VENTURI TECHNOLOGIES INC, 10KSB, 1999-04-15

VENTURI TECHNOLOGIES INC
10KSB, 1999-04-15
PERSONAL SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998, or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to

Commission File Number 000-25183

VENTURI TECHNOLOGIES, INC.
(Name of small business issuer in its charter)

NEVADA 87-0580279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1327 NORTH STATE STREET
OREM, UTAH 84047
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (801) 235-9552

Securities registered under Section 12(b) of the Exchange Act:

Name of each exchange
Title of Each Class on which registered
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NONE NONE

</TABLE>

Securities registered pursuant to Section 12(g) of the Exchange Act:

COMMON STOCK, $0.001 PAR VALUE
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

Registrant's revenues for its most recent fiscal year were $6,290,886

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant as of was approximately $26,150,093
calculated using a per share price of $4.0625, the closing price March 31, 1999
of the Registrant's common stock on the NASD OTC Bulletin Board.

As of March 31, 1999, Registrant had outstanding 8,679,976 shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE
None

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

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VENTURI TECHNOLOGIES, INC.
INDEX-FORM 10-KSB

PART I

Page
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Item 1. Description of Business...............................................................................1

Item 2. Description of Properties.............................................................................5

Item 3. Legal Proceedings.....................................................................................6

Item 4. Submission of Matters to a Vote of Security Holders...................................................6

PART II

Item 5. Market for the Common Equity and Related Stockholder Matters..........................................7

Item 6. Management's Discussion and Analysis or Plan of Operations...........................................16

Item 7. Financial Statements.................................................................................19

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................19

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act...............................................................20

Item 10. Executive Compensation...............................................................................21

Item 11. Security Ownership of Certain Beneficial Owners and Management ......................................23

Item 12. Certain Relationships and Related Transactions ......................................................24

PART IV

Item 13. Exhibits and Reports on Form 8-K.....................................................................26

Signatures ....................................................................................................29

</TABLE>

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Venturi provides carpet cleaning and fire and flood restoration services to its
customers through locations in Texas, Utah and California. Venturi is vertically
integrated, and manufactures certain of the components used in its proprietary
carpet cleaning equipment, including a flash heater, modulator box and cyclonic
return system. Venturi's headquarters is located in Orem, Utah.

Venturi has developed a proprietary system for carpet cleaning, known as
VenturiClean(TM). It consists of four unique components. The first is the use of
electromagnetic oxidizing water ("EO water"), which Venturi creates at each
operating base. The second is the use of proprietary cleaning solutions. Third
is the use of flash heaters which heat the EO water closer to application to the
carpet, and the fourth is a specially-designed wand fluid lift system (including
the modulator box and cyclonic return system). Unlike traditional carpet
cleaning systems, VenturiClean(TM) does not flood the carpet or leave chemicals
or cleaning agents in the carpet fibers as a by-product of its cleaning process.
VenturiClean(TM) uses three proprietary cleaning agents or fluids. Each is
non-toxic, with no surfactants, shampoos or harmful solvents. The first cleaning
fluid, "Clean Right", is an organic, mineral-based cleaning agent designed to be
used as a spotting agent with high temperatures to emulsify particles in
excessively dirty carpet. The other two proprietary cleaning products (EPA I and
EPA II) are forms of EO water, and have been molecularly modified and
electrically charged to increase their cleaning and sanitizing efficiency. EPA I
has a low pH, and EPA II has a high pH, to address different cleaning needs.
Venturi believes that each of these proprietary cleaning agents is non-toxic and
may be ingested without harmful effect. Each leaves no residue as a by-product
of the cleaning process. EPA I and EPA II kills bacteria, mold, spores, viruses
and other pathogens within a short time after contact.

Venturi's primary source of revenues is from carpet cleaning and flood
restoration services.

Venturi has experienced substantial growth in revenue in recent years. From 1994
to 1998, Venturi's total revenues grew from $230,300 (in pre-pooling revenues)
to $6,290,886. Venturi has combined its revenues with those companies it has
acquired, in that same period, which have been accounted for as poolings of
interests (see Item 6, MANAGEMENT'S DISCUSSION AND ANALYSIS). Venturi's expenses
have also increased dramatically, and Venturi has begun to take steps to more
closely control its expenses. Venturi intends to capitalize on its proprietary
VenturiClean(TM) system and continue to consolidate this fragmented industry,
and to develop repeat clients in all segments of the industry.

HISTORY AND DEVELOPMENT OF VENTURI

Venturi was incorporated in Nevada on January 30, 1997, under the name HiTek
Carpet Care, Inc. Venturi was formed for the purpose of acquiring carpet
cleaning and damage restoration service companies. The formation was effected
with the issuance of 1,500,000 shares of Common Stock for $150,000. On June 30,
1997, HiTek issued 2,807,714 shares of its common stock to the shareholders of
Venturi Technologies, Inc., a Texas Corporation formed on August 17, 1994 (the
"Texas Corporation"). The Texas Corporation became a wholly-owned subsidiary of
Venturi when the stockholders of the Texas Corporation exchanged all of the
issued and outstanding shares of the Texas Corporation for shares of Common
Stock and Preferred Stock of Venturi. The share exchange was consummated
pursuant to a Stock for Stock Agreement dated as of June 30, 1997, and was
treated as a tax-free reorganization. In connection with the reorganization,
HiTek Carpet Care, Inc. changed its name to Venturi Technology Enterprises,
Inc., and recently changed its name to Venturi Technologies, Inc. As a result of
the exchange, the former Venturi stockholders attained ownership and voting
control of HiTek. Through its subsidiary, Venturi acquired the assets of two
carpet cleaning companies in Texas and Utah during 1995 and 1996.

Venturi was approved for trading on April 10, 1997 on the NASD OTC Bulletin
Board, under the symbol "VTIX".

In 1995, the Texas Corporation acquired substantially all of the net assets of
Dependable Janitorial, Inc. and Dependable Carpet Cleaning, an Orem, Utah-based
company, pursuant to a Contract of Sale. The Texas Corporation issued 137,499
shares of common stock in the exchange. In March 1996, the Texas Corporation
exchanged 100,000 shares of its

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common stock for substantially all of the net assets of T-Co Carpet Cleaning and
T-Co Heating Systems, and Preferred Carpet Care of Dallas. T-Co had operations
in Irving, Texas, providing carpet cleaning services and manufacturing heating
units for carpet cleaning equipment. Venturi has integrated the heaters
manufactured by T-Co Heating Systems, and has developed certain additional
proprietary equipment used in its proprietary VenturiClean(TM) cleaning method.
Venturi formed a separate wholly-owned subsidiary named "T-Co Manufacturing,
Inc." as a Utah corporation in 1997. This corporation has never functioned as a
separate entity, and has no employees or assets. Also in March 1996 the Texas
Corporation acquired all of the net assets of Preferred Carpet Care in Lubbock,
Texas for 10,000 shares of common stock.

In October 1996, the Texas Corporation exchanged 22,000 shares of its Common
Stock for substantially all of the net assets of Stone Flood & Fire Restoration
and ProTech Restoration, with carpet cleaning and restoration operations in
Provo, Utah.

In March 1998, Venturi acquired substantially all of the net assets of Protech
Carpet Cleaning and Flood Restoration, of Riverton, Utah, in exchange for 4,000
shares of Common Stock. In April 1998, Venturi acquired substantially all of the
net assets of Complete Carpet Service, a Dallas, Texas-based carpet cleaning
enterprise, in exchange for 7,500 shares of Common Stock. In July 1998, Venturi
acquired substantially all of the net assets of a sole proprietorship doing
business in Lancaster, California under the names "All Valley Carpet, All Valley
Carpet & Upholstery Cleaning and All Valley Restoration Service." These assets
were acquired in exchange for 5,000 shares of Venturi's Common Stock. In June
1998, Venturi agreed to acquire substantially all of the net assets of
Video-Aire, a company providing duct cleaning services, in exchange for 160,000
shares of Common Stock. However, this acquisition was rescinded by mutual
agreement in October, 1998. In August of 1998, Venturi acquired substantially
all of the assets of Dirt Free Carpet and Upholstery Cleaning, Inc., a Texas
Corporation, with operations in Houston, Texas, in exchange for 52,632 shares of
its common stock. In October 1998, Venturi acquired substantially all of the net
assets of Top Gun, Inc., a northern California based carpet cleaning company, in
exchange for 8,000 shares of Common Stock. In October 1998, Venturi acquired
substantially all of the net assets of Disaster Plus Corp., a fire and flood
restoration business located in Orem, Utah in exchange for 4,000 shares of
Venturi Common Stock. Effective as of December 27, 1998, Venturi has acquired
substantially all of the net assets of Flohr, Inc., a Utah corporation doing
business as Magic Touch Carpet and Furniture Cleaning in Midvale, Utah in
exchange for 6,500 shares of Common Stock. Venturi is engaged in ongoing
negotiations for acquisition of stock or assets of other carpet cleaning
companies; however, none of such negotiations has resulted in any binding formal
agreement or agreement in principle.

The Texas Corporation entered two other acquisition agreements with parties
related to each other; however, for various reasons the assets so acquired were
eventually divested. See "Legal Proceedings."

INDUSTRY OVERVIEW

As reported by industry sources, the annual domestic market for carpet cleaning
services was approximately $5 to $10 billion in 1997; and the market for flood
repair and restoration was estimated to be much larger.

The industry can be divided into four segments: commercial cleaning, apartment
and multi-family residential cleaning, single-family residential cleaning and
restoration or disaster cleanup. The industry is highly fragmented, although
there are a small number of franchise competitors, such as Service Master,
ChemDry and DuraClean.

Current carpet cleaning technology has remained the same for the past 20 years.
Despite the fact that trade publications have estimated that nearly 90% of
carpet cleaning customers are dissatisfied with the results of their carpet
cleaning services, no improvements had been made in the basic technology until
Venturi developed VenturiClean(TM) and entered the market. Two basic carpet
cleaning methods are used throughout the rest of the industry: the steam
extraction method and the spin bonnet method. Approximately 40% of carpet
cleaning uses the steam extraction method, which involves the injection of hot
water into the carpet, usually at a pressure of about 300 psi, and the use of a
vacuum process to attempt to remove the water. Some companies using the steam
extraction method apply a soap or chemical prespray followed by a rinse with
clean water; others use water with chemical or soap solutions during the
cleaning phase without a rinse. This method is not as effective as
VenturiClean(TM) because the water used penetrates the carpet backing and pad
before the vacuum process can retrieve that water. Only about 60% of the water
applied to the carpet

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is ever retrieved; the rest remains in the carpet fiber, backing and pad,
requiring days to dry. Once the water has evaporated, it leaves a residue of
soils, chemicals and surfactants, and often feels crusty. The residual
surfactants act as magnets for dirt particles, and the carpet becomes soiled
soon after the cleaning. This process also causes delamination of the carpet
backing, weakening the carpet fibers.

The other basic method is CO(2) foam and spin bonnet. Although drier than steam
extraction, these methods still require cleaning and foaming chemicals to be
mixed with water and then applied to the carpet. The expanding foam is intended
to lift particles out of the carpet for extraction with a vacuum process or dry
pad buffing. An alternative method uses carbonated water designed to effervesce
soil from the carpet. The residue is then buffed out with a cotton towel on a
buffing machine. The carpet fiber does not get as wet as with the steam
extraction method, but the vacuuming of foam and the buffing of carbonated
chemicals does not remove soils and surfactants with the efficiency of
VenturiClean(TM). Carpet fibers are also damaged from the buffing process.

The oldest carpet cleaning method uses a rotary shampoo machine. The carpet is
scrubbed with a rotary buffing machine to shampoo soap into the carpet with a
bristle pad and then the carpet is vacuumed while still wet. This method also
wets the carpet backing and pad and leaves behind surfactant based residue.

MARKETING

The primary method of selling carpet cleaning to individuals is through mass
marketing, using billboards, radio, television, distribution of coupons, yellow
pages advertising, local publications, door hangers, and customer call services.
In addition, Venturi participates in trade shows and local chamber of commerce
events, such as golf tournaments and luncheons. Multifamily carpet cleaning
services are promoted in this manner, and also through advertising in industry
publications, targeting of national apartment management companies and
demonstrations. Services for commercial properties are marketed to building
maintenance companies, and through demonstrations and participation in local
building management associations. Finally, restoration services are marketed
primarily through industry publications and participation in industry
associations and trade shows.

RAW MATERIALS; PATENTS; LICENSES; TRADEMARKS AND SERVICE MARKS

Venturi's proprietary technology permits it to remove virtually all of the dirt,
soils and residue from a carpet; most other methods commonly in use by Venturi's
competitors remove much less of the dirt, soils and residue. Further, through
use of Venturi's proprietary technology, which removes virtually all of the
fluids used in its process, carpets dry within hours of cleaning, whereas the
drying time can extend up to several days using the methods of Venturi's
competitors. Venturi has received two patents relating to its equipment and
technology. One relates to the use of EO water in a carpet cleaner and system,
and the other relates to the water heater. The United States Patent and
Trademark Office has issued a notice of allowance for the carpet cleaner patent
application.

Venturi licenses some of its technology from several sources. The raw materials
necessary for the delivery of Venturi's services are: EO water, trucks and
utility shells, and cleaning units. Venturi produces its own EO water using
equipment purchased from Primacide, L.C., a Nevada limited liability company,
pursuant to an Exclusive Use and Purchase Agreement. Primacide is owned by
International Acqua Chemicals L.C. and Destiny Recovery Systems, L.C. Each of
the members owns 50% of Primacide. Destiny Recovery Systems, L.C. is a Nevada
limited liability company, of which 30% is owned by Venturi and 70% is owned by
Gaylord M. Karren and John M. Hopkins, Venturi's Chairman and Chief Executive
Officer and President, respectively. Each operating base must have a machine for
the manufacture of EO water. Venturi has in the past purchased these machines
from an unrelated third party at a cost of $6,000 per machine. Primacide has
manufactured a new, more efficient model of this machine, which will be
available to Venturi at a price of $9,500 per machine. No payments have yet been
made to Primacide for EO water manufacturing machines, and Venturi expects to
fund purchases from Primacide under capital leases. Venturi expects to begin
acquiring and using the new model as soon as it is available, and to replace the
old machines as cash flow permits. Venturi does not own any patents or other
intellectual property rights related to the production of EO water or the
manufacture of the machines acquired from Primacide. The Primacide agreement
grants Venturi the worldwide rights to use and exploit the EO technology in the
carpet cleaning and ventilation duct cleaning industries, and allows Venturi to
purchase its entire requirements for EO machines. The Primacide agreement runs
until May 5, 2003, but is automatically renewed on a

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yearly basis thereafter. It may be terminated by either party after 120 days
written notice or after 30 days written notice if the other party fails to
comply with its terms.

Venturi is a party to a Requirements Contract with DT Enterprises, a California
proprietorship, dated February 15, 1996, pursuant to which it purchases its
requirements for the Clean Right carpet cleaning solution. The contract has no
minimum purchase requirements, and the cleaning products are priced at DT
Enterprises' current list prices. The contract runs for a period of 10 years
from its date, and may be extended for an additional term of 10 years at
Venturi's option.

Venturi has contracted with Vortex/Aero-Tech of Salt Lake City, Utah, a leading
manufacturer of professional carpet cleaning equipment to manufacture and
assemble the Venturi truck mount units, which employ the VenturiClean(TM)
technology. Vortex/Aero-Tech has the capacity to meet Venturi's truck production
schedule for the foreseeable future. Even if this were not the case, the items
manufactured by Vortex/Aero-Tech are readily obtainable from other sources.
Vortex/Aero-Tech does not provide carpet cleaning or restoration services, and
is not a competitor of Venturi.

Venturi has received a patent on the heaters manufactured by T-Co Manufacturing.
The heating unit is an electronically monitored dual flow flash heater, which
permits detailed control of the water temperature, enabling Venturi to deliver
water to the carpet fibers at a constant temperature.

Venturi has filed an application to register the mark Venturi Technologies with
the United States Patent and Trademark Office, and is in the process of applying
to register the mark VenturiClean(TM). Venturi intends to apply for trademark or
service mark registration as additional terminology for its services and
products are developed.

MANUFACTURING

Venturi has no separate manufacturing facility. Rather, all of its manufacturing
is performed at its headquarters in Orem, Utah on an as-needed basis.

