outlays for selling, demonstration and
general and administrative purposes. During fiscal year 1996, the Company earned
$26,000 in revenues for professional services. Operating expenses of $690,424 in
fiscal year 1996 consisted primarily of outlays for selling, demonstration and
general and administrative purposes compared to $36,698 in the prior period.
Liquidity and Financial Resources
The Company had working capital of $5,665,509 and $538,987 as of October 31,
1999 and 1998, respectively. The Company had cash and cash equivalents of
$5,496,280 and $156,468 for the same respective periods.
Liquidity has been provided primarily by fees earned from its strategic Alliance
Partner, Burns & Roe, down payments on ordered PWC systems, private sales of
securities and consulting fees. The Company is and will continue to be dependent
upon the deposits from the sale of equipment, equipment sales, the sale of
securities to and loans from private investors. It is anticipated that the
Company's capital requirements for future periods will increase and future needs
are anticipated to be met from the above and from cash generated from the
operations of its business.
Operating capital for the year ended October 31, 1999, was primarily a result of
the fees for services to its Strategic Alliance Partner, Burns & Roe. Additional
revenue was provided from fees for testing and customer research and from
expense offset from billing to a company for services which were not in the
Company's main product line. The Company anticipates that cash generated from
operations in the form of customer deposits, equipment sales, further sale of
capital stock and the utilization of loan facilities, if needed will be more
than sufficient to satisfy working capital and capital expenditure requirements
for the foreseeable future. This will provide the Company with the financial
flexibility to respond quickly to business opportunities, including
opportunities for growth through internal development, research and development,
strategic alliances and ventures and/or acquisitions.
On December 29, 1998, the Company entered into a short-term loan agreement for
$750,000 with the Connecticut Development Authority (CDA). The note had an
interest rate of 6.55% and was due and payable within one year or the completion
of a public offering, whichever comes first. The note was paid in full on
September 22, 1999.
7
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS: (CONTINUED)
- --------------------------------------------------------------------------------
In the period August thru December 31,1996 the Company sold 638,917 shares of
its restricted common stock to private investors at $1.50 per share for
aggregate proceeds of $958,375. For each share purchased the Company issued a
two year warrant to purchase one share of its common stock at $4.00 per share
which was reduced to $3.50 per share and extended 1 year. As of December 31,
1999, 531,126 warrants were exercised for aggregate proceeds of $1,860,050. The
remaining outstanding warrants expired.
In the period April thru June 30,1997 the Company sold 119,359 shares of its
restricted common stock to private investors at $7.00 per share for aggregate
proceeds of $835,513. For each share purchased the Company issued a two year
warrant to purchase one share of its common stock at $12.00 per share which was
reduced to $9.00 per share and will expire on June 30, 2000.
In the period April thru October 20,1999 the Company sold 696,978 shares of its
restricted Series A, 8% Cumulative convertible, redeemable, preferred stock at a
purchase price of $10.00 per share for aggregate proceeds of $6,969,780. For
every two preferred shares purchased, the Company granted one common stock
warrant exercisable at $15.00 per share. The shares are convertible into the
Company's common stock, four months after the closing date, at a rate determined
by dividing the purchase price per share ($10) by eighty percent of the market
price per share of common stock from the average closing price for the previous
five trading days. However, in no event shall the conversion price be less than
$4 per share, or more than $6 per share. On September 15, 2002, the convertible
preferred stock may be redeemed at the option of the Company for $10 per share,
plus all accumulated and unpaid dividends. If not redeemed, the shares will
automatically be converted to common shares at $5 per share, or the current
market price of the common shares. The dividends shall be paid in additional
convertible preferred stock, and are payable on the last business day of March,
June, September, and December. In conjunction with the issuance of the preferred
stock the Company issued Warrants to purchase 589,113 shares of common stock at
a price of $15.00 per share. These Warrants will expire on August 31, 2001
provided the average closing bid prices of the common stock for the previous
thirty trading days is $16.50 or higher. In the event the common stock is lower
than $16.50 per share, the exercise period of the Warrants will be extended
until the Common stock exceeds $16.50 per share for ten consecutive trading
days. At that point, the Company can give the Warrant holders thirty days notice
that the Warrants will expire. Should the Company choose not to cause the
expiration of the Warrants sooner, they will expire on August 31, 2004. The
Company incurred commissions and expenses of $585,581 in connection with this
offering.
