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As filed with the Securities and Exchange Commission on February 10, 2000
Commission File No. 333-94517
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VENTURI TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
NEVADA 7217 87-0580279
(State of jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Classification Code Number) Identification Number)
organization)
763 NORTH 530 EAST
OREM, UTAH
(801) 235-9552
(Address and telephone number of registrant's principal executive offices and
principal place of business)
GAYLORD M. KARREN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
763 NORTH 530 EAST
OREM, UTAH 84097
(801) 235-9552
(Name, address and telephone number of agent for service)
----------------------
Copies to:
RANDALL A. MACKEY, ESQ. RANDY K. JOHNSON, ESQ.
MACKEY PRICE & WILLIAMS VENTURI TECHNOLOGIES, INC.
170 SOUTH MAIN STREET, SUITE 900 763 NORTH 530 EAST
SALT LAKE CITY, UTAH 84101-1655 OREM, UTAH 84097
TELEPHONE: (801) 575-5000 TELEPHONE: (801) 235-9552
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER
THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
-----------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 (the "Securities Act"), other than securities offered
only in connection with dividend or interest reimbursement plans check the
following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission acting pursuant to said Section 8(a), may determine.
<PAGE>
VENTURI TECHNOLOGIES, INC.
CROSS REFERENCE SHEET
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FORM S-3 ITEM NO. AND CAPTION PROSPECTUS CAPTION
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<S> <C>
Item 1. Front of Registration Statement and Outside Front Cover Page
Outside Front Cover Pages of Prospectus
Item 2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus Cover Pages
Item 3. Summary Information , Risk Factors and Ratio Prospectus Summary; Risk
of Earnings to Fixed Charges Factors
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Price Not Applicable
Item 6. Dilution Not Applicable
Item 7. Selling Security Holders Selling Securityholders, Optionholders and
Shareholders
Item 8. Plan of Distribution Outside Front Cover Page; Plan of Distribution
Item 9. Description of Securities Outside Front Cover Page; Description of
Securities
Item 10. Interests of Named Experts and Counsel Legal Matters; Exhibits
Item 11. Material Changes Not Applicable
Item 12. Incorporation of Certain Information by Documents Incorporated by Reference
Reference
Item 13. Disclosure of Commission Position Description of Securities
on Indemnification for Securities Plan of Distribution
Act Liabilities
Item 14 Other Expenses of Issuance and Distribution Other Expenses of Issuance and Distribution
Item 15. Indemnification of Directors and Officers Indemnification of Directors
and Officers
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
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PROSPECTUS
10,673,579 Shares of Common Stock
VENTURI TECHNOLOGIES, INC.
We provide carpet cleaning and fire and flood restoration services
using proprietary technology known as the VenturiCleanSM System. We believe
our new process for cleaning carpets represents a major advance in carpet
cleaning technology. Only the patented VenturiCleanSM System uses our
proprietary non-toxic, non-detergent, non-surfactant, high temperature and
molecularly-aligned water that creates a "super-wet" cleaning fluid ("EPA"
water). The VenturiCleanSM System recovers most of the water applied to
carpets, reducing drying time, while also killing and removing almost all
foreign contaminants and pathogens, all with zero toxicity. No other carpet
cleaning system uses the same water treatment, high temperatures, retrieval,
and fluid control system as our company.
Our strategy is to consolidate the highly fragmented professional
carpet cleaning services industry by acquiring independent carpet cleaning
companies nationwide. We presently operate in Utah, Texas, California,
Nevada, Arizona, Florida, Kentucky and Vancouver, British Columbia. We have
identified acquisition targets in several other states, and we plan to have a
nationwide presence within the next 12 to 18 months. We plan to expand our
operations to other states through acquisitions, until the VenturiCleanSM
System is in use throughout the United States.
Our primary purpose in registering Common Stock for resale is to raise
money to acquire smaller, independent carpet cleaning companies as part of
our strategy to consolidate the highly fragmented carpet cleaning services
industry, and to provide funds for our general operations. We are registering
for resale a total of 10,673,579 shares of Common Stock.
The Prospectus supercedes all prior registrations. Our shares are
quoted on the NASD OTC Bulletin Board under the symbol VTIX. On February 8,
2000, the closing sales price for our Common Stock was $2.50 per share.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is dated February 11, 2000.
