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 JULY 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 August 31, 2000
------------------- ------------------------------
Common Stock - No Par 7,894,597
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STARTECH ENVIRONMENTAL CORPORATION
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Auditors review letter 3
Balance sheets - July 31, 2000 and October 31, 1999 4
Statements of operations for the three months and nine months
Ended July 31, 2000 and 1999 5
Statements of cash flows for the nine months ended
July 31, 2000 and 1999 6
Notes to Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
SIGNATURE 14
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2
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KOSTIN 345 North Main Street
RUFFKESS West Hartford, CT 06117
& COMPANY, INC West Hartford o New London
Main Line: (860) 236-1975
Toll Free: (800) 286-KRCO
Fax: (860) 236-1783
Web: www.kostin.com
[GRAPHIC OMITTED]
To the Board of Directors
Startech Environmental Corporation
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
We have reviewed the accompanying balance sheet, and the related statements of
operations, and cash flows of Startech Environmental Corporation as of July 31,
2000 and for the three-month and nine months then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
West Hartford, Connecticut
September 13, 2000
Leading Edge Alliance o Kreston International o American Institute of Certified
Public Accountants o Private Companies Practice Section o SEC Practice Section o
Connecticut Society of Certified Public Accountants An Equal Opportunity
Employer
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
(unaudited) (audited)
July 31, October 31,
ASSETS 2000 1999
----------- -----------
Current assets:
<S> <C> <C>
Cash and cash equivalents ....................................... $ 5,542,105 $ 5,496,280
Accounts receivable ............................................. 842,821 512,066
Inventory ....................................................... 884,812 --
Other current assets ............................................ 12,390 8,903
----------- -----------
Total current assets ................................... 7,282,128 6,017,249
Property & equipment, net .................................. 335,626 135,383
Other assets ............................................... 47,125 222,186
----------- -----------
Total assets ........................................... $ 7,664,879 $ 6,374,818
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable ................................................ $ 541,152 $ 245,574
Capital Lease, current portion .................................. 23,435 8,057
Other accrued expenses .......................................... 550,889 98,109
----------- -----------
Total Current liabilities .............................. 1,115,476 351,740
Long-term liability:
Capital lease payable, net of current portion ................... 16,672 7,718
----------- -----------
Total liabilities ...................................... 1,132,148 359,458
----------- -----------
Stockholders' (deficit) equity:
Preferred stock, no par value
10,000,000 shares authorized;
Shares issued and outstanding: 593,978 at July 31,
2000, (aggregate liquidation preference of
$5,939,780 at July 31, 2000; 696,978 (aggregate liquidation
preference of $6,969,780) at October 31, 1999 ................... 5,473,732 6,384,199
Common stock, no par value,
800,000,000 shares authorized;
Shares issued and outstanding:
7,894,597 July 31, 2000 and
6,905,257 at October 31, 1999 ................................... 6,444,596 2,984,219
Additional paid-in capital ...................................... 1,742,745 300
Accumulated deficit ............................................. (7,128,342) (3,353,358)
----------- -----------
Total stockholders' equity ............................... 6,532,731 6,015,360
----------- -----------
Total liabilities and stockholders' equity ................. $ 7,664,879 $ 6,374,818
=========== ===========
See notes to financial statements
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<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Nine Months
Quarter Ended Quarter Ended Ended Ended
July 31, 2000 July 31, 1999 July 31, 2000 July 31, 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue .......................................................... $ 239,607 $ 591,092 $ 1,087,607 $ 2,236,873
Cost of sales .................................................... 128,469 533,066 537,355 1,846,692
----------- ----------- ----------- -----------
Gross profit ..................................................... 111,138 58,026 550,252 390,181
----------- ----------- ----------- -----------
Operating expenses
Selling expense ............................................. 45,939 64,586 387,516 122,833
Research and Development .................................... 43,593 0 43,593 0
General and administrative expense .......................... 721,686 426,039 1,967,652 983,452
----------- ----------- ----------- -----------
Total operating expense .......................................... 811,218 490,625 2,398,761 1,106,285
----------- ----------- ----------- -----------