Year 2000
The Company's has not experienced any problems with its internal organization or
with its critical third party relationships including customers, strategic
partners, and suppliers with respect to any year 2000 issues.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
- -----------------------------------------------------
Financial statements and supplementary data begin on following page.
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
- --------------------------------------------------------------
As of December 1996, the Company changed its accountant from Robert Moe &
Associates, P.S. to Kostin, Ruffkess & Company, LLC. The Company has filed a
Form 8-K with the Commission reflecting the change in accountants. There are no
disagreements on any matters of accounting principles or practices or financial
statements disclosure and none are contemplated.
8
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STARTECH ENVIRONMENTAL CORPORATION
Consolidated Financial Statements
October 31, 1999, 1998 and 1997
9
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Table of Contents
For The Years Ended October 31, 1999, 1998 and 1997
Independent Auditors' Report...................................... 11
Consolidated Balance Sheets....................................... 12
Consolidated Statements of Operations............................. 13
Consolidated Statements of Changes in Stockholders' Equity........ 14
Consolidated Statements of Cash Flows............................. 15
Notes to the Consolidated Financial Statements.................... 16
10
<PAGE>
KOSTIN, RUFFKESS & COMPANY, LLC
Certified Public Accountants
345 North Main street
West Hartford, CT 06117-2521
(860) 236-1975
Toll Free: (800) 286-5726
FAX: (860) 236-1783
Internet: http://www.kostin.com
To the Board of Directors
Startech Environmental Corporation
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Startech
Environmental Corporation as of October 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended October 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Startech
Environmental Corporation as of October 31, 1999 and 1998, and the results of
its operations, changes in stockholders' equity and its cash flows for each of
the three years in the period ended October 31, 1999, in conformity with
generally accepted accounting principles.
West Hartford, Connecticut
December 22, 1999
11
<PAGE>
<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
Consolidated Balance Sheets
October 31, 1999 and 1998
1999 1998
Assets
<S> <C> <C>
Current assets:
Cash $ 5,496,280 $ 156,468
Accounts receivable 512,066 892,473
Inventory -- 652,454
Other current assets 8,903 1,366
----------- -----------
Total current assets 6,017,249 1,702,761
Equipment, at cost, net of
accumulated depreciation 135,383 19,573
Other assets 222,186 102,114
----------- -----------
$ 6,374,818 $ 1,824,448
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 245,574 $ 692,130
Capital lease - short-term 8,057 --
Note payable - short-term -- 100,000
Other accrued expenses 98,109 371,644
----------- -----------
Total current liabilities 351,740 1,163,774
Long-term liability:
Capital lease payable 7,718 --
----------- -----------
Total liabilities 359,458 1,163,774
----------- -----------
Stockholders' equity:
Preferred stock; no par value;
10,000,000 shares authorized;
696,978 shares issued and
outstanding (aggregate liquidation
preference of $6,969,780) at October 31, 1999 6,384,199 --
Common stock; no par value;
800,000,000 shares authorized;
shares issued and outstanding:
6,905,257 at October 31, 1999 and
6,845,965 at October 31, 1998 2,984,219 2,708,524
Additional paid-in capital 300 300
Deficit (3,353,358) (2,048,150)
----------- -----------
Total stockholders' equity 6,015,360 660,674
----------- -----------
$ 6,374,818 $ 1,824,448
=========== ===========
The accompanying notes are an integral part of the financial statements
12
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Consolidated Statements of Operations
For The Years Ended October 31, 1999, 1998 and 1997
Year Ended October 31,
----------------------
1999 1998 1997
Revenues $ 2,268,964 $ 1,088,782 $ 10,000
Cost of goods sold 2,138,259 446,222 --
----------- ----------- -----------
Gross profit 130,705 642,560 10,000
Selling, general and administrative
expenses 1,477,104 1,116,293 907,855
----------- ----------- -----------
Loss from operations (1,346,399) (473,733) (897,855)
----------- ----------- -----------
Other income (expense):
Interest income 101,521 23,664 29,497
Interest expense (33,450) (9,000) (9,000)
----------- ----------- -----------
