startechsupp903.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

424B3 1 startechsupp903.htm SUPPLEMENT NO. 3 startechsupp903.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-145903

PROSPECTUS SUPPLEMENT NO. 3
TO PROSPECTUS DATED JUNE 5, 2008

STARTECH ENVIRONMENTAL CORPORATION

This Prospectus Supplement No. 3 supplements information contained in our prospectus dated June 5, 2008, as amended and supplemented from time to time, and includes the attached Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on September 15, 2008. This prospectus relates to the resale by the selling securityholders identified on pages 79-82 of the prospectus of up to 4,806,391 shares of our common stock, no par value.

You should read this Prospectus Supplement No. 3 in conjunction with the prospectus. This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the prospectus, including any amendments or supplements thereto.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE CAREFULLY CONSIDER THE “RISK FACTORS” BEGINNING ON PAGE 8 OF THE PROSPECTUS.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus Supplement No. 3 or the Prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is September 16, 2008


UNITED STATES
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, 2008

[ ]	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)

Colorado		84-1286576
(State of incorporation)		(I.R.S. Employer
		Identification Number)
88 Danbury Road, Suite 2A
Wilton, Connecticut 06897
(Address of principal executive offices, including 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 whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [ ]				Accelerated filer [ ]
Non-accelerated filer [ ]				Smaller reporting company [ x ]

Indicate by check mark if the Registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [ x ]

As of September 15, 2008, 23,326,178 shares of common stock of the registrant were outstanding.

STARTECH ENVIRONMENTAL CORPORATION

TABLE OF CONTENTS


		Page
		Number
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	17
Item 4T.	Controls and Procedures	17

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
Signatures		20

PART 1- FINANCIAL INFORMATION

Item 1. Financial Statements


STARTECH ENVIRONMENTAL CORPORATION
Condensed Consolidated Balance Sheets

		July 31, 2008			October 31, 2007
		(unaudited)
ASSETS
Current assets:

Cash and cash equivalents	$	6,574,213		$	11,612,863
Accounts receivable		3,373,250			2,891,250
Note receivable		385,000			385,000
Inventories		4,572,104			550,821
Prepaid expenses and other current assets		178,266			100,372

Total current assets		15,082,833			15,540,306

Equipment and leasehold improvements, net		1,963,759			1,973,757

Other assets		60,016			89,374

Total assets	$	17,106,608		$	17,603,437

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	671,412		$	260,594
Customer deposits and deferred revenue		15,591,643			12,931,144

Total liabilities		16,263,055			13,191,738

Commitments and contingencies

Stockholders' equity:
Preferred stock, no par value, 10,000,000 shares authorized;
none issued and outstanding		-			-
Common stock, no par value; 800,000,000 shares authorized;
23,297,161 issued and outstanding at July 31, 2008 and
23,072,775 issued and outstanding at October 31, 2007		34,202,922			33,938,101
Additional paid-in capital		5,628,497			5,481,497
Deferred leasing costs		(78,901	)		(256,426	)
Accumulated deficit		(38,908,965	)		(34,751,473	)

Total stockholders' equity		843,553			4,411,699

Total liabilities and stockholders' equity	$	17,106,608		$	17,603,437

See notes to these condensed consolidated financial statements.


STARTECH ENVIRONMENTAL CORPORATION
Condensed Consolidated Statements of Operations
(unaudited)

		Three Months Ending July 31,						Nine Months Ending July 31,
		2008			2007			2008			2007
Revenue	$	16,494		$	354,958		$	151,961		$	612,910
Cost of revenue		-			77,597			116,522			165,357
Gross profit		16,494			277,361			35,439			447,553
Operating expenses:
Selling expenses		164,008			293,477			537,815			603,060
Research and development expenses		48,284			43,260			147,019			213,765
General and administrative expenses		1,232,730			605,674			3,539,496			2,004,464
Asset impairment charge		-			126,000			-			126,000
Depreciation and amortization expenses		56,784			44,570			168,843			135,073
Total operating expenses		1,501,806			1,112,981			4,393,173			3,082,362
Loss from operations		(1.485,312	)		(835,620	)		(4,357,734	)		(2,634,809	)
Other income (expense):
Interest income		33,224			59,498			200,242			85,635
Interest expense		-			-			-			(16,045	)
Amortization of deferred debt discount		-			-			-			(101,858	)
Amortization of deferred financing costs		-			-			-			(13,783	)
Change in value of warrants and conversion option		-			-			-			(107,826	)
Other income		-			2,779			-			121,029
Total other income (expense)		33,224			62,277			200,242			(32,848	)
Net loss before income taxes		(1,452,088	)		(773,343	)		(4,157,492	)		(2,667,657	)
Income taxes		-			166			-			4,934
Net loss	$	(1,452,088	)	$	(773,509	)	$	(4,157,492	)	$	(2,672,591	)
Per share data:
Net loss per share - basic and diluted	$	(0.06	)	$	(0.03	)	$	(0.18	)	$	(0.12	)
Weighted average common shares
outstanding - basic and diluted		23,274,712			22,973,476			23,148,520			21,694,135

See notes to these condensed consolidated financial statements.


STARTECH ENVIRONMENTAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited)


		Nine Months Ended
		July 31, 2008			July 31, 2007

Cash flows from operating activities:
Net loss	$	(4,157,492	)	$	(2,672,591	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Asset impairment charge		-			126,000
Stock based compensation		147,000			263,054
Non cash consulting expenses		-			73,250
401(k) match through issuance of common stock		264,821			48,171
Depreciation and amortization		168,843			135,073
Amortization of deferred financing costs		-			13,783
Amortization of deferred leasing costs		177,525			157,800
Amortization of deferred debt discount		-			101,858
Change in value of warrants and conversion option		-			107,826
Changes in operating assets and liabilities:
Accounts receivable		(482,000	)		(150,000	)
Prepaid expenses and other current assets		(77,894	)		3,007
Inventories		(4,021,283	)		4,301
Other assets		29,358			(107	)
Accounts payable and accrued expenses		410,818			(100,523	)
Customer deposits and deferred revenue		2,660,499			4,631,840
Net cash (used in) provided by operating activites		(4,879,805	)		2,742,742

Cash flows used in investing activities:
Purchase of equipment		(158,845	)		(149,440	)
Cash used in investing activities		(158,845	)		(149,440	)

Cash flows from financing activities:
Repayments of convertible debenture		-			(191,857	)
Proceeds from exercise of options, warrants and
common stock issuance		-			4,699,205
Net cash provided by financing activities		-			4,507,348

Net (decrease) increase in cash and cash equivalents		(5,038,650	)		7,100,650

Cash and cash equivalents, beginning		11,612,863			2,279,914

Cash and cash equivalents, ending	$	6,574,213		$	9,380,564

See notes to these condensed consolidated financial statements.

STARTECH ENVIRONMENTAL CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Liquidity Matters.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Startech Environmental Corporation (the “Company” or “Startech”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. In the opinion of management, such statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. Pursuant to the requirements of the Securities and Exchange Commission (the “SEC”) applicable to quarterly reports on Form 10-Q, the accompanying financial statements do not include all the disclosures required by GAAP for annual financial statements. While the Company believes that the disclosures presented are adequate to make the information not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007, as filed with the SEC on January 29, 2008. Operating results for the three and nine months ended July 31, 2008 are not necessarily indicative of the results that may be expected for the full fiscal year ending October 31, 2008, or any other interim period.

Liquidity Matters

The Company has historically incurred net losses from operations, although operating activities generated $5,042,260 of cash during the fiscal year ended October 31, 2007, primarily due to the receipt of $8,250,000 of deposits associated with two new sales agreements. For the nine months ended July 31, 2008, net cash used in operating activities was $4,879,805 despite the receipt of $2,737,460 of customer deposits. As of July 31, 2008, the Company had cash and cash equivalents of $6,574,213 and a working capital deficiency of $1,180,222. Subsequent to July 31, 2008, the Company has not received any additional deposits or other amounts in connection with the aforementioned sales agreements.

The Company has historically raised funds through the sale of equity and debt instruments. Although no such funds were raised during the nine months ended July 31, 2008, during the fiscal year ended October 31, 2007, the Company received net cash proceeds of approximately $4,699,000 from various investors in consideration of the sale of a total of 2,081,149 shares of the Company’s common stock pursuant to various private placement transactions.

Although the Company believes that it has sufficient liquidity to sustain its existing business for at least the next twelve months, there is no assurance that unforeseen circumstances will not have a material effect on the business that could require the Company to raise additional capital or take other measures to conserve liquidity in order to sustain operations.

Note 2 – Summary of Certain Significant Accounting Policies.

Principles of Consolidation

The unaudited condensed consolidated financial statements of Startech include the accounts of Startech Corporation, its wholly-owned subsidiary. All intercompany transactions have been eliminated in consolidation.

Revenue Recognition

In general, the Company recognizes revenue on the sale of its manufactured products when the contract is completed, unless the contract terms dictate otherwise. Revenues earned from consulting, design and other professional services, if any, are recognized when the services are completed. For distributorship agreements, revenue is recognized for services and training upon completion and the distribution rights are amortized over the three year period of the distributorship agreements.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R. Stock-based compensation expense for all share-based payment awards is based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. The Company recognizes these compensation costs over the requisite service period of the award, which is generally the option vesting term.

Note 2 — Summary of Certain Significant Accounting Policies, continued.

Income Taxes

Effective November 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits”. A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of FIN 48.

In accordance with FIN 48, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as interest expense in the consolidated statements of operations. Penalties would be recognized as a component of general and administrative expenses.

In many cases, the Company’s tax positions are related to tax years that remain subject to examination by relevant tax authorities. The Company files income tax returns in the United States (federal) and in the State of Connecticut. The Company remains subject to federal or state income tax examinations by tax authorities for the fiscal year ended October 31, 2004 and thereafter.

The adoption of the provisions of FIN 48 did not have a material impact on the Company’s consolidated financial position and results of operations. As of July 31, 2008, no liability for unrecognized tax benefits was required to be recorded.

The Company has a deferred tax asset of approximately $12,298,489 as of July 31, 2008, primarily relating to federal net operating loss carryforwards of approximately $32,403,552 available to offset future taxable income through 2028. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. At present, the Company does not have a sufficient history of income to conclude that it is more likely than not that the Company will be able to realize any or all of its tax benefits in the near future and therefore a valuation allowance was established in the full value of the deferred tax asset.

A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or any or all of the valuation allowance net of appropriate reserves. Should the Company be profitable in future periods with supportable trends, the valuation allowance will be reversed accordingly.

Reclassifications

Certain reclassifications have been made to the fiscal 2007 financial statements to conform to the presentation used in the fiscal 2008 financial statements. The reclassifications had no effect on net losses as previously reported.

Net Loss per Share of Common Stock

Basic net loss per share excludes dilution for potentially dilutive securities and is computed by dividing net loss attributable to holders of shares of common stock by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other instruments to issue shares of common stock were exercised or converted into shares of common stock. Potentially dilutive securities realizable from the exercise of options and warrants aggregating 9,916,288 and 11,295,408 at July 31, 2008 and 2007, respectively, are excluded from the computation of diluted loss per share as their inclusion would be anti-dilutive.

Recent Accounting Pronouncements

In May 2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted Accounting Principles.” The current hierarchy of generally accepted accounting principles is set forth in the American Institute of Certified Accountants (AICPA) Statement of Auditing Standards (SAS) No. 69, “The meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. Statement No. 162 is intended to improve financial reporting by identifying a consistent framework or hierarchy for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. This Statement is effective 60 days following the SEC’s approval of the Public Company Oversight Board Auditing amendments to SAS 69. The Company is currently evaluating the application of this Statement but does not anticipate that the Statement will have a material effect on the Company’s results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133” (“SFAS 161”), to require enhanced disclosures about an entity’s derivative and hedging activities and thereby improve the transparency of financial reporting. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company is currently in the process of evaluating the impact of the adoption of SFAS 161 on its results of operations and financial condition.

In February 2008, the FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”) that defers the effective date of applying the provisions of SFAS 157 to the fair value measurement of non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (or at least annually), until fiscal years beginning after November 15, 2008. The Company is currently evaluating the effect that the adoption of FSP 157-2 will have on its consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (“SFAS 160”), to improve the relevance, comparability and transparency of the information that a reporting entity provides in its consolidated financial statements by (1) requiring the ownership interests in subsidiaries held by parties other than the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity, (2) requiring that the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income, (3) requiring that changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, (4) by requiring that when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary be initially measured at fair value and (5) requiring that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is currently in the process of evaluating the impact of the adoption of SFAS 160 on its results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 141R (Revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration and certain acquired contingencies. SFAS 141R also requires that acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

The FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting pronouncements and regulations as of July 31, 2008 that will become effective in subsequent periods; however, management of the Company does not believe that any of those pronouncements would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during fiscal 2008 or 2007, and management does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective.

Note 3 — Note Receivable.

On October 25, 2006, the Company received a promissory note from an entity in the principal amount of $385,000 in conjunction with a sales agreement. As part of the agreement, the Company was scheduled to receive payment on or before September 15, 2007, but the payment was never received. The entity has since requested multiple extensions, each of which has been granted by the Company, the latest of which calls for monthly installment payments of $50,000 beginning November 1, 2008, and concluding with a final payment of $135,000 on April 30, 2009. There can be no assurance that the Company will receive all or any portion of this payment or any subsequent payments. The Company has recorded the corresponding $385,000 liability within customer deposits and deferred revenue in the condensed consolidated balance sheets.

Note 4 – Inventories.

Inventories consist of raw materials and work-in-process and are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventories consist of the following:


		July 31,	October 31,
		2008	2007

Raw materials	$	152,841	$	263,841
Work-in-process		4,419,263		286,980

	$	4,572,104	$	550,821

As of July 31, 2008, the Company reclassified certain inventory items aggregating $3,230,000 from vendor deposits to inventory upon delivery of such items.

Note 5 – Cornell Transactions.

2007 Standby Equity Distribution Agreement

On April 11, 2007, the Company entered into a Standby Equity Distribution Agreement (“2007 SEDA”) with Cornell Capital Partners, L.P. (“Cornell”). Pursuant to the 2007 SEDA, the Company may, at its discretion, periodically sell to Cornell shares of common stock for a total purchase price of up to $10 million. For each share of common stock purchased under the 2007 SEDA, Cornell will pay the Company 96% of the lowest closing bid price of the Company’s common stock for the five trading days immediately following the notice date. Cornell will also retain 5% of the amount of each advance under the 2007 SEDA. Cornell’s obligation to purchase shares of the Company’s common stock issuable under the 2007 SEDA is subject to certain conditions and limitations, including an effective registration statement covering the resale shares of the Company’s common stock under the 2007 SEDA. The Company incurred a placement agent fee of $5,000 under the Placement Agent Agreement relating to the 2007 SEDA. Currently, the registration statement covering the resale of shares of common stock issuable under the 2007 SEDA has not been filed and the 2007 SEDA is not available for use.

2007 Securities Purchase Agreement

On April 11, 2007, pursuant to a securities purchase agreement, the Company issued and sold to Cornell 833,333 shares of common stock at a price per share of $2.40, for an aggregate purchase price of $2,000,000 (“2007 SPA”). In connection with the issuance of the common stock, the Company issued to Cornell a Class A warrant and a Class B warrant, each warrant entitling Cornell to purchase 833,333 shares of the Company’s common stock at an exercise price per share of $3.40 per share and $4.40 per share, respectively. On May 10, 2007, the exercise price of all of these warrants was adjusted to $2.20, in accordance with the warrant terms. The warrants expire on April 11, 2011. The 2007 SPA provided Cornell with registration rights (“2007 Registration Rights”) to register for resale the shares of common stock issued to Cornell. In connection with the 2007 SPA, the Company paid an origination fee to Cornell in the form of 41,666 shares of common stock and a cash payment of $95,000. Pursuant to the 2007 Registration Rights, the Company was obligated to file a registration statement within 45 days of April 11, 2007 and obtain effectiveness no later than 120 days following such date (or 150 days if the registration statement receives a “full review” by the SEC) and maintain effectiveness of such registration agreement until all the shares may be sold without regard to manner of sale requirements and volume limitations pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). In the event the Company did not obtain effectiveness within the time periods described above, and if certain other events occurred, the Company would be subject to liquidated damages in an amount, in cash, equal to 1% of the purchase price paid by Cornell for the shares of common stock issued pursuant to the 2007 SPA, plus an additional 1% for each additional month an effective registration is delayed, up to a maximum of 12%, or $240,000, payable in cash. In accordance with FASB Staff Position EITF 00-19-2 “Accounting for Registration Payment Arrangements”, which specifies that a contingent obligation to make future payments under a registration payment arrangement should be separately recognized and measured if the obligation becomes probable and is reasonably estimable in accordance with SFAS No. 5, “Accounting for Contingencies”, the Company has recognized a contingent obligation in its financial statements.

In connection with the 2007 Registration Rights, the Company filed a registration statement on Form S-1 on June 1, 2007, filed Amendment No. 1 to Form S-1 on October 31, 2007, filed Amendment No. 2 to Form S-1 on March 11, 2008, filed Amendment No. 3 to Form S-1 on May 13, 2008 and filed Amendment No. 4 to Form S-1 on May 30, 2008. The 150 day deadline for the registration statement to be declared effective passed in early September 2007. The registration statement was declared effective by the SEC on June 3, 2008. However, on February 15, 2008, an amendment of SEC Rule 144 under the Securities Act became effective. Consequently, the shares of common stock issued pursuant to the 2007 SPA are freely tradable without the need for an effective registration statement.

2008 Warrants

Cornell Warrant Agreement

On May 6, 2008, the Company reduced to writing prior oral agreements with Cornell whereby Cornell agreed to waive the anti-dilution provisions in the September 15, 2005 warrants issued to them as such provisions related to a private placement of shares of the Company’s common stock subsequent to September 15, 2005 at a price per share below $2.53, which issuance would have resulted in downward adjustments to the exercise price of the warrants to $1.88 per share and an increase in the number of shares upon exercise of those warrants to 874,734 shares of the Company’s common stock. In consideration of this written agreement, on May 9, 2008 the Company issued to Cornell new warrants to purchase 30,000 shares of the Company’s common stock at an exercise price of $1.50 per share, valued at $15,600. These warrants will expire on May 9, 2011 and will have substantially the same terms as the warrants issued on September 15, 2005, except that the full-ratchet anti-dilution rights will expire on September 15, 2008, the date on which the warrants issued to Cornell on September 15, 2005 will expire.

Note 6 – Sales Concentrations.

During the three months ended July 31, 2008 and 2007, $16,494 (100%) and $54,958 (15%) of the Company’s revenue was derived from the amortization of one and four distributorship agreements, respectively. During the nine months ending July 31, 2008 and 2007, $75,000 (49%) and $426,000 (70%) of the Company revenues was generated from the sale and installation of manufactured parts to one customer, respectively.

Note 7 — Stockholders’ Equity.

Common Stock

The Company sponsors 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. Contributions by the Company are made in the form of shares of common stock at the prevailing current market price and vest equally over an employee’s initial three-year service period. The Company matches the first ten percent of an employee’s contributions on a dollar-for-dollar basis, up to the maximum contribution allowed under the Internal Revenue Code. Contributions for the nine months ended July 31, 2008 and 2007 were $84,821, and $48,171, respectively. These contributions were, or will be, made through the issuance of 74,386 and 19,979 shares of common stock, respectively. Contributions for the three months ended July 31, 2008 and 2007 were $26,268, and $15,721, respectively. These contributions were, or will be, made through the issuance of 36,615 and 6,484 shares of common stock, respectively.

On May 2, 2008, the Company issued 150,000 shares of its common stock, valued at $180,000, to its 401(k) plan as a non-discretionary contribution to the 401(k) plan participants.

Warrants

A summary of warrant activity for the nine months ended July 31, 2008 is as follows:


				Weighted
	Number of			Average
	Warrants			Exercise Price
Outstanding, November 1, 2007	9,693,827		$	4.29
Granted	30,000			1.50
Exercised	-			-
Expired	(1,583,539	)		6.22

Outstanding, July 31, 2008	8,140,288		$	3.91

Exercisable, July 31, 2008	8,140,288		$	3.91

Stock Options

On January 4, 2008, the Company issued options to purchase an aggregate of 45,000 shares of common stock exercisable at $1.73 per share to six employees, including executive officers. The options vested immediately upon grant and have an exercise period of ten years. During the nine months ended July 31, 2008, the Company recorded a compensation charge equal to the $52,200 value of these options.

On May 7, 2008, the Company issued options to purchase an aggregate of 60,000 shares of common stock exercisable at $1.10 per share to four members of the board of directors. The options vested immediately upon grant and have an exercise period of ten years. During the nine months ended July 31, 2008, the Company recorded a compensation charge equal to the $30,600 value of these options.

For the nine months ended July 31, 2008 and 2007, the Company incurred aggregate stock-based compensation expense of $147,000 and $263,054, respectively. For the three months ended July 31, 2008 and 2007, the Company incurred aggregate stock-based compensation expense of $30,600 and $51,774, respectively. As of July 31, 2008, the total unrecognized compensation costs on non-vested options are $0.

In addition, in February 2008, the Company’s board of directors adopted a resolution to amend the Company’s 2000 Stock Option Plan to increase the number of shares of common stock with respect to which stock options may be granted by 1,000,000 shares which was approved at the Company’s annual meeting of shareholders on May 7, 2008. The number of shares that are eligible to be issued in the aggregate under the Company’s 2000 Stock Option Plan has now been increased to 2,000,000 shares.

The fair value of share-based payment awards have been estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:


	Nine months ended July 31
	2008	2007

Risk-free interest rate range	3.00%-3.26%	4.65%-5.00%
Dividend yield	N/A	N/A
Expected volatility	82%	98%
Expected life in years	10	4.5

A summary of option activity for the nine months ended July 31, 2008 is as follows:


				Weighted-
				Average	Aggregate
				Exercise	Intrinsic
	Shares			Price	Value

Outstanding at November 1, 2007	1,700,000		$	4.82

Granted	105,000			1.37
Exercised	—			—
Forfeited	(29,000	)		4.30
Expired	—			—
Outstanding at July 31, 2008	1,776,000		$	4.62	$ —
Exercisable at July 31, 2008	1,776,000		$	4.62	$ —

The weighted average fair value of options granted during the nine months ended July 31, 2008 using the fair value methodology was $0.79 per share.

The Company accounts for the expected life of options in accordance with the “simplified” method provisions of SEC Staff Accounting Bulletin (“SAB”) No. 110 (December 2007), which enables the use of the simplified method for “plain vanilla” share options as defined in SAB No. 107.

Note 8 – Commitments and Contingencies.

Employment Agreement

On September 30, 2004, the board of directors approved the terms of an employment agreement between Joseph F. Longo and the Company, whereby Mr. Longo will serve as the Chief Executive Officer and President of the Company and will be paid an annual salary of $185,000. The term of the Employment Agreement is three years, effective as of January 1, 2004, and automatically renews for successive one year periods, unless either party provides written notice of non-renewal at least 90 days prior to the anniversary date. Effective August 1, 2007, the Board of Directors approved an increase in Mr. Longo’s annual salary to $210,000. Upon termination of employment, Mr. Longo is entitled to six months of base salary and benefits continuation as severance. After the severance period, if Mr. Longo was involuntarily terminated without cause, he is entitled to additional termination benefits, including an annual payment of $97,500 for the remainder of his life, plus lifetime reimbursement of gap medical insurance premiums to cover expenses not covered by Medicare or Medicaid, to the extent commercially available. If Mr. Longo is survived by his spouse, she will receive half of the annual payment amount ($48,750) for the remainder of her life, plus continuation of the gap medical insurance benefit. These entitlements are unfunded and Mr. Longo’s rights to these benefits are as an unsecured general creditor of the Company. On January 28, 2008, the parties executed an amendment to clarify provisions with respect to such agreement.

Sales Agreements

On May 10, 2007, the Company entered into a Plasma Converter System ("PCS") purchase agreement with a customer for an aggregate sales price of $19,275,000. The purchase price provides that payments are to be made in installments. The Company received $9,155,500 through July 31, 2008. As of July 31, 2008, payments aggregating $3,373,250 were past due and are reflected in accounts receivable and customer deposits and deferred revenue in the Company’s unaudited condensed consolidated financial statements as of July 31, 2008. There can be no assurance that these payments or other payments contemplated by this contract will be made or that the Company will deliver the Plasma Converter Systems covered by this purchase agreement. Management has indicated that the Company is currently in discussion with the customer with respect to a revised delivery schedule related to past due payments.

On August 10, 2007, the Company entered into a PCS purchase agreement with a customer for an aggregate sales price of $5,400,000. Through July 31, 2008, the Company has received $1,350,000 in payments relating to this agreement. The balance of the purchase price is scheduled to be paid in installments. As of March 5, 2008, the Company agreed to a revised payment schedule with the customer to extend the $540,000 payment originally due on May 15, 2008 to June 15, 2008. The Company has not yet received this payment. There can be no assurance that these payments or other payments contemplated by this contract will be made or that the Company will deliver the Plasma Converter Systems covered by this purchase agreement. Management has indicated that the Company is currently in discussion with the customer with respect to a revised delivery schedule related to past due payments.

For both agreements referred to above, the down payment and installment payments received and accrued have been included as part of customer deposits and deferred revenue in the consolidated balance sheet. Final installments will be made upon the issuance of a certificate of completion if and when the installation of the PCSs has been completed. All amounts, other than the down payment, not paid by the customer within 30 days after such amounts become due and payable to the Company, shall bear interest as stated, not to exceed the maximum rate of interest allowed by applicable law.

Operating Leases

The Company leases office space under non-cancelable operating leases through December 31, 2011. On June 17, 2008, the Company exercised its option to extend its current lease at 88 Danbury Road located in Wilton, CT. The terms of the lease were extended three years at the rate of $11,224 per month, and will expire on December 31, 2011. The following table shows the Company’s future lease commitments under its operating leases:


Twelve Months Ended
July 31,		Annual Rent

2009	$	141,643
2010		134,688
2011		134,688
2012		78,568

Total	$	489,587

Concentration of Credit Risk

The Company’s cash and cash equivalents consist of cash balances at one financial institution and short-term high quality liquid investments with maturities of less than thirty days. The short-term investments are high quality commercial paper, U.S. Treasury notes and U.S. Treasury bills. The cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per institution. From time to time, the Company’s balances may exceed these limits. At July 31, 2008, uninsured cash balances were approximately $6,300,000. The Company does not believe it is exposed to any significant credit risk for cash.

Note 9 – Litigation and Other Contingencies

On April 30, 2008, the Company received a letter from Plasco Energy Group Inc., or Plasco, indicating that Plasco filed a complaint against the Company in the United States District Court for the Southern District of Texas, Houston Division, alleging that the Company’s Plasma Converter System infringes a January 1994 U.S. patent entitled “Municipal Solid Waste Disposal Process” issued to Carter and Tsangaris of Ottawa, Canada. On June 13, 2008, the Complaint was dismissed, without prejudice, by the United States District Court for the Southern District of Texas. In addition, despite the fact that management of the Company has indicated that it is confident that the Company does not infringe on Plasco's patent, the Company has obtained assurance from Plasco's counsel that Plasco has agreed not to sue the Company for infringement of the patent.

In addition to the matter noted above, the Company is a party to one or more claims or disputes which may result in litigation. The Company’s management does not, however, presently expect that any such matters will have a material adverse effect on the Company’s business, financial condition or results of operations.

Note 10 – Subsequent Events.

Common Stock Issuances

Subsequent to July 31, 2008 the Company issued 18,423 shares of its common stock valued at $12,896, and 10,594 shares valued at $8,867 to its 401 (k) plan as a matching contribution.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q contains a number of "forward-looking statements". Specifically, all statements other than statements of historical facts included in this Quarterly Report on Form 10-Q regarding our financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements are based on the beliefs of management, as well as assumptions made by and information currently available to management. When used in this quarterly report, the words "anticipate," "believe," "estimate," "expect," "may," "will," "continue" and "intend," and words or phrases of similar import, as they relate to our financial position, business strategy and plans, or objectives of management, are intended to identify forward-looking statements. These statements reflect management’s current view with respect to future events and are subject to risks, uncertainties and assumptions related to various factors including, without limitation, those described below the heading "Overview" and in our registration statements and periodic reports filed with the SEC under the Securities Act of 1933, as amended (the “Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Although management believes that its expectations are reasonable, we cannot assure you that such expectations will prove to be correct. Should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in this Quarterly Report on Form 10-Q as anticipated, believed, estimated, expected or intended.

In this Item 2, references to the "Company," "Startech", "we," or "us" means Startech Environmental Corporation and its wholly-owned subsidiary.

Overview

We are an environmental technology company that fabricates and sells a recycling system for the global marketplace using components manufactured by third parties. We believe that our plasma processing technology, known as the Plasma Converter System (“PCS”), achieves closed-loop elemental recycling that destroys hazardous and non-hazardous waste and industrial by-products and is capable of converting them into useful commercial products. These products could include a synthesis gas called PCG (Plasma Converted Gas), surplus energy for power, hydrogen, metals and silicate for possible use and sale by users of the Plasma Converter System.

Until January 2004, we were engaged solely in the manufacture and sale of equipment for use by others. Since then, we have attempted to broaden the scope of our available revenues. This change was brought about by our decision to attempt to expand our market penetration strategies and opportunities. Rather than only market and sell our products for use by others, we are now seeking opportunities to become directly involved in the operation and use of our products.

We believe specific events will drive demand for our Plasma Converter System. They include:

Increases in waste, and in particular hazardous waste, due to rising consumer/industrial consumption and population growth in most nations;
Current waste disposal and remediation techniques such as landfills and incineration becoming regulatory, socially and environmentally less acceptable;
A need for critical resources, such as power and water, to sustain local economies; and
The emphasis being placed upon the production of distributed power and the need to provide alternatives to fossil fuels.

We believe that our core plasma technology addresses these waste and resource issues by offering remediation solutions that are integrated with a range of equipment solutions and services. We believe our products will add value to our potential customers’ businesses as they could possibly realize revenue streams from disposal or processing fees, as well as from the sale of resulting commodity products and services.

We have been actively educating and promoting to our potential customers the benefits of the Plasma Converter System over other forms of waste remediation technologies. Our efforts to educate the public and governments are continuing. Like most new technologies, we have been met with varying degrees of resistance. We believe that there is a rising comfort level with our Plasma Converter System technology, resulting in part from our educational and informational efforts.

Our business model and our market development strategies arise from our mission, which is to change the way the world views and employs discarded materials. We expect to achieve this objective by strategically marketing a series of products and services emanating from our core Plasma Converter System technology that could possibly produce saleable fossil fuel alternatives while possibly providing a safer and healthier environment. We expect to implement this strategy through sales of our Plasma Converter System with our providing after-sales support and service, build own and operate/build own and transfer of ownership facilities, joint development projects and engineering services.

Recognizing the increasing importance of alternative energy and power sources in general, and hydrogen in particular, in 2005, we expanded our product line to include StarCell™, a hydrogen separation technology. Working in conjunction with the Plasma Converter System, StarCell provides what we believe to be an environmentally friendly renewable source of hydrogen power.

Recent Developments

Renegotiation of Sales Agreement Payment Schedule-

On May 10, 2007, the Company entered into a sales agreement with EnviroSafe Corp. for an aggregate sales price of $19,275,000 for the sale of certain Plasma Converter Systems to be located at a former pharmaceutical facility in Puerto Rico. The purchase price is being paid in installments. EnviroSafe has advised Startech that it expects to acquire this property during the fourth calendar quarter of 2008. Management has been advised that delays on the closing of that facility by EnviroSafe have caused delays in Startech's receipt of agreed upon payments from EnviroSafe until the facility closing is completed by EnviroSafe. As of July 31, 2008, payments aggregating $9,155,500 have been received. As of July 31, 2008, payments aggregating $3,373,250 were past due and are reflected in accounts receivable and customer deposits and deferred revenue in the Company’s unaudited condensed consolidated financial statements as of July 31, 2008. There can be no assurance that these payments or other payments contemplated by this contract will be made or that the Company will deliver the Plasma Converter Systems covered by this purchase agreement. Management has indicated that the Company is currently in discussion with EnviroSafe with respect to a revised delivery schedule related to past due payments.

On August 10, 2007, the Company entered into a sales agreement with Waste2GreenEnergy Ltd (w2ge) for an aggregate sales price of $5,400,000 for the sale of certain Plasma Converter Systems to be located at a new facility to be built in Bytom, Poland. On August 20, 2007, the Company received a down payment of $540,000. In addition to the August 2007 payment, the Company has received installment payments of $810,000 through July 31, 2008. Due to delays in the w2ge PCS program, as of March 5, 2008, the Company agreed to a revised payment schedule with w2ge and, in connection therewith, the Company agreed to extend the $540,000 payment originally due on May 15, 2008 to June 15, 2008. As of September 15, 2008, the Company has not received such payments. There can be no assurance that these payments or any other payments contemplated by the contract will be made or that the Company will deliver the Plasma Converter Systems covered by the purchase agreement. Management has indicated that the Company is currently in discussion with the customer with respect to a revised delivery schedule related to past due payments.

Strategic Alliance

On March 23, 2008, we entered into a strategic alliance with Hydrogen Engine Center, Inc., or HEC, to combine HEC's alternative gas energy conversion technology and our Plasma Converter Processing technology. On August 19, 2008, HEC delivered a hydrogen power generator system to us for demonstration purposes at our Bristol, Connecticut facility. During August 2008, in connection therewith, we announced our plan to produce and market a carbonless power system for "Green Electricity" in stationary facilities. It is expected that HEC's internal combustion engines will generate clean power for stationary facilities using the hydrogen produced by our Plasma Converter Systems.

Other Developments

In February 2008, our board of directors adopted a resolution for us to reincorporate from Colorado to Delaware, and submitted such proposal to our shareholders for approval at our annual meeting of shareholders, which took place on May 7, 2008. The proposal to reincorporate to Delaware did not receive the requisite number of votes required to approve the reincorporation.

In addition, in February 2008, our board of directors adopted a resolution to amend our 2000 Stock Option Plan to increase the number of shares with respect to which stock options may be granted by 1,000,000 shares, subject to the approval of our shareholders at our annual meeting of shareholders, which took place on May 7, 2008. At the annual meeting, we received the requisite number of votes of our shareholders to approve the increase of the number of shares that may be issued under our 2000 Stock Option Plan.

Departure of Directors or Principal Officers

On July 15, 2008, Peter J. Scanlon, the Chief Financial Officer, Vice President, Treasurer and Secretary of the Company informed the board of directors of the Company that, for family reasons, he has decided to retire from the Company effective October 31, 2008. Mr. Scanlon has served the Company for ten years.

The Company has initiated the process of searching for Mr. Scanlon’s replacement in an effort to provide for an orderly transition upon his retirement.

Results of Operations

Comparison of three months ended July 31, 2008 and 2007

Operations

Revenues. Total revenues were $16,494 for the three months ended July 31, 2008, compared to $354,958 for the same fiscal period in 2007, a decrease of $338,464, or 95.4% . The decrease was primarily due to $300,000 of revenues relating to manufactured parts and installation materials for the fiscal 2007 period compared to the fiscal 2008 period. This revenue was attributable to an overhaul project for Mihama, Inc., whereby their PCS was recently relocated near Kobe, Japan, for which we are providing field service support and replacement parts. Mihama, Inc. is now using a PCS to safely and irreversibly destroy PCB's (polychlorinated bephenyls) and to support its sales and marketing program. Revenue from the amortization of distributor fees decreased to $16,494 for the three months ended July 31, 2008 compared to $54,958 for the same period in the prior year. The 36-month amortization period for three of the four distributor agreements that were being amortized during the three months ended July 31, 2007 were completed. Distribution fees that have been received but are not yet amortized are included in customer deposits and deferred revenue on the condensed consolidated balance sheet. Unamortized distribution fees declined to $155,487 at July 31, 2008, compared to $232,964 at October 31, 2007 and both amounts include $150,000 of fees received that are not yet being amortized, pending receipt of the remaining balance from the customer.

Gross Profit. Gross profit was $16,494 for the three months ended July 31, 2008, compared to $277,361 in the same period in fiscal 2007, or a decrease of $260,867 or 94.1%, due to less revenue generated from the Mihama project and a decrease in amortization of distributor fees compared to the prior year.

Selling Expenses. Selling expenses for the three months ended July 31, 2008 were $164,008, compared to $293,477 for the same period in the prior year, a decrease of $129,469, or 44.1%, primarily due to lower marketing, commissions and consulting expenses.

Research and Development Expenses. Research and development expenses for the three months ended July 31, 2008 were $48,284, compared to $43,260 for the same period in the prior year, an increase of $5,024 or 11.6%, primarily due to an increase in travel-related expenses.

General and Administrative Expenses. General and administrative expenses for the three months ended July 31, 2008 were $1,232,730, compared to $605,674 for the same period in 2007, an increase of $627,057, or 104%. This was primarily due to an increase in professional fees including accounting, consultants, legal and board of directors fees by $233,666, from $243,384 to $477,050, primarily due to SEC filing requirements, including several registration statement amendments, new filing requirements relating to compensation, new proxy proposals for our 2008 annual shareholders meeting, and other related expenses. In addition, officers and other salaries and related expenses increased by $122,164 from $344,574 to $466,738 during the three months ended July 31, 2008, and the Company made contributions to its 401k plan in the amount of $206,268, primarily for the 150,000 shares of common stock issued on May 2, 2008, compared to an aggregate contribution of $15,721 for the same period in the prior year.

Depreciation and Amortization Expenses. Depreciation and amortization expenses for the three months ended July 31, 2008 were $56,784, compared to $44,570 for the same period in the prior year, an increase of $12,214, or 27.4%, primarily due to higher depreciation expenses on the equipment at our facility in Bristol, Connecticut.

Other Income (Expense)

Interest Income. Interest income for the three months ended July 31, 2008 was $33,224, compared to $59,498 in the same fiscal period in 2007, a decrease of 44.2%, due to lower cash balances and lower interest rates on our money markets investments.

Other Income. Other income for the three months ended July 31, 2008 was $0, compared to $2,779 in the same fiscal period in 2007, which is due to the completion of the Department of Energy program.

Results of Operations

Comparison of nine months ended July 31, 2008 and 2007

Operations

Revenues. Total revenues were $151,961 for the nine months ended July 31, 2008, compared to $612,910 for the same fiscal period in 2007, an decrease of $460,949, or 75.2% . Mihama revenue decreased by $351,000 for the nine months ended July 31, 2008 compared to the nine months ended July 31, 2007, primarily due to revenues for manufactured parts and installation. This revenue was attributable to an overhaul project for Mihama, Inc., whereby their PCS was recently relocated near Kobe, Japan, for which we are providing field service support and

replacement parts. Mihama, Inc. is now using a PCS to safely and irreversibly destroy PCB's (polychlorinated bephenyls) and to support its sales and marketing program. Additionally, there was a $109,949 decline in the amortization of distributor fees, to $76,961 from $186,910, because the 36-month amortization period for three of the four distributor fees that were being amortized during the nine months ended July 31, 2007 was completed.

Gross Profit. Gross profit was $35,439 for the nine months ended July 31, 2008, compared to $447,553 in the same fiscal period in 2007, or a decrease of $412,114 or 92.1%, due to less revenue generated from the Mihama project and lower amortization of distributor fees compared to fiscal 2007.

Selling Expenses. Selling expenses for the nine months ended July 31, 2008 were $537,815, compared to $603,060 for the same period in the prior year, a decrease of $65,245, or 10.8%, primarily due to lower commissions and marketing expenses relating to sales efforts of PCS, and lower consulting expenses.

Research and Development Expenses. Research and development expenses for the nine months ended July 31, 2008 were $147,019, compared to $213,765 for the same period in the prior year, a decrease of $66,746 or 31.2%, primarily due to a decrease in the number of personnel devoted to research and development activities.

General and Administrative Expenses. General and administrative expenses for the nine months ended July 31, 2008 were $3,539,496, compared to $2,004,464 for the same fiscal period in 2007, an increase of $1,535,032, or 76.6% . Salary costs increased by $299,339, from $918,986 to $1,218,325, primarily due to salary increases and an increase in headcount in our engineering and design departments. Professional fees including accounting, consultants, legal and board of director fees increased by $914,208, from $436,320 to $1,350,538, primarily due to an increase in hiring and outside legal, accounting and consulting fees relating to assistance with SEC filings including several registration statement amendments, new filing requirements relating to compensation, and new proxy disclosures for the 2008 annual meeting. Additionally, the 401k employer match expense increased to $264,821 for the nine months ended July 31, 2008 as compared to $48,171 in the prior year. This non cash expense is primarily due to the board approval of 150,000 common shares as a non discretionary contribution to our 401k plan on behalf of our employees.

Depreciation and Amortization Expenses. Depreciation and amortization expenses for the nine months ended July 31, 2008 were $168,843, compared to $135,073 for the same period in the prior year, an increase of $33,770, or 25.0%, primarily due to higher depreciation expenses on the equipment at our facility in Bristol, Connecticut.

Other Income (Expense)

Interest Income. Interest income for the nine months ended July 31, 2008 was $200,242, compared to $85,635 in the same period in 2007, an increase of 133.8%, which is due to higher cash balances from the receipt of customer deposits and private placement proceeds.

Other Income. Other income for the nine months ended July 31, 2008 was $0, compared to $121,029 in the same period in 2007, which is due to the completion of the Department of Energy program.

Other Expense. Other expense (including interest expense, amortization of deferred financing costs, amortization of deferred debt discount and change in the value of warrants and conversion option) for the nine months ended July 31, 2008 was $0, compared to $239,514 in the same period in 2007, due to the convertible notes issued to Cornell Capital Partners having been fully repaid or converted into shares of common stock.

Liquidity and Capital Resources

We have historically incurred net losses from operations, although operating activities generated $5,042,260 of cash during the fiscal year ended October 31, 2007, primarily due to the receipt of $8,250,000 of installment payments associated with two sales agreements. For the nine months ended July 31, 2008, net cash used in operating activities was $4,879,805, despite the receipt of $2,737,460 of customer deposits. As of July 31, 2008, we had cash and cash equivalents of $6,574,213 and a working capital deficiency of $1,180,222. Subsequent to July 31, 2008, we have not received any additional payments in connection with the aforementioned sales agreements.

We have historically raised funds through the sale of equity and debt instruments. Although no such funds were raised during the nine months ended July 31, 2008, during the fiscal year ended October 31, 2007, we received net cash proceeds of approximately $4,699,000 from various investors in consideration of the sale of 2,081,149 shares of common stock pursuant to various private placement transactions.

Although we believe that we have sufficient liquidity to sustain our existing business for at least the next twelve months, there is no assurance that unforeseen circumstances will not have a material effect on our business that could require us to raise additional capital or take other measures to conserve liquidity in order to sustain operations.

Operating activities used $4,879,805 of cash and cash equivalents during the nine months ended July 31, 2008, primarily due to a net loss of $4,157,492, offset by $758,189 of non-cash charges, plus $4,021,283 in cash outflows for the purchase of certain inventory items, partially offset by the receipt of a $2,737,460 in customer deposits.

Investing activities resulted in $158,845 of cash outflows during the nine months ended July 31, 2008 due to the purchase of equipment.

We have been, and will continue to be, dependent upon the deposits and progress payments from distributorship agreements, sales of our products and sales of our securities. It is anticipated that our capital requirements for future periods will increase and our future working capital needs will be obtained from the sources described above, and possibly demonstration and testing programs, joint development programs, build, own and operate facilities and cash generated from the operation of our business.

We believe that continuing operations for the longer term will be supported primarily through anticipated growth in revenues and, if necessary, through additional sales of our securities. Management is continuing its efforts to secure additional funds through the sale of equity instruments. There can be no assurance that we will be able to grow our revenues or sell any of our securities on terms acceptable to us or at all.

Recent Accounting Pronouncements

In May 2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted Accounting Principles.” The current hierarchy of generally accepted accounting principles is set forth in the American Institute of Certified Accountants (AICPA) Statement of Auditing Standards (SAS) No. 69, “The meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. Statement No. 162 is intended to improve financial reporting by identifying a consistent framework or hierarchy for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. This Statement is effective 60 days following the SEC’s approval of the Public Company Oversight Board Auditing amendments to SAS No. 69. The Company is currently evaluating the application of this Statement but does not anticipate that the Statement will have a material effect on the Company’s results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133” (“SFAS 161”), to require enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company is currently in the process of evaluating the impact of the adoption of SFAS 161 on its results of operations and financial condition.

The FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting pronouncements and regulations as of July 31, 2008 that will become effective in subsequent periods; however, management of the Company does not believe that any of those pronouncements would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during fiscal year 2008 or 2007, and management does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Item 3. Qualitative and Quantitative Disclosures about Market Risk.

The Company is primarily exposed to foreign currency risk, interest rate risk and credit risk.

Foreign Currency Risk — We develop products in the United States and market our products in North America, Japan, Europe, Asia, Africa, the Middle East and South America as well as other parts of the world. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because a significant portion of our revenues are currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets.

Interest Rate Risk — Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our investments are in short-term instruments. Due to the short-term nature of our investments, we believe that we do not have a material interest rate risk exposure.

Credit Risk — Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result, we do not anticipate any material operating losses due to credit risk.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports filed with the SEC is recorded, processed, summarized and reported within the time period specified in the rules and forms of the SEC and includes, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s Chief Executive Officer and Chief Financial Officer are responsible for establishing, maintaining and enhancing these controls and procedures. They are also responsible, as required by the rules established by the SEC, for the evaluation of the effectiveness of these procedures.

Based on their evaluation of the Company’s disclosure controls and procedures, which took place as of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and the Chief Financial Officer concluded that these disclosure controls and procedures were not effective at the “reasonable assurance” level. These controls ensure that the Company is able to collect, process and disclose the information required in the reports that the Company files with the SEC within the required time period.

Our independent auditors have reported to our board of directors a matter involving internal controls that our independent auditors considered to be a reportable condition and material weakness, under standards established by the Public Company Accounting Oversight Board. The material weakness identified relates to our limited segregation of duties. Segregation of duties within our company is limited due to the small number of employees that are assigned to positions that involve the processing of financial information. Although we are aware that segregation of duties within our company is limited, we believe (based on our current roster of employees and certain control mechanisms we have in place), that the risks associated with having limited segregation of duties are currently insignificant.

Given this reportable condition and material weakness, management devoted additional resources, including the engagement of an outside consultant, to address disclosure issues during the three and nine month periods ending July 31, 2008. As a result, we are confident that our financial statements for the three and nine months ended July 31, 2008 fairly present, in all material respects, our financial condition and results of operations. Management does not believe that the above reportable condition and material weakness affected the results for the three and nine months ended July 31, 2008 or any prior period.

Changes in Internal Control Over Financial Reporting

During the nine months ended July 31, 2008, there were no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and as such, we are not required to provide the information under this Item 1A.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits.

The following exhibits are attached to this report or are incorporated by reference herein.

	31.1	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

	31.2	Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

	32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

	32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *


	* Filed herewith

SIGNATURES

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
	(Registrant)

Dated: September 15, 2008	BY: /s/ Joseph F. Longo Joseph F. Longo Chairman, Chief Executive Officer, President and Directo

Dated: September 15, 2008	BY: /s/ Peter J. Scanlon Peter J. Scanlon Chief Financial Officer, Secretary, Vice President, and Principal Financial Officer