Loss from operations ............................................. (700,080) (432,599) (1,848,509) (716,104)
----------- ----------- ----------- -----------
Other income (expense):
Interest income ......................................... 87,444 10,121 247,980 34,775
----------- ----------- ----------- -----------
Loss before Income Taxes ......................................... (612,636) (422,478) (1,600,529) (681,329)
----------- ----------- ----------- -----------
Income tax expense ............................................... 940 1,857 7,710 2,107
----------- ----------- ----------- -----------
Net loss ......................................................... $ (613,576) $ (424,335) $(1,608,239) $ (683,436)
=========== =========== =========== ===========
Net loss ......................................................... (613,576) (424,335) (1,608,239) (683,436)
Less: Preferred Dividends ........................................ 171,676 16,016 2,166,745 16,016
----------- ----------- ----------- -----------
Loss attributable to common shareholders ......................... $ (785,252) $ (440,351) $(3,774,984) $ (699,452)
Net loss per share ............................................... $ (0.10) $ (0.06) $ (0.50) $ (0.10)
=========== =========== =========== ===========
Weighted average common
shares outstanding ............................................... 7,772,238 6,891,309 7,484,994 6,873,411
=========== =========== =========== ===========
See notes to financial statements
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<TABLE>
<CAPTION>
STARTECH ENVIRONMENTAL CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Nine Months
Ended Ended
July 31, 2000 July 31, 1999
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income (Loss) ...................................... $(1,608,239) $ (683,436)
Adjustments to reconcile net income to net cash provided
By operating activities:
Depreciation ........................................... 38,307 3,680
401K plan match made by the issuance ................... 8,342 0
Expenses paid through the issuance of common stock ..... 90,530 0
(Increase) decrease in accts. receivable ............... (330,755) 412,495
(Increase) decrease in inventory ....................... (884,812) 552,454
(Increase) decrease in other current assets ............ (3,487) 0
(Increase) decrease in other assets .................... 175,061 47,368
Increase(decrease) in notes/accounts payable ........... 295,578 67,607
Increase (decrease) in accrued expense ................. 430,194 6,251
----------- -----------
Net cash used in operating activities .................. (1,789,281) 406,419
----------- -----------
Cash flows used in investing activities:
Capital expenditures ................................... (200,149) 0
Stock offering ......................................... 0 1,957,550
----------- -----------
Net cash by investing activities ....................... (200,149) 1,957,550
----------- -----------
Cash flows from financing activities:
Decrease in capital leases ............................. (14,069) 0
Proceeds from common stock issuance .................... 2,049,324 0
----------- -----------
Net cash provided by financing activities .............. 2,035,255 0
----------- -----------
Net increase (decrease) in cash ........................ 45,825 2,363,969
Cash at beginning of period ............................ 5,496,280 156,467
----------- -----------
Cash and cash equivalents at end of period ............. $ 5,542,105 $ 2,520,436
=========== ===========
See notes to financial statements
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STARTECH ENVIRONMENTAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
The consolidated financial statements of Startech Environmental Corporation
(collectively referred to herein as the "Company", unless the context indicates
otherwise) presented herein are unaudited. In the opinion of management, these
financial statements include all adjustments necessary for a fair presentation
of the financial position, results for the nine month ended July 31, 2000 are
not necessarily indicative of results for the entire year. 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.
Note 1. Basis of Presentation:
On November 17, 1995, Startech Corporation, was acquired in a reverse
acquisition, in which all the then issued and outstanding shares of common stock
of Startech Corporation were exchanged for 4,000,000 shares of Kapalua
Acquisitions, Inc.'s common stock. After the acquisition and exchange of stock,
the former shareholders of Startech Corporation owned 80.5% of the common stock
of Kapalua Acquisitions, Inc.
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 under the purchase method 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.
Note 2. Capital Lease Obligation:
The Company has entered into capital lease obligations for computer and
telephone equipment. The term of the leases range from 36 to 39 months, with
principal and interest due in aggregate monthly installments of $3,248 at
interest rates ranging from 10.6% to 16.3%. The equipment was capitalized at
$55,403 and is being depreciated over five years. Depreciation expense for the
nine months ended July 31, 2000 was $6,395 and accumulated depreciation for the
nine months ended was $6,820.