Total other income 68,071 14,664 20,497
----------- ----------- -----------
Income tax expense 10,864 3,982 550
----------- ----------- -----------
Net loss $(1,289,192) $ (463,051) $ (877,908)
=========== =========== ===========
Net loss per share $ (0.19) $ (0.07) $ (0.12)
=========== =========== ===========
Average common
shares outstanding 6,875,999 6,887,736 6,695,316
=========== =========== ===========
The accompanying notes are an integral part of the financial statements
13
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Consolidated Statements of Changes in Stockholders' Equity
For The Years Ended October 31, 1999, 1998 and 1997
Additional
Common Preferred Paid-In
Shares Amount Shares Amount Capital Deficit
Balance, October 31, 1996 5,850,374 $ 653,834 -- $ -- $ 300 $ (707,191)
Shares issued for cash 820,151 1,843,206 -- -- -- --
Stock dividends issued 309,027 -- -- -- -- --
Shares issued during the year
for services rendered 39,000 103,844 -- -- -- --
Shares issued for the
purchase of inventory 45,000 97,722 -- -- -- --
Shares redeemed for
Trican note receivable (50,000) (100,000) -- -- -- --
Net loss during the year
ended October 31, 1997 -- -- -- -- -- (877,908)
----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1997 7,013,552 2,598,606 -- -- 300 (1,585,099)
Shares issued during the year
for services rendered 34,544 109,918 -- -- -- --
Shares returned and cancelled
as the result of a lawsuit (202,131) -- -- -- -- --
Net loss during the year
ended October 31, 1998 -- -- -- -- -- (463,051)
----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1998 6,845,965 2,708,524 -- -- 300 (2,048,150)
Shares issued during the year
for services rendered 45,792 226,445 -- -- --
Shares issued for cash 13,500 49,250 696,978 6,384,199 -- --
Net loss during the year
ended October 31, 1999 -- -- -- -- -- (1,289,192)
Dividends -- -- -- -- -- (16,016)
----------- ----------- ----------- ----------- ----------- -----------
Balance, October 31, 1999 6,905,257 $ 2,984,219 696,978 $ 6,384,199 $ 300 $(3,353,358)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements
14
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Consolidated Statements of Cash Flows
For The Years Ended October 31, 1999, 1998 and 1997
Year Ended October 31,
----------------------
1999 1998 1997
Cash flows from operating activities:
Net loss $(1,289,192) $ (463,051) $ (877,908)
Adjustments to reconcile net loss to net
cash used in operating activities:
Expenses paid for through the
issuance of common stock 226,445 109,918 38,844
Depreciation 16,847 1,396 --
(Increase) decrease in:
Accounts receivable 380,407 (892,473) --
Prepaid expense -- 65,333 (333)
Inventory 552,454 (552,454) (2,278)
Other current assets (7,537) (1,366) 10,851
Other assets (120,072) (53,617) (48,497)
Increase (decrease) in:
Accounts payable (446,556) 624,962 39,763
Accrued expenses (289,551) 350,749 (16,367)
----------- ----------- -----------
Net cash used in operating activities (976,755) (810,603) (855,925)
----------- ----------- -----------
Cash flows used in investing activities:
Purchase of equipment (15,655) (20,969) --
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from preferred stock issuance 6,284,199 -- --
Proceeds from common stock issuance 49,250 -- 1,563,206
Proceeds from notes payable 750,000 -- --
Repayment of notes payable (750,000) -- --
Repayment of capital lease payable (1,227) -- --
----------- ----------- -----------
Net cash provided by financing activities 6,332,222 -- 1,563,206
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 5,339,812 (831,572) 707,281
Cash and cash equivalents, beginning 156,468 988,040 280,759
----------- ----------- -----------
Cash and cash equivalents, ending $ 5,496,280 $ 156,468 $ 988,040
=========== =========== ===========
The accompanying notes are an integral part of the financial statements
15
</TABLE>
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies:
- ----------------------------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements of Startech Environmental Corporation
include the accounts of Startech Corporation, its wholly-owned subsidiary. All
intercompany transactions have been eliminated in consolidation.
Company's Activities
- --------------------
The Company is an environmental technology corporation dedicated to the
development, production and marketing of low cost waste minimization, resource
recovery, and pollution prevention systems that convert waste into valuable
commodities. The Company is no longer considered to be in the development stage
as revenues from shipments and services performed have begun to be recognized in
calendar year 1998.
