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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
[ ] 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)
6295 EAST 56TH AVENUE
COMMERCE CITY, COLORADO 80022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 444-4444
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 [ ]
As of August 10, 2000, Registrant had outstanding 13,840,682 shares of
Common Stock.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
UNAUDITED
<TABLE>
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 538,530
Accounts receivable, net of $120,000 allowance for
doubtful accounts 1,432,394
Inventory 159,237
Note receivable-related party 58,227
Other current assets 78,257
Total current assets 2,266,645
Fixed assets
Capital lease equipment 8,010,112
Machinery and equipment 1,128,717
Computer and office equipment 275,769
Automobiles and trucks 1,113,394
------------
Total fixed assets 10,527,992
Less accumulated depreciation (2,689,875)
------------
Net fixed assets 7,838,116
Deferred tax asset, net of valuation allowance of $3,827,408 3,648,000
Goodwill, net of amortization of $248,016 6,677,231
Lease and rent deposits 362,482
------------
Total assets $ 20,792,474
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,148,811
Accrued liabilities 1,460,948
Notes payable to stockholders 1,114,922
Current portion long-term debt and capital leases 2,486,899
------------
Total current liabilities 7,211,580
Long-term liabilities
Notes payable - stockholders 3,929,602
Capital lease obligations, net of unamortized discount 4,072,805
------------
Total long-term liabilities 8,002.407
Total Liabilities 15,213,987
============
Stockholders' equity
Preferred stock, Series A through E, $.001 par
value, cumulative, convertible, 5,000,000
shares authorize, 3,408,993 issued and outstanding 3,408
Common stock,$.001 par value, 20,000,000 shares authorized,
13,840,607 issued and 13,837,907 outstanding 15,041
Additional Paid-in capital 28,665,869
Common shares held in treasury (13,091)
Retained earnings (deficit) (23,092,739)
------------
Total stockholders' equity 5,578,487
------------
Total liabilities and stockholders' equity $ 20,792,474
============
</TABLE>
2
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VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
June 30
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
Carpet cleaning $ 4,924,491 $ 2,220,199
Expenses:
Carpet cleaning 4,502,503 2,135,804
Other selling, general & administrative 1,359,970 784,882
Depreciation and amortization 757,673 237,770
------------ ------------
Total expenses 6,620,146 3,158,456
------------ ------------
Net (loss) from operations (1,695,654) (938,257)
Other income and expense:
Interest expense and amortization of debt discount (528,117) (125,195)
Gain on Sale of Fixed Assets 48,464
------------ ------------
Net (loss) from continuing operations,
before income tax benefit (2,175,308) (1,063,452)
Income tax benefit -- 372,208
------------ ------------
Net (loss) $ (2,175,308) $ (691,244)
============ ============
Per share amounts (basic and diluted):
Net loss from continuing operations before
income tax benefit $ (.16) $ (.10)
Income tax benefit $ -- $ .04
------------ ------------
Net (loss) $ (.16) $ (.07)
============ ============
Weighted average shares used in computing
per share amounts 13,803,606 10,365,976
============ ============
</TABLE>
3
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VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
June 30
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,175,477) $ (691,244)
Adjustments to reconcile net loss to net cash used
in operating activities:
Provision for allowance on accounts receivable 32,267 --
Common stock issued in lieu of wages, rent, interest,
and fees 83,880 --
Compensatory options and warrants -- --
Depreciation and amortization 757,673 237,770
Gain on Sale on sale of Fixed Assets (48,464) --
Impairment losses -- --
Changes in operating assets and liabilities:
Accounts receivable (378,613) (654,343)
Other current assets 56,641 (3,884)
Inventory (36,209) --
Lease and rent deposits (69,456) --
Accounts payable and accrued liabilities (212,557) (313,132)
Deferred taxes, net of valuation allowance -- (372,208)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,990,312) (1,797,041)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and other fixed assets (68,113) (1,893,667)
Proceeds from Sales of Fixed Assets 50,000
Cash Given up with Discontinued Operations (33,381) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (51,494) (1,893,667)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit 1,000,000 729,730
Payments on capital lease obligations -- --
Payment of Cash Dividend -- (15,727)
Payments on notes payable to stockholders (2,398,166) --
Issuances of common stock for cash 1,346,354 4,820,000
Issuances of preferred stock for cash 1,500,000 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,448,188 5,534,003
----------- -----------
NET INCREASE (DECREASE) IN CASH (593,618) 1,843,295
Cash at Beginning of Period 538,530 292,479
----------- -----------
CASH AT END OF PERIOD $ 1,132,148 $ 2,135,774
=========== ===========
Supplemental disclosures - Cash interest paid $ 213,245 $ 151,363
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
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VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
UNAUDITED
1. INTERIM FINANCIAL STATEMENT POLICIES AND DISCLOSURES
The unaudited, consolidated, condensed financial statements of Venturi
Technologies included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote Disclosures normally required in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These consolidated, condensed financial statements reflect all adjustments
which, in the opinion of management, are necessary to present a fair statement
of the results of operations for the interim periods presented. All of the
adjustments which have been made in these consolidated, condensed financial
statements are of a normal recurring nature.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-KSB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Form 10-QSB may contain trend information and forward-looking
statements that involve risks and uncertainties. The actual results of
operations of the Company could differ materially from the Company's historical
results of operations and those discussed in such forward-looking statements as
a result of certain factors set forth in this section and elsewhere in this Form
10-QSB, including information incorporated by reference.