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended and, in accordance therewith, we file
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
and information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices at Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511, and at 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 at prescribed rates. In addition, the Commission maintains a web
site at http:/www.sec.gov containing reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission, including our company.
We have filed with the Commission a Registration Statement (together
with all amendments and exhibits) on Form S-3 under the Securities Act of
1933, as amended, with respect to the Common Stock offered pursuant to this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any agreement or other document referred to
herein are not necessarily complete and reference is made to the copy of such
agreement or to the Registration Statement and to the exhibits and schedules
filed therewith. Copies of the material containing this information may be
obtained from the Commission upon payment of the prescribed fee.
PROSPECTUS SUMMARY
This summary highlights some information from the prospectus. It may
not contain all of the information that is important to you. To understand
this offering fully, you should read the entire prospectus carefully,
including the risk factors and the financial statements.
THE COMPANY
We provide carpet cleaning and fire and flood restoration services
using proprietary technology known as the VenturiCleanSM System. We believe
our new process for cleaning carpets represents a major advance in carpet
cleaning technology. Only the VenturiCleanSM System uses our proprietary
non-toxic, non-detergent, non-surfactant, high temperature and
molecularly-aligned water that creates a "super-wet" cleaning fluid ("EPA"
water). The patented VenturiCleanSM System recovers most of the water applied
to carpets, reducing drying time, while also killing and removing almost all
foreign contaminants and pathogens, all with zero toxicity. No other carpet
cleaning system uses the same water treatment, high temperatures, retrieval,
and fluid control system as our company.
We are a Nevada corporation incorporated on January 30, 1997, and are
the successor to a Texas corporation of the same name which was incorporated
in August 1994. Our strategy is to consolidate the highly fragmented
professional carpet cleaning services industry by acquiring independent
carpet cleaning companies nationwide. We presently operate in Utah, Texas,
California, Nevada, Arizona, Florida, Kentucky and Vancouver, British
Columbia. We have identified acquisition targets in several other states, and
we plan to have a nationwide presence within the next 12-18 months. We plan
to expand our operations to other states through acquisitions, until the
VenturiCleanSM System is in use throughout the United States.
We are executing a two-part growth strategy: (1) gain new markets
through strategic acquisitions; and (2) expand market share in existing
markets through our proprietary technology and superior service. Our growth
strategy secures immediate market share through strategic acquisitions, while
our superior cleaning technology allows us to quickly penetrate those
markets, thus expanding market share, reducing competition, and increasing
revenues. Significantly, our superior technology, its focus on customer
satisfaction and implementation of an aggressive marketing program has
resulted in an across-the-line increase in the number of trucks operated per
base and per truck revenues. The increase in same base sales following
acquisition is something that sets us apart from most other roll-up companies.
Carpet cleaning has changed little in past decades, and barriers to
entry have remained low. Consequently, there are approximately 50,000
carpet-cleaning companies (independent and franchises) in the United States
generating an estimated $10 billion in annual revenues. The largest of these
companies holds only a 2% market share. Our objective is to change this by
using our patented technology, quality customer service, aggressive
marketing, and public structure to become the major company in the carpet
cleaning industry.
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Beaulieu Group, LLC, a privately owned carpet manufacturer, is a major
shareholder and strategic partner with us. Beaulieu is one of the top three
carpet manufacturers in the world with annual revenues exceeding $1.5
billion. Beaulieu sells its products through a national network of over
30,000 dealers. Beaulieu and our company expect to benefit from cross selling
our respective products and services.