Basis of Presentation
- ---------------------
On November 17, 1995, Startech Environmental Corporation, formerly Kapalua
Acquisitions, Inc., acquired all the issued and outstanding shares of common
stock of Startech Corporation in exchange for 4,000,000 shares of Kapalua
Acquisitions, Inc.'s common stock. After the acquisition and exchange of stock,
the former shareholders of Startech Incorporated owned 80.5% of the common stock
of Kapalua Acquisitions, Inc. Subsequent to November 17, 1995, Kapalua
Acquisitions, Inc. filed registration statements with the Securities and
Exchange Commission to register certain securities.
On January 2, 1996, Kapalua Acquisitions, Inc. changed its name to Startech
Environmental Corporation. The financial statements of Startech Environmental
Corporation include all of the accounts of Startech Corporation. This
acquisition has been accounted for as a pooling-of-interests in the accompanying
financial statements. The fiscal year end for both companies before the
acquisition was October 31, and the financial statements for all periods
presented have been restated to reflect the combination of the two companies.
Management Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at October 31, 1999, 1998
and 1997, and revenues and expenses during the years then ended. The actual
outcome of the estimates could differ from the estimates made in the preparation
of the financial statements.
16
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies: (Continued)
- ----------------------------------------------------
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments, with a maturity of three
months or less when purchased, to be cash equivalents. The primary investments
will be high quality commercial paper, U.S. Treasury Notes, and T-Bills.
Regarding supplementary cash flows information, income taxes paid were $2,577
for the year ended October 31, 1999, $3,982 for the year ended October 31, 1998
and $550 for the year ended October 31, 1997. Interest paid in 1999 was $33,450.
No interest was paid for the years ended October 31, 1998 and 1997. The Company
also had the following non-cash transactions:
<TABLE>
<CAPTION>
1999
----
Shares Amount
<S> <C> <C>
Common shares issued for services rendered in 1999 45,792 $ 226,445
Preferred stock issued to repay notes payable 10,000 100,000
Demonstration equipment transferred from inventory to equipment -- 100,000
Equipment acquired through capital lease -- 17,002
Accrued dividends on the preferred stock -- 16,016
1998
----
Shares Amount
Issued shares for services rendered in 1998 34,544 $ 109,918
Shares returned and cancelled in 1998 ( 202,131) --
1997
----
Shares Amount
Issued shares for services rendered in 1997 39,000 $ 103,844
Issued shares for inventory in 1997 45,000 97,722
Issued shares for which cash was received in 1996 161,000 280,000
Shares redeemed in the collection of a note receivable in 1997 50,000 100,000
Inventory
- ---------
Inventory consists of work in process, and is stated at lower of cost or market.
Cost is determined by the first-in, first-out method.
</TABLE>
17
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 1 - Summary of Significant Accounting Policies: (Continued)
- ---------------------------------------------------
Equipment
Depreciation of equipment is provided using the straight-line method over the
estimated useful lives of the assets. Expenditures for major renewals and
betterments which extend the useful lives of the equipment are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
Other Assets
- ------------
Other assets consist of deposits on the purchase of office furniture, inventory
and the deposit on the office lease, in 1999. Other assets consist entirely of
deferred stock offering costs for 1998.
Income Taxes
- ------------
Income taxes consist of State taxes on capital. The Company has net operating
loss carryforwards of approximately $2,771,000 expiring in various years through
2013.
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share are based on the weighted average number of shares of
common stock outstanding during the year. The Company has 2,517,839 potential
common shares in 1999, and 758,276 potential common shares in 1998 and 1997 that
were not used in the computation of diluted earnings per share because they
would have been anti-dilutive for each of the three years ended October 31,
1999, 1998 and 1997. Subsequent to October 31, 1999, the Company had issued
569,693 additional common shares.
Off Balance Sheet Risk
- ----------------------
The Company had more than $100,000 in a single bank during the year. Amounts
over $100,000 are not insured by the Federal Deposit Insurance Corporation.
However, management does monitor the financial condition of the institution
where these funds are invested.