RESULTS OF OPERATIONS
REVENUES. Revenues increased by 122% to $4,924,491 for the quarter ended June
30, 2000, compared to $2,220,199 for the quarter ended June 30, 1999. This
increase was attributable primarily to the Company's growth into new geographic
areas by virtue of acquisitions of carpet cleaning companies, and to increased
market penetration in geographic areas where the company has acquired new bases
of operations.
OPERATING EXPENSES. Operating expenses increased by 110% to $6,620,146 for the
quarter ended June 30, 2000, compared to $3,158,456 for the quarter ended June
30, 1999. This increase is attributable to the acquisitions made during the past
year. During the second quarter of 2000 management commenced an aggressive plan
to reduce operating expenses. During the quarter, approximately 17 positions
were eliminated from on going base operations. In July 2000, an incentive
compensation plan for technicians was implemented throughout the company.
Historically, most technicians were compensated on an hourly basis. This plan is
expected to improve productivity and to increase revenue.
Due to a negative impact on cash flow, operations in Lexington and Louisville,
Kentucky, and Lubbock, Texas, were closed during the quarter. Likewise,
Operations in Santa Rosa, California were close during July 2000. Assets from
these bases were redeployed to other existing operations. The following table
shows summarized combined results of the above mentioned closed bases for the
quarter ended June 30, 2000:
<TABLE>
<S> <C>
Revenues $205,116
5
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Cash Expenses ($437,470)
Cash Loss ($232,355)
</TABLE>
OTHER SELLING, GENERAL AND ADMINISTRATIVE. Other selling, general and
administrative expenses increased 73% to $1,359,970 for the quarter ended June
30, 2000 compared to $784,882 for the quarter ended June 30, 1999. This increase
is primarily attributed to corporate overhead expenses. During the quarter the
company's corporate office was relocated from Orem, Utah, to Commerce City,
Colorado. Approximately 34 corporate overhead positions were eliminated,
primarily from the office in Orem, while approximately 6 positions were added in
Commerce City.
OTHER INCOME AND EXPENSE. Other income and expense increased 283% to $479,653
for the quarter ended June 30, 2000 compared to $125,195 for the quarter ended
June 30, 1999. This is primarily an increase in interest expense associated with
the additional truck lease obligations entered into during the last year.
LIQUIDITY AND CAPITAL RESOURCES
a. On April 6, 2000, the Internal Revenue Service filed a Notice of Federal Tax
Lien against the Company in the amount of $342,121.82 for unpaid withholding
taxes during 1998 and 1999, plus penalties and interest. In researching the
non-payment of federal withholding taxes, management discovered that the Company
had also failed to pay a substantial amount of state withholding taxes during
1998, 1999 and 2000 to the states of Utah, Texas and California. Management
estimates that the total amount of unpaid state withholding taxes is
approximately $290,000, not including interest and penalties. It is estimated
that the total unpaid federal and state withholding taxes through April 2000,
including penalties and interest, is approximately $ 1,140,000. On July 31, 2000
the Internal Revenue Service file Notice of Federal Tax Lien against the Company
in the amount of $25,523.42 for unpaid withholding taxes during 1999.
Additionally, on July 31 2000, the Company received notice from the Internal
Revenue Service that it intends to levy certain assets in the amount of
$171,198.60 for unpaid withholding taxes during the quarter ended March 31,
2000. The Company made adequate provisions for all of these items in the quarter
ended March 31, 2000.
On April 6, 2000, current management of the Company was unaware that federal and
state withholding taxes had not been paid during 1998 and 1999. Upon learning of
the Company's failure to pay such federal and state taxes, management hired
counsel to represent the Company in working out a payment arrangement with
federal and state taxing authorities, and immediately began work on a plan to
fund any such payment arrangement. Management is confident that the Company will
be able to pay all unpaid federal and state withholding taxes, penalties and
interest and that the filing of the Federal Tax Lien will not have a material
adverse effect upon the Company or its operations.
