SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMMENDMENT NO. 1
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
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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
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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
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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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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
STARTECH ENVIRONMENTAL CORPORATION
BALANCE SHEET
January 31, January 31,
ASSETS 2000 1999
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<S> <C> <C>
Current Assets:
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
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$ 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 ................................ 281,711 109,174
----------- -----------
Total Current Liabilities .................... $ 493,060 $ 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 ............................ 1,307,134 300
Accumulated deficit Net Income (loss) ................. (5,129,355) (2,042,761)
----------- -----------
Total Stockholders' (deficit) equity ........... $ 7,520,940 $ 666,063
$ 8,014,000 $ 2,110,566
=========== ===========
See notes to financial statements
3
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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
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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
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Total other income (expense) ..................... 51,134 16,955
Income tax expense ....................................... 1,750 250
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Net Income(Loss) .......................................... $ (281,635) $ 5,389
=========== ===========
Net Income(Loss) .......................................... (281,635) 5,389
Less: Preferred Dividends ................................. 1,494,363 0
----------- -----------
Loss attributable to common shareholders .................. $(1,775,998) $ 5,389
Net Gain(Loss) per share .................................. $ (0.24) $ 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
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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)
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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
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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:
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. 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.
Note 3. Cash Flow
During the three months ended January 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.
Three months ended January 31, 2000 and 1999
--------------------------------------------
January 31, January 31,
2000 1999
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Common shares for services rendered $ 0 $ 0
Preferred stock dividend 148,105 0
Fixed assets financed through capital leases 30,176 0
Series A convertible preferred shares
converted to common shares1,021,790 0
Accretion of dividends associated
with the issuance of the
convertible preferred shares 1,306,834 0
Accrued Preferred Dividends 39,424 0
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Note 4. Interim Financial Information (Unaudited)
The interim financial statements of the Company for the three months ended
January 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.
Note 5. 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.
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.
7
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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.
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
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Startech is an environmental technology corporation engaged in the
commercialization and continued development of its Plasma Waste ConverterTM
(PWC) systems for the recycling, resource recovery, reduction and remediation of
hazardous and nonhazardous organic and inorganic materials and wastes including
radioactive wastes.
The Startech Plasma Waste Converter is a closed-loop recycling system that
converts materials formerly regarded as hazardous wastes into useful commodity
products. The hazardous waste can be organic and inorganic, in the form of a
gas, liquid, and solids or any combination thereof. Waste volume reductions
higher than 300 to 1 have been demonstrated. Depending on the waste processed,
the principal commodities produced by the system are a synthetic gas called PCG
(Plasma Converted Gas)TM, metals, and an obsidian-like inert silicate stone. The
PCG can be used as a chemical feed stock to produce polymers and other common
industrial products, as a fuel to produce electricity, as a fuel source for fuel
cells, as a heating plant fuel to reduce the cost and reliance on fossil fuels,
and in desalinization applications to produce fresh water for irrigation and
drinking. The metals can be employed in the metallurgical industry. The stone
silicates can be employed in the abrasives industry, and as an aggregate
material for construction industry applications.
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PART II - OTHER INFORMATION
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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: September 21, 2000 By: /S/ Joseph F. Longo
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Joseph F. Longo
President
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