Note 2 - Property, Plant and Equipment:
- ---------------------------------------
Equipment is summarized by major classifications as follows:
1999 1998
Computer equipment $ 23,250 $ 6,248
Demonstration equipment 114,720 14,721
Furniture and fixtures 1,653 --
Vehicles 14,002 --
------------- ------------
153,625 20,969
Less: accumulated depreciation 18,242 1,396
------------- ------------
$ 135,383 $ 19,573
============= ============
18
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 3 - Operating Lease:
- -------------------------
The Company leases its office under a lease agreement that expired in September
1999. The monthly rental payments were $2,109. Rental expense, including real
estate taxes for the years ended October 31, 1999, 1998 and 1997, were $28,847,
$24,531 and $23,644, respectively. On December 3, 1999, the Company entered into
a five year lease for its new office space. There is an option for the Company
to extend the lease for a five year term with the Landlord having the option to
cancel after two years. Annual non-cancelable rent payments for the next five
years are as follows:
October 31,
-----------
2000 $154,183
2001 168,000
2002 173,517
2003 184,633
2004 172,792
Note 4 - Note Payable:
- ----------------------
The $100,000 note payable is a demand note dated September 1, 1995, with 9%
interest payable to Mr. John Celantano. Mr. Celantano is a stockholder of the
Company and provides both sales and professional consulting services to the
Company. The note was repaid in 1999 through the issuance of 10,000 shares of
convertible preferred stock. All prior accrued interest was forgiven.
On December 29, 1998, the Company entered into a short-term loan agreement for
$750,000 with the Connecticut Development Authority (CDA). The note bore
interest at 6.55% and was due within one year or the completion of a public
offering, whichever comes first. The note was collateralized by the assets of
the Company. In addition, an officer/shareholder has personally guaranteed up to
28% of the balance and another officer/shareholder has pledged 100,000 shares of
his common stock of the Company. This note was paid off with proceeds from the
issuance of the preferred stock.
Note 5 - Stockholders' Equity:
- ------------------------------
Preferred Stock
- ---------------
During 1999 the Company issued 696,978 shares of its 8% Series A cumulative,
convertible, redeemable, preferred stock. The Company incurred commissions and
issuance costs of $585,581 in connection with issuance. The shares are
convertible into the Company's common stock, four months after the closing date,
at a rate determined by dividing the purchase price per share ($10) by eighty
percent of the market price per share of common stock from the average closing
price for the previous five trading days. However, in no event shall the
conversion price be less than $4 per share, or more than $6 per share. On
September 15, 2002, the convertible preferred stock may be redeemed at the
option of the Company for $10 per share, plus all accumulated and unpaid
dividends. If not redeemed, the shares will automatically be converted to common
shares at $5 per share, or the current market price of the common shares. The
dividends shall be paid in additional convertible preferred stock, and are
payable on the last business day of March, June, September, and December. On
September 30, 1999, the Company declared a dividend of $16,016.
19
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 5 - Stockholders' Equity: (Continued)
- ------------------------------
Warrants
- --------
In conjunction with the August 28, 1996, stock offering, the Company has
unregistered Warrants to purchase 744,774 shares of common stock; of which
625,417 of the Warrants were initially exercisable at a price of $4.00 per share
and were set to expire on December 31, 1998. At the discretion of the Company,
the exercise price of these Warrants was reduced to $3.50 per share and the
expiration date was extended to December 31, 1999. During 1999, 13,500 of these
Warrants were exercised. An additional 119,359 Warrants were initially
exercisable at a price of $12.00 per share, and were set to expire on June 30,
1999. At the discretion of the Company, the exercise price of these Warrants was
reduced to $9.00 per share, and the expiration date was extended to June 30,
2000. Initially, once the Warrants were exercised, the shares were restricted
for a two year period. They are now restricted for a one year period, in
accordance with rule 144. The Company reserves the right to cancel or extend the
Warrants once the restriction period has been satisfied and the exercised period
fulfilled. The Warrants may be exercised in lots of 100 common shares or more up
to the total amount of Warrants for which each investor had originally
subscribed. In conjunction with the issuance of the preferred stock in 1999, the
Company issued Warrants to purchase 589,113 shares of common stock at a price of
$15.00 per share. These Warrants will expire on August 31, 2001, provided the
average closing bid prices of the common stock for the previous thirty trading
days is $16.50 or higher. In the event the common stock is lower than $16.50 per
share, the exercise period of the Warrants will be extended until the common
stock exceeds $16.50 per share for ten consecutive trading days. At that point,
the Company can give the Warrant holders thirty days' notice that the Warrants
will expire. Should the Company choose not to cause the expiration of the
Warrants sooner, they will expire on August 31, 2004.