CUSTOMERS

Venturi's customers consist principally of individuals located in Texas, Utah
and California, commercial property owners and managers, and insurance
companies. No single customer accounts for five percent (5%) or more of
Venturi's sales. The largest concentration of Venturi's customers are in Texas.
Venturi has no present plans to market its services outside the United States in
the foreseeable future.

GOVERNMENT REGULATION

Venturi's present operations are not subject to special regulatory controls.

COMPETITION

In a study conducted by Combustion Resources, a Utah limited liability company,
EO water processed through the modulator box decreased the surface tension
sufficiently to permit the wand-lift system to remove virtually all of the test
stains cleaned in the study (soil and carbon powder, and barbecue sauce and
animal fat). An additional effect of the use of the modulator box is the
prevention of scale buildup and improved cleaning performance. Further, the use
of EO water showed very fast bacterial kill rates, thereby providing a
sanitizing effect.

Despite these technological improvements, Venturi remains subject to significant
competition. The carpet cleaning industry is highly fragmented, with thousands
of companies nationwide, many of which are sole proprietorships. Venturi faces
further competition in recruitment of personnel and distributors. Some of
Venturi's competitors are substantially larger and have available considerably
greater financial resources than Venturi. Venturi's ability to remain
competitive depends, in significant part, on Venturi's ability to continue its
acquisition program and to recruit and retain personnel. Although Venturi
believes its benefit and compensation plans, and other incentive programs
provide its

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employees with significant earning potential, there can be no assurance that
Venturi's programs for recruitment and retention of personnel will be
successful.

Venturi cannot guarantee that its competitors will not develop proprietary
systems with capabilities similar to VenturiClean(TM) without violating any of
Venturi's intellectual property rights.

RESEARCH AND DEVELOPMENT

In 1997, Venturi commissioned an analysis of carpet cleaning systems by
Combustion Resources, a Utah limited liability company, which produced a report
on September 19, 1997, comparing VenturiClean(TM) with the standard carpet
cleaning methods described above. The analysis was performed by Dr. L. Douglas
Smoot, the past Dean of the College of Engineering and Technology, professor of
Chemical Engineering and current Director of the Advanced Combustion Engineering
Research Center at Brigham Young University. Dr. Robison concluded that use of
these proprietary components removed over 99% of micro-organisms from carpet,
thus achieving a significant level of carpet decontamination.

There are no long term studies on the effect of prolonged exposure to EO water.
Although Venturi believes such exposure has no known side effects, Venturi has
not commissioned any study of same.

EMPLOYEES

As of March 31, 1999, Venturi had 149 full-time employees. These numbers include
personnel located at Venturi's bases in Texas, Utah and California, as well as
administrative personnel. Venturi considers its employee relationships to be
satisfactory. None of Venturi's employees is a member of any labor union, and
Venturi has never experienced any business interruption as a result of any labor
disputes.

ITEM 2. DESCRIPTION OF PROPERTIES

FACILITIES

Venturi rents its headquarters building, located in Orem, Utah, and the
following additional facilities, which have lease terms between 6 months and 60
months, and lease payments between $675 to $4,000:

PURPOSE LOCATION

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Headquarters 1327 North State, Orem, Utah

Operating Base 3322 Garden Brook, Dallas, Texas

Operating Base 218 West Cottage, Sandy, Utah

Operating Base 8550 Winkler, Suite B, Houston Texas

Operating Base 350 South Beltline, Suite 101, Irving, Texas

Operating Base 5709 D 40th Street, Lubbock, Texas

Operating Base 930 North 1610 West, Orem, Utah
(Restoration)

Operating Base 2223 Handley Ederville Rd., Fort Worth, Texas

Operating Base 2763 West Avenue L, #170, Lancaster, CA

</TABLE>

Venturi also leases mobile office space located adjacent to its headquarters
building in Orem, Utah, which house certain administrative and training
personnel. This space is leased for a term of six months, at a cost of $1,050.00
per month.

Venturi believes that each of its facilities is suitable for its current use.
Venturi also believes that upon expiration of the current lease terms, alternate
space would be available at reasonable cost for continuation of its business.

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In addition to these leased properties, Venturi owns two parcels of real
property in Orem, Utah which serve as an operating base. These properties have
outstanding mortgages of $47,887 and $52,940, with monthly payments of $747 and
$677, respectively.

Venturi has entered a Master Lease Agreement with Northstar Capital, LLC, to
provide funding in an amount not to exceed $3,000,000 to acquire trucks and
equipment. Pursuant to this Master Lease Agreement, Venturi has signed 4
equipment schedules having balances totaling $693,159. The monthly payments on
these equipment schedules is $6,695, $4,120, $9,741 and $6,738, respectively.

Venturi also has outstanding 4 equipment schedules with Sentry
Financial, with unpaid balances totaling $163,160. These leases
have monthly payments of $2,182, $1,145, $2,280 and $5,975,
respectively. The Master Lease Agreement with Northstar Capital
replaced the Sentry Financial facility.

In May of 1998, Venturi received a commitment through Capital Partners, Inc. for
lease financing in an amount of up to $3,000,000. As of March 31, 1999, a total
of $456,000 had been funded on the lease facility arranged through Capital
Partners, Inc.

ITEM 3. LEGAL PROCEEDINGS

Venturi is currently a party to a lawsuit, captioned HAL B. PHILLIPS, BEVERLY H.
PHILLIPS AND QUALITEK SUPPLY, INC. V. VENTURI TECHNOLOGY ENTERPRISES, INC.,
GAYLORD KARREN, JOHN HOPKINS, WILLIAM C. THOMAS, MERRILL L. LITTLEWOOD AND JAMES
A. FRAME, Cause No. 98-03695, 126th District Court, Travis County, Texas. The
lawsuit arose out of the acquisition of plaintiff's business assets on March 30,
1996, pursuant to an Asset Purchase Agreement. In approximately August 1996,
Venturi terminated its relationship with the plaintiffs and in April 1997 filed
a lawsuit in Utah State Court alleging that Hal B. Phillips, Beverly Phillips
and Qualitek Supply, Inc. made misrepresentations to Venturi to induce Venturi
to acquire the assets and had breached the Asset Purchase Agreement, and
requesting that the Asset Purchase Agreement be rescinded or terminated. The
Utah State Court action was dismissed on the grounds that the Utah court did not
have personal jurisdiction over the defendants, who were residents of the State
of Texas, and did not have sufficient contacts with the State of Utah. On April
8, 1998, the Phillips and Qualitek filed this action in Texas State Court
alleging violations of Texas securities laws in connection with the issuance of
100,000 shares of Venturi Common Stock in exchange for the assets of Qualitek,
as well as fraud, negligent misrepresentation, breach of contract and
conversion, and seeking damages in the amount of $2,500,000. Venturi has filed
an answer and counterclaim asserting the same claims as in the Utah state
action. Venturi intends to vigorously defend this lawsuit. Discovery has not yet
been completed, and it is difficult to evaluate the likelihood of an unfavorable
outcome to Venturi. During pre-litigation settlement negotiations, the
plaintiffs provided Venturi with a detailed itemization of their claimed damages
in the amount of $57,000. Therefore, Venturi believes the actual damages are
substantially less than the amount requested. As a result, Venturi believes that
any damage award should not be material; however, there can be no assurance that
this will be the case. Venturi's operations could be jeopardized to the extent a
damage award exceeded the amount of liquid assets available for payment of such
award.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

Of the 8,679,976 shares of Common Stock outstanding as of March 31, 1999, all
but 476,000 are "restricted securities" within the meaning of Rule 144
promulgated under the Securities Act, and may not be sold except in compliance
with the registration requirements of the Securities Act or an applicable
exemption under the Securities Act, including an exemption pursuant to Rule 144
thereunder.

In general, under Rule 144 as currently in effect, any affiliate of Venturi and
any person (or persons whose sales are aggregated) who has beneficially owned
his or her restricted shares for at least one year, is entitled to sell in the
open market within any three-month period a number of shares of Common Stock
that does not exceed the greater of (i) 1% of the then outstanding shares of
Venturi's common stock, or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain limitations on manner of sale, notice requirements,
and availability of current public information about Venturi. Non-affiliates of
Venturi who have held their restricted shares for two years are entitled to sell
their shares under Rule 144 without regard to any of the above limitations,
provided they have not been affiliates for the three months preceding such sale.

Further, Rule 144A as currently in effect, in general, permits unlimited resales
of certain restricted securities of any issuer provided that the purchaser is an
institution that owns and invests on a discretionary basis at least $100 million
in securities or is a registered broker-dealer that owns and invests $10 million
in securities. Rule 144A allows the existing stockholders of Venturi to sell
their shares of Common Stock to such institutions and registered broker-dealers
without regard to any volume or other restrictions. Unlike under Rule 144,
restricted securities sold under Rule 144A to nonaffiliates do not lose their
status as restricted securities.

Beginning in July, 1997, Venturi's Common Stock has been quoted on the OTC
Bulletin Board under the trading symbol "VTIX." The following are the high and
low closing bid prices of the Common Stock on the OTC Bulletin Board as reported
by the NASDAQ Trading & Market Services of The Nasdaq Stock Market, Inc. for the
periods indicated.

Bid Price Volume
Period --------- ------
Calendar Year High Low
------------- ---- ---

1997
First Quarter N/A N/A N/A
Second Quarter N/A N/A N/A
Third Quarter 5-3/8 4 5,900
Fourth Quarter 5-3/8 4-1/8 7,100

1998
First Quarter 5-7/8 5-3/8 26,700
Second Quarter 7-1/4 3-1/2 48,700
Third Quarter 4 2-1/4 35,200
Fourth Quarter 2-7/8 1-1/4 109,300
</TABLE>

The bid prices represent quotations between dealers without retail markups,
markdowns or commissions and do not necessarily represent actual transactions.

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The Company currently intends to retain future earnings, if any, to fund
the development and growth of the Company's proposed business and operations.

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At March 31, 1999, there were 188 holders of record of the Company's
8,679,976 shares of Common Stock outstanding, 34 holders of record of the 64,410
shares of Series A Preferred Stock that have been issued, two holders of record
of the 260,000 shares of Series B Preferred Stock that have been issued, and one
holder of record of the 552,845 shares of Series C Preferred Stock that have
been issued.

RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, Venturi (or its predecessor) has conducted three
private offerings of common stock and three private offerings of preferred
stock. Venturi has also issued common stock as consideration for the acquisition
of the assets of various carpet cleaning businesses in the past three years. In
addition, Venturi has issued a number of shares of common stock to employees and
vendors. Certain of the desired offerings occurred at or about the same time, or
within six (6) months of each other, and under certain circumstances could be
subject to integration. However, based upon the five factor test contained in
Rule 502 of Regulation D, Venturi is of the opinion that none of the offerings
should be integrated.

Details regarding those offerings are as follows:

A. Between January 1996 and September 1996, Venturi sold a total of
64,410 shares of Series A Preferred Stock for $10.00 cash per share in
a private offering primarily to accredited investors in reliance upon
Rules 505 and 506 under the Securities Act of 1933. Dominion Capital
Corporation of Dallas, Texas was employed by Venturi as Soliciting
Agent in that offering. All prospective investors were given a private
placement memorandum that included a complete disclosure of Venturi,
its financial results, its business and various risks of the
investment. Investors were required to sign a Subscription Agreement
in which the investor represented, among other things, that he or she
was acquiring the shares for his or her own account, and not for
resale, and that the investor was experienced in financial matters and
could bear the economic risk of an investment in Venturi. Following is
a list of investors in that offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------

<S> <C> <C>
SERIES A PREFERRED Don & Katherine Halsey Trust $12,500/($10.00 per share)
Henry Ross IRA $35,000/"
Pete & Angie Danna $20,000/"
John Towers $ 2,500/"
Carroll Kennedy Burgess IRA $25,000/"
Theodore Tuinstra $10,000/"
Leo Smith IRA $15,000/"
Mary Kirk Trust $10,000/"
Jerry & Mai Hamilton Trust $10,000/"
Robert Davidson $25,000/"
Doug Rhone Trust $25,000/"
Marjorie McCray $35,000/"
J. Moyle $30,000/"
David Sartain IRA $12,500/"
Clyde Webb $25,000/"
Edward J. Gallatin IRA $25,000/"
Vikki Minadeo $25,000/"
Wayne Farlow IRA $21,000/"
Bill Sass $25,000/"
Raymond Earl Sloan IRA $15,000/"
Paul B. Fletcher $20,000/"
Marybess Salvaggio $20,000/"
Bennett E. Greenfield $15,000/"
George E. Kugler $15,000/"
</TABLE>

-8-
<PAGE>

<TABLE>

Rebecca J. Das $20,000/"
Robert D. Stephens, Jr. IRA $25,000/"
George & Frances Tyler $15,000/"
Suelema M. Roman $25,000/"
Jack J. Stephens $13,000/"
Mickey Long $12,500/"
George R. Tyler IRA $15,000/"
Sandi Kinney $13,000/"
Bruce Axtell $25,000/"
A. Ken Flake $ 7,100/"

</TABLE>

B. Beginning in January 1998 Venturi offered up to 315,000 shares of
Series B Preferred Stock to accredited investors in reliance upon
Regulation S under the Securities Act of 1933. In January 1998,
200,000 shares of Series B Preferred Stock was sold to Entrepreneurial
Investors, Ltd., an accredited investor which is located offshore, for
$5.00 cash per share. In April 1998, an additional 50,000 shares of
Series B Preferred Stock was sold to Entrepreneurial Investors, Ltd.
for $20.00 per share. Venturi employed no brokers or underwriters in
that offering, although Equity Services, Ltd. was employed as a
Placement Agent. 10,000 shares of Series B Preferred Stock was paid to
Equity Services, Ltd. in payment for service as placement agent.
Following is a list of investors in that offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------
<S> <C> <C>
SERIES B PREFERRED Entrepreneurial Investors, Ltd. $2,000,000
Equity Services, Ltd. Services

</TABLE>

C. Beginning in February 1998 the Company has offered up to 1,609,756
shares of Series C Preferred Stock to accredited investors in reliance
upon Rule 506 under the Securities Act of 1933. Between February 1998
and March 31, 1999, a total of 552,845 shares had been sold to Invest
Linc Emerging Growth Equity Fund I, L.L.C., a Nevada limited liability
company (formerly known as CDL Emerging Growth Equity Fund), for a
total of $1,133,334 cash. No brokers or underwriters were employed by
the Company in that offering. Following is a list of investors in that
offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------
<S> <C> <C>
SERIES C PREFERRED Invest Linc Emerging Growth
Equity Fund I, L.L.C. $1,133,334
</TABLE>

The offerings described in paragraphs B and C occurred within six months of
each other. However, offering B was an offering of Series B Preferred Stock to
non-residents under Regulation S. The sole investor in offering B was a company
organized in the Bahamas, with its principal office in the Bahamas, and whose
beneficial owners are all European citizens and residents. The placement agent
who received 10,000 shares of Series B Preferred Stock as consideration for its
services, is a Nevis company comprised solely of non-resident beneficial owners.
Offering B qualifies as a Regulation S offering and is not subject to
integration with a Regulation D offering.