THE OFFERING
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<S> <C>
Securities Offered ........... The resale 10,673,579 shares of Common Stock,
consisting of (i) the resale of 70,437 shares of
Common Stock issuable upon the conversion of our
Series A Convertible Preferred Stock (the
"Series A Preferred Stock"); (ii) the resale of
1,190,000 shares of Common Stock issuable upon
the conversion of our Series B Convertible
Preferred Stock (the "Series B Preferred
Stock"); (iii) the resale of 4,607,476 shares of
Common Stock issuable upon the conversion of our
Series D Convertible Preferred Stock (the
"Series D Preferred Stock"); (iv) the resale of
1,000,000 shares of Common Stock issuable upon
the conversion of our Series E Convertible
Preferred Stock (the "Series E Preferred
Stock"); (v) the resale of 1,466,666 shares of
Common Stock issuable upon the exercise of
warrants granted to Sentry Financial Corporation
("Sentry Warrants"), Franklin Funding ("Franklin
Warrants") and Aspen Capital Resources, LLC
("Aspen Capital Warrants") and options granted
to Equity Services, Ltd. ("ESL Options"); and
(vi) the resale of 2,324,000 shares of Common
Stock, including 15,000 shares of Common Stock
held by James K. Stone, Executive Vice President
of Operations and a director of the Company,
pursuant to registration rights granted to
certain individuals and entities. Each share of
Series A Preferred Stock is convertible at a
conversion ratio of 1.0393585771 shares of
Common Stock for each share of Series A
Preferred Stock. Each share of Series B
Preferred Stock is convertible at a conversion
ratio of five shares of Common Stock for each
share of Series B Preferred Stock. Each share of
Series D Preferred Stock is convertible at a
conversion ratio of two shares of Common Stock
for each share of Series D Preferred Stock. Each
Sentry Warrant entitles the holder to purchase
one share of Common Stock at an exercise price
of $.10 per share. Each Franklin Warrant
entitles the holder to purchase one share of
Common Stock at exercise prices ranging from
$.01 to $3.00 per share. The Aspen Warrants
entitle the holder to purchase up to 250,000
shares of Common Stock at an exercise price of
$2.40 per share, 250,000 shares of Common Stock
at an exercise price of $2.80 per share and
533,333 shares of Common Stock at an exercise
price of $3.00 per share. Each ESL Option
entitles the holder to purchase one share of
Common Stock at an exercise price of $3.00 per
share. The selling security holders may offer
their shares through public or private
transactions, at prevailing market prices, or at
privately negotiated prices. See
"Securityholders Registering Shares" and
"Description of Securities."
Common Stock
outstanding prior to the
offering ..................... 11,179,532 shares
Common Stock
outstanding after the
offering (1).................. 19,514,111 shares
Use of Proceeds............... All funds received by the Company upon the
exercise of the warrants and options will be
used for general corporate purposes. We will not
receive any proceeds from the conversion of the
Series A, Series B, Series D or Series E
Preferred Stock. See "Use of Proceeds."
Risk Factors.................. The offering involves a high degree of risk.
See "Risk Factors."
OTC Bulletin Board
Common Stock symbol........... VTIX
</TABLE>
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(1) Assumes all preferred stock is converted to Common Stock and all options
and warrants whose underlying Common Stock is being registered herein are
exercised.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by us with the Securities and Exchange
Commission are incorporated herein by reference:
1. Annual Report on Form 10-KSB for the year ended December 31, 1998;
2. Quarterly Reports on Forms 10-QSB for the quarters ended March 31,
1999, June 30, 1999, and September 30, 1999;
3. Current Reports on Form 8-K dated October 19, 1999, as filed on
November 17, 1999; dated November 15, 1999, as filed on November 30,
1999; and dated December 15, 1999, as filed on December 30, 1999.
4. The description of our Common Stock contained on the Registration
Statement on Form 8-A as filed on December 18, 1999.
All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended and prior to the termination of this offering, shall be
deemed to be incorporated by reference in this Prospectus. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or in any
other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
We will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the documents
that have been incorporated herein by reference, other than Exhibits to such
documents (unless such Exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Joe Fox, Vice
President of Investor Relations, Venturi Technologies, Inc., 763 North 530
East, Orem, Utah 84097, (801) 235-9552.
RISK FACTORS
Before you invest in our Common Stock, you should be aware that there
are various risks, including those described below. You should consider
carefully these risk factors together with all of the other information
included in this prospectus before you decide to purchase shares of our
Common Stock. No investment should be made by any person who is not in a
position to lose the entire amount of his or her investment.
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other forward-looking information. When considering such
forward-looking statements, you should keep in mind the risk factors and
other cautionary statements in this prospectus. The risk factors noted in
this section and other factors noted throughout this prospectus, including
certain risks and uncertainties, could cause our actual results to differ
materially from those contained in any forward-looking statement.
INDEPENDENT ACCOUNTANT RAISