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, 2006


|_|  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ____ to ____



                           Commission File No. 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)

                         15 Old Danbury Road, Suite 203
                            Wilton, Connecticut 06897
                            -------------------------
          (Address of principal executive offices, including zip code)

                                 (203) 762-2499
                                 --------------
               (Registrants telephone number, including area code)

           Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act: Common Stock, no par value


     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, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [ ]   Accelerated Filer [ ]   Non-accelerated filer [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 18, 2006, 20,708,017 shares of common stock were
outstanding.

<PAGE>

                       STARTECH ENVIRONMENTAL CORPORATION

                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION                                             PAGE
------------------------------                                             ----

Item 1.  Financial Statements (unaudited)

         Condensed consolidated balance sheets - July 31, 2006
         and October 31, 2005                                               1

         Condensed consolidated statements of operations for the
         three and nine months ended July 31, 2006 and 2005                 2

         Condensed consolidated statements of cash flows for the
         nine months ended July 31, 2006 and 2005                           3

         Notes to condensed consolidated financial statements              4-12

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                              13-20

Item 3.  Quantitative and Qualitative Disclosure about Market Risk         21

Item 4.  Controls and Procedures                                          21-22

PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings                                                 23
Item 1A. Risk Factors                                                      23
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds       23
Item 3.  Defaults Upon Senior Securities                                   23
Item 4.  Submission of Matters to a Vote of Security Holders               23
Item 5.  Other Information                                                 23
Item 6.  Exhibits                                                          23


<PAGE>
<TABLE>
<CAPTION>

                                  PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                                STARTECH ENVIRONMENTAL CORPORATION
                               Condensed Consolidated Balance Sheets

                                                                      July 31, 2006   October 31,
                                                                       (unaudited)        2005
                                                                      ------------    ------------
                                     Assets
                                     ------
Current assets:
<S>                                                                   <C>             <C>
   Cash and cash equivalents                                          $  2,760,436    $  2,489,529
   Accounts receivable                                                      29,430          56,106
   Inventory                                                               326,392         326,392
   Prepaid expenses and other current assets                                11,307          40,008
                                                                      ------------    ------------

Total current assets                                                     3,127,565       2,912,035

Equipment and leasehold improvements, net                                2,173,407       2,141,755

Deferred financing costs, net                                               24,271         251,610
Deferred offering costs                                                    239,595         239,595
Other assets                                                                89,266          89,266
                                                                      ------------    ------------


Total assets                                                          $  5,654,104    $  5,634,261
                                                                      ============    ============

                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current liabilities:
   Accounts payable                                                   $     88,386    $    109,225
   Accrued expenses                                                        248,059         363,351
   Convertible notes, net of deferred debt discount of $200,652 and
     $1,897,871 respectively                                               680,371         402,129
   Detachable warrants                                                     599,344         819,884
   Conversion option on convertible notes                                  184,119       1,098,758
   Customer deposits and deferred revenue                                1,390,769       1,187,796
   Capital lease - short-term                                                 --               242
                                                                      ------------    ------------

      Total current liabilities                                          3,191,048       3,981,385
                                                                      ------------    ------------


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;
  27,904,917 issued and 20,708,017, outstanding at July 31, 2006;
  23,121,569 issued and 18,641,569 outstanding at October 31, 2005      28,911,007      25,142,363
Additional paid-in-capital                                               3,671,426       1,742,745
Deferred offering costs                                                   (990,000)       (990,000)
Deferred compensation                                                     (164,771)           --
Accumulated deficit                                                    (28,964,606)    (24,242,232)
                                                                      ------------    ------------

      Total stockholders' equity                                         2,463,056       1,652,876
                                                                      ------------    ------------
Total Liabilities and Stockholders' Equity                            $  5,654,104    $  5,634,261
                                                                      ============    ============


         See accompanying notes to the condensed consolidated financial statements.

                                               1
<PAGE>

                                            STARTECH ENVIRONMENTAL CORPORATION
                                     Condensed Consolidated Statements of Operations
                                                       (Unaudited)

                                                                    Three Months Ended              Nine Months Ended
                                                                         July 31,                       July 31,
                                                               ----------------------------    ----------------------------
                                                                   2006            2005            2006            2005
                                                               ------------    ------------    ------------    ------------

Revenue                                                        $    286,131    $     96,064    $    761,793    $    162,034

Cost of sales                                                        66,744            --           202,486            --
                                                               ------------    ------------    ------------    ------------

Gross profit                                                        219,387          96,064         559,307         162,034
                                                               ------------    ------------    ------------    ------------


Operating expenses:
Selling expenses                                                    167,367         253,024         526,064         690,178
Research and development expenses                                    81,467          80,474         244,669         250,664
General and administrative expenses                                 654,578         657,353       2,334,755       2,163,528
Depreciation and amortization expenses                               49,116          53,392         145,609         160,011
                                                               ------------    ------------    ------------    ------------
Total operating expenses                                            952,528       1,044,243       3,251,097       3,264,381
                                                               ------------    ------------    ------------    ------------

Loss from operations                                               (733,141)       (948,179)     (2,691,790)     (3,102,347)

Other income (expense):
  Interest income                                                    34,292           5,303          70,422          16,668
  Interest expense                                                  (27,059)            (29)       (141,544)           (221)
  Amortization of deferred financing costs                          (24,273)           --          (227,339)           --
  Amortization of deferred debt discount                           (200,652)           --        (1,709,809)           --
  Change in value of warrants and conversion option               1,284,978            --           (65,129)           --
  Other income                                                        3,757         103,060          45,490         307,052
                                                               ------------    ------------    ------------    ------------
     Total other income(expense)                                  1,071,043         108,334      (2,027,909)        323,499


Income tax expense                                                     --             5,169           2,675          20,164
                                                               ------------    ------------    ------------    ------------

Net income(loss)                                               $    337,902    ($   845,014)   ($ 4,722,374)   ($ 2,799,012)
                                                               ============    ============    ============    ============

Per share data:
Net income(loss) per share - basic                             $       0.02    ($      0.05)   ($      0.24)   ($      0.16)
Net income(loss) per share - diluted                           $       0.02    ($      0.05)   ($      0.24)   ($      0.16)
                                                               ============    ============    ============    ============

Weighted average common shares outstanding - basic               20,359,930      17,919,337      19,283,313      17,858,828
Weighted average common shares outstanding - diluted             21,306,621      17,919,337      19,283,313      17,858,828
                                                               ============    ============    ============    ============


                    See accompanying notes to the condensed consolidated financial statements.

                                                       2
<PAGE>

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

                                                            Nine Months Ended
                                                                July 31,
                                                       --------------------------
                                                          2006           2005
                                                       -----------    -----------
Cash flows from operating activities:
   Net loss                                            $(4,722,374)   $(2,799,012)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
     Stock based compensation                              563,603           --
     401(k) match through issuance of common stock          46,653         44,651
     Depreciation and amortization                         145,609        160,011
     Amortization of deferred financing costs              227,339           --
     Amortization of deferred debt discount              1,709,809           --
     Change in value of warrants and conversion             65,129           --
     option
Changes in operating assets and liabilities
     Accounts receivable                                    26,676           --
     Notes receivable                                         --          (50,000)
     Prepaid expenses and other current assets              28,701         (1,500)
     Accounts payable                                      (20,839)       160,511
     Customer deposits and deferred revenue                202,973        337,966
     Accrued expenses                                     (115,292)        (7,938)
                                                       -----------    -----------
Net cash used in operating activities                   (1,842,013)    (2,155,311)
                                                       -----------    -----------

Cash flows used in investing activities:
     Purchase of equipment                                (177,261)      (282,074)
                                                       -----------    -----------

Cash flows from financing activities:
     Proceeds from exercise of options, warrants
       and common stock issuance                         2,721,990      1,371,746
     Repayment of convertible note                        (431,567)          --
     Principal repayment of capital lease payable             (242)        (3,721)
                                                       -----------    -----------
Net cash provided by financing activities                2,290,181      1,368,025
                                                       -----------    -----------

Net increase (decrease) in cash and cash equivalents       270,907     (1,069,360)

Cash and cash equivalents, beginning                     2,489,529      2,401,061
                                                       -----------    -----------

Cash and cash equivalents, ending                      $ 2,760,436    $ 1,331,701
                                                       ===========    ===========


See accompanying notes to the condensed consolidated financial statements.

                                        3
</TABLE>
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Basis of Presentation and Management Liquidity Plans.
--------------------------------------------------------------

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 financial statements should be
read in conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended October
31, 2005. Operating results for the three and nine months ended July 31, 2006
are not necessarily indicative of the results that may be expected for the
fiscal year ending October 31, 2006 or any other interim period.

     The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern and the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and liabilities
presented in the financial statements do not purport to represent realizable or
settlement values. The Company has no significant revenues, has suffered
significant and recurring operating losses and needs to raise additional capital
in order to be able to accomplish its business plan objectives. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.

     The Company has historically satisfied its capital needs primarily from the
sale of equity securities. On September 16, 2005, the Company entered into a
Securities Purchase Agreement (the "Purchase Agreement") and a Standby Equity
Distribution Agreement (the "Standby Agreement") with Cornell Capital Partners,
L.P. and its affiliates ("Cornell"). The Purchase Agreement provides for Cornell
to purchase up to $2,300,000 of Secured Convertible Debentures maturing in
September 2006 ("the Debentures"). This entire amount was funded in September
and October 2005 On April 22, 2006, Cornell converted $1,000,000 of the secured
convertible debentures into 543,478 shares of common stock. Through July 31,
2006, the Company has made principal payments aggregating $431,567 towards the
Debentures. On September 5, 2006, the Company received notification from Cornell
stating that the maturity date of the Debentures was changed to October 18,
2007.

     The Standby Agreement requires Cornell, at the Company's option, to
purchase up to an aggregate of $20,000,000 of the Company's common stock,
subject to certain limitations as discussed in Note 6, over a two-year period
commencing on the effective date of a registration statement filed with the SEC.
In addition, on May 23, 2006, the Company received cash proceeds of $2,600,000
from an investor for the sale of 1,300,000 shares of common stock pursuant to a
private placement transaction.

     Management of the Company is continuing its efforts to secure additional
funds through equity and/or debt instruments. If the Company is unable to raise
sufficient additional funds, it will have to develop and implement a plan to
extend payables and reduce overhead until sufficient additional capital is
raised to support further operations. There can be no assurance that such a plan
will be successful. These condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Note 2 - Stock-Based Compensation.
----------------------------------

     For the three and nine months ended July 31, 2006, the Company incurred
stock-based compensation expense of $133,416 and $563,603, respectively. Prior
to November 1, 2005, the Company accounted for stock based compensation under
the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"). Accordingly, the Company generally recognized
compensation expense only when it granted options with an exercise price below
market price at the date of grant. Any resulting compensation expense was
recognized ratably over the associated service period, which was generally the

                                       4
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


option vesting term. Prior to November 1, 2005, the Company provided pro-forma
disclosure amounts in accordance with SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("SFAS 148"), as if the fair value
method defined by SFAS 123 had been applied to its stock-based compensation.

     Effective November 1, 2005, the Company adopted the fair value recognition
provisions of SFAS 123R, using the modified prospective transition method and
therefore has not restated prior periods' results. Under this transition method,
stock-based compensation expense after the adoption of SFAS 123R includes
compensation expense for all stock-based compensation awards granted prior to,
but not yet vested as of November 1, 2005, based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123. Stock-based
compensation expense for all share-based payment awards granted after November
1, 2005 is based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123R. The Company recognizes these compensation costs over
the requisite service period of the award, which is generally the option vesting
term.

     As a result of adopting SFAS 123R, the impact to the consolidated condensed
financial statements on net income (loss) for the three and nine months ended
July 31, 2006 was a change of $133,416 and $563,603, respectively, than if the
Company had continued to account for stock-based compensation under APB 25. The
impact on both basic and diluted earnings per share for the three and nine
months ended July 31, 2006 was $0.00 and $0.03 per share, respectively.

     As of July 31, 2006, the fair value of nonvested options totaled $164,771,
of which $52,145 is for options granted prior to November 1, 2005 and $112,626
is for options granted after November 1, 2005.

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

                                                      Nine months ended
                                                           July 31
                                                   -----------------------
                                                    2006             2005
                                                    ----             ----
     Risk-free interest rate range                  4.00%            4.60%
     Dividend yield                                  N/A              N/A
     Expected volatility                          81%-132%            52%
     Expected life in years                           6                10


The following table illustrates the effect on net loss and net loss per share
had the Company applied the fair value provisions of SFAS 123 during the three
and nine months ended July 31, 2005:

                                   Three Months       Nine Months
                                   Ended              Ended
                                   July 31, 2005      July 31, 2005
                                   -------------      -------------


Net loss as reported               $   (845,014)      $(2,799,012)

Deduct:  Stock based employee
compensation determined under
the fair value method                      --             (48,900)
                                   ------------       -----------

Pro forma net loss                 $   (845,014)      $(2,847,912)
                                   ============       ===========

Basic and Diluted
Net loss per share                 $      (0.05)      $     (0.16)
                                   ============       ===========

Pro forma Basic and Diluted
Net loss per share                 $      (0.05)      $     (0.16)
                                   ============       ===========

                                        5
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


A summary of option activity for the nine months ended July 31, 2006 is as
follows:

--------------------------------------------------------------------------------
                                                           Weighted-
                                              Weighted-     Average
                                              Average      Remaining   Aggregate
                                              Exercise    Contractual  Intrinsic
            Options                 Shares      Price        Term        Value
--------------------------------------------------------------------------------
Outstanding at November 1, 2005   1,819,500     $2.62     4.15 years
--------------------------------------------------------------------------------
Granted                              75,000     $3.03      9.6 years
--------------------------------------------------------------------------------
Exercised                          (17,000)     $2.11      5.4 years
--------------------------------------------------------------------------------
Canceled                           (54,000)     $3.09     7.67 years
--------------------------------------------------------------------------------
Expired                               --          --       --  years
--------------------------------------------------------------------------------
Outstanding at July 31, 2006      1,823,500     $2.62     5.45 years   $ 43,780
--------------------------------------------------------------------------------
Exercisable at July 31, 2006      1,748,500     $2.60     5.30 years   $ 43,780
--------------------------------------------------------------------------------

A summary of the status of the Company's non-vested options as of July 31, 2006,
and changes during the nine months ended July 31, 2006 is presented below:

------------------------------------------------------------------------
                                                     Weighted-Average
      Non-vested Shares                Shares      Grant Date Fair Value
------------------------------------------------------------------------
Non-vested at November 1, 2006         133,000                    $2.40
------------------------------------------------------------------------
Granted                                 75,000                    $3.03
------------------------------------------------------------------------
Vested                               (158,000)                    $2.40
------------------------------------------------------------------------
Forfeited                                --                         --
------------------------------------------------------------------------
Non-vested at July 31, 2006             50,000                    $3.03
------------------------------------------------------------------------

As of July 31, 2006 the total unrecognized compensation costs on non-vested
options is $164,771.

The weighted-average grant-date fair value of options granted during the nine
months ended July 31, 2006 and 2005 amounted to $0.03 per share and $0.00,
respectively. There has been 17,000 stock options exercised during the nine
months ended July 31, 2006.

Net Earnings (Loss) per Share of Common Stock

Basic net income (loss) per share is computed by dividing net income (loss)
attributable to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per share
reflects the potential dilution that could occur if securities or other
instruments to issue common stock were exercised or converted into common stock.
Potentially dilutive securities are excluded from the computation of diluted net
income (loss) per share when their inclusion would be antidilutive. The
following table sets forth the components used in the computation of basic and
diluted income (loss) per share:
<TABLE>
<CAPTION>

                              ----------------------------------------------------------------------------
                                  For the three months ended                For the nine months ended
                              ----------------------------------------------------------------------------
                              July 31, 2006        July 31, 2005        July 31, 2006        July 31, 2005
                              (Unaudited)**        (Unaudited)*          (Unaudited)*         (Unaudited)*
                              ----------------------------------------------------------------------------
<S>                             <C>                  <C>                  <C>                  <C>
Weighted average shares
outstanding, basic              20,359,930           17,919,337           19,283,313           17,858,828
Incremental shares of common
stock equivalents                  424,471                 --                   --                   --

Conversion of convertible
debenture to common stock          522,220                 --                   --                   --
                                ----------           ----------           ----------           ----------
   Weighted average shares
    outstanding, diluted        21,306,621           17,919,337           19,283,313           17,858,828
                                ==========           ==========           ==========           ==========

                                        6
</TABLE>
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


* Potential common shares of approximately 4,200,000 for the three and nine
months ended July 31, 2005, respectively and approximately 7,600,000 for the
nine months ended July 31, 2006 were excluded from the computation of diluted
earnings per share, as their inclusion would be anti dilutive.

** For the three months ended July 31, 2006 and 2005, approximately 5,900,000
potential common shares were not included in the dilutive earnings per share
calculation because the exercise price and warrant price was greater than the
average market price of the common stock for the period.

Note 3 - Inventory.
-------------------

     Inventory consists of raw materials and is stated at the lower of cost or
market. Cost is determined by the first-in, first-out method.

Note 4 - Equipment and Leasehold Improvements.
----------------------------------------------

     Equipment and leasehold improvements consist of the following:

                                         Useful Life   July 31,      October 31,
                                          (In years)     2006           2005
                                          ----------     ----           ----

Computer equipment                            3-5    $   238,778    $   236,851
Equipment                                     7-15     2,139,004      2,043,725
Furniture and fixtures                        3-7        144,383        144,383
Leasehold improvements                        4-7        109,993        108,096
Other                                         4-7         41,134         23,625
                                                     -----------    -----------
                                                       2,673,292      2,556,680
Less: accumulated depreciation                        (1,156,535)    (1,010,926)
                                                     -----------    -----------
                                                       1,516,757      1,545,754
Construction in progress                                 656,650        596,001
                                                     -----------    -----------
Total equipment and leasehold improvements           $ 2,173,407    $ 2,141,755
                                                     ===========    ===========


     Construction in progress includes the costs of constructing the Company's
proprietary ceramic filtration system. Costs may include materials, labor,
overhead and permits. When construction is completed, the asset will be
reclassified as equipment and will be amortized when placed in service.

     Depreciation expense totaled $49,115 and $53,392 for the three months ended
July 31, 2006 and 2005, respectively. Depreciation expense totaled $145,609 and
$160,011 for the nine months ended July 31, 2006 and 2005, respectively.

Note 5 - Convertible Note.

     On September 15, 2005, the Company entered into a Purchase Agreement and a
Standby Equity Distribution Agreement with Cornell. The Purchase Agreement
provides for Cornell to purchase up to $2,300,000 of secured convertible
debentures of which $1,150,000 was funded within five business days of the date
of the Purchase Agreement and the balance was funded on October 19, 2005. The
Debentures, which originally matured in September 2006, require monthly interest
payments at a rate of 10% per annum and monthly principal payments commencing
March 2006. The Company can prepay the Debentures at anytime upon three days
written notice. If the Company's common stock is trading above the conversion
price at the time of the prepayment the Company must pay a 20% premium on the
amount of the prepayment. The Debentures are secured by substantially all of the
Company's assets and by shares of the Company's common stock as discussed below.
The Debentures are convertible by Cornell at any time at a conversion price of
$1.84 per share of common stock.

                                       7
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


     The Purchase Agreement required the Company to file a registration
statement within 30 days of the date of the agreement and to use its best
efforts to have the registration statement declared effective by the SEC within
120 days of the date of the Purchase Agreement, which was originally extended to
May 15, 2006 and is now under discussion with Cornell for a further extension.
In the event the registration statement is not filed or declared effective
within the prescribed time periods, the Company will be required to pay
liquidated damages as defined under the Purchase Agreement, unless the reason
the registration statement is not be declared effective is not the direct
responsibility of Company. The Company has recently filed a registration
statement and is working with Cornell to resolve pending comments from the SEC.

     In connection with the issuance of the Debentures, the Company issued to
Cornell three year warrants to purchase 650,000 shares of the Company's common
stock at an exercise price per share of $2.53.

     The gross proceeds of $2,300,000 were recorded net of a discount of
$2,168,995. The debt discount consisted of a $897,121 value related to the
warrants and $1,271,874 value related to the embedded conversion option. The
warrants and the embedded conversion option was accounted for under EITF Issue
No. 00-19 "Accounting for Derivative Financial Instruments Index to and
Potentially Settled in a Company's Own Stock" ("EITF 00-19") and EITF 05-4, View
A "The Effect of a Liquidated Damages Clause on a Freestanding Financial
Instrument". Due to certain factors and the liquidated damage provision in the
registration rights agreement, the Company determined that the embedded
conversion option and the warrants are derivative liabilities. Accordingly, the
warrants and the embedded conversion option will be marked to market through
earnings at the end of each reporting period. The warrants and the conversion
option are valued using the Black-Scholes valuation model. For the three and
nine months ended July 31, 2006, the Company reflected a gain of $1,284,978 and
a loss of $65,129, respectively, representing a change in the value of the
warrants and conversion option. The debt discount of $2,168,995 is being
accreted over a period of one year. Accordingly, the Company recorded a charge
for the amortization of the deferred debt discount in the amount of $200,652 and
$1,709,809, respectively, for the three and nine months ended July 31, 2006.

     The Company paid a fee of $230,000 (10% of the purchase price), structuring
fees equal to $30,000 and other fees of $27,554 in connection with the
convertible note. These fees have been recorded as deferred financing costs and
charged to interest expense through the maturity date of the debentures.
Amortization expense for the three and nine months ended July 31, 2006 amounted
to $24,273 and $227,339 respectively.

     In connection with the Purchase Agreement, the Company and its Chief
Executive Officer and President, agreed to pledge 3,580,000 shares and 900,000
shares of the Company's common stock, respectively, to secure payment of all the
obligations due under the convertible notes. Such shares are to be held in
escrow, pursuant to the terms of an escrow agreement, until all amounts due
under the convertible notes are paid in full. The Company issued 900,000 shares
of restricted common stock to its Chief Executive Officer and President in place
of the shares of common stock being pledged pursuant to the Escrow Agreement.
These shares will be held in escrow and will only be released in the event any
of the pledged shares are forfeited or released pursuant to the terms of the
Escrow Agreement.

     On April 22, 2006, Cornell converted $1,000,000 of the Debentures into
543,478 shares of common stock. Through July 2006, the Company has made
principal payments aggregating $431,567 towards the Debentures. In accordance
with EITF 00-19, upon these repayments and conversion, the Company has
reclassified $1,200,307, representing the portion of the derivative liability,
to additional paid-in capital.

     On September 5, 2006, the Company received notification from Cornell
stating that the maturity date of the Debentures was changed to October 18,
2007.

Note 6 - Stockholders' Equity.
------------------------------

     On May 23, 2006, the Company entered into a Stock Purchase and Registration
Rights Agreement (the "FB Agreement") with FB U.S. Investments, L.L.C, (the
"Investor"), pursuant to which the Investor purchased 1,300,000 shares of the
Company's common stock, no par value (the "Common Stock") for aggregate gross
proceeds of $2,600,000. In addition to the shares of Common Stock, the Company
issued the Investor warrants to purchase an aggregate of 2,600,000 additional
shares of Common Stock (the "Investor Warrants"). Pursuant to the FB Agreement,

                                       8
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


the Company granted the Investor piggyback registration rights with respect to
the shares of Common Stock purchased by the Investor as well as the shares of
Common Stock issuable upon exercise of the Investor Warrants. In addition, the
Company issued 65,000 shares of common stock valued at $130,000, 130,000
warrants, and paid cash to the placement agent of $130,000 with respect to this
transaction.

     On September 16, 2005, the Company entered into the Purchase Agreement and
a Standby Equity Distribution Agreement with Cornell. The Standby Equity
Distribution Agreement requires Cornell, at the Company's option, to purchase,
from time to time, up to an aggregate of $20,000,000 of the Company's common
stock over a two-year period commencing on the effective date of a registration
statement filed with the SEC. Such registration statement has not been declared
effective. The purchase price for each share of common stock under the Agreement
is equal to 96% of the market price as defined. Each request by the Company is
limited to $2,000,000. The Company issued to Cornell 386,956 shares of the
Company's common stock valued at $979,000 as a fee for entering into the Standby
Equity Distribution Agreement and issued 4,348 shares valued at $11,000 to the
placement agent. In addition, the Company incurred legal and various other costs
of $239,595 in connection with this transaction. These costs have been charged
to deferred offering costs. Cornell is to receive a fee equal to 5% of each
advance and structuring and due diligence fees aggregating $25,000. The amount
of capital available under the equity line of credit is not dependent on the
price or volume of the Company's common stock. However, Cornell may not own more
than 9.9% of the outstanding common stock at any time.

     On November 22, 2005, the Company entered into the SICAV ONE Stock Purchase
Agreement and SICAV TWO Stock Purchase Agreement (collectively, the "Mercatus
Agreements") with Mercatus & Partners, Limited ("Mercatus"). Pursuant to the
Mercatus Agreements, the Company has agreed to sell to Mercatus an aggregate of
2,716,900 shares of common stock (the "Mercatus Shares"), no par value per share
("Common Stock"), for an aggregate purchase price of $5,000,000. Mercatus will
have up to thirty days from the date of the delivery of the Mercatus Shares to
Brown Brothers Harriman, the custodial bank, to tender the purchase price to the
Company. The Mercatus Shares have been placed in escrow. The Company has not yet
received any proceeds pursuant to the Mercatus Agreements.

     During the nine months ended July 31, 2006, the Company received $216,000
in cash proceeds from the exercise of 120,000 warrants by an investor.

     During the nine months ended July 31, 2006, the Company received $35,990 in
cash proceeds from the exercise of 17,000 options by employees.

Note 7 - Stock Options
----------------------

     During the nine months ended July 31, 2006, the Company granted 50,000
options valued at approximately $121,000 to a consultant in connection with
certain services to be performed through May 31, 2007.

Note 8 - Operating Leases
-------------------------

     The Company leases office space, equipment, computers and vehicles under
non-cancelable operating leases expiring between 2006 and 2008.

     The Company's corporate headquarters is located in Wilton, Connecticut
where the Company leases 5,800 square feet of office space from CD Station, LLC
as landlord. The lease and taxes provides for monthly payments of $18,038
through December 2006, when the lease expires. The Company was informed that the
lease at its corporate headquarters will not be renewed at December 2006. The
Company is reviewing its options of relocating. The Company's product showroom
is located in Bristol, Connecticut, where the Company leases 10,800 square feet
of office space from Tunxis Management, as landlord. The lease provides for
monthly payments of $8,166 through June 2008, when the lease expires.

     The Company's manufacturing facility is also located in Bristol,
Connecticut, where the Company leases 30,000 square feet of manufacturing space
from Gaski Leasing, as landlord. The lease provides for monthly payments of
$5,750. This lease arrangement is on a month-to-month basis.

                                       9
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


     Rent expense for the three months ended July 31, 2006 and 2005 was $99,236
and $85,235, respectively. Rent expense for the nine months ended July 31, 2006
and 2005 was $289,942 and $255,116, respectively. The following table shows the
future lease commitments for the corporate headquarters at Wilton, Connecticut,
the Product showroom in Bristol, Connecticut, and the manufacturing facility in
Bristol, Connecticut:


     Fiscal Year       Annual Rent
     -----------       -----------
     2006                $97,200
     2007                175,100
     2008                122,300

Note 9 - Commitments.
---------------------

Employment Agreements

     On September 30, 2004, the Board of Directors approved the terms of an
employment agreement between Joseph F. Longo and the Company. Mr. Longo will
serve as the Chief Executive Officer and President 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, unless extended by the Company.

     On December 1, 2005, the Company reached an agreement with Ralph Dechiaro,
its Vice President of Business Operations, pursuant to which the Company agreed
to award Mr. Dechiaro options to purchase 25,000 shares of common stock at an
exercise price equal to the closing price of the Company's common stock on
December 14, 2005, or $1.90. One half of these options vested on January 1, 2006
and the other half vest on June 30, 2006. In addition, the Company agreed to
grant Mr. Dechiaro a one-time bonus/incentive award of $20,000, payable in cash,
less applicable taxes, which was paid on December 23, 2005. The Company also
agreed to provide Mr. Dechiaro with a severance package, as defined. Should Mr.
Dechiaro voluntarily resign, severance pay would not apply.

     On December 13, 2005, the Company reached an agreement with its Chief
Financial Officer, Peter Scanlon, that provides for additional compensation
equal to $6,000 per month and a severance package based on years of service.

License Agreement

     The Company has a licensing agreement for the development, hardware
manufacture and technology exploitation within the waste and non-waste industry
application for Hydrogen Selective Membranes. This agreement provides for the
exclusive right to utilize this Hydrogen Selective Membrane technology for all
applications in the principles of plasma arc technology. This agreement was
effective July 8, 2001 and extends for a period of 20 years.

DOE Grant

     The Company received a grant from the Department of Energy ("DOE") for the
development of a Startech Hydrogen Production Project which includes the
evaluation of the viability of integrated hydrogen production from waste
materials. This program included two (2) test programs; the first was initiated
in October 2004 and was completed in December 2005. The second testing phase was
initiated in January 2006 and is the final test is planned to be submitted in
January 2007 and presented in May 2007. The grant is a reimbursement of expenses
incurred in connection with the project and is recorded as other income in the
statement of operations when received. For the nine months ended July 31, 2006
and 2005 the Company received $134,149 and $224,504 respectively.

                                       10
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Future Fuels

     On March 15, 2006, the Company announced that it and Future Fuels, Inc.
(FFI), a subsidiary of Nuclear Solutions, Inc. (OTCBB: NSOL) of Washington,
D.C., have formed a Strategic Alliance Agreement to mutually obtain contracts
for waste-to-ethanol facilities. The Company has also received the Letter Of
Intent from FFI for FFI's purchase of a 100 ton-per-day Startech Plasma
Converter System (PCS) for installation in a waste-to-ethanol facility in Toms
River, New Jersey scheduled to go on-line in late 2007.


Concentration of Credit Risk

     The Company's cash and cash equivalents consist of cash balances at two
financial institutions and short-term high quality liquid investments with
maturities of less than sixty days. The short-term investments are high quality
commercial paper, U.S. Treasury notes and U.S. Treasury bills. No realized gains
or losses were recorded during the nine months ended July 31, 2006 and 2005. 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. The Company does not believe it is exposed to any significant
credit risk for cash.


Note 10 - Employee Benefit Plan.
--------------------------------

     The Company sponsors an employee savings plan designed to qualify under
Section 401K 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 common stock at the prevailing current market price and
vest equally over a three-year period. The Company will match the first six
percent of employee contributions on a dollar-for-dollar basis up to the maximum
contribution allowed under Internal Revenue Code. Contributions for the nine
months ended July 31, 2006 and 2005 were $52,577 and $46,219, respectively.
These contributions were paid through the issuance of 20,970 and 20,857 shares
of common stock, respectively.


Note 11 - Recently Issued Accounting Pronouncements.
----------------------------------------------------

     In February 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard 155 - Accounting for Certain Hybrid
Financial Instruments ("SFAS 155"), which eliminates the exemption from applying
SFAS 133 to interests in securitized financial assets so that similar
instruments are accounted for similarly regardless of the form of the
instruments. SFAS 155 also allows the election of fair value measurement at
acquisition, at issuance, or when a previously recognized financial instrument
is subject to a remeasurement event. Adoption is effective for all financial
instruments acquired or issued after the beginning of the first fiscal year that
begins after September 15, 2006. Early adoption is permitted. The adoption of
SFAS 155 is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

     In March 2006, the FASB issued Statement of Financial Accounting Standard
156 - Accounting for Servicing of Financial Assets ("SFAS 156"), which requires
all separately recognized servicing assets and servicing liabilities be
initially measured at fair value. SFAS 156 permits, but does not require, the
subsequent measurement of servicing assets and servicing liabilities at fair
value. Adoption is required as of the beginning of the first fiscal year that
begins after September 15, 2006. Early adoption is permitted. The adoption of
SFAS 156 is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

     In July 2006, the FASB released FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting and reporting for uncertainties in income
tax law. This Interpretation prescribes a comprehensive model for the financial

                                       11
<PAGE>

STARTECH ENVIRONMENTAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


statement recognition, measurement, presentation and disclosure of uncertain tax
positions taken or expected to be taken in income tax returns. This
Interpretation shall be effective for fiscal years beginning after December 15,
2006. Earlier adoption is permitted as of the beginning of an enterprise's
fiscal year, provided the enterprise has not yet issued financial statements,
including financial statements for any interim period for that fiscal year. The
cumulative effects, if any, of applying this Interpretation will be recorded as
an adjustment to retained earnings as of the beginning of the period of
adoption. The Company has commenced the process of evaluating the expected
effect of FIN 48 on its financial statements and is not currently in a position
to determine such effects.


















                                       12
<PAGE>

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" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Specifically, all statements other
than statements of historical facts included in this quarterly report 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 our 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 and the Exchange Act.

     Although we believe that our expectations are reasonable, we cannot assure
you that our 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 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

     Startech Environmental Corporation is an environmental technology company
commercializing its proprietary plasma processing technology known as the Plasma
Converter(TM) that achieves closed-loop elemental recycling that irreversibly
destroys hazardous and non-hazardous waste and industrial by-products while
converting them into useful commercial products. These products include a rich
synthesis gas called PCG (Plasma Converted Gas)(TM) surplus energy for power,
hydrogen, metals and silicates for use and for sale.

     The Company's activities during the four fiscal years beginning November 1,
1992 and ending October 31, 1995 consisted primarily of the research and
development of the Plasma Converter. On November 17, 1995, Kapalua Acquisitions,
Inc., a Colorado corporation, completed the acquisition of all of the issued and
outstanding shares of the common stock of Startech Corporation, a Connecticut
corporation, and then changed its name to Startech Environmental Corporation.

     On November 18, 1995, the board of directors of the Company unanimously
approved a change of the business purpose of Kapalua Acquisitions Inc. from one
seeking an acquisition candidate to one engaged in the business of manufacturing
and selling the Plasma Converter system to recover, recycle, reduce and
remediate hazardous and non-hazardous waste materials. From that time to the
date of this filing, the Company has maintained this as its principal focus.

     In 2001, recognizing the increasing importance of alternative energy and
power sources in general, and hydrogen in particular, we expanded our product
line to include a StarCell (TM) hydrogen separation technology. Working in
conjunction with our core product, the Plasma Converter(TM), StarCell(TM) will
provide a green and renewable source of hydrogen for power and processing
applications. In 2003, this brought significant change and, due to the factors
mentioned above, as well as the rising comfort level with plasma based
technologies through our educational and informational effort we are now being
greeted by a much more receptive marketplace. This change was dictated by the
needs of our customers and the demands of the marketplace. This change began in
January 2002 and continues to be integrated.

                                       13
<PAGE>

     Startech is an environmental technology corporation that manufactures,
markets and sells a recycling system called the Plasma Converter for the global
marketplace. Until January 2002, we were solely engaged in the manufacture and
sale of equipment for use by others. Thereafter, we have attempted to broaden
the scope of our available revenue opportunities. This change was brought about
by management's decision to expand its 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 reconsidered our stated philosophy of not engaging
in the processing of feedstock materials and/or waste and decided that it was
timely to seek out and include all possible market penetration strategies,
including build own operate, build own transfer of ownership, and joint
development projects.

     By concentrating on re-positioning the Company for long-term growth, we did
not achieve the sales goals we had anticipated would occur in the 2003, 2004 and
2005 fiscal years. However, we believe this new way of approaching the market
over time will help achieve maximum penetration in the shortest timeframe.

     We believe specific events are driving demand for our Plasma Converter.
They include:

     o    Increases in waste, and in particular hazardous wastes, due to rising
          consumer/industrial consumption and population growth in most nations;

     o    Current waste disposal and remediation techniques such as landfills
          and incineration are becoming regulatory, socially and environmentally
          unacceptable;

     o    A need for critical resources such as power and water to sustain local
          economies; and

     o    The emphasis being placed upon the production of distributed power and
          the need to provide alternatives to fossil fuels.

     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 these products will add value to our
customers' business so they can realize revenue streams from disposal or
processing fees, a reduction in material disposal costs, as well as from the
sale of resulting commodity products and services. Alternatively, this will
allow our customers to generate a valuable product while at the same time using
a zero cost basis, or revenue generating source of raw material (waste). The
costs of hazardous waste treatment and disposal methods continue to rise, and
now range from approximately $900 to more than $2,000 per ton. This does not
include the additional processing, handling, packaging, insurance and management
costs sustained by the hazardous waste generator within its facility prior to
final disposal.

     Since 1995, we have been actively educating and promoting to our customers
the benefits of the plasma converter over other forms of waste remediation
technologies. Ongoing education of the public and government is continuing. Like
most new technologies we have been met with varying degrees of resistance. A
rising comfort level with our plasma converter technology resulting in part from
our educational and informational efforts has created additional awareness in
the marketplace. We have taken steps to transform our business model from being
solely a seller of equipment to a total solutions provider, including facility
ownership or management. Our business model and its market development
strategies arise from our mission, which is to change the way the world views
and employs discarded materials; what many would now call waste we view as a
feedstock. We expect to achieve this objective by strategically marketing a
series of products and services emanating from the core Plasma Converter (TM)
technology, resulting in saleable fossil fuel alternatives while providing a
safer and healthier environment. This strategy will be implemented through
Plasma Converter sales with after sales support and service, build own
operate/build own transfer of ownership facilities, joint development projects
and engineering services.

     For the nine months ended July 31, 2006, the Company incurred a net loss of
$4,722,374, compared to a net loss of $2,799,012 for same period in 2005.

     Prior to November 1, 2005, the Company accounted for stock-based
compensation under the recognition and measurement provisions of Accounting
Principles Board Opinion No. 25 ("APB 25"). Accordingly, the Company generally

                                       14
<PAGE>

recognized compensation expense only when it granted options with a discounted
exercise price. Any resulting compensation expense was recognized ratably over
the associated service period, which was generally the option vesting term.
Prior to November 1, 2005, the Company provided pro-forma disclosure amounts in
accordance with SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("SFAS 148"), as if the fair value
method defined by SFAS 123 had been applied to its stock-based compensation.

     Effective November 1, 2005, the Company adopted the fair value recognition
provisions of SFAS 123R, using the modified prospective transition method and
therefore has not restated prior periods' results. Under this transition method,
stock-based compensation expense after the adoption of SFAS 123R includes
compensation awards granted prior to, but not yet vested as of November 1, 2005,
based on the grant date fair value estimated in accordance with the original
provisions of SFAS 123. Stock-based compensation expense for all share-based
payment awards granted after November 1, 2005 is based on the grant-date fair
value estimated in accordance with the provisions of SFAS 123R. The Company
recognizes these compensation costs over the requisite service period of the
award, which is generally the option vesting term.

     As a result of adopting SFAS 123R, the impact to the consolidated condensed
financial statements on net loss for the three and nine months ended July 31,
2006 was a change of $133,416 and $563,603, greater respectively, than if the
Company had continued to account for stock-based compensation under APB 25. The
impact on both basic and diluted earnings per share for the three and nine
months ended July 31, 2006 was $0.00 and $0.02 per share, respectively.

     As of July 31, 2006, unvested options totaled $164,771 of which $52,145 is
for options granted prior to November 1, 2005 and $112,626 is for options
granted after November 1, 2005.


Recent Developments

The Mihama Plasma Converter in Japan

     Startech, in conjunction with Mihama, Inc has completed the PCB
(polychlorinated byphenyls) Testing at the Hiemji, Japan facility. Preliminary
results indicate complete destruction of the PCB's in the Plasma Converter
System. This testing included PCB contaminated papers and oils. Independent
sampling was performed by Mihama, Inc's laboratory contractors and the final
test report should be available to Mihama by year end. As the Company's Japan
distributor, Mihama will also use the system to support its Startech sales and
marketing operations and be able to demonstrate a Plasma Converter System in a
commercial operation to its customers.

Poland

     The initial contracts signed in Poland are still pending project funding
and remain in the financial development stage. Discussions continue on project
scope and configuration.

DOE StarCell Test Program

     Startech has submitted the Phase II test plan to the U.S. Department of
Energy (DOE) and we have initiated system and StarCell module modification
utilizing the test data derived from Phase I testing. These system enhancements
and updated test protocols will be utilized during the first and second rounds
of testing. The program is on track and the final test report will be submitted
to DOE by year end with final presentation in May 2007

Vitech

     The customer will be processing 20,000 pounds per day of Reverse Logistic
Pharmaceuticals. Reverse Logistic Pharmaceuticals are items such as expired
drugs and medications from retailers and manufacturers that must be destroyed.
Vitech expects to break ground on construction and place an order for their
first 10 ton per day system within a few months.

                                       15
<PAGE>

GlobalTech

     On October 3, 2005, the Company entered into an agreement with GlobalTech
Environmental Incorporated ("GlobalTech") of Central, Hong Kong, with offices in
Shanghai, Beijing and Changzhou in China as its exclusive distributor for the
Peoples Republic of China. GlobalTech will be managing the Distributorship with
its principal operating partner the Jingu Group. Jingu is a company with
diversified businesses in urban infrastructure development and planning,
construction and also environmental engineering. The Jingu world headquarters is
located in Changzhou, Jiangsu on the east coast of China near Shanghai.


     On June 1, 2006, the Company received $100,000 from GlobalTech, the
Company's distributor for the Peoples Republic of China, to start the production
of the installation drawings and engineering documentation for a 10 ton-per-day
Plasma Converter System to be located in Liaoning Province, China. Startech has
met with GlobalTech's representatives in our Bristol, CT facility and is
completing final project scope discussion for project initiation.

PlasTech Solutions

     The PlasTech Solutions Australian 10 TPD Plasma Converter System is
currently on hold pending agreement modifications. We expect final determination
during the next quarter.

     PlasTech Solutions, Ltd. of New South Wales, Australia is Startech's
exclusive distributor for Australia, New Zealand and Oceana. The
first-of-its-kind Startech 10 TPD Plasma Converter in the PlasTech territory
will be processing an assortment of industrial and institutional wastes. The
processing facility will also serve as the PlasTech demonstration facility to
support its Plasma Converter sales program.

Italian Distributor

     On June 5, 2006, the Company announced the appointment of COGIM SpA of Via
Riscassi n.8, San Nicolo di Rottofreno, 29010 Piacenza-Italy and Via Principessa
Clotilde, 7, 00196 Roma as the exclusive Startech distributor for the Italian
Republic.

     COGIM SpA is an international, multi-disciplined services company and
general contractor registered in Italy that specializes in the provision of
turnkey pre-engineered modular-accommodation solutions and services particularly
to the construction, oil and gas industries, plus disaster relief, exploration
and military and government installations. The COGIM capability includes:
professional services, design, manufacture, construction management and all
logistics and services in support of project delivery and operations. The
provision and management of water and all waste disposal utilities are a major
component of COGIM's services.

Ludlow Energy SmallCap Index

     On August 15, 2006 the Company announced that it has been added as a
component to the Ludlow Energy SmallCap Index.The Ludlow Energy SmallCap Index
is a basket of U.S.-traded small-cap alternative energy stocks. The Index
provides both institutional and individual investors a gauge for tracking the
day-to-day performance of small-cap alternative energy stocks. The index is
designed for investors who have a long-term bullish outlook on the renewable and
alternative energy market. The Ludlow Energy SmallCap Index is owned and
operated by Ludlow Energy Fund, Inc., based in New York City.

                                       16
<PAGE>

Panama

     On September 14, 2006 the Company announced that Sicmar International
Panama S. A. signed a contract with the city of Las Tablas securing the land and
the waste for the 200-ton-per-day Sicmar Plasma Converter Facility. This
first-of-its-kind resource recovery center in Panama will process municipal
solid waste.

     Sicmar International is a Startech associate and the company's exclusive
representative in the Republic of Panama.




























                                       17
<PAGE>

Results of Operations

Comparison of three months ended July 31, 2006 and 2005

     Revenues. Total revenues were $286,131 for the three months ended July 31,
2006, as compared to $96,064 for the same period in 2005, an increase of
$190,067 or 198%. For the three months ended July 31, 2006, a portion of the
distributorship agreements were recognized as revenue in the amount of $65,972.
These distributorship agreements were signed with Plasteck Solutions Limited,
representing Australia and New Zealand, Plasmatech Caribbean Corporation
representing Puerto Rico and Materiales Renovados, Sl representing Spain.
Additionally, revenues of $120,155 were derived from the ongoing testing program
in Mihama, Japan and $100,000 for engineering services relating to the China
program. The revenue for the three months ending July 31, 2005 was related to
distributorship agreements were signed with Plasteck Solutions Limited,
representing Australia and New Zealand, Plasmatech Caribbean Corporation
representing Puerto Rico and Materiales Renovados, Sl representing Spain.

     Gross Profit. Gross profit was $219,387 for the three months ended July 31,
2006, compared to a gross profit of $96,064 in the same period in 2005, or an
increase of $123,323 from the same period in 2005, or 128.4%. Gross margins were
directly impacted due to the revenue recognized from the distributorship
agreements, Mihama and China.

     Selling Expenses. Selling expenses for the three months ended July 31, 2006
were $167,367, compared to $253,024 for the same period in the prior year, a
decrease of $85,657, or 33.9%. Selling expenses decreased as a result of lower
consulting expenses and lower marketing activity.

     Research and Development Expenses. Research and development expenses for
the three months ended July 31, 2006 were $81,467, compared to $80,474 for the
same period in the prior year. The expenses were primarily consistent with the
prior year.

     General and Administrative Expenses. General and administrative expenses
for the three months ended July 31, 2006, were $654,578, compared to $657,353
for the same period in 2005, a decrease of $2,775 or 0.5%. This decrease was
related to lower salary, and public relations expenses, offset by an increase in
stock based compensation in the amount of $133,416.

     Other Income/Expenses. Other income for the three months ended July 31,
2006 was $1,071,043, compared to other income of $108,334 in the same period in
2005, an increase in income of $962,709. The increase in income is directly
attributable to the non-cash items relating to the Cornell debenture financing
including the change in value of warrants and conversion value amounting to
$1,284,978, amortization of deferred debt discount of $200,652 and amortization
of deferred financing costs amounting to $24,273.

     Interest Income. Interest income for the three months ended July 31, 2006
was $34,292, compared to $5,303 in the same period in 2005, an increase of
546.7%. The increase is due to higher returns on the Company's short-term
investments and higher average interest rates.

Comparison of nine months ended July 31, 2006 and 2005

     Revenues. Total revenues were $761,793 for the nine months ended July 31,
2006, as compared to $162,034 for the same period in 2005, an increase of
$599,759 or 370%. For the nine months ended July 31, 2006, a portion of the
distributorship agreements were recognized as revenue. These distributorship
agreements were signed with Plasteck Solutions Limited, representing Australia
and New Zealand, Plasmatech Caribbean Corporation representing Puerto Rico and
Materiales Renovados, Sl representing Spain. Additionally, revenues were derived
from the ongoing testing program in Mihama, Japan and for engineering services
relating to the China program. The revenue for the nine months ending July 31,
2005 was related to distributorship agreements were signed with Plasteck
Solutions Limited, representing Australia and New Zealand, Plasmatech Caribbean
Corporation representing Puerto Rico and Materiales Renovados, Sl representing
Spain.

                                       18
<PAGE>

     Gross Profit. Gross profit was $559,307 for the nine months ended July 31,
2006, compared to a gross profit of $162,034 in the same period in 2005, or an
increase of $397,273 from the same period in 2005. Gross margins were directly
impacted due to the revenue recognized from the distributorship agreements.

     Selling Expenses. Selling expenses for the nine months ended July 31, 2006
were $526,064, compared to $690,178 for the same period in the prior year, a
decrease of $164,114 or 23.8%. Selling expenses decreased as a result of lower
consulting expenses and lower marketing activity.

     Research and Development Expenses. Research and development expenses for
the nine months ended July 31, 2006 were $244,669, compared to $250,664 for the
same period in the prior year, a decrease of $5,995. This decrease was primarily
related to a decrease in travel expenses.

     General and Administrative Expenses. General and administrative expenses
for the nine months ended July 31, 2006 were $2,334,755, compared to $2,163,528
for the same period in 2005, an increase of $171,227. This increase was related
to stock-based compensation, higher rent, office supplies and stockholder
relations expense offset by lower consulting and public relations expense.

     Other Expense. Other expense for the nine months ended July 31, 2006 was
$2,027,909, compared to Other Income of $323,499 the same period in 2005, an
increase in expense of $1,704,410. The increase in expense is directly
attributable to the non-cash items relating to the Cornell debenture financing,
including the change in value of warrants and conversion value amounting to
$65,129, amortization of deferred debt discount amounting to $1,709,809 and
amortization of deferred financing costs amounting to $227,339.

     Interest Income. Interest income for the nine months ended July 31, 2006
was $70,422, compared to $16,668 in the same period in 2005, an increase of
$53,754. The increase is due to higher returns on the Company's short-term
investments and higher average interest rates.

Liquidity and Capital Resources

     As of July 31, 2006, we had cash and cash equivalents of $2,760,436 and
working capital of $63,483. During the nine months ended July 31, 2006, our cash
and cash equivalents increased by $270,907.

     The Company has historically satisfied its capital needs primarily from the
sale of equity securities. We are currently in discussions with several funding
sources to raise additional capital through the issuance of additional equity
securities. The Company has been actively engaged in an effort to secure
financing from other investment sources. If we are unable to secure financing we
may not be able to maintain operations as presently conducted and may cease
operating as a going concern.

     On September 15, 2005, the Company entered into the Purchase Agreement and
Standby Agreement with Cornell. The Purchase Agreement provides for Cornell to
purchase up to $2,300,000 of secured convertible debentures of which $1,150,000
was funded within five business days of the date of the Purchase Agreement and
the balance was funded on October 19, 2005. The Debentures, which originally
matured in September 2006, require monthly interest payments at a rate of 10%
per annum and monthly principal payments commencing March 2006. The Company can
prepay the Debentures at anytime upon three days written notice. If the
Company's common stock is trading above the conversion price at the time of the
prepayment the Company must pay a 20% premium on the amount of the prepayment.
The Debentures are secured by substantially all of the Company's assets and
shares of common stock as discussed below.

                                       19
<PAGE>

     The Purchase Agreement requires the Company to file a registration
statement within 30 days of the date of the agreement and to use its best
efforts to have the registration statement declared effective by the Securities
and Exchange Commission within 120 days of the date of the agreement, which was
originally extended to May 15, 2006 and is now under discussion with Cornell for
a further extension. In the event the registration statement is not filed or
declared effective within the prescribed time periods, the Company will be
required to pay liquidated damages as defined under the Purchase Agreement,
unless the reason the registration statement is not declared effective is not
the direct responsibility of Company. The Company has recently filed a
registration statement and is working with Cornell to resolve pending comments
from the SEC.

     The debentures are convertible by Cornell at any time at a conversion price
of $1.84 per share of common stock.

     On April 22, 2006, Cornell converted $1,000,000 of the convertible
debenture into 543,478 shares of common stock. Through July 31, 2006, the
Company has made principal payments aggregating $431,567 towards the Debentures.

     In connection with the Purchase Agreement, the Company and its Chief
Executive Officer and President, agreed to pledge 3,580,000 shares and 900,000
shares, respectively, to secure payment of all the obligations due under the
convertible notes. Such shares are to be held in escrow pursuant to the terms of
an Escrow Agreement until all amounts due under the convertible notes are paid
in full. The Company has issued 900,000 shares of restricted common stock to its
President in place of the shares of common stock being pledged pursuant to the
Escrow Agreement. These shares will be held in escrow and will only be released
to the Chief Executive Officer and President in the event any of the pledged
shares are forfeited or released pursuant to the terms of the Escrow Agreement.

     On September 16, 2005, the Company entered into a Purchase Agreement and a
Standby Agreement with Cornell. The Standby Agreement requires Cornell, at the
Company's option, to purchase, from time to time, up to an aggregate of
$20,000,000 of the Company's common stock over a two-year period commencing on
the effective date of a registration statement filed with the SEC. Such
registration statement has not been declared effective. The purchase price for
each share of common stock under the Agreement is equal to 96% of the market
price as defined. Each request by the Company is limited to $2 million. The
amount of capital available under the equity line of credit is not dependent on
the price or volume of the Company's common stock. Cornell may not own more than
9.9% of the outstanding common stock at any time.

     Our investing activities have consisted primarily of short-term, high
quality liquid investments, with maturities of 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. No
realized gains or losses were recorded during the nine months ended July 31,
2006 or 2005.

     On November 22, 2005, the Company entered into the SICAV ONE Stock Purchase
Agreement and SICAV TWO Stock Purchase Agreement (collectively, the "Mercatus
Agreements") with Mercatus & Partners, Limited ("Mercatus"). Pursuant to the
Mercatus Agreements, the Company has agreed to sell to Mercatus an aggregate of
2,716,900 shares of common stock (the "Mercatus Shares"), no par value per share
("Common Stock"), for an aggregate purchase price of $5,000,000. Mercatus will
have up to thirty days from the date of the delivery of the Mercatus Shares to
Brown Brothers Harriman, the custodial bank, to tender the purchase price to the
Company. The Mercatus Shares have been placed in escrow. The Company has not yet
received any proceeds pursuant to the Mercatus Agreements.

     On May 23, 2006, the Company entered into a Stock Purchase and Registration
Rights Agreement (the "FB Agreement") with FB U.S. Investments, L.L.C, an
Alabama limited liability company (the "Investor"), pursuant to which the
Investor purchased 1,300,000 shares of the Company's common stock, no par value
(the "Common Stock") for aggregate gross proceeds of $2,600,000. In addition to
the shares of Common Stock, the Company issued the Investor warrants to purchase
an aggregate of 2,600,000 additional shares of Common Stock (the "Investor
Warrants"). Pursuant to the Purchase Agreement, the Company granted the Investor
piggyback registration rights with respect to the shares of Common Stock
purchased by the Investor as well as the shares of Common Stock issuable upon
exercise of the Investor Warrants.

                                       20
<PAGE>

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, Middle East, 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 there is not a material risk exposure.

     Credit Risk - Our accounts receivables 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
losses in this area.


Item 4. Controls and Procedures.

Disclosure Controls and Procedures

     The Company maintains controls and procedures designed to ensure that it is
able to collect the information that is required to be disclosed in the reports
filed with the SEC, and to process, summarize and disclose this information
within the time period specified in the rules of the SEC. The Company's Chief
Executive and Chief Financial Officers are responsible for establishing,
maintaining and enhancing these 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 report,
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.

Internal Controls

     The Company maintains a system of internal controls designed to provide
reasonable assurance that transactions are executed in accordance with
management's general or specific authorization; transactions are recorded as
necessary to (1) permit preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America, and
(2) maintain accountability for assets. Access to assets is permitted only in
accordance with management's general or specific authorization.

     It is the responsibility of the Company's management to establish and
maintain adequate internal control over financial reporting. However, due to its
small size and limited financial resources the Company's Chief Financial Officer
(CFO), a member of management, has been the only full time employee principally
involved in accounting and financial reporting. The Board of Directors has
recognized that as a result, there is no formal segregation of duties within the
accounting function, leaving management of all aspects of financial reporting
and physical control of cash and equivalents in the hands of the CFO. Based on
the integrity and trustworthiness of the CFO, the Board of Directors has had
confidence that there have been no irregularities in the Company's financial
reporting or in the protection of its assets.

                                       21
<PAGE>

     Our independent auditors have reported to our Board of Directors certain
matters involving internal controls that our independent auditors considered to
be a reportable conditions and material weaknesses, under standards established
by the American Institute of Certified Public Accountants. The first 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. The second material weakness
identified is in our ability to ensure that the accounting for our debt and
equity-based transactions is accurate and complete. The Company has recently
consummated a series of complex debt and equity transactions involving the
application of highly specialized accounting principles. Although we believe
that these events are unique, we are evaluating certain corrective measures we
may take including the possibility of hiring an outside consultant to provide us
with the guidance we need at such times that we may engage in these complex
transactions.

     Given these reportable conditions and material weaknesses, management
devoted additional resources to resolving questions that arose during the three
month period ending July 31, 2006. As a result, we are confident that our
financial statements for the quarter ended July 31, 2006 fairly present, in all
material respects, our financial condition and results of operations. Management
does not believe that the above reportable conditions and material weaknesses
affected the results for the quarter ended July 31, 2006 or any prior period.

     There were no significant changes in our internal controls over financial
reporting that occurred during the quarter ended July 31, 2006 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.






















                                       22
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 1A. Risk Factors.

     There have been no material changes to the Company's risk factors as set
forth in its Annual Report on Form 10-K for the fiscal year ended October 31,
2005.

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

     On July 12, 2006, the Company issued 6,484 shares of common stock to its
401(k) plan as a matching contribution.

     On May 15, 2006, the Company received cash proceeds in the amount of
$20,300 from the exercise of options and issued 10,000 shares of common stock
upon exercise thereof.

     On May 23, 2006 the Company issued 1,300,000 shares of common stock to FB
US Investments, LLC for a private placement at $2.00 per share.

     On July 6, 2006 the Company issued 65,000 shares of common stock to Peras
Asset and Environmental Management as commission for the May 23, 2006
transaction with FB US Investements.

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


                                       23
<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 19th day of September, 2006.

                                         STARTECH ENVIRONMENTAL CORPORATION
                                         (Registrant)


                                         BY: /S/ Joseph F. Longo
                                         -----------------------
                                             Joseph F. Longo
                                             Chairman, Chief Executive Officer,
                                             President and Director

                                         BY: /S/ Peter J. Scanlon
                                         ------------------------
                                             Peter J. Scanlon
                                             Chief Financial Officer, Secretary,
                                             Vice President, and Principal
                                             Financial Officer

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joseph F. Longo and Peter J. Scanlon, or
either of them, his or her attorneys-in-fact, for such person in any and all
capacities, to sign any amendments to this report and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
either of said attorneys-in-fact, or substitute or substitutes, may do or cause
to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the Company
and in the capacities and on this 19th day of September 2006.


SIGNATURES                             TITLE
----------                             -----

/s/ Joseph F. Longo                    Chairman, Chief Executive Officer,
-------------------                    President  & Director
Joseph F. Longo


/s/ John J. Fitzpatrick                Director
-----------------------
John J. Fitzpatrick


/s/ Joseph A. Equale                   Director
--------------------
Joseph A. Equale


/s/ Chase P. Withrow III               Director
------------------------
Chase P. Withrow III


/s/ L Scott Barnard                    Director
-------------------
L Scott Barnard


                                       24