D. Between August 1994 and June 1997, Venturi sold a total of 212,505
shares of common stock for $2.40 cash per share in a private offering
in reliance upon Rules 505 and 506 under the Securities Act of 1933,
and Section 4(2) of the Securities Act of 1933, primarily to
individuals with a pre-existing relationship with Venturi or its
founders. Venturi used no underwriter or brokers in that offering.
Although that offering was open to accredited and unaccredited
investors, no more than 35 unaccredited investors purchased shares in
that offering. All prospective investors were given a private
placement memorandum that included a complete disclosure of Venturi,
its financial results, its business and various risks of the
investment. Investors were required to sign a Subscription Agreement
in which each investor represented, among other things, that he or she
was

-9-
<PAGE>

acquiring the shares for his or her own account, and not for resale,
and that the investor was experienced in financial matters and could
bear the economic risk of an investment in Venturi. Following is a
list of investors in that offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------
<S> <C> <C>
COMMON STOCK Dean Schafer $ 23,700
Mary Loiuse Hopkins $ 12,000
John Branscom $ 4,000
T.Blake Horrocks $ 24,000
Merril Littlewood $ 6,000
David Frey $ 18,000
Bonnie & Leo Smith $ 6,000
Ron & Leslie Rutledge $ 4,000
Rebecca Stahle $ 1,500
Aaron & Tami Pyfer $ 2,400
Kevin Pyfer $ 24,000
HPKK Family Trust $ 5,040
Claudeen Hill $ 8,208
Ronald Karren $ 42,075
American Pension Services
Custodian Ronald Karren $ 7,925
Alan Bingham $ 1,200
Bruce Axtell $185,000
Bryan Karren $ 1,500
Kevin Karren $ 1,000
Julie Karren $ 375
Darrell Karren $ 375
Leslie Ann Karren $ 375
Tim Woodard $ 1,500
Thomas Williams $ 5,000
The Priority Group $ 50,000
William Moore $ 12,000
Ray Lynn Jorgensen $ 1,500
Gregg Anderson $ 11,000
Scott Farrer $ 15,000

</TABLE>

The common stock offering described in this paragraph overlaps the offering
of Series A Preferred Stock described in paragraph A. However, offering A
involved the sale of Series A Preferred stock for $10.00 cash consideration in
an offering conducted by Dominion Capital Corporation to Dominion's existing
clients, most of whom were accredited investors. Offering D involved the sale by
Venturi (not through a placement agent) of common stock for $2.40 per share to
individuals who had a pre-existing family or business relationship with the
founders of Venturi. Offering A was primarily for the purpose of obtaining
financing on an equipment lease line of credit through Sentry Capital that
required $1.00 of invested equity for every $1.00 of equipment financing
advanced. Offering D was to provide working capital and capital for research and
development. The two offerings involved different classes of stock, were offered
for substantially different consideration and were conducted as entirely
separate plans of financing and for totally different purposes.

E. Between December 1997 and August 1998, Venturi sold a total of 88,409
shares of common stock for $3.50 cash per share in a private offering
to accredited and unaccredited investors in reliance upon Rules 505
and 506 under the Securities Act of 1933. Each share of Common Stock
sold in that offering was accompanied by a warrant entitling the
holder to purchase an additional share of common stock for $6.00.
Venturi used no underwriter or brokers in that offering. Although that
offering was open to accredited and unaccredited investors, no more
than 35 unaccredited investors

-10-
<PAGE>

purchased shares in that offering. All prospective investors were
given a private placement memorandum that included a complete
disclosure of Venturi, its financial results, its business and various
risks of the investment. Investors were required to sign a
Subscription Agreement in which the investor represented, among other
things, that he or she was acquiring the shares for his or her own
account, and not for resale, and that the investor was experienced in
financial matters and could bear the economic risk of an investment in
Venturi. Following is a list of investors in that offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------

<S> <C> <C>
COMMON STOCK
COMMON STOCK WARRANTS
Richard Barnes $ 1,000
Adam Dunn $ 1,000
Brandon Horrocks $ 1,000
Robert Cless Karren $ 5,005
Stanley Kopesec $ 2,706
Professional Painting 50,001
Cochran, Lund & Davidson $25,000
Kevin & Patti Pyfer $14,000
Stuart Starkey $ 5,000
Kirby Cochran $ 5,000
Brett Davis $ 1,000
Brent Higginson $ 2,100
Jim & Patrice Stone $10,000
Ned Karren $ 3,500
Floyd & Patricia Fox $ 4,000
Joe Fox $58,717
Louis Sacco $21,000
Benjamin Press $35,000
J.T. Weber Mark Cripe $ 1,015
Robert E. Fellows $ 3,500
Margo Murphy $ 3,500
Doran Pratte $10,000
Cless Karren $ 5,005
Dawn Baker $ 1,050
Kardell & Sandra Schmidt Lou Sacco $10,500
Doug Zibriskie $ 2,000
Reed Buley $10,000
Floyd & Patricia Fox $ 4,000
Darin Yancey $ 2,500
Marvin Yancey $10,000
Mike Cox $ 4,500
</TABLE>

The offerings described in paragraphs C and E occurred within six months of
each other. However, offering C involved the sale of Series C Preferred Stock to
a single accredited investor. Offering E involved the sale of up to $750,000 of
common stock to accredited investors and to less than 35 non-accredited
investors. Even if offering C were integrated with offering E, it would
nevertheless qualify as a Rule 506 offering of less than $5,000,000 to an
unlimited number of accredited investors and up to 35 non-accredited investors.

The offerings described in paragraphs D and E overlap with each other.
However, offering D involved the sale of common stock by the Texas Corporation
(Action Venturi Technologies, Inc.). Offering E involved the sale of common
stock by the successor entity after the reorganization of the Texas Corporation
and Hi-Tek Carpet Care, a Nevada corporation, which occurred in July of 1997.
The reorganization entity was substantially different from its

-11-
<PAGE>

pre-reorganization counterparts. Although the Texas Corporation is now a
wholly-owned subsidiary of the Nevada Corporation, at the time of these
offerings, they were unrelated. Since two separate issuers were involved, these
offerings are not subject to integration.

F. In December 1997, Venturi issued a total of 33,982 shares of its
common stock to its employees in reliance upon Rule 701 and a written
contract pursuant thereto. The following employees received the
indicated shares in this transaction:

SECURITIES ISSUED NAME OF EMPLOYEE NUMBER OF SHARES RECEIVED
- ----------------- ---------------- -------------------------

COMMON STOCK Jason Barker 86
Robert Barnes 343
Kevin Campbell 57
Keith Hexem 752
Tom Jensen 853
Jeremy Marini 274
Jim Stone 1481
Chad Taylor 514
Marlane Wright 690
Doug Zibriskie 1143
Jamie Zuniga 86
Dale Karren 646
Jaime Robles 457
Raul Robles 457
Leslie Rutledge 211
Bill Thomas 971
Bridge Whitmire 402
Tim Woodward 874
Blake Horrocks 1466
Brandon Horrocks 1006
Marsan Horrocks 486
Derrick Paper 406
Susan Rittman 655
Debbie Taylor 796
Eric Iverson 316
Jerry Thomas 786
John Hawkes 271
Vicki Johnson 618
Bo Hopkins 137
Kevin Karren 843
Joel Karren 581
Ed Norton 1286
Randy Norton 205
Brandon Paris 114
Nate Robins 146
John Hopkins 572
Gaylord Karren 4572
Shane Karren 137
Ron Karren 4286

</TABLE>

G. In August 1998, Venturi offered a total of 600,000 shares of common
stock to various offshore residents for $2.00 per share in an offering
exempt from registration under Regulation S promulgated under the
Securities Act of 1933. As of September 23, 1998, a total of 75,000
shares of common stock had been sold in that offering, for cash
consideration in the amount of $150,000. All investors in that
offering signed a Subscription Agreement in which they

-12-
<PAGE>

represented that they were not residents of the United States, and
that they did not purchase the shares with the intent that they would
eventually come to rest in the United States. No underwriters or
brokers were employed in that offering, although Equity Services,
Ltd., a Nevis company, acted as a placement agent in that offering.
Following is a list of investors, to date, in that offering:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------

<S> <C> <C>
COMMON STOCK Aspen Investments 12,500 $25,000
Peninsula Corp. 25,000 $50,000
Prism, Inc. 25,000 $50,000
Securitron, Ltd. 12,500 $25,000
</TABLE>

H. In January 1997, Venturi issued 1,500,000 shares of common stock to
the following persons at $.10 per share (for aggregate consideration
of $150,000) without registration under Rule 504 adopted under Section
3(b) of the Securities Act of 1933, in connection with its formation:

SECURITIES SOLD NAMES OF INVESTORS NUMBER OF SHARES PURCHASED
--------------- ------------------ --------------------------
<S> <C> <C>
COMMON STOCK Eileen Albertson 2,000
Autumn Leaf, Inc. 120,000
Battle of Midway Incorporated 112,000
J.C. Blanleil 2,000
Rachael A. Burton 2,000
Mary Ann Coleman 2,000
Delta Financial Resources Inc. 210,000
Diversified Lenders Inc. 210,000
Gayle Dorsey 2,000
Ronald L. Drake 2,500
Marci Evans 2,000
Darlene Fawcett 2,000
Kris Gornichec 200,000
Emil Gulbranson 2,000
Melville K. Gulbranson 20,000
Rebecca Gulbranson 2,000
Kerri Heavenor 2,000
Betty Hurtado 2,000
Dixie Hutchins 2,000
Garth P. Jarman 2,000
Bryan L. Jeffery 1,000
Wydell, Jeffery 2,000
Jana Jensen 2,000
Jacob D. Klassen 2,000
Linda Klassen 2,000
John J. Kochel 2,000
Mark Larson 1,000
Roslyn Mackay 2,000
Mary Magouirk 1,000
Renetta Mecham 2,000
MK Resources, Inc. 5,000
Tracy J. Nelson 2,000
Suzanne Pancheri 1,000
Freddie C. Roberts, Jr. 3,000
Karen Roberts 1,000
Janis & David R. Rowberry 1,000
</TABLE>

-13-
<PAGE>

<TABLE>

Lise-Lotte Ruzicka 1,000
Nancy Smithanik 2,000
Symmetry Inc. 100,000
Jeffery Clark Tanner 200,000
Max C. Tanner 50,000
Mont E. Tanner 204,000
Renee Tieman 2,000
C. F. Walker 4,500
Gordon J. Weaver 2,000
Kimberly Witter 2,000
Monica Young 2,000
---------
1,500,000

</TABLE>

Although the offerings described in paragraphs D and H occurred within six
months of each other, these offerings involved what were two separate
corporations at the time. Offering D involved the sale of common stock by the
Texas Corporation (Action Venturi Technologies, Inc.) at $2.40 per share for
working capital purposes. Offering H involved the original issuance of stock by
Hi-Tek Carpet Care, Inc., a Nevada corporation, at $.10 per share in connection
with its formation. Offering H was a public issuance by the Nevada corporation
in a Rule 504 transaction as part of its formation. Although the Texas
corporation is now a wholly-owned subsidiary of the Nevada Corporation, at the
time of these offerings, they were unrelated. Since two separate issuers were
involved, these offerings are not subject to integration.

The offerings described in paragraphs E and H did not occur within six
months of each other. Offering H involved the original issuance of stock by
Hi-Tek Carpet Care, Inc., a Nevada corporation, at $.10 per share in connection
with its formation. Offering H was a public issuance by the Nevada corporation
in a Rule 504 transaction as part of its formation. Offering E was conducted by
the post-reorganization entity, offering common stock at $3.50 per share for
working capital purposes. Although the Texas Corporation is now a wholly-owned
subsidiary of the Nevada Corporation, at the time of these offerings, they were
substantially different entities, with substantially different capital
structures. Offering E was not commenced until six months after completion of
offering H; and five months after completion of the reorganization. Since two
different issuers were involved, these offerings are not subject to integration.
These offerings clearly were not for the same purpose or part of the same plan
of financing.

I. Over the past three years, Venturi issued or agreed to issue upon
expiration of rescission rights under applicable acquisition
agreements 289,934 shares of common stock to various persons in
exchange for all of the business assets and liabilities of their
companies or shares in their businesses in reliance upon Section 4(2)
of the Securities Act of 1933. The sellers were given a copy of the
Company's current business plan and were provided with the opportunity
to investigate the Company in as much detail as they desired. The
sellers represented in the Acquisition Agreement in connection with
the sale that they were acquiring the shares for investment and not
for resale, and the shares so issued contained a restrictive legend
consistent with the fact that neither the shares nor the transaction
was registered. These transactions are isolated issuances of common
stock to owners of carpet cleaning businesses. These transactions are
entirely isolated from one another, each involving a completely
separate business; thus, they are not part of a single plan of
financing. Each transaction constitutes a private, separately
negotiated arrangement in which the recipient of the common stock is
in an equal bargaining position with Venturi. Each transaction is
subject to arms length negotiation between Venturi and the owner of
the business and his/her representatives. These business owners
possess sufficient business acumen and financial sophistication as a
result of their successful operation of a carpet cleaning or flood
restoration business. They are familiar with the industry, having
operated their own successful business prior to becoming associated
with Venturi. The stock exchanged for the assets of these businesses
is a minor part of the consideration received by them. The primary
benefits result from delivery of new trucks equipped with Venturi's
proprietary equipment, the assumption by Venturi of all administrative
functions, the

-14-
<PAGE>

maintaining of existing salary levels and an opportunity to earn
enhanced performance bonuses using Venturi's proprietary equipment,
the provision of uniform employee benefits, and the intangible
benefits associated with becoming part of a larger organization. Each
transaction has an "assimilation" period of 60 to 90 days during which
the seller becomes a part of Venturi's organization but retains the
right to regain their assets if both parties jointly agree to part
ways. During this period, the seller is trained in the operation of
Venturi's equipment and processes, is provided with new trucks
equipped with Venturi's proprietary equipment, is paid at the same
rates as before the transaction (with the availability of performance
bonuses), and is allowed to sell Venturi's services and proprietary
systems to its customers. Their old equipment may be sold after
the assimilation period and would be returned to them if they so
desired. During the assimilation period, the seller is given access
to all information about Venturi that would be available in a
registration statement, including its finances and operations. In
fact, these individuals probably have access to a greater volume of
information regarding Venturi's operations than could be contained in
a registration statement since they acquire first-hand knowledge
regarding the efficacy of Venturi's technology and its ability to
perform as represented. Because these individuals are not losing the
ability to operate a carpet cleaning business, the stock represents a
long term exit or retirement strategy for them. For these reasons,
Venturi believes these exchanges comply with the requirements of the
Section 4(2) exemption. Persons to whom stock was issued in connection
with acquisitions are as follows:

<TABLE>

<S> <C>
Erie Dekker 50,122
Jerry Thomas 10,936
William Thomas 60,147
Jim Riley 54,679
Alvin Childers 44
Doug Gilbert 2,187
June Thomas 2,187
Jim & Patrice Stone 22,000
Protech Carpet 4,000
Complete Carpet Care 7,500
Danny Levine 5,000
Dirt Free 52,632
Disaster Plus 4,000
Top Gun (Joe Canada) 8,000
Flohr, Inc. (Magic Touch) 6,500
</TABLE>

J. During the past three years, Venturi has issued common stock to
various parties as consideration for extension of credit and
forbearance in receiving payment for services rendered in reliance
upon Section 4(2) of the Securities Act of 1933. Each party was given
a copy of Venturi's current business plan and the opportunity to
investigate Venturi. In some instances, the issuance of shares was not
in lieu of payment, but merely in consideration for receiving payment
after a scheduled due date. If interest or penalties accrued on
delayed payments, those amounts were also paid by Venturi. Each
transaction involved individuals with whom Venturi has had a
longstanding relationship, and each was a separate, isolated incident
not involving a public offering. Nevertheless, each individual was
given access to the same information that would be contained in a
registration statement and were able to fend for themselves given
their financial sophistication and the nature and extent of their
pre-existing relationship with Venturi. Those persons and the amount
of stock issued are as follows:

SECURITIES ISSUED NAMES OF RECIPIENTS NUMBER OF SHARES ISSUED
- ----------------- ------------------- -----------------------

<S> <C> <C>
COMMON STOCK The Priority Group 14,286
Riverbottom Hollow 7,000
The Priority Group 14,285

</TABLE>

-15-
<PAGE>

<TABLE>

Joe Bye 5,000
Bill Maxwell 3,600
Jim Stone 10,000
Joe Bye 1,500
Kirby Cochran 750
Bill Davidson 750
Sentry Financial 15,622
Bill Davidson 109,359
L. G. Rose 5,000
Danny Hepler 5

</TABLE>

K. Between November 1998 and February 1999, Venturi sold a total of
3,545,455 shares of common stock to a single accredited investor whose
principals had a pre-existing relationship with Venturi, in an
isolated transaction for $1,170,000 cash. The purchaser of that stock
is as follows:

SECURITIES SOLD NAMES OF INVESTORS CONSIDERATION PAID
- --------------- ------------------ ------------------

<S> <C> <C>
COMMON STOCK Cochran Consulting $ 1,170,000

</TABLE>

REPORT ON REGISTRATION OF COMMON STOCK ON FORM SB-2

On December 3, 1998 a Registration Statement on Form SB-2 filed by the Company
was declared effective by the Securities and Exchange Commission (file no.
333-60491). The Registration Statement registered 750,000 shares of Common
Stock, which the Company intended to offer to the public for $2.00 per share.