The company has withheld and remitted all applicable federal and state payroll
taxes for the quarter ended June 30, 2000
b. On May 16, 2000, the company received notice that its $1,000,000 Note Payable
to Aspen Capital Resources Partner, LLC. had been called and was payable May 26,
2000. The Aspen Capital note was replaced with a $1,000,000 revolving line of
credit provided by Compass Bank, in Houston, Texas. The Compass Bank line of
credit is payable in full on May 30, 2001. The interest rate is a variable rate
based on
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the prime rate as published in the WALL STREET JOURNAL. Interest for the Compass
bank line of credit is payable on a quarterly basis.
c. During the quarter ended June 30, 2000, the Company raised a total of
$2,838,630 from the sale of common stock, Series F Preferred Stock and warrants
to purchase common stock to certain accredited investors, most of whom had a
pre-existing relationship with the Company. See Sales of Unregistered
Securities, below.
d. Management is currently in discussion with several parties to raise the
capital necessary to fund the company's current cash needs, as well as to fund
the company's future growth. Additionally, management is continuing its efforts
to maximize the cash flow of the company's current operations. Management is
actively engaged in several initiatives to increase revenue, reduce and control
costs and to improve working capital management. Management is confident of its
ability to raise sufficient capital to meet the company's current obligations,
as well as, to fund the company's growth.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
VORTEX ENGINEERING, LLC vs. VENTURI TECHNOLOGIES, INC., AERO TECH
MANUFACTURING, INC., AND FRANKLIN FUNDING, INC., Third District Court, Salt
Lake County, Utah, Civil No. 000904048. In May 2000 Vortex Engineering, LLC
filed an action against the Company and against Aero Tech Manufacturing, Inc.
and Franklin Funding, Inc., claiming damages in excess of $1.6 million
arising out of the Company's alleged breach of an agreement to purchase
carpet cleaning trucks and equipment from Vortex. An amended complaint was
filed in June 2000, and the Company filed an answer and counterclaim against
Vortex in July 2000. The Company entered into an agreement in June 1999 to
purchase carpet cleaning trucks from Vortex. Vortex subcontracted its
manufacturing obligations under the agreement to Aero Tech Manufacturing.
Franklin Funding, Inc. was the Company's financing source for the trucks. The
Company terminated the agreement with Vortex primarily because of defects in
the trucks and equipment and because of the failure and refusal of Vortex to
remedy the defects. Vortex claims the Company is obligated to purchase an
additional quantity of trucks pursuant to the terms of the agreement, despite
the termination. There is also a dispute between Vortex and Venturi as to the
ownership of the vehicle exhaust heat exchange system used on the Venturi
trucks. Discovery has not begun. The parties have tentatively scheduled a
mediation session in September to attempt to reach a quick resolution. It is
too early to predict the outcome of this case, but management does not
believe an unfavorable outcome would have a materially adverse effect upon
the Company or its patented process.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
SALES OF UNREGISTERED SECURITIES
During the quarter ended June 30, 2000, the Company had the following sales of
unregistered securities:
(a) In April, 2000, the Company sold a total of 331,815 shares of common
stock for $2.00 per share, and granted five year warrants to purchase
a total of 259,909 shares of common stock for $2.81 per share, to the
following, each of whom is an accredited investor as defined in
Regulation D promulgated under the Securities Act of 1933:
<TABLE>
<CAPTION>
Investor Shares Warrants
-------- ------ --------
<S> <C> <C>
Carl M. and Marie T. Bouckaert (1) 246,346 192,961
Greenwich A.G. (2) 85,469 66,948
</TABLE>
-------------------
7
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(1) Mr. and Mrs. Bouckaert are the owners of Beaulieu Group, LLC,
holder of 2,303,738 shares of Series D Preferred Stock of the
Company, convertible into 4,607,476 shares of commons stock. The
Chief Operating Officer of Beaulieu Group, LLC (Stuart W. Thorn)
is a member of the board of directors of the Company.
(2) Greenwich A.G. is the holder of 1,600,000 shares of common stock
of the Company, and one of its managing directors (Daniel
Dornier) serves on the board of directors of the Company.
(b) On April 18, 2000, the Company sold a total of 150,000 shares of its
Series F Preferred Stock for $10.00 per share, with each one share of
Series F Preferred Stock convertible into five shares of common stock,
and granted five year warrants to purchase a total of 587,500 shares
of the Company's common stock for an exercise price of $2.81 per
share, to the following, each of whom is an accredited investor as
defined in the Securities Act of 1933:
<TABLE>
<CAPTION>
Investor Shares Warrants
-------- ------ --------
<S> <C> <C>
Daniel Dornier (1) 75,000 (convertible 293,750
into 375,000 shares
of common stock)
Dr. Rainer Bischoff (2) 75,000 (convertible 293,750
into 375,000 shares
of common stock)
</TABLE>
-------------------
(1) Daniel Dornier is a member of the board of directors of the
Company. He is also a managing director of Greenwich A.G., holder
of 1,600,000 shares of the Company's common stock.
(2) Dr. Rainer Bischoff is a managing director of Greenwich A.G.,
holder of 1,600,000 shares of the Company's common stock.
(c) In response to an urgent and sudden need for capital, in June 2000,
the Company sold a total of 675,000 shares of common stock for $1.00
per share (a discount of approximately 10-20% from the then market
price of the Company's common stock), and granted warrants to purchase
675,000 shares of common stock for $1.00 per share, to the following
individuals, each of whom is an accredited investor as defined in
Regulation D under the Securities Act of 1933:
<TABLE>
<CAPTION>
Investor Shares Warrants
-------- ------ --------
<S> <C> <C>
BER Investments, LTD (1) 150,000 150,000
Daniel Dornier (2) 150,000 150,000
Mitchell J. Martin (3) 75,000 75,000
Gabrielle Dornier (4) 200,000 200,000
Borries Broszio 100,000 100,000
</TABLE>
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(1) BER Investments, LTD is also the holder of 100,000 shares of
Series F Preferred Stock, convertible into 500,000 shares of
common stock, and the holder of warrants to purchase 391,666
shares of common stock for $2.81 per share. Bruce E. Ranck,
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chairman of the board of directors of the Company, is managing
partner of BER Investments, LTD.
(2) Daniel Dornier is a member of the board of directors of the
Company. He is the holder of 75,000 shares of Series F Preferred
Stock (convertible into 375,000 shares of common stock) and
warrants to purchase 293,750 shares of common stock. He is also a
managing director of Greenwich A.G., holder of 1,685,469 shares
of common stock and warrants to purchase an additional 66,948
shares of common stock.
(3) Mitchell J. Martin is a member of the board of directors of the
Company. He is also the holder of 372,750 shares of common stock.
(4) Gabrielle Dornier is the sister of Daniel Dornier, a director of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on June 22, 2000 in Houston,
Texas. Proxies for the meeting were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934. As of the May 31, 2000 record date for the
meeting, the Company had shares of common stock and voting preferred stock
outstanding that were entitled to a total of 19,096,934 votes. Shares
representing a total of 11,250,689 votes (58.9% of total) were represented at
the meeting in person or by proxy.
The following matters were submitted to shareholders for a vote at the meeting:
(a) the election of five members to the Company's board of directors; (b) the
amendment to the Company's Articles of Incorporation to increase the number of
shares of capital stock from 27,000,000 shares of common stock and 5,000,000
shares of preferred stock to 50,000,000 shares of common stock and 7,000,000
shares of preferred stock; (c) the approval of the Company's 2000 Stock
Incentive Plan for employees and consultants, and the allocation of 1,750,000
shares of the Company's common stock for issuance pursuant to options granted
under the Plan, and (d) the ratification of the appointment of Child & Company
as independent auditors of the Company for the fiscal year ending December 31,
2000.
All of the nominees for the board of directors were elected, and all of the
proposals submitted to the shareholders were approved. The following votes were
cast at the meeting:
<TABLE>
<CAPTION>
Matter Votes For Votes Against Abstain
------ --------- ------------- -------
<S> <C> <C> <C>
ELECTION OF DIRECTORS
Bruce E. Ranck 11,248,866 0 1,823
Michael F. Dougherty 11,248,866 0 1,823
Mitchell J. Martin 11,248,237 0 2,452
Daniel Dornier 11,250,689 0 0
Stuart W. Thorn 11,250,689 0 0
AMENDMENT TO ARTICLES OF INCORPORATION 11,231,060 19,000 629
ADOPTION OF 2000 STOCK INCENTIVE PLAN 11,241,689 9,000 0
RATIFICATION OF INDEPENDENT AUDITORS 11,250,689 0 0
</TABLE>
9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) No reports were filed on Form 8-K during the quarter for which this
report is filed.
10
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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: August __, 2000 By: /s/ Michael F. Dougherty
--------------------------------------
Michael F. Dougherty
Chief Executive Officer
By: /s/ Stephen S. Abate
--------------------------------------
Stephen S. Abate
Chief Financial Officer
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