Note 3. Equity Transactions
For the three months ended July 31, 2000, the Company issued 9,541 additional
common stock shares relating to warrants being exercised at $9.00 per share.
Total proceeds received were $85,869. These warrants are related to a previous
private placement dated June 30, 1997. There was a total of 22,084 warrants
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exercised resulting in total proceeds of $198,702. The remaining 97,275 warrants
expired on June 30, 2000. Connecticut Development Authority received 433,286
warrants at $7.00 per share.
For the three months ended July 31, 2000 the Company declared and paid a stock
dividend on its Series A convertible preferred in the amount of $149,090 which
represented 14,909 preferred shares. For the nine months ended July 31, 2000 the
Company declared and paid a stock dividend on its Series A convertible preferred
in the amount of $401,714, which represented 40,171, preferred shares.
Note 4. Cash Flow
During the nine months ended July 31, 2000 the Company had non-cash
transactions. The following is a listing of these transactions and the dollar
value of the stock associated with these transactions.
Nine months ended July 31, 2000 and 1999
----------------------------------------
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<CAPTION>
July 31, July 31,
-------- --------
2000 1999
------ ------
<S> <C> <C>
Common shares for services rendered $ 90,530 $0
Preferred stock dividend 385,698 0
Fixed assets financed through capital leases 38,401 0
Series A convertible preferred shares converted to common shares 1,312,181 0
Accretion of dividends associated with the issuance of the
convertible preferred shares 1,742,445 0
Accrued Preferred Dividends 38,602 0
401k Plan Match 8,342 0
</TABLE>
Note 5. Interim Financial Information (Unaudited)
The interim financial statements of the Company for the nine months ended July
31, 1999 and 2000, included herein, have been prepared by the Company, without
audit, pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principals have been condensed or
omitted pursuant to the rules and regulations relating to interim financial
statements.
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Note 6. Revenue Recognition
The Company recognizes revenue on the sale of its manufactured products at the
date of delivery. Revenues earned from consulting and design services are
recognized when the services are completed.
Note 7. Employee Benefit Plan
On June 1, 2000 The Company implemented an employee savings plan designed to
qualify under Section 401(k) of the Internal Revenue Code. This plan is for all
full-time employees who have completed 30 days of service. Company contributions
are made in the form of common stock at the prevailing current market price and
will vest equally over a three-year period. The Company will match the first 6
percent of the contribution on a dollar for dollar basis up to the maximum
contribution allowed under Internal Revenue Code. Contributions for the three
months ended July 31, 2000 were $8,342 which is approximately 840 shares of our
common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Result of Operations
--------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q 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, 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 for the future with respect to
financial performance or operating strategies, 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 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.
For the nine months ended July 31, 2000, approximately 55% of our revenue was
generated by sales to customers located outside the United States. We believe
that international sales will continue to account for a significant portion of
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our sales for the foreseeable future. Current sales are denominated in U.S.
dollars and foreign exchange rate fluctuations have not had an impact on our
results of operations.
Substantially all of our revenue and costs from government contracts are subject
to audit under various federal statutes. In December 1999 an audit was conducted
with the DCAA (Greater Connecticut branch office) in conjunction with the US
Army Chemical and Biological Defense Command. With the successful completion of
this audit we awaiting the final invoice payment and the final fee payment from
our prime contractor Burns & Roe for two invoices totaling $416,773.
Comparison of three months ended July 31, 1999 and 2000
Revenues. Our total revenues were $239,607 for the three months ended July 31,
2000, as compared to $ 591,092 for the same period in 1999, a decrease of $
351,485 or 59.5%. Our decrease in revenue was due to the fact that in the 1999
period we were working on the Army sub-contract, whereas for the three months
ended July 31, 2000, we completed the Assembled Chemical Weapons Assessment Army
(ACWA) Project.
Gross Profit. Our gross profit was $111,138 for the three months ended July 31,
2000 an increase of $51,112 or 91.5% from the same period in 1999. Our gross
margins on revenue were 46.4% for the three months ended July 31, 2000. The
improved gross profit margins for the period ended July 31, 2000 were
attributable to revenues earned from the final payment fee from the US Army for
the Assembled Chemical Weapons Assessment Army (ACWA) Project, improved profit
margins associated with our strategic agreement with UXB International, lower
associated costs related to our distributors, while for the period ended July
31, 1999 lower gross profit margins resulted mainly from the higher than
expected initial costs relating to the Assembled Chemical Weapons Assessment
Army (ACWA) project.
General and administrative expenses. Our general and administrative expenses for
the three months ended July 31, 2000 were $721,686, up $295,647, or 69.4%, from
the same period in 1999. The increase is due to a higher level of salaries as a
result of hiring additional personnel to support our operations, depreciation
expenses related to furniture and fixtures and computer equipment, software
expenses, printing expenses, occupancy expenses, professional services fees and
insurance expenses.
Research and development expenses. Our research and development expenses for the
three months ended July 31, 2000 were $43,593 100.0%, from the same period in
1999 during which no research and development expenses were reported. The
increase is due to costs related to improved design and engineering of our
Plasma Waste Converter, and further development of Plasma Converted Gas.
Selling Expenses. Our selling expenses for the three months ended July 31, 2000
were $45,939, an decrease of $18,647, or 28.8%, from the similar period 1999.
The decrease is due to lower consulting services and travel costs offset by
higher marketing and demonstration cost.
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Interest income. Our interest income for the three months ended July 31, 2000
was $87,444, as compared to $10,121 in the similar period 1999 and increase of
763%. The increase is due to higher cash balances as a result of the recently
completed preferred private placement dated October 20, 1999, and higher
interest rates earned on the investments.
Income taxes. Income taxes for the three months ended July 31, 2000 were $940 as
compared with $1,857 in the similar period 1999. We have minimal tax obligations
due to the fact that we have not had meaningful profitability to this point. We
have tax loss carry forwards of $6.5 million to offset against future profits.
Comparison of nine months ended July 31, 1999 and 2000
Revenues. Our total revenues were $1,087,607 for the nine months ended July 31,
2000, as compared to $2,236,873 for the same period in 1999, a decrease of
$1,149,266 or 51.4%. Our decrease in revenue was due to the fact that in the
2000 period we received revenues from new and existing agreements which were
less than revenues received from the Assembled Chemical Weapons Assessment Army
(ACWA) Project in the 1999 period.
Gross Profit. Our gross profit was $550,252 for the nine months ended July 31,
2000 an increase of $160,071 or 41.0% from the same period in 1999. The improved
gross profit margins for the nine months ended July 31, 2000 were attributable
to revenues received from the Burns & Roe for the Assembled Chemical Weapons
Assessment Army (ACWA) Project, improved profit margins associated with our
strategic agreement with UXB International, lower costs associated with our
distributors and consulting agreements, while for the period ended July 31, 1999
lower gross profit margins resulted mainly from the higher than expected actual
costs relating to the Assembled Chemical Weapons Assessment Army (ACWA) project.
General and administrative expenses. Our general and administrative expenses for
the nine months ended July 31, 2000 were $1,967,652, an increase of $984,200, or
100.0%, from the same period in 1999. The increase is due to a higher level of
salaries as a result of hiring additional personnel to support our operations,
professional services fees, depreciation expenses related to furniture and
fixtures and computer equipment, stockholders relations expenses, occupancy and
office expenses, and insurance expenses.
Research and development expenses. Our research and development expenses for the
nine months ended July 31, 2000 were $43,593 an increase of 100.0%, from the
same period in 1999 during which no research and development expenses were
reported. The increase is due to costs related to improved design and
engineering of our Plasma Waste Converter, and further development of Plasma
Converted Gas.
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Selling Expenses. Our selling expenses for the nine months ended July 31, 2000
were $387,516, an increase of $264,683, or 215.5%, from the similar period 1999.
The increase for the nine months ended July 31, 2000 is due to higher consulting
services, marketing expenses and demonstration cost as compared to the nine
months ended July 31, 1999.
Interest income. Our interest income for the nine months ended July 31, 2000 was
$247,980, as compared to $34,775 in the similar period 1999 an increase of
613.0%. The increase is due to higher cash balances as a result of the recently
completed preferred private placement on October 20, 1999, and higher interest
rates earned on our investments.
Income taxes. Income taxes for the nine months ended July 31, 2000 were $7,710
as compared with $2,107 in the similar period 1999. We have minimal tax
obligations due to the fact that we have not had meaningful profitability to
this point. We have tax loss carry forwards of $6.5 million to offset against
future profits, if any.
Liquidity and Capital Resource
------------------------------
As of July 31, 2000, we had cash of $5,542,105 and working capital of
$6,166,652. During the quarter ended July 31, 2000, our cash decreased by
$471,862. This was primarily due to the proceeds from warrants, offset by
purchases of fixed assets and raw materials.
Our investing activities have consisted primarily of short-term high quality
liquid investments, with maturities with three months or less when purchased,
which are considered cash equivalents. The primary investments are high quality
commercial paper, U.S. treasury notes and Treasury-bills.
For the nine months ended July 30, 2000 the Company declared three quarterly
dividends on its Series A convertible preferred in the amount of $401,714, which
was paid by the issuance 40,171, preferred shares.
We believe that cash generated from operations, our current cash balances, and
other sources of capital, will be sufficient to satisfy our projected working
capital and planned capital expenditures for at least 24 months.
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
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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.
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 feedstock 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.
Recent Developments
-------------------
On April 27, 2000 The Company filed a S-1 for the registration of 50% of the
Series A Convertible Preferred Stock, and to register the underlying common
shares related to the Series A preferred stock, warrants, and CDA warrants. The
Company has filed a registration statement with the Securities and Exchange
Commission and has received its third round comments from the SEC. The Company
is preparing to respond to the comments, and will file an amended S-1
registration statement shortly.
On July 12, 2000 The Company filed an application with the Listing
Qualifications Department of The Nasdaq Stock Market Inc., for listing on the
Nasdaq SmallCap Market. The Company's application is currently under review.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS.
We, Joseph Longo, President, John Watts our former Executive Vice President, and
Chief Financial Officer, and Kevin Black, Senior Vice President and General
Counsel, both in their capacity as officers and personally, are defendants in a
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lawsuit filed in the U.S. District Court for the District of Connecticut, in
Bridgeport, Connecticut. The Court had previously dismissed the claims against
Mr. Black on March 31, 1999. The lawsuit was filed by John Easton of Oakville,
Canada. The complaint demands payment of 475,000 shares of our common stock, for
commissions and/or fees for services rendered to us in connection with raising
funds needed to consummate the reverse acquisition on November 17, 1995, of
Startech Corporation by Kapalua Acquisitions, Incorporated, subsequently renamed
Startech Environmental Corporation. Shortly after the above action was filed,
Mr. Easton's two sons, Dexter Easton and Spencer Easton, commenced an additional
action against us for our refusal to lift a restrictive legend on stock issued
to them at the time of the reverse acquisition. They demanded we remove the
restrictive legend from 28,882 shares. The two actions were joined as they arise
from the same fact pattern and transaction.
The parties have entered into a Settlement Agreement and Release based upon
an oral settlement in principal that was reached on May 26, 2000 at the U.S.
District Court in Bridgeport, Connecticut before a magistrate. The principal
terms of the settlement call for the removal of the restrictive legend from
28,882 shares of common stock held by Spencer and Dexter Easton and the issuance
of 171,118 shares of common stock to John Easton that previously had been paid
for in 1995. John Easton will also receive an option to purchase 25,000
unregistered shares of our common stock at $10.00 per share exercisable after
three years from the date the agreement is executed. All the parties have signed
mutual releases as against the other. The sale of all of the shares subject to
this agreement, excluding the stock options, will be governed by a restrictive
liquidation clause limiting the number of shares that may be sold during
specific time periods. It will take a minimum of 20 months for all the shares to
be sold assuming they are sold at the maximum allowable rate. The parties have
submitted a joint Dismissal with Prejudice with the Court and are awaiting its
approval.
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, 2000 By: /s/ Joseph F. Longo
------------------ --------------------------------
Joseph F. Longo
Chief Executive Officer,
President
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