As of March 31, 1999, no securities had been sold pursuant to the Registration
Statement, and the Company had not yet decided how to proceed with that
offering.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations, which should be read in conjunction with the
Financial Statements (including the notes thereto), contains forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The Company believes that its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations.
The Company's actual results could differ materially from those anticipated in
these forward looking statements as a result of certain factors discussed in
this section.

GENERAL

Venturi was formed in 1997, but has operational and financial data from prior
periods as a result of the operations of its predecessor, which was formed in
1994. That company is now a wholly owned subsidiary of Venturi. See "Venturi's
Business-History and Development." Venturi's management has formulated a
strategy that calls for it to consolidate the fragmented carpet cleaning
industry by purchasing companies operating in particular locations, and
converting the acquired companies to use of Venturi's proprietary processes.

Venturi acquires unrelated companies that typically are much smaller than
Venturi. Ordinarily, the owners of the target company exchange all or
substantially all of the target company's assets or stock for Venturi common
stock. Each acquisition has been treated as a pooling-of-interest business
combination wherein the operating results of each combined entity have been
included in Venturi's financial statements as though the acquired business had

-16-
<PAGE>

been combined as of the beginning of each year. Due to the small relative size
and low profitability of the target companies, the effect on Venturi's balance
sheet is not material. Each target company is similar to other target companies
such that separate segment disclosures of each acquisition are not required to
fairly state Venturi's financial condition.

The combined entities will record assets and liabilities in accordance with
generally accepted accounting principles. Venturi's management anticipates no
adjustments to net assets of any of the combined entities to comply with or
adopt the same accounting principles or the same fiscal years. Under the
pooling-of-interests method of accounting, the retained earnings accounts of all
entities will be combined.

Venturi's historic operations have consisted of revenues from carpet cleaning
and fire and flood restoration in the areas of Orem, Utah, and Fort
Worth/Dallas, Houston and Lubbock, Texas, utilizing a proprietary technology and
process. The primary costs of operating Venturi's business are the trucks and
vans used to house the cleaning equipment, labor and cleaning equipment and
supplies.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUES. Revenues increased by 11.9% to $6,290,886 for the year ended December
31, 1998 compared to $5,620,914 for the year ended December 31, 1997. This
increase in sales was attributable to increased market penetration in geographic
areas where the Company has acquired new bases of operations, and to generally
increased marketing activities by the Company and its acquisitions.

OPERATING EXPENSES. Operating expenses totaled $12,399,297 for the year ended
December 31, 1998, an increase of 47% from $8,443,986 for the year ended
December 31, 1997. The increase in operating expenses during the current year
was primarily attributable to the 89.6% increase in the cost of goods from
1997 to 1998, which in turn was primarily attributable to the higher cost of
goods paid by carpet cleaning companies acquired by the Company before their
acquisition by the Company. The increase in operating expenses was also
partly attributable to an increase of 21.2% in administrative expenses from
1997 to 1998, which was primarily the result of inefficiencies in acquired
companies prior to their acquisition by the Company. The Company's interest
expense increased by 657% to $854,941 for the year ended December 31, 1998
compared to $130,038 for the year ended December 31, 1997. This increase in
interest expense was primarily attributable to certain liabilities assumed by
the Company in acquisitions, interest on payables owed by the Company, and
interest expense on financing provided to the Company by third parties.

LOSSES FROM OPERATIONS. Losses from operations increased to ($6,108,411) for
the year ended December 31, 1998 a 116% increase from the ($2,823,072) for
the corresponding period of the prior year. This increase was a result of the
increase in operating expenses caused primarily to the pooling of interests
accounting treatment of the Company's acquisitions, and from an increase in
general administrative expenses incurred in preparing for future acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

During the year ending December 31, 1998, Venturi received $5,087,214 in new
funding, compared with $1,235,000 in new funding during the year ending December
31, 1997. New funding in 1998 was provided by $2,000,000 from the private
placement of Series B Preferred Stock, $1,133,334 from the private placement of
Series C Preferred Stock, $1,481,875 in capital leases, and the balance from the
private sales of common stock. New funding in 1997 was provided by $146,000 in
capital leases and $1,089,000 in private placements of securities (of which
approximately $99,100 was related to subscriptions for Series A Preferred Stock,
and the balance was attributable to private placements of common stock).

As of March 31, 1999, the Company had commitments for an additional
approximately $8 million in new funding, which will include the sale of
securities and capital leases.

-17-
<PAGE>

At December 31, 1998, Venturi had a cash balance of $266,931, compared to $7,379
at December 31 of the prior year. At December 31, 1998, Venturi had a working
capital balance of $857,796, compared to $213,809 at December 31, 1997. At
December 31, 1998, Venturi's capital resources consisted of equipment leases of
$1,877,359, cash on hand of $266,931, and private equity funding of $1,619,598
representing the invested equity through December 31, 1998.

Venturi's primary liquidity needs are $1,020,000 to cover corporate overhead for
the next three months and $3,000,000 to fund purchases of additional capital
equipment. Historically, Venturi has funded its operations through operating
income, bank borrowings, and private placements of securities.

Venturi will use the proceeds from the sales of securities for which it had
commitments as of March 31, 1999 to provide working capital and to finance
additional trucks and acquisitions of carpet cleaning companies. Venturi's
business plan calls for it to have a total of 275 trucks in operation by
December 31, 1999. Venturi presently has approximately 50 trucks in service.
$3,000,000 is available to fund truck and equipment purchases pursuant to a
Master Lease Agreement with Northstar Capital, L.L.C. Venturi has signed four
(4) equipment schedules having balances totaling $693,159. Additional trucks
will be funded with the remaining $2,000,000 available under the Northstar
Capital, L.L.C. leasing facility. Venturi has also received a commitment for up
to $3,000,000 in lease financing through Capital Partners, Inc., of which
$456,000 has been funded as of March 31, 1999. These facilities should be
adequate to fund Venturi's capital equipment purchases.

Venturi's accounts receivable increased to $548,449 for the period ending
December 31, 1998 compared to $71,628 for the period ending December 31, 1997.
The increase in accounts receivable was attributable to increased revenues
primarily from sales to multi-family housing complexes and from new disaster
restoration customers.

SEASONALITY

Venturi's business varies little from season to season, although it does
experience slightly higher revenues in summer.

INFLATION

Inflation historically has not had a material effect on Venturi's operations.
When the price of raw materials has increased, the costs have been built into
the pricing structure. Venturi does not have either long-term supply contracts
or long-term contracts with customers. Prices are determined centrally, and are
quoted based on the prevailing market trends. Accordingly, Venturi does not
believe inflation will have a material effect on its future operations.

PLAN OF OPERATION

Venturi intends to enter new markets through acquisitions. Initially, Venturi
intends to focus on acquisitions in the southern and western United States. The
acquired companies will then be converted and trained in the use of
VenturiClean(TM). The next target markets for Venturi are California, Nevada and
Arizona. In selecting a new market, Venturi's primary goal is to identify a
market that has the potential to produce $100,000 in monthly revenues within six
months after consummation of the acquisition. Venturi looks for the following
attributes in acquisition candidates: five years successful operations within
the market; favorable financial condition; reputation for quality service and
integrity; quality management dedicated to aggressive growth; willingness to
accept stock in exchange for assets; and annual revenue in excess of $250,000.
Where possible, Venturi seeks to acquire market leaders or those businesses with
the largest market share. Venturi has begun to receive regular inquiries from
other companies in the industries desiring to have access to the
VenturiClean(TM) and to become part of a larger organization.

As of December 31, 1998, Venturi had approximately 50 carpet cleaning and
restoration trucks in operation. These trucks generated an average of
approximately $11,642 per truck per month. These revenue figures are better

-18-
<PAGE>

than anticipated by Venturi's management, which based its projections of future
operations on the assumption that each truck would generate approximately
$10,300 per month. Of course, Venturi cannot guarantee that its trucks will be
able to continue to generate revenue at this level. Past performance is not a
guarantee of future performance.

YEAR 2000

The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Management of the
Company does not anticipate that any significant modification or replacement of
the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company is not able to determine, however, whether any of its suppliers,
lenders, or service providers will need to make any such software modifications
or replacements or whether the failure to make such software corrections will
have an effect on the Company's operations or financial condition.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company are included beginning immediately
following the signature page to this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

-19-
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth certain information regarding the directors and
executive officers of Venturi.

NAME AGE POSITION
---- --- --------

Gaylord M. Karren 50 Chairman, Chief Executive
Officer, Director
John M. Hopkins 47 President, Director
William Thomas 45 Vice President of Assimilations
Merril L. Littlewood 54 Chief Financial Officer
Joel Karren 44 Vice President of Training
Ronald M. Karren 36 Vice President of Corporate
Communications, and Secretary
James Stone 35 Vice President of Operations,
Director
</TABLE>

The directors of Venturi hold office until the next annual meeting of
stockholders of Venturi or until their successors are elected and duly
qualified. All officers serve at the discretion of the directors.

Venturi's board will be expanded to five members during 1999, and Venturi is in
the process of establishing an audit committee and a compensation committee,
consisting of at least two independent directors. The compensation committee
will make decisions regarding salaries, incentive compensation, stock option
grants and other matters with respect to executive officers and other key
employees of Venturi.

The Board of Directors of the Company held six meetings in 1998. No director
attended fewer than 75% of all meetings of the Board of Directors in 1998.

BUSINESS EXPERIENCE

GAYLORD M. KARREN has served as Chairman, Chief Executive Officer
and Director since Venturi's founding. Mr. Karren
obtained his Bachelor of Arts degree in Finance
and Banking from Brigham Young University in 1973;
and his Masters Degree in Banking from the
University of Oklahoma in 1979. Prior to founding
Venturi, Mr. Karren managed apartment complexes
and retirement homes; formed and operated oil and
gas ventures; and directed lending operations for
leading banks in Montana and Utah.

JOHN M. HOPKINS has served as President and Director since
Venturi's founding. Prior to forming Venturi, Mr.
Hopkins was a property manager, and co-founded an
oil drilling company. In addition, he was active
in chemical and oil sales operations. Mr. Hopkins
attended Utah State University, with a pre-
engineering emphasis.

WILLIAM THOMAS has served as Vice President of Assimilations
since January 30, 1995. Mr. Thomas was the owner
and operator of T-Co Manufacturing prior to its
acquisition by Venturi. Prior to forming T-Co
Manufacturing in 1989, Mr. Thomas operated carpet
cleaning services in Garland and Lubbock, Texas.
He received his B.A. degree from Texas Tech
University in 1974, and was enrolled in the Texas
Tech Graduate School Clinical Psychology
Master/Doctorate Program in 1976.

MERRIL L. LITTLEWOOD has served as Venturi's Chief Financial Officer
since January 1, 1998. Mr. Littlewood

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<PAGE>

is a certified public accountant, and has been
associated with Potter, Littlewood & Petty, P.C.,
certified public accountants, since 1979. Prior to
1979, he held various accounting and management
positions. He received his Bachelor of Science
Degree in Accounting from Brigham Young University
in 1969.

RONALD M. KARREN has served as Venturi's Vice President of
Corporate Communications since April 1, 1997, and
as its corporate Secretary since July 1, 1998. Mr.
Karren graduated from Brigham Young University in
1991, with a Bachelor of Science Degree in
International Relations, with an emphasis on
Marketing. Prior to joining Venturi, Mr. Karren
was a project manager of a land development
project in Idaho Falls, Idaho. Mr. Karren also
founded the Great Basin Fly & Outfitters in Provo,
Utah, an exclusive fly shop. Ron Karren is the
nephew of Gaylord Karren, Venturi's Chairman and
Chief Executive Officer.

JOEL KARREN is the Vice President of Training, and was the
President of Venturi's subsidiary, T-Co
Manufacturing. He was instrumental in the design
of Venturi's first truck mount carpet cleaning
units. Mr. Karren is an expert in automotive
service, and prior to joining Venturi, operated
several successful businesses in California and
Idaho. Joel Karren is the brother of Gaylord
Karren, Venturi's Chairman and Chief Executive
Officer.

JAMES STONE has served as Vice President of Operations since
January 4, 1998. Prior to joining the Company, Mr.
Stone was the founder and chief operating officer
of Pro-Tech Restoration, Inc. and Stone Flood and
Fire, which was acquired by the Company in 1996.
Mr. Stone has also founded a securities firm.

ITEM 10. EXECUTIVE COMPENSATION

No officer has received compensation in excess of $100,000 in any of the past
three years. The following table sets forth information as to the compensation
paid or accrued to Venturi's Chief Executive Officer and President for the three
years ended December 31, 1998. The salary column includes certain management
fees paid in lieu of wages.

SUMMARY COMPENSATION TABLE

Long-Term Compensation
---------------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- ------------------------------ ----------------------
Other
Annual Restricted Securities Long-term All Other
Name and Compensa- Stock Underlying Incentive Compensa-
Principal Position Year Salary($) Bonus($) tion($) Awards($) Options/SARs(#) Payout($) tion ($)
- ------------------ ---- --------- -------- ------- --------- --------------- --------- --------
(1) (1)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gaylord M. Karren, 1998 0 0 90,000 0 104,000 0 0
Chairman, CEO 1997 0 0 90,000 0 0 0 0
and Director 1996 0 0 90,000 0 0 0 0

John M. Hopkins, 1998 0 0 90,000 0 104,000 0 0
President and 1997 0 0 90,000 0 0 0 0
Director 1996 0 0 90,000 0 0 0 0

</TABLE>

(1) The Company paid management fees to these officers, or to entities owned
principally by them, in the approximate amounts indicated in the table.
These fees were for services rendered by the officers in lieu of wages.

-21-
<PAGE>

DIRECTORS COMPENSATION

No Compensation has been paid to any directors for service in such capacity in
the past, and no such compensation is presently payable to directors, but
directors may be reimbursed for certain expenses in connection with attendance
at Board and committee meetings. At such time as the Board of Directors deems
appropriate, the Company intends to consider adoption of an appropriate policy
to compensate non-employee directors, to attract and retain the services of
qualified non-employee directors.

COMPENSATION PURSUANT TO BENEFIT PLANS AND ARRANGEMENTS

STOCK OPTIONS

By resolution dated July 1, 1997, Venturi's Board of Directors adopted a Dual
Stock Option Plan, and reserved 2,500,000 shares of the Company's Common Stock
for issuance pursuant to the Plan. The Plan is a continuation of a similar plan
adopted by the Texas Corporation in July of 1996. Of the Common Stock reserved
for issuance pursuant to the Plan, 1,500,000 shares are allocated to the
Employee Program, and 1,000,000 shares are allocated to the Consultant Program.
The Employee Program is for all key employees (including employees who are also
directors of the Company or its subsidiaries). The Consultant Program is for all
consultants including directors who are not also employees of the Company.
Options granted pursuant to the Employee Program are intended to qualify as
Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986,
as amended, and options granted under the Consultant Program are intended to be
Non-Statutory Stock Options. The Plan is being administered by the entire Board.
The entire Board administers the Consultant Program. After this offering, the
Company shall ensure that the committee satisfies the requirements of Section 16
of the Exchange Act and the Code. The administrator determines the terms of
options granted under the Plan, including the number of shares subject to the
option, exercise price, term and the rate at which the options become
exercisable. The exercise price of all Incentive Stock Options granted under the
Plan must be at least equal to the fair market value of the Common Stock of the
Company on the date the option is granted.

The options vest immediately and their term may not exceed ten years. If not
terminated earlier, the Plan will terminate on July 1, 2006. Termination will
not affect rights and obligations granted prior to termination. The
administrator has the authority to amend or terminate the Plan so long as such
amendment or termination does not adversely affect any outstanding options.

As of December 31, 1998, 470,007 incentive stock options had been granted under
the Plan at an option price of $2.40; and 608,000 nonqualified stock options had
been granted under the Plan at $.01 per share. In December, 1997, Venturi
recorded compensation expense of $1,396,000 for the difference between the
exercise price and the fair value of the underlying stock at the date of grant
of 400,000 of the nonqualified options that had been granted in 1997 (which was
$3.50 per share). In December, 1998, Venturi recorded compensation expense of
$725,920 for the difference between the exercise price and the fair value of the
underlying stock at the date of grant for nonqualified options granted in 1998.

The following table sets forth information concerning individual grants of stock
options to the Named Executive Officers during the fiscal year ended December
31, 1998.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

Number of Securities Percent of total
Underlying options/SARs granted Exercise or
Options/SARs to employees in fiscal Base Price
Name granted (#) year ($/Sh) Expiration Date
---- ----------- ---- ------ ---------------

<S> <C> <C> <C> <C>
Gaylord M. Karren 104,000 28.9% $ 0.01 May, 2008

</TABLE>

-22-
<PAGE>

<TABLE>

John M. Hopkins 104,000 28.9% $ 0.01 May, 2008

</TABLE>

The following table sets forth information concerning the exercise of options by
the Named Executive Officers during the fiscal year ended December 31, 1998, as
well as the aggregate number and value of unexercised options held by the Named
Executive Officers on December 31, 1998.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-the-Money Options/SARs at
at December 31, 1998(#) December 31, 1998($)
------------------------------- ----------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------

Gaylord M. Karren -0- -0- 104,000 -0- 128,960 -0-

John M. Hopkins -0- -0- 104,000 -0- 128,960 -0-

</TABLE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The following table sets forth certain information as of March 31, 1999,
regarding ownership of Venturi's Common Stock (i) by each person known by
Venturi to be the beneficial owner of more than 5% of Venturi's outstanding
Common Stock, (ii) by each director of Venturi, (iii) by certain related
stockholders, and (iv) by all executive officers and directors of Venturi as a
group. All persons named have sole voting and investment power with respect to
such shares, subject to community property laws, and except as otherwise noted.
The table includes unexercised options to acquire Common Stock held by the
persons listed. The table assumes that there are 13,283,138 shares of Common
Stock beneficially owned by all shareholders (being the sum of 8,679,976 shares
of Common Stock outstanding as of March 31, 1999 plus (i) 1,728,332 shares which
may be acquired at any time pursuant to options, (ii) 957,575 shares issuable
upon exercise of warrants, (iii) 64,410 shares issuable upon conversion of
64,410 shares of Series A Preferred Stock which the Series A Preferred
Stockholders have the right to acquire at any time, (iv) 1,300,000 shares
issuable upon conversion of 260,000 shares of Series B Preferred Stock which the
Series B Preferred Stockholders have the right to acquire at any time, and (v)
552,845 shares issuable upon conversion of 552,845 shares of Series C Preferred
Stock which the Series C Preferred Stockholder has the right to acquire at any
time).

Stockholder Name Number of Shares Beneficially Owned Percentage Beneficially Owned
- ---------------- ----------------------------------- -----------------------------

<S> <C> <C>
5%STOCKHOLDERS
Gaylord M. Karren (1) 1,225,515 9.23%
John M. Hopkins (2) 1,225,515 9.23%

DIRECTORS AND OFFICERS
Gaylord M. Karren 1,225,515 9.23%
John M. Hopkins 1,225,515 9.23%
William Thomas 89,618 0.67%
Merril L. Littlewood (3) 402,734 3.03%
Joel Karren 72,381 0.54%
Ronald M. Karren 29,069 0.22%
James Stone 27,383 0.21%

</TABLE>

-23-
<PAGE>

<TABLE>

All executive officers and directors as a
group (seven persons) 3,072,215 23.13%

BENEFICIAL STOCKHOLDERS
Entrepreneurial Investors, Ltd. (4) 1,250,000 9.41%
Cochran Consulting 3,545,455 26.69%

</TABLE>

- --------------

(1) Includes 104,000 shares of Common Stock for which Mr. Karren holds options,
and 1,121,515 shares owned outright.

(2) Includes 104,000 shares of Common Stock for which Mr. Hopkins holds options,
and 1,121,515 shares owned outright.

(3) Includes 400,000 shares of Common Stock for which Mr. Littlewood holds
options, and 2,734 shares owned outright.

(4) Series B Preferred Stockholders. Entrepreneurial Investors, Ltd. is a
Bahamas investment company, of which Robert E. Cordes is the sole director. As
such, Mr. Cordes has the power to vote and direct the disposition of the Series
B Preferred Stock held by Entrepreneurial Investors, Ltd. The stock of
Entrepreneurial Investors, Ltd. is widely held entirely by European investors.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth herein describes certain transactions between the
Company and certain affiliated parties. Future transactions, if any, will be
approved by a majority of the disinterested members of the Company and will be
on terms no less favorable to the Company than those that could be obtained from
unaffiliated parties.

Gaylord M. Karren, John M. Hopkins, James A. Frame, Jason Karren, Jack Paris and
Wayne Mortensen founded Action Venturi Technologies, Inc. (the "Texas
Corporation") in August 1994 and would be considered promoters of Venturi. In
connection with the formation of Action Venturi Technologies, Inc., Gaylord M.
Karren, John M. Hopkins and James A. Frame each purchased 106,690 shares of
common stock at a price of $.22 per share, for a total of $69,164. Jason Karren,
Jack Paris and Wayne Mortensen each contributed $10,000 in cash plus the value
of past services rendered to Venturi in exchange for 40,000, 35,000 and 35,000
shares of Common Stock in September, 1994. In addition, in consideration for
past services rendered to Venturi, shares of common stock of that corporation
were issued to Eric Dekker (45,833 shares), Joel Karren (4,500 shares) and Dale
Karren (5,000 shares). On June 30, 1997, the foregoing persons and all other
stockholders of the Texas Corporation exchanged their Texas Corporation stock
for a like amount and kind of stock in Hi-Tek Carpet Care, Inc. A total of
2,807,714 shares of Hi-Tek Common Stock were exchanged, including 926,250 shares
held by Gaylord M. Karren, 926,250 shares held by John M. Hopkins, 120,000
shares held by James A. Frame, 35,000 shares held by Jason Karren, 35,000 shares
held by Jack Paris, 35,000 shares held by Wayne Mortensen, and 2,500 shares held
by Merril L. Littlewood.

In connection with the organization of HiTek Carpet Care, Inc. in January of
1997, the following persons purchased Common Stock at $.10 per share, for a
total consideration of $150,000: Eileen Albertson; Autumn Leaf, Inc.; Battle of
Midway Incorporated; J.C. Blanleil; Rachael A. Burton; Mary Ann Coleman; Delta
Financial Resources, Inc.; Diversified Lenders, Inc.; Gayle Dorrsey; Ronald L.
Drake; Marci Evans; Darlene Fawcett; Kris Gornichec; Emil Gulbranson; Melville
K. Gulbranson; Rebecca Gulbranson; Kerri Heavenor; Betty Hurtado; Dixie
Hutchins; Garth P. Jarman; Bryan L. Jeffery; Wydell Jeffery; Jana Jensen; Jacob
D. Klassen; Linda Klassen; John J. Kochel; Mark Larson; Roslyn Mackay; Mary
Magouirk; Renetta Mecham; MK Resources, Inc.; Tracy J. Nelson; Suzanne Pancheri;
Freddie C. Roberts, Jr.; Karen Roberts; Janis and David R. Rowberry; Lise-Lotte
Ruzicka; Nancy Smithanik; Symmetry Inc.; Jeffery Clark Tanner; Max C. Tanner;
Mont E. Tanner; Renee Tieman; C.F. Walker; Gordon J. Weaver; Kimberly Witter;
and Monica Young.

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<PAGE>

None of the persons in the immediately preceding paragraph is the beneficial
owner of 5% of Venturi's Common Stock. Venturi has not engaged in any other
transactions with the foregoing persons.

Merril L. Littlewood, the Chief Financial Officer of the Company, is also a
principal in Potter Littlewood & Petty, P.C., certified public accountants.
Potter Littlewood & Petty, P.C. has prepared Venturi's tax returns for the years
1995, 1996, and 1997.

Venturi has outstanding loans from its executive officers and principal
stockholders. It presently owes Gaylord M. Karren $44,821; John M. Hopkins
$55,000; and James Stone $315,007. The loans from Gaylord M. Karren and John M.
Hopkins do not bear interest, are payable on demand, and have no scheduled
repayment terms with the exception of payment of $1,965 per month to Mr. Karren
to enable him to repay the source of the loan funds, a second mortgage on his
personal residence. The loans from James Stone bear interest ranging from 8.9%
to 17.11%. Monthly payments on the loans from James Stone are $6,000.

Venturi issued 700,866 shares of Common Stock to Gaylord M. Karren and John M.
Hopkins in consideration of the assignment to Venturi of certain patent
applications and in lieu of interest on the loans referred to above. Venturi
owns 30% of Destiny Recovery Systems, a Nevada limited liability company, of
which Gaylord M. Karren and John M. Hopkins own 70%. Destiny Recovery Systems in
turn owns 50% of Primacide, L.C., a Nevada limited liability company. No
payments have been made to Primacide by Venturi; payments will be paid in the
future for the purchase of the EO water manufacturing machines. See "Raw
Materials; Patents; Licenses; Trademarks and Service Marks." Venturi has loaned
Primacide $40,024 to fund its ongoing operations. This loan bears interest at 8%
per annum, and is payable on demand at any time after March 1, 1999.

Randy K. Johnson is Venturi's general counsel. He also served as Venturi's
corporate Secretary until July 1, 1998. Venturi has paid approximately $60,000
to Mr. Johnson or firms in which he practices for legal services rendered since
January 1, 1997. As of March 31, 1999, Venturi owes Mr. Johnson or firms in
which he practices approximately $70,000 for services rendered.

Venturi entered into a Consulting Agreement with Capital Solutions, Inc., a
Delaware corporation, pursuant to which CSI has agreed to assist Venturi in
locating and obtaining sources of additional capital. In consideration for such
services, Venturi paid CSI a non-refundable, nonaccountable expense retainer of
$10,000.

Venturi is a party to a financial consulting agreement with Capital Solutions of
Salt Lake City, Utah. Pursuant to this agreement, Venturi has issued 150,000
shares of Common Stock in lieu of cash payment for consulting services rendered.

Venturi is a party to a Registration Rights Agreement with Equity Services, Ltd.
("ESL"), dated December 31, 1997. Equity Services, Ltd. is the holder of 10,000
shares of Venturi's issued and outstanding Series B Preferred Stock. This stock
was issued in consideration for acting as placement agent for the Series B
Preferred Stock. The Registration Rights Agreement grants ESL the right to
demand that Venturi register under the Securities Act Common Stock issuable upon
conversion of the Series B Preferred Stock. This demand right commences June 30,
1999, and Venturi is obligated to use its best efforts to effect such a
registration. Also commencing on June 30, 1999, ESL is entitled to participate
in any registration of Common Stock initiated by Venturi.

Venturi also is a party to a Registration Rights Agreement with Entrepreneurial
Investors, Ltd. ("EIL"), dated December 31, 1997. Entrepreneurial Investors,
Ltd. is the holder of 250,000 shares of Venturi's issued and outstanding Series
B Preferred Stock. Together, ESL and EIL own all of the issued and outstanding
shares of Venturi's Series B Preferred Stock. The Registration Rights Agreement
grants EIL the right to demand that Venturi register under the Securities Act
Common Stock issuable upon conversion of the Series B Preferred Stock. This
demand right commenced December 31, 1997, and Venturi is obligated to use its
best efforts to effect such a registration. Also commencing on December 31,
1997, EIL is entitled to participate in any registration of Common Stock
initiated by Venturi.

-25-
<PAGE>

Venturi is a party to a Business and Financial Advisory Agreement with CDL
Capital Corp. (now known as Invest Linc Capital Corp.) (one of the holders of
the Series C Preferred Stock), pursuant to which Venturi retained CDL Capital
Corp. to serve as its financial advisor. Venturi is obligated to reimburse CDL
Capital Corp. for expenses, to pay consulting fees of $200 per hour, and to pay
a success fee equal to a percentage of funds raised for Venturi through debt or
equity financings. As a retainer, CDL Capital Corp. was paid a fee of warrants
to acquire 100,000 shares of Common Stock, at an exercise price of $2.05 per
share. The agreement runs for a period of one year from March 10, 1998, the date
it was signed.

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<PAGE>

PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.

Exhibit No. Document
- ----------- --------

<S> <C>

3.0 Articles of Incorporation of Venturi Technologies,
Inc. (Nevada), as amended (1)
3.1 Bylaws of Venturi Technologies, Inc.(1)
3.2 Amended and Restated Articles of Incorporation of
Venturi Technologies, Inc. (Texas) dated 5-23-96 (1)
3.3 Articles of Incorporation of Action Venturi
Technology, Inc. dated 8-15-94 (1)
3.4 Bylaws of Action Venturi Technology, Inc.(1)
3.5 Articles of Incorporation of T-Co Manufacturing,
Inc. dated 5-8-97(1)
4.0 Specimen Stock Certificate(1)
4.1 Articles of Incorporation of Venturi Technologies,
Inc. (Nevada), as amended pp. 4-5 (See above Exhibit
3.0)(1)
4.2 Bylaws of Venturi Technologies, Inc., pp. 12-13 (See
above Exhibit 3.0)(1)
4.3 Certificate of Designation of Preferences,
Limitations, and Relative Rights for Venture
Technology Enterprises, Inc. for Series A and Series
B Preferred Stock dated 12-24-97(1)
4.4 Action by Unanimous Written Consent of the Board of
Directors of Venturi Technologies Inc. Creating
Series C Preferred Stock dated 7-98 with Exhibit(1)
4.5 Registration Rights Agreement with Equity Services,
Ltd. dated 12-31-97(1)
4.6 Registration Rights Agreement with Entrepreneurial
Investors, Ltd. dated 12-31-97(1)
4.7 Lock up Agreement with Equity Services, Ltd. dated
12-23-97(1)
4.8 Lock Up Agreement with Invest Linc Emerging Growth
Equity Fund I, L.L.C. dated 7-28-98(1)
4.9 Master Equipment Financing Agreement with Sentry
Financial Corp. dated 6-18-96(1)
4.10 Master Lease Agreement with Northstar Capital LLC
dated 2-17-98(1)
5.0 Opinion Letter of Mackey Price & Williams
regarding Legality of Securities dated
7-29-98(1)
10.0 Dual Stock Option Plan between Venturi Technology
Enterprises, Inc. and its key employees, officers,
directors and consultants dated 7-1-97(1)
10.1 Form Incentive Stock Option Agreement between
Venturi Technology Enterprises, Inc. and its
employees dated 1-1-97(1)
10.2 Form Non-Statutory Stock Option Agreement between
Venture Technology Enterprises, Inc. and its
consultants dated 7-1-97(1)
10.3 Non-statutory Stock Option Agreement between Venture
Technology Enterprises, Inc. and Merril Littlewood
dated 7-1-97(1)
10.4 Requirements Agreement with DT Enterprises dated 2-
15-96(1)
10.5 Exclusive Use and Purchase Agreement between
Primicide, LLC and Venturi Technologies, Inc.(1)
10.6 Placement Agent's Option Certificate with Equity
Services, Ltd. dated 6-30-98(1)
10.7 Agreement of Collateral between Gaylord Karren and
John Hopkins and HiTek Carpet Care Inc. dated 3-
97(1)
10.8 Patent Application Assignment between John M.
Hopkins and Venturi Technology Enterprises, Inc.
dated 12-22-97(1)
10.9 Patent Application Assignment between Gaylord Karren
and Venturi Technology Enterprises, Inc. dated 12-
22-97(1)
10.10 Patent Assignment between John M. Hopkins and
Venturi Technology Enterprises, Inc. dated
12-22-97(1)
</TABLE>

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<PAGE>

<TABLE>

<S> <C>

10.11 Verified Statement Claiming Small Entity Status by
John M. Hopkins dated 3/17/97(1)
10.12 Verified Statement Claiming Small Entity Status by
Gaylord Karren dated 3-17-97(1)
10.13 Master Equipment Financing Agreement with Sentry
Financial Corp. dated 6-18-96 (See above Exhibit
4.9)(1)
10.14 Master Lease Agreement with Northstar
Capital LLC dated 1-17-98 (See above Exhibit
4.10)(1)
10.15 Warrant Purchase Agreement between Northstar
Capital, LLC and Venturi Technology Enterprises,
Inc. dated 2-17-98(1)
10.16 Letter from Capital Partners Extending Lease Funding
to Venturi Technology Enterprises, Inc. dated
5-7-98(1)
10.17 Agreement of Purchase and Sale of Assets between
Bill Thomas, d.b.a. T-Co Carpet Cleaning and T-Co
Heating Systems, and Venturi Technologies, Inc.
dated 3-96(1)
10.18 Agreement of Purchase and Sale of Assets between
Michael Shurtliff, d.b.a. Protech Carpet Cleaning
and Flood Restoration, and Venturi Technology
Enterprises, Inc. dated 3-31-98(1)
10.19 Bill of Sale and Assignment between Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Flood
Restoration, and Venturi Technology Enterprises,
Inc.(1)
10.20 Liabilities Undertaking between Michael Shurtliff,
d.b.a. Protech Carpet Cleaning and Flood
Restoration, and Venturi Technology Enterprises,
Inc. dated 4-98(1)
10.21 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking between Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Floor
Restoration, and Venturi Technology Enterprises,
Inc. dated 4-98(1)
10.22 Agreement of Purchase and Sale of Assets between
Reed T. and Lana B. Buley, d.b.a. Complete Carpet
Service, and Venturi Technology Enterprises, Inc.
dated 4-30-98(1)
10.23 Bill of Sale and Assignment between Reed T. and Lana
B. Buley and d.b.a. Complete Carpet Service and
Venturi Technology Enterprises, Inc.(1)
10.24 Liabilities Undertaking between Reed T. and Lana B.
Buley d.b.a. Complete Carpet Service and Venturi
Technology Enterprises, Inc. dated 4-98(1)
10.25 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking between Reed T. and
Lana B. Buley d.b.a. Complete Carpet Service and
Venturi Technology Enterprises, Inc. dated 4-98(1)
10.26 Letter of Intent re: Proposed Acquisition by Venturi
Technology Enterprises, Inc. of Carpet and
Upholstery Cleaning Assets of Daniel M. Levine(1)
10.27 Agreement of Purchase and Sale of Assets between
Daniel M. and Kathleen L. Levine, d.b.a. All Valley
Carpet, All Valley Carpet & Upholstery and All
Valley Restoration Service, and Venturi Technology
Enterprises dated 7-3-98(1)
10.28 Bill of Sale and Assignment between Daniel M. and
Kathleen L. Levine, d.b.a. All Valley Carpet, All
Valley Carpet & Upholstery and All Valley
Restoration Service, and Venturi Technology
Enterprises, Inc.(1)
10.29 Liabilities Undertaking between Daniel M. Levine,
d.b.a. All Valley Carpet, All Valley Carpet &
Upholstery and All Valley Restoration Service, and
Venturi Technology Enterprises dated 7-3-98(1)
10.30 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking between Daniel M.
Levine and Venturi Technology Enterprises dated 7-3-
98(1)
10.31 Agreement of Purchase and Sale of Assets between
Video Aire and Venturi Technology Enterprises, Inc.
dated 6-30-98(1)
10.32 Letter of Intent re: Proposed Acquisition of Assets
between Dirt Free Carpet & Upholstry [sic] Cleaning
Inc. and Venturi Technology Enterprises dated
6-29-98(1)
10.33 Letter of Intent re: Proposed Acquisition of Assets
between Rob Bleyl d.b.a. Disaster Plus and Venturi
Technology Enterprises, Inc. dated 7-22-98(1)
10.34 Letter of Intent re: Proposed Acquisition of Duct
Cleaning Business of Bob L. Allen dated 7-29-98(1)
10.35 Stock Purchase Agreement between CDL Capital Corp.,
CDL Emerging Growth Equity Fund I, L.L.C., Gaylord
Karren and John Hopkins, and Venturi Technology
Enterprises dated 4-10-98(1)

</TABLE>

-28-
<PAGE>

<TABLE>

<S> <C>

10.36 Placement Agreement of Venturi Technology
Enterprises, Inc. with Equity Services, Ltd. dated
12-31-97(1)
10.37 Investor Subscription Agreement of Venturi
Technology Enterprises, Inc. with Entrepreneurial
Investors, Ltd. dated 12-31-97(1)
10.38 Soliciting Dealer Agreement between Dominion Capital
and Venturi Technologies, Inc. dated 8-9-96(1)
10.39 Agreement and Plan of Reorganization of Venturi
Technologies, Inc. and HiTek Carpet Care Inc. dated
5-15-97(1)
10.40 Stock-for-Stock Reorganization Agreement between
HiTek Carpet Care, Inc. and stockholders of Venturi
Technologies, Inc. dated 6-9-97(1)
10.41 Promissory Note between HiTek Carpet Care, Inc. and
Venturi Technologies, Inc. dated 5-31-97(1)
10.42 Business and Financial Advisory Agreement between
CDL Capital Corp. and Venturi Technology
Enterprises, Inc. dated 3-10-98(1)
10.43 Application for Certificate of Authority to Transact
Business in Texas by Venturi Technology Enterprises,
Inc.(1)
10.44 Consent of Combustion Resources, L.L.C. dated
September 29, 1988(2)
10.45 Agreement of Purchase and Sale of Assets
dated as of August 14, 1998 re Dirt Free
Carpet and Upholstery
Cleaning, Inc.(2)
10.46 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking dated as of August 14,
1998(2)
10.47 Employment Agreement with Robert Bleyl dated October
5, 1998(2)
10.48 Employment Agreement with David J. Bleyl dated
October 5, 1998(2)
10.49 Agreement of Purchase and Sale Assets dated as of
October 5, 1998 with Disaster Plus corp., Robert D.
Bleyl and David J,. Bleyl(2)
23.0 Consent of Child & Company, independent accountants,
dated April 13, 1999

</TABLE>

- ------------

(1) Incorporated by reference from Registration Statement on Form SB-2, as
filed on August 3, 1998.
(2) Incorporated by reference from Amendment No. 1 to Registration Statement on
Form SB-2, as filed on October 19, 1998.

(b) REPORTS ON FORM 8-K

None

-29-
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

VENTURI TECHNOLOGIES, INC.

Dated: April 14, 1999 By: /s/Gaylord M. Karren
---------------------------
Gaylord M. Karren, Chairman of the Board
and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons in counterpart on behalf of the Company on
the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/Gaylord M. Karren Chairman of the Board and April 14, 1999
- ------------------- Chief Executive Officer
Gaylord M. Karren (Principal Executive Officer)

/s/John M. Hopkins President and Director April 14, 1999
- ------------------
John M. Hopkins

/s/James Stone Director April 14, 1999
- --------------
James Stone

/s/Merril L. Littlewood Chief Financial Officer April 14, 1999
- ----------------------- (Principal Financial and
Merril L. Littlewood Accounting Officer)

/s/Ronald M. Karren Secretary April 14, 1999
- -------------------
Ronald M. Karren

-30-
<PAGE>

VENTURI TECHNOLOGIES, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS

<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>

<S> <C>

CONTENTS

Report of Independent Auditors....................................1

Audited Consolidated Financial Statements

Consolidated Balance Sheet........................................2
Consolidated Statements of Operations.............................3
Consolidated Statements of Stockholders' Equity...................4
Consolidated Statements of Cash Flows.............................5
Notes to Consolidated Financial Statements........................6

</TABLE>

<PAGE>

CHILD & COMPANY
- ---------------
A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
265 EAST 100 SOUTH, SUITE 300, SALT LAKE CITY, UT 84111

PHONE: (801) 534-0774 FAX: (801)519-9470

INDEPENDENT AUDITORS' REPORT

Shareholders and Officers
Venturi Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Venturi
Technologies, Inc. as of December 31, 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1998 and 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Venturi
Technologies, Inc. as of December 31, 1998, and the consolidated results of
its operations and its cash flows for the years ended December 31, 1998 and
1997 in conformity with generally accepted accounting principles.

/s/ Child & Company

April 9, 1999

1
<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998

<TABLE>

<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents - Note C $ 266,931
Accounts receivable, net of allowance of $27,000
in 1998 548,449
Note Receivable - related party - Note E 40,024
Other current assets 2,342
-----------
Total current assets $ 857,796

Fixed assets - Note C
Capital lease equipment 1,877,359
Machinery and equipment 711,148
Computer and office equipment 124,464
Automobiles and trucks 1,077,938
Buildings 139,000
Land 20,000
-----------
Total fixed assets 3,949,909
Less accumulated depreciation (1,638,300)
-----------
Net fixed assets 2,311,609
-----------
Deferred tax asset, net of valuation allowance of $837,000 - Note G 3,182,162

Lease and rent deposits 115,133
-----------
Total assets $ 6,466,700
-----------
-----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,649,394
Accrued liabilities - Note J 811,970
Commercial Finance Group - Notes A & B 295,239
Notes payable to stockholders - Note B 225,202
Current portion long term debt and capital leases 822,113
-----------
Total current liabilities $ 3,803,918

Long-term liabilities - Note C
Notes payable - stockholders, net of unamortized discount 316,264
Capital lease obligations, net of unamortized discount 338,253
Notes payable to banks and vehicle finance companies 176,380
Notes payable - other 49,787
-----------
Total long-term liabilities 880,684

Commitments and contingencies - Note I
Stockholders' equity - Note D
Preferred stock, -Series A, B & C $.001 par value,
cumulative, convertible, 5,000,000 shares
authorized, 877,255 shares issued and outstanding 877
Common stock, $.001 par value, 20,000,000 shares authorized,
5,837,361 shares issued and outstanding 5,837
Additional Paid-in capital 9,698,963
Retained earnings (deficit) (7,923,579)
-----------
Total stockholders' equity 1,782,098
-----------
Total liabilities and stockholders' equity $ 6,466,700
-----------
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

2
<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31
1998 1997
------------ ------------
(Restated - Note A)

<S> <C> <C>
Revenues:
Carpet cleaning and restoration $ 6,290,886 $ 5,620,914

Expenses:
Carpet cleaning and restoration costs 3,884,475 2,049,700
Advertising 575,583 490,161
Other selling, general & administrative 6,590,241 5,465,198
Depreciation expense 494,057 308,889
Interest 854,941 130,038
------------ ------------
Total expenses 12,399,297 8,443,986
------------ ------------

Net (loss) from operations (6,108,411) (2,823,072)
Other income - interest and gains on sale
of assets 44,450 --
------------ ------------

Net (loss) before income tax benefit (6,063,961) (2,823,072)

Income tax benefit 3,182,162 --
------------ ------------

Net (loss) $ (2,881,799) $ (2,823,072)
------------ ------------

Per share amounts (basic and diluted):

Net loss from continuing operations before
income tax benefit $ (1.28) $ (.68)

Income tax benefit .66 --
------------ ------------

Net (loss) $ (.62) $ (.68)
------------ ------------
------------ ------------
Weighted average shares used in computing
per share amounts 4,796,554 4,156,416
------------ ------------
------------ ------------

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

3
<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1998

Preferred Stock Preferred Stock Additional Retained
Common Stock (Series A, B & C) Subscription Paid-in Earnings
Shares Amount Shares Amount Receivable Capital (Deficit) Total
--------- ----------- ------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1997 2,670,250 $ 2,670 39,560 $ 39 $ -- $ 760,883 $(1,311,789) $ (548,197)
(Restated - Note A)

Common stock issued
for cash 1,830,268 1,830 839,114 840,944

Common stock issued in
lieu of wages and rent 42,235 42 151,894 151,936

Preferred stock issued
for cash 198,850 199 (870,000) 1,118,301 248,500

Preferred stock issued
for services and fees 31,000 31 154,969 155,000

Preferred stock dividends
paid or accrued (54,810) (54,810)

Compensatory stock
options at fair market
value - Note D 1,396,000 1,396,000

Normal pre-pooling
distributions made to
shareholders of acquired
entities (331,207) (331,207)

Net loss (2,823,072) (2,823,072)
--------- ----------- ------- ----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1997 4,452,753 $ 4,542 269,410 $ 269 $ (870,000) $ 4,421,161 $(4,520,878) $ (964,906)
--------- ----------- ------- ----------- ----------- ----------- ----------- -----------
--------- ----------- ------- ----------- ----------- ----------- ----------- -----------

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

4
<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1998

Preferred Stock Preferred Stock Additional Retained
Common Stock (Series A, B & C) Subscription Paid-in Earnings
Shares Amount Shares Amount Receivable Capital (Deficit) Total
--------- --------- ------- -------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1998 4,542,753 $ 4,542 269,410 $ 269 $ (870,000) $ 4,421,161 $(4,520,878) $ (964,906)

Common stock issued
for cash 908,468 908 421,097 422,005

Compensatory stock
options at fair value
- Note D 767,920 767,920

Common stock issued
in lieu of interest 21,600 22 75,578 75,600

Common stock issued
for consulting services,
fees and wages 155,720 156 544,844 545,000

Common stock issued
upon conversion of
warrants 208,820 209 104,201 104,410

Proceeds received for
preferred shares
subscribed 870,000 870,000

Series B preferred stock
issued for cash 47,747 48 879,897 879,945

Series B preferred stock
issued for fees 7,253 7 145,048 145,055

Series A preferred stock
dividends paid or
accrued (64,410) (64,410)

Series C preferred stock
issued for cash 480,975 481 985,519 986,000

Series C preferred stock
issued for fees 71,870 72 147,262 147,334

Warrants issued with
lease line 1,137,750 1,137,750

Warrants issued for
legal and consulting
fees at fair value 68,686 68,686

Normal pre-pooling
distributions made
to shareholders of
acquired entities (456,492) (456,492)

Net loss (2,881,799) (2,881,799)
--------- --------- ------- -------- ------------ ----------- ----------- -----------
Balances at
December 31, 1998 5,837,361 $ 5,837 877,255 $ 877 $ -- $ 9,698,963 $(7,923,579) $ 1,782,098
--------- --------- ------- -------- ------------ ----------- ----------- -----------
--------- --------- ------- -------- ------------ ----------- ----------- -----------

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

5
<PAGE>

VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31
1998 1997
----------- -----------
(Restated - Note A)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,881,799) $(2,823,072)
Adjustments to reconcile net loss to net cash used in operating
activities:
(Gain) loss on disposal of property 38,261 (82,228)
Preferred stock issued for services and fees 292,389 155,000
Common stock issued in lieu of wages, rent, interest, and fees 725,010 151,936
Compensatory options and warrants 836,606 1,396,000
Depreciation and amortization 494,057 308,889
Amortization of debt discount 466,562 --
Changes in operating assets and liabilities:
Accounts receivable (425,910) (2,263)
Other current assets 21,101 920
Lease and rent deposits (115,133) --
Accounts payable and accrued liabilities 1,711,520 276,596
Checks drawn in excess of bank balance (28,950) 8,254
Deferred taxes, net of valuation allowance (3,182,162) --
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (2,048,448) (609,968)
CASH FLOWS FROM INVESTING ACTIVITIES
Note receivable - related party (40,024) --
Purchases of equipment and other fixed assets (274,599) (429,760)
Proceeds from the sale of fixed assets 120,250 --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (194,373) (429,760)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from bank line-of-credit (29,804) 605
Proceeds from notes payable to stockholders 65,600 229,265
Payments on notes payable and capital lease obligations (486,681) (146,485)
Payments on notes payable to stockholders (261,117) (33,887)
Payments on notes payable to employees -- (8,800)
Issuances of common stock for cash 422,005 840,944
Issuances of preferred stock for cash 1,865,945 248,500
Proceeds from preferred stock subscribed 870,000 --
Payment of cash dividends on preferred stock (25,110) (36,893)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,420,838 1,093,249
----------- -----------
NET INCREASE (DECREASE) IN CASH 178,017 53,521
Cash at Beginning of Year 88,914 35,393
----------- -----------
CASH AT END OF YEAR $ 266,931 $ 88,914
----------- -----------
----------- -----------

SUPPLEMENTAL DISCLOSURES
Schedule of non-cash investing and financing activities:
Warrants issued for lease line - unamortized debt discount $ 1,137,750 $ --
Notes payable and capital lease obligations entered into
to acquire equipment and other fixed assets $ 1,426,437 $ 221,746
Preferred stock dividends accrued but not paid $ 39,300 $ 17,917
Reduction of notes payable via sale of property -- $ 140,000
Subscription receivable $ -- $ 870,000
Cash interest paid $ 327,714 $ 103,150

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

6
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY

The summary of significant accounting policies of Venturi Technologies, Inc.
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.

BUSINESS ACTIVITY

Venturi Technologies, Inc. (the Company, formerly HiTek Carpet Care, Inc.) was
formed on January 30, 1997 in Nevada for the purpose of acquiring carpet
cleaning and damage restoration service companies. The formation was effected
with the issuance of 1,500,000 shares of common stock for $150,000. On June 30,
1997, the Company entered into a stock-for-stock agreement and plan of
reorganization between HiTek Carpet Care, Inc. (HiTek) and Venturi Technologies,
Inc. (Venturi). The combined company's business purpose is to provide carpet
cleaning and flood damage restoration services for residential, commercial and
multi-family locations throughout the U.S. Pursuant to the stock-for-stock
exchange agreement, HiTek issued 2,807,714 additional shares of its common stock
in exchange for all outstanding common shares of Venturi. Also, as part of the
exchange, HiTek issued 64,410 shares of its Series A preferred, $.001 par value,
10% cumulative, convertible, and voting stock for all 64,410 shares of Venturi
preferred, no par value cumulative convertible non-voting stock. As a result of
the exchange, the former Venturi shareholders attained ownership and voting
control over the combined entity equal to approximately 66% and Venturi became a
wholly-owned subsidiary of HiTek. Accordingly, the combination has been
accounted for as a reverse stock-for-stock acquisition under the purchase method
of accounting. Substantially all of the business activities and purposes of
Venturi have continued. Concurrent with the exchange, HiTek changed its name to
Venturi Technologies, Inc.

Prior to June 30, 1997, the only transactions of HiTek were related to
organizational and start up activities and only immaterial liabilities existed.
Accordingly, the financial statements present the historical financial position
and results of operations and retained earnings of Venturi and no goodwill has
been recorded. In what is regarded as a recapitalization, the historical
stockholders equity of Venturi has been retroactively restated for the
equivalent number of shares received in the exchange after giving effect to
differences in par value. Costs associated with the business combination have
been charged to operations of the combined entity (Venturi Technologies, Inc.).

Venturi was organized and began business in 1992. Prior to, and since the
acquisition, Venturi had obtained its growth through a series of mergers with
companies engaged in substantially the same business. Accordingly, the Company's
consolidated financial statements include not only those of HiTek but also the
operations of the combined entities. All inter-company transactions have been
eliminated in consolidation.

The names of the entities combined with Venturi during 1997 and 1998 and the
dates combined are as follows (all entities combined are engaged in carpet
cleaning and flood damage restoration):

o Complete Carpet Service - a sole proprietorship located in Dallas,
Texas. The acquisition took place in April, 1998.

7
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)

o Pro Tech Carpet Cleaning and Flood Restoration - a partnership located
in Riverton, Utah. The acquisition took place in March, 1998.

o Disaster Plus Corporation - an S-corporation located in Lindon, Utah.
The acquisition took place in October, 1998.

o Dirt Free Carpet Cleaning and Upholstery, Inc. - an S- corporation
located in Houston, Texas. The acquisition took place in September,
1998.

o All Valley Carpet and Upholstery - a sole proprietorship located in
Lancaster, California. The acquisition took place in June, 1998.

o Top Gun Carpet Cleaning, Inc. - an S-corporation located in Santa
Rosa, California. The acquisition took place in October, 1998.

o Flohr, Inc. doing business as Magic Touch Carpet and Furniture
Cleaning - an S-corporation located in Midvale, Utah. The acquisition
took place in December, 1998.

A total of 87,632 shares of $.001 par value common stock have been issued in
connection with the combinations. No combinations occurred in 1997.

Results of operations of the previously separate enterprises for the period
prior to the mergers are summarized as follows:

1998 1997
---- ----
<S> <C> <C>
Revenues $2,414,898 $3,460,651
Net Income $ 295,641 $ 339,382
Pre-combination distributions $ 456,492 $ 331,207

</TABLE>

These mergers have been treated as pooling-of-interest business combinations
wherein the operating results of each combined entity have been included in
the financial statements as though the enterprises had been combined as of
the beginning of each year presented. The combined enterprise has recorded
assets and liabilities in conformity with generally accepted accounting
principles. Accordingly, 1997 and 1998 revenues and expenses have been
restated to reflect results of the combined entities as if the combinations
had occurred at January 1, 1997. Expenses related to the mergers have been
deducted from resulting net income.

There were no adjustments to net assets of any of the combined enterprises to
comply with or adopt the same accounting principles or the same fiscal years.
Under the pooling-of-interests method of accounting the retained earning
accounts of all enterprises have been combined.

8
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)

REVENUE RECOGNITION

The Company records revenues as services are performed and as the customer is
billed or payment received. Refunds and allowances are not material.

Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with a maturity
of three months or less to be cash equivalents.

FIXED ASSETS

Depreciable fixed assets are stated at cost and depreciated using the
straight-line method based on estimated useful lives. Amortization of assets
under capital leases has been included in depreciation expense.

ESTIMATES

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets and liabilities as well as footnote disclosures
included in the financial statements. Significant estimates relating to debt
issuance costs (see note D), allowances for bad debts, income taxes (see note
G), and compensatory stock options (see Note D) have been included in the
financial statements. Actual amounts could differ from those reported.

ADVERTISING COSTS

The Company expenses the costs of advertising as incurred. Advertising expenses
aggregated $575,583 in 1998, and $490,161 in 1997.

TAXES BASED ON INCOME

Deferred taxes are provided for items recognized in different periods for
financial and tax reporting purposes in accordance with Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes.

NET LOSS PER SHARE

Net loss per share is computed using the weighted average number of common
shares outstanding during the periods presented.

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No 128, Earnings Per Share.
The Statement simplifies the standards for computing earnings per share ("EPS"),
and requires the presentation of both basic and diluted EPS on the face of the
statement of earnings with supplementary disclosures. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997. The
Company has adopted the provisions

9
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)

of SFAS no. 128 in its 1998 and 1997 financial statements. A reconciliation of
factors entering into the computation of basic versus diluted earnings per-share
is not necessary due to the anti-dilutive effect of any potential common shares
on net loss per share.

LONG-LIVED ASSETS

In 1996, the Company adopted SFAS 121, Accounting for the impairment of
Long-Lived Assets and of Long-Lived Assets to be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations or
that are expected to be generated by those assets that are less than the
carrying value of the assets. There were no impairment losses recorded in
1998 or 1997 as the result of adopting SFAS 121.

STOCK OPTIONS

In October 1995, the FASB issued SFAS 123, Accounting for Stock-Based
Compensation. Under SFAS 123, the Company has recorded compensation expense
with respect to the issuance of certain compensatory non-qualified options
and warrants (see Note D). In addition, the Company has made certain other
disclosures under SFAS 123 regarding pro-forma net loss and net loss per
share amounts using the fair value method of valuing compensatory stock
options and warrants. The Company has also recorded various other expenses
related to the issuance of warrants and options to non-employees using the
fair value method required by SFAS 123.

RECENTLY ISSUED PRONOUNCEMENTS

In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS 130 is effective for fiscal years beginning after December 15, 1997. The
Company has adopted SFAS 130 during the first quarter of 1998, though its impact
was insignificant.

In June 1997, the FASB issued SFAS 131, Disclosures about Segments of an
Enterprise and Related Information. The Statement requires public business
enterprises to report certain information about operation of segments in
complete sets of financial statements of the enterprise and in condensed
financial statements of interim periods issued to shareholders. It also
requires that public business enterprises report certain information about
their products and services, the geographic areas in which they operate, and
their major customers. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. The Company has adopted SFAS 131 in 1998, but its impact
is insignificant as management feels that only one operating segment exists
within the company. This segment is evaluated company-wide by management for
internal reporting purposes. The Company has no overseas customers.

CREDIT RISK

The Company's customers include individuals and companies that may be affected
by changing economic conditions.

10
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
(CONTINUED)

During 1997, the Company "sold" its accounts receivable to a factoring
company which paid up to 80% of current receivables and retained 16% of
current receivables sold in reserve against future bad debts. The factoring
company also charged a fee of 4% to 8% of receivables submitted. The Company
was at risk for receivables that had been sold but not collected. In 1998,
the Company settled its obligations with the factoring company and entered
into a new financing agreement with the same company. Under the new
agreement, the Company receives a specified funding amount under a $300,000
line of credit arrangement based on "eligible accounts receivable" which is
determined by the financing company once the monthly aging is submitted. The
line of credit uses the receivables as collateral and the financing company
may collect on the receivables directly as needed, to maintain adequate "loan
to value". Annual interest is compounded daily at 12% (see note B). In
addition, the financing company holds out commissions and other fees from the
monthly proceeds. The Company feels it has adequately reserved for doubtful
accounts receivable.

The Company does not routinely maintain cash balances at banking institutions in
excess of federally insured amounts. In addition, the company's customers are
made up of many very small accounts which are spread throughout the country and
are not confined to any one particular region.

RECLASSIFICATION

Certain 1997 amounts have been reclassified to conform with the 1998
presentation.

B. NOTES PAYABLE

Short-term notes payable and the carrying value of collateral at December 31,
1998 is as follows:

Net Carrying Value Note Balance at
of Collateral December 31, 1998
------------- -----------------
<S> <C> <C>
Notes payable to shareholders, no stated
interest due on demand, unsecured $ -- $225,202
Line-of-credit - $300,000 limit, 12% stated
interest rate excluding fees. Secured by
accounts receivable 548,449 295,239
------------- -----------------
$548,449 $520,441
------------- -----------------
------------- -----------------
</TABLE>

The weighted average interest rate for short-term notes during 1998 was 8.45%
and at year-end was 7.72%. The maximum amount outstanding at any month end was
$581,529 and the weighted average amount outstanding during 1998 was $401,499.

11
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Net Carrying Value Note Balance at
of Collateral December 31, 1998
------------- -----------------
<S> <C> <C>

Notes payable to shareholders, interest from
9.4% to 17.11%, monthly payments of
$300 to $2,500, unsecured, due dates -
1999 through March 2027 $ -- $ 471,209

Notes payable to banks, interest ranging from 9.25% to 14.95%, due dates
ranging from 1999 to 2013, monthly payments ranging from $361 to $975,
secured by vehicles, equipment and real estate 324,303 142,445

Notes payable to vehicle finance companies, interest ranging from 3.9% to 16%
per annum, payments from $230 to $3,649 per month, due dates - 1999 to
2002, secured by vehicles 339,010 170,595

Notes payable to individuals, interest at 12%
per annum, payment at $677 per month,
due 2011, collateralized by real estate 56,095 52,031

Note payable to bank, guaranteed by the Small Business Administration,
11.25% per annum, monthly payments of $1,298, collateralized by
certain buildings and equipment, due 2112 168,552 33,779

Capital lease obligations, for vehicles effective interest of 12% to 35.29% per
annum, monthly payments of $72 to $8,056, lease terms of 24 to 60
months, ending in 2003 (Note I) 1,474,103 1,483,440

Unamortized debt discount arising from the
issuance of detachable warrants and shares
with notes payable to shareholders and capital leases (see Note D),
amortized over the lives of the obligations using implicit
rates ranging from 12% to 32% -- (650,702)
----------- ---------
$ 2,362,063 1,702,797
-----------
-----------
Less current portion (822,113)
---------
$ 880,684
---------
---------

</TABLE>

12
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

C. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

Future minimum lease payments of capital lease obligations for the five years
succeeding December 31, 1998 are as follows:

<TABLE>

<S> <C> <C>
1999 $ 535,092
2000 456,734
2001 290,268
2002 94,933
2003 106,404

</TABLE>

Maturities of long-term debt (excluding capital leases) for the five years
succeeding December 31, 1998 are $287,021 in 1999, $49,200 in 2000, $24,962 in
2001, $126,868 in 2002, $59,592 and $322,416 thereafter.

D. SHAREHOLDERS' EQUITY

The Company has issued 700,866 shares of its no-par common stock to two of its
key officers in lieu of interest for two loans with the Company totaling
$154,975 (see note C). The loans have no stated term but are expected to be
repaid within five years. The Company originally recorded unamortized debt
discount totaling $97,446 related to the issuance equal to the value of the
shares issued in lieu of interest. The average issuance price of shares issued
through the date of the loans was used in the computation of the value of the
shares issued. Unamortized debt discount costs are amortized over the remaining
five years, assuming an interest rate of 12 1/4% per annum, and have been offset
against the face value of the underlying debt.

The Company has reserved 1,500,000 shares of common stock for adoption of an
incentive stock option plan for its employees. The options vest immediately and
expire within 10 years of the date of grant (2006). As of December 31, 1998, and
1997, 470,007 options had been granted under this plan at an option price of
$2.40 per share. The Company has reserved 1,000,000 shares of common stock for
the adoption of a non-qualified stock option plan. In July, 1997, 400,000
non-qualified compensatory options were granted under this plan, with immediate
vesting, exercisable for up to ten years, at $.01 per share. Accordingly, the
Company recorded compensation expense of $1,396,000 for the fair value of the
options ($3.50 per share) at the date of grant using the method of accounting
permitted under SFAS statement 123 (FAS 123) - Accounting for Stock Based
Compensation. In June 1998, the Company granted another 208,000 options to
executive officers with the same terms. The Company recorded compensation
expense of $725,920 under FAS 123, in 1998.

The Company has issued other common stock options and warrants throughout 1998
for various services and benefits which were considered compensatory. The number
of options and warrants granted, as well as types and amounts of services and
costs incurred are as follows.

o Combustion Resources - 20,000 options exercisable at $2.40 per share
through June of 2001. Research and development expenses of $42,000 equal to
the computed fair value of the options, were recorded. No other research
expenses were incurred.

13
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

D. SHAREHOLDERS' EQUITY (CONTINUED)

o Capital Partners - 18,274 warrants exercisable at $2.50 per share
through July of 2001. Consulting expenses of $14,436 was recorded for
the fair value of the warrants.

o Meyer Hendricks - 175, 000 warrants exercisable at $2.50 per share
through November of 2001. Legal fees of $54,250 were recorded for the
fair value of the warrants.

o Franklin Funding and Northstar Capital - 388,820 warrants exercisable
at $.50 per share and 25,000 warrants exercisable at $2.00 per share
through February 2008. The warrants were issued as part of the
Company's vehicle lease line commitment for $3,000,000 (see note C).
Accordingly, the value of the warrants totaling $1,138,000 was
recorded as debt discount and offset against the underlying liability
in accordance with Accounting Principles Board (APB) 14 - "Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants".
The Company amortized the discount over the life of each phase of the
lease which is three years using the interest rate method. The
amortization has been recorded as interest expense. In December, 1998,
Franklin Funding exercised 208,820 of the $.50 per share warrants for
no cash consideration in return for other concessions related to the
lease line.

As permitted by SFAS 123, the Company used the Black-Scholls method of computing
the fair value of options and warrants at the date of grant. The weighted
average risk-free interest rate used to estimate the fair value ranged from
5.01% to 5.15% with no expected dividends. Stock prices for sixty-one different
dates ranging both before and after grant dates were used in measuring
volatility.

The weighted average exercise prices for compensatory options outstanding at
December 31, 1998 and 1997 were $1.30 per share and $1.52 per share,
respectively. The weighted average exercise prices for options granted during
1998 is $1.75 per share. The weighted average fair value of options granted
below the market value of company stock at the grant date is $3.37 per share.
The weighted average fair value of compensatory warrants was $2.97 per share in
1998.

All options granted are exercisable. There were no options or warrants
granted in which the exercise price exceeded the fair value of stock at the
date of grant.

In 1996, the Company had granted 83,333 warrants for the purchase of common
stock to an equipment lessor at an exercise price of $2.40 per share as part of
its lease agreement. These warrants may be exercised within one year from the
date of first funding and expire in 2006. No services were rendered as
consideration for these warrants. In addition, the Company has issued warrants
for the purchase of 5,000 shares of common stock to a soliciting dealer in
consideration for services rendered in connection with the offering of Series A
Preferred Stock outlined below. The warrants entitle the holder to acquire
common stock for $5.00 per share exercisable before June, 2002. The value of
these warrants at the date of grant was estimated to be approximately $2,400.

On June 30, 1997, the Company commenced a private placement offering for 142,857
shares of common stock at $3.50 per share. The offering expired on December 31,
1997. Under the terms of the offering,

14
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

D. SHAREHOLDERS' EQUITY (CONTINUED)

each share was entitled to a warrant for the purchase of one share of common
stock at $6.00 per share, exercisable before July, 2000. At December 31, 1997,
88,409 warrants were granted under the offering.

As of December 31, 1997, the Company had issued 64,410 shares of 10%, $.001 par
value, cumulative, convertible Series A Preferred Stock as part of a 150,000
share offering at $10.00 per share. The preferred shares are convertible at any
time to common stock at a rate of one to 1.093585771. The preferred shares carry
voting rights. The shares carry liquidation preferences at $10.00 per share plus
an amount equal to all accumulated and unpaid dividends. The Company has the
option to call the Series A Preferred Stock for redemption at any time. The
price to the holders of the Series A Preferred Stock by Venturi for any such
redemption shall equal $11.00 per share plus any accrued or unpaid dividends to
the date of the call for redemption. Such redemption price shall, at the option
of the holder of the shares, either be paid in cash or in common stock at a
conversion rate of 1.093585771 of common stock for each share of Series A
Preferred Stock. Holders of the Series A Preferred Stock are entitled to
receive, when declared by the Board of Directors, cumulative cash dividends of
$1.00 per share annually, in priority to common stock dividends. The Company
declared cash dividends for the Series A preferred shareholders of $64,410 in
1998. During 1998, the Company paid dividends of $25,110. At December 31, 1998,
the Company was obligated for preferred stock dividends in arrears totaling
$57,218. As of December 31, 1997, the Company had paid $36,892 in preferred
dividends and was obligated for $17,918 in preferred dividends in arrears,
representing a total of $54,810 in preferred dividends declared in 1997.
Accordingly, these amounts were used in arriving at income available to common
shareholders in computing earnings per share. The Company has the option to call
the Series A Preferred Stock for redemption at any time at a redemption price of
$11.00 per share plus any unpaid dividends. The redemption may be paid in cash
or converted to common stock at a conversion rate of one share of common stock
for each share of preferred stock, at the option of the holder. Each share of
preferred stock includes a warrant to acquire one share of common stock for
$5.00 exercisable before June, 2002.

In December 1997, the Company commenced a private placement of 300,000 shares of
6% Series B, cumulative, convertible Preferred Stock (315,000 shares authorized)
to Entrepreneurial Investors, Ltd. (EIL). The placement took place as follows:

o Phase I for 200,000 shares at $5.00 per share on or before
December 31, 1997.

o Phase II for 50,000 shares at $20.00 per share or before March
31, 1998.

o Phase III for 50,000 shares at $20.00 per share did not occur in
1998, as planned. The Company has sought and obtained other
sources of funding to replace this funding.

The shares bear rights to a cumulative dividend of 6% per annum, when ,and as,
declared by the board of directors payable on a quarterly basis with shares of
common stock based on the 30 day average closing bid price of the common stock
prior to the declared dividend date. As of December 31, 1998 and 1997, the
Company had not paid and was not obligated for any Series B preferred dividends.
Each share of preferred stock is convertible into five shares of common stock.
The shares carry liquidation preferences of $10.00 per share plus all
accumulated and unpaid dividends. Under phases I and II of the offering, the
Company received a total of $1,750,000 as consideration for issuing 250,000
shares of Series B preferred

15
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

D. SHAREHOLDERS' EQUITY (CONTINUED)

stock, with $250,000 of the proceeds used to pay commissions, legal fees and
expenses of Equity Services, Ltd (ESL).

Concurrent with each phase of the offering, the Company issued 5,000 additional
shares at $5.00 per share to ESL as additional payment of fees and expenses. In
each of 1997 and 1998, 5000 shares were issued to ESL for these services which
have been charged to operations.

As part of the offering, the Company has agreed to grant 50,000 options to EIL,
and 5,000 options to ESL to acquire common stock upon the completion of each
phase of the offering at an option price of $3.50 per share, exercisable in five
years.

In April, 1998, the Company commenced a private placement for 1,609,756 shares
of 6% Series C cumulative, convertible, non-voting preferred stock at $2.05 per
share for a total of $3,300,000. The preferred stock has a par value of $.001
per share and bears the right to cumulative annual dividends when, and as,
declared by the Board of Directors, payable quarterly in cash or in the
equivalent number of restricted common shares of the Company (at $2.05 share).
The Series C preferred stock is convertible into common stock at the rate of one
share preferred to one share common. Consistent with the other classes of
preferred stock, the Series C preferred shares carry liquidation rights equal to
the issuance price of $2.05 per share plus accrued or unpaid dividends.

As of December 31, 1998, the Company had raised a total of $1,133,334 for
552,845 shares issued. After payment of $147,334 in financial advisory fees
and "success" fees, the Company received net proceeds of $986,000. As of
December 31, 1998, the Company granted 520,325 options for the purchase of
common stock at $2.05 per share exercisable through December of 1999. In
addition, warrants for an additional 268,293 shares of common stock were
issued at a strike price of $2.05 per share exercisable through April, 2003.
If the Series C preferred shareholders exercise these options and warrants,
they will be granted warrants to acquire an additional 268,293 share of
common stock at the $2.05 per share strike price resulting in the total
placement of 1,609,756 equivalent common shares.

The Company has not declared, nor paid any common stock dividends for 1998 or
1997. The Company also has not declared nor paid any Series B or Series C
preferred dividends. The options, warrants, and convertible preferred stock
instruments mentioned above are all securities potentially dilutive in future
periods and were not included in the computation of earnings per share in 1998
and 1997 because they are considered anti-dilutive in periods when the Company
reports losses from continuing operations. Subsequent to year-end, the Company
has issued additional shares of common and preferred stock (see Note H).

E. RELATED PARTY TRANSACTIONS

The Company has entered into several notes payable with officers and
shareholders of the Company. The amounts and terms of these notes are disclosed
in Note C.

At December 31, 1997, the Company had accrued management fees to
certain officers and shareholders

16
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

E. RELATED PARTY TRANSACTIONS (CONTINUED)

of the Company of $54,952. The Company paid management fees of $184,598 in 1998
and $137,048 in 1997 to these officers or to entities owned principally by them.
These fees were for services rendered by the officers in lieu of wages and, in
some cases, the fees were paid to the same officers owed under notes payable
outlined in Note C. The Company has also performed minor carpet cleaning
services for these companies at prices commensurate with its pricing system for
other customers.

In 1998 and 1997, the Company paid $45,745 and $39,628 respectively, in fees and
relocation expenses to an accounting firm which is owned by an officer and
shareholder of the Company. At December 31, 1998, the Company still owed this
firm $48,243.

The Company has loaned $40,024 to a company owned principally by two executive
officers and major shareholders of the Company. The note receivable bears
interest at 8% per annum and is payable upon demand any time after March 1,
1999. The Company also paid rent in 1997 of $24,500 with 7,000 shares of the
Company's common stock. This shareholder was paid a total of $48,000 in cash and
common stock in 1997 for facilities used by the Company. In 1997, the Company
paid $3,400 in commissions to a shareholder who brokered a significant vehicle
lease agreement for the Company. The Company also paid $15,000 to a shareholder
for a research study of the Company's carpet cleaning solution.

During 1998, the Company issued shares to various individuals and entities who
were existing shareholders for interest, wages, and consulting as shown on the
statement of shareholder's equity. During 1997, the Company's president opened a
personal checking account which was used to pay certain business expenses of the
Company. Some company funds were deposited into this account to cover these
expenses. As of December 31, 1997, the Company was owed approximately $18,000
from its president for excess funds deposited into the account.

F. COMPANY OPERATIONS AND GOING CONCERN CONSIDERATIONS

As shown in the accompanying financial statements, the Company has incurred
net pre-tax losses of $6,063,961 for the year ended December 31, 1998 and
$2,823,072 for the year ended December 31, 1997. As of December 31, 1998, the
Company reported a retained earnings deficit of $7,923,579. The accompanying
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. However, management has
consistently shown the ability to raise capital through debt and equity
financing. Throughout 1997 and 1998, and since year-end, management has
continued to follow through on its plans to raise the necessary capital to fund
operations and repay its current obligations. As discussed in notes G and H, the
Company has entered into negotiations for several agreements to raise capital
and secure additional market share. The Company also plans to continue its
strategy of acquiring profitable carpet cleaning and damage restoration
companies to meet the demand that management expects to face as a result of its
exclusive service arrangement with a large carpet manufacturer. To date, the
Company has been negotiating with several of these "targets" and expects to
close agreements with several of these in 1999. The anticipated financing in
1999 under agreements that are currently being negotiated is expected to fund
operations and meet the Company's current obligations through the end of 1999.
Accordingly, in spite of the Company's historical losses, management believes
that significant doubt about the Company's ability to continue as a going
concern is mitigated.

17
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

G. INCOME TAXES

The Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements to give effect to the resulting temporary differences which arise
primarily for differences in accounting methods, the basis of fixed assets, and
depreciation methods based on the income taxes expected to be payable in future
years. Tax credits (if any) are accounted for by the flow-through method as a
reduction of the current income tax provision.

Income tax expense (benefit) for 1998 consists of:

Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Federal $ -- $(2,969,806) $(2,969,806)
State $ -- (212,356) (212,356)
-------- ----------- -----------
Total $ -- $(3,182,162) $(3,182,162)
-------- ----------- -----------
-------- ----------- -----------
</TABLE>

Components of deferred tax expense (benefit) consists of:

Year Ended December 31
1998 1997
----------- -----------
<S> <C> <C>
Debt discount amortization $ (168,263) $ --
Stock based compensation (313,727) (523,500)
Net operating loss (3,537,172) (1,114,561)
Valuation allowance 837,000 1,638,061
----------- -----------
Net deferred tax benefit $(3,182,162) $ --
----------- -----------
----------- -----------
</TABLE>

Reconciliation of taxes at the federal statutory rate to income tax benefit:

Year Ended December 31
1998 1997
----------- -----------
<S> <C> <C>
Tax benefit computed at the federal income tax
rate of 35% $(2,122,387) $ (988,075)
State tax benefit, net of valuation allowance (212,356) --
Income of enterprises passed through to shareholders
in periods prior to combination (103,474) (118,784)
Other 3,500 (22,436)
Increase (decrease) in valuation allowance (747,445) 1,129,295
----------- -----------
Net benefit $ 3,182,162 $ --
----------- -----------
----------- -----------

</TABLE>

The Company has adopted the provisions of Financial Accounting Statement No.
109, "Accounting for Income Taxes." Under Statement 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial operating
and tax bases of assets and liabilities and are measured using the enacted
marginal tax rates and

18
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

G. INCOME TAXES (CONTINUED)

laws that will be in effect when the differences are expected to reverse.

There was no significant provision for federal or state income taxes for 1997 as
the Company had incurred significant operating losses and there was no assurance
that the Company would realize the benefit of the resulting net operating loss
carryforwards.

Accordingly due to the uncertainties surrounding the timing of realizing the
benefits of its favorable tax attributes in future tax returns, the Company had
placed a valuation allowance against its otherwise recognizable deferred tax
assets. The valuation allowance increased by approximately $1,138,000 during the
year ended December 31, 1997. The increase in the valuation allowance was due to
the increase in the net operating loss carry forward.

Since 1997, however, management has evaluated its ability to raise funds in
the capital markets and to secure lease and debt financing (see note E) and
is of the opinion that the Company has the ability, more likely than not, of
realizing the benefits of the net operating loss carryforwards within the
permitted tax carryforward period of 20 years. The Company's management has
come to this conclusion as the result of negotiations that have take place
before year end with a large multinational carpet manufacturer that has
agreed to provide funding to the Company for $3,000,000 under a Series D
preferred stock agreement (see notes F and H). As part of the negotiations,
the carpet manufacturer has agreed to require all of its dealers throughout
the United States to use the Venturi system, thus providing the Company
with access to markets that it currently does not have access to. Management
is of the opinion that its strategy of acquiring profitable companies with
shares of its common stock combined with its access to markets under the
exclusive arrangement with the manufacturer will enable it to realize taxable
income sufficient to utilize the net operating loss carryforwards.
Accordingly, the valuation allowance has been reduced from $1,638,000 to
$837,000.

Certain deferred tax assets arising form temporary differences relating to
non-qualified compensatory stock options and warrants have been recorded, but a
valuation allowance of $837,000 has been placed against them due to the
continued uncertainty as to the eventual share price at which they may be
exercised. Because the deferred tax assets relate to net operating loss
carryforwards which the Company doesn't expect to realize in the next twelve
months, they have been classified as long-term.

The amount of deferred tax assets along with the offsetting valuation
allowances are significant estimates in which it is reasonably possible that
the effect on the financial statements will change in the near term due to
the fact that agreements mentioned in the forgoing paragraph may be rescinded
at some future date.

Future net operating loss carry-forwards may be limited by the provisions of IRC
Section 382, which potentially limits the use of net operating losses after a
significant change in ownership of an entity occurs.

Current tax benefit for 1998 and 1997 does not include the tax effects of
entities combined prior to date of consummation which were S-Corporations,
partnerships, or sole proprietorships through the date of combination with the
Company. Accordingly, taxable income prior to this date will be taxed to the
former shareholders of these entities. Net operating loss carryforwards of
$8,036,458 will expire in 2011 through 2013.

19
<PAGE>

VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

H. SUBSEQUENT EVENTS

Subsequent to year-end the Company issued 2,727,270 shares of common stock
for cash of $981,000 and continues to pursue opportunities to obtain funding
with the issuance of additional shares. Shares for services and in lieu of
interest have also been issued.

The Company has entered into negotiations with a large multinational carpet
manufacturer for the purchase of 2,150,000 shares of Series D preferred stock
for $3,000,000. Discussions with company legal counsel and with company
management indicated that the agreement is likely to be signed in April, 1999
and as part of its provisions will include an exclusive service agreement
whereby Venturi will provide the carpet cleaning and maintenance services for
all of the manufacturer's dealers across the country.

On March 16, 1999, the Company signed a letter of intent with a group of foreign
investors for the issuance of 1,052,632 shares of common stock for $2,000,000.

Had each of the forgoing events occurred in 1998, the number of common and
preferred shares outstanding at December 31, 1998 would have changed
materially.

I. LEASE COMMITMENTS AND CONTINGENCIES

The Company leases vehicles, which are recorded in the financial statements as
capitalized leases (see Note C). Total amortization of leased vehicles included
in depreciation expense is $242,241 for 1998 and $58,320 for 1997.

The Company also leases office space and certain equipment under cancelable
and non-cancelable lease arrangements accounted for as operating leases. Rent
expense under non-cancelable leases was $82,903 in 1998 and $83,820 in 1997.
Future minimum payments under non-cancelable lease arrangements for the next
five years are as follows: $118,558 in 1999, $118,558 in 2000, and $45,991 in
2001.

The Company is currently defending a lawsuit brought by owners of a once
prospective merger candidate. The plaintiffs are asserting damages of $2,500,000
for violation of Texas Securities laws. As of the date of this report, the
Company has not answered the plaintiff's complaint, but intends to do so and to
vigorously pursue a counterclaim against the plaintiff for misrepresentations
made to induce the Company to acquire the plaintiffs company. Both the Company's
management and its legal counsel believe the plaintiff will not recover a
material judgement against the Company.

The Company is also defending an action brought by a temporary staffing service
seeking $51,000 in damages for personal services. The Company is disputing the
amounts claimed, but management believes an unfavorable outcome would not have a
material impact on its financial statements.

J. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Included in accrued liabilities are sales tax obligations totalling $102,739,
accrued wages and salaries of $135,235, and payroll taxes payable of $386,333, a
portion of which are delinquent and includes estimates of penalties.

<PAGE>

EXHIBIT 23.0

PHONE: (801) 534-0774 FAX: (801)519-9470

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form 10-KSB of our
report dated April 9, 1999 on our audits of the financial statement of Venturi
Technologies, Inc.

CHILD & COMPANY, PC
Salt Lake City, Utah
April 14, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VENTURI
TECHNOLOGIES, INC. AUDITED CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED
DECEMBER 31, 1998 AND 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 266,931
<SECURITIES> 0
<RECEIVABLES> 548,449
<ALLOWANCES> 27,000
<INVENTORY> 0
<CURRENT-ASSETS> 857,796
<PP&E> 3,949,909
<DEPRECIATION> (1,638,300)
<TOTAL-ASSETS> 6,466,700
<CURRENT-LIABILITIES> 3,803,918
<BONDS> 880,684
0
877
<COMMON> 5,837
<OTHER-SE> 1,775,384
<TOTAL-LIABILITY-AND-EQUITY> 6,466,700
<SALES> 6,290,886
<TOTAL-REVENUES> 6,290,886
<CGS> 0
<TOTAL-COSTS> 3,884,475
<OTHER-EXPENSES> 8,514,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 854,941
<INCOME-PRETAX> (6,063,961)
<INCOME-TAX> 3,182,162
<INCOME-CONTINUING> (2,881,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,881,799)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)

</TABLE>