Note 6 - Non-qualifying Stock Option Plan:
- ------------------------------------------
In November 1995, the Company registered 2,000,000 common shares, issuable upon
exercise of stock options issued by the Company under its 1995 Non-qualifying
Stock Option Plan (the Plan) for employees, directors and other persons
associated with the Company whose services have benefited the Company.
The options must be issued within 10 years from November 20,1995. Determination
of the option price per share and exercise date is at the sole discretion of the
Compensation Committee. During the year ended October 31, 1997, the Company
issued 145,167 stock options with an additional 34,544 stock options being
issued during the year ended October 31, 1998, for services rendered. All
options were immediately exercised for one share of common stock. The exercise
price ranged from $.25 to $10.00 per share. The aggregate value of these
services is reflected as an increase in common stock. During the year ended
October 31, 1999, the Company issued 20,000 stock options, with an exercise
price of $5.00 per share. On the issuance date, the market value was the same as
the exercise price, therefore, no compensation expense was recorded.
Note 7 - Major Customer:
- ------------------------
Approximately 94 and 91 percent of revenues were derived from one major customer
in 1999 and 1998, respectively.
20
<PAGE>
STARTECH ENVIRONMENTAL CORPORATION
Notes To The Consolidated Financial Statements
For The Years Ended October 31, 1999, 1998 and 1997
Note 8 - Capital Lease Obligation:
- ----------------------------------
During 1999, the Company entered into a capital lease obligation for computer
equipment. The term of the lease is for 24 months, with principal and interest
due in monthly installments of $827 at 15.3%. The equipment was capitalized at
$17,002 and is being depreciated over five years. Depreciation expense for 1999
was $850 and accumulated depreciation at October 31, 1999, is $850.
Total remaining lease payments:
2000 $ 9,925
2001 8,270
-----------
18,195
Less: unamortized interest 2,420
-----------
15,775
Less: current portion 8,057
-----------
$ 7,718
===========
Note 9 - Fair Value of Financial Instruments:
- ---------------------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate that
value:
Cash and other current assets are carried in the accompanying balance sheet at
cost, which is a reasonable estimate of their fair value. Accounts payable,
notes payable and accrued expenses are also carried at cost, which is a
reasonable estimate of their fair value.
Carrying Estimated
Amount Fair Value
ASSETS:
Cash $ 5,496,280 $ 5,496,280
Accounts receivable 512,066 512,066
LIABILITIES:
Accounts payable 245,574 245,574
Capital lease payable 15,775 15,775
Accrued expenses 98,109 98,109
Note 10 - Commitments:
- ----------------------
The Company has committed to purchase new furniture and equipment and inventory
in the amount of $452,691. At October 31, 1999, the Company had made deposits on
these purchases in the amount of $175,061, which is included on the balance
sheet under other assets. In addition, the Company has an agreement with certain
individuals for the use of certain patents. The agreement provides for monthly
payments of $1,000 and has no expiration date.
21
<PAGE>
PART III
Note: The information pursuant to Items 10, 11, 12 and 13 is omitted from this
report (in accordance with Federal Instruction G for Form 10-K) since the
Company is filing with the Commission (by no later than February 28, 2000), a
definitive proxy statement pursuant to Regulation 14A, which involves the
election of directors at the annual shareholders' meeting of the Company,
expected to be held on February 25, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
- -------- ----------------------------------------------------------------
(a) (1) Financial Statements
--------------------
The financial statements are listed below and included under Item 8, are
filed as part of this report.
Report of Independent Auditors
Consolidated balance sheet at October 31, 1999 and October 31, 1998
Consolidated statement of operations for each of the three years in the
period ended October 31, 1999
Consolidated statement of changes in stockholder's equity for each of the
three years in the period ended October 31,1999
Consolidated statement of cash flows for each of the three years ended
October 31, 1999.
Notes to the consolidated financial statements
(2) Financial Statement Schedules
-----------------------------
All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the
consolidated financial statements and notes thereto.
22
<PAGE>
(3) Exhibits
--------
Exhibit
No. Description
3(i). Articles of Incorporation of the Company
----------------------------------------
(incorporated by reference as Exhibit 1.1
to the Registrant's Registration Statement
3(ii). Bylaws of the Company
---------------------
(incorporated by reference to Exhibit 1.7
to the Registrant's Registration Statement
on Form 10, SEC File No. 0-25312).
4. Instruments defining the rights of security
-------------------------------------------
holders, including indentures
-----------------------------
None
9. Voting Trust Agreement
----------------------
None
10. Material contracts
------------------
Acquisition Agreement between the
Registrant and Startech.
(incorporated by reference to Exhibit
10.3 to the Registrant's Form 8-K dated
August 25, 1995, SEC File No. 0-25312).
11. Statement re computation of per share earnings
----------------------------------------------
Not applicable
12. Statement re computation of ratios
---------------------------------
None
13. Annual report to security holders
---------------------------------
Not applicable
16. Letter re change in certifying accountant
-----------------------------------------
Incorporated by reference to the Registration
Form 8-K filed on January 28, 1997
18. Letter re change in accounting principles
-----------------------------------------
None
23
<PAGE>
(3) Exhibits - continued
--------------------
19. Report furnished to security holders
------------------------------------
None
21. Subsidiaries of the registrant
------------------------------
Startech Corporation, a wholly owned subsidiary
22. Published report regarding matters
-----------------------------------
submitted to vote of security holders
-------------------------------------
Not applicable
23. Consent of experts and counsel
------------------------------
Consent of Kostin, Ruffkess & Company, LLC
24. Power of attorney
-----------------
Not applicable
27. Financial Data Schedule
------------------------
Filed herein
28. Information from reports furnished to state
-------------------------------------------
insurance agencies
------------------
None
29. Additional Exhibits
-------------------
Nonqualifying Stock Option Plan
(incorporated by reference as Exhibit 10.1
to the Registrant's Registration Statement
on Form S-8, SEC File No. 33-99790).
(b) Reports on FORM 8-K
--------------------
No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
On January 28, 1997, the Company filed a report on Form 8-K to
announce that it replaced the accounting firm of Robert Moe &
Associates, P.S. as a result of engaging Kostin, Ruffkess &
Company, LLC.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 26th day of
January, 2000.
STARTECH ENVIRONMENTAL CORPORATION
(Registrant)
BY: /S/ Joseph F. Longo
-------------------------------
Joseph F. Longo
CEO, President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the Company
and in the capacities and on this 26th day of January 2000.
SIGNATURES TITLE DATE
- ---------- ----- ----
/S/ Joseph F. Longo Chairman of the Board of Directors,
- ------------------------ CEO, President and Treasurer
Joseph F. Longo January 26, 2000
/S/ Leonard V. Knap Member of the Board of Directors,
- ------------------------ Senior Vice President
Leonard V. Knap January 26, 2000
/S/ Kevin M. Black Member of the Board of Directors,
- ------------------------ Corporate Secretary,
Kevin M. Black Senior Vice President,
General Counsel January 26, 2000
25
Exhibit 23 - Consent of Independent Accountants
We consent to the incorporation by reference in this annual report (Form 10-K)
of Startech Environmental Corporation of our report dated December 22, 1999,
included in the 1999 Annual Report to the Shareholders of Startech Environmental
Corporation.
West Hartford, Connecticut
January 26, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the annual
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 5,496,280
<SECURITIES> 0
<RECEIVABLES> 512,066
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,017,249
<PP&E> 153,625
<DEPRECIATION> 18,242
<TOTAL-ASSETS> 6,374,818
<CURRENT-LIABILITIES> 351,740
<BONDS> 0
0
6,384,199
<COMMON> 2,984,219
<OTHER-SE> (3,353,058)
<TOTAL-LIABILITY-AND-EQUITY> 6,374,818
<SALES> 2,268,964
<TOTAL-REVENUES> 2,268,964
<CGS> 2,138,259
<TOTAL-COSTS> 3,615,363
<OTHER-EXPENSES> 101,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,450
<INCOME-PRETAX> (1,278,328)
<INCOME-TAX> 10,864
<INCOME-CONTINUING> (1,289,192)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,289,192)
<EPS-BASIC> (.19)
<EPS-DILUTED> (.19)
</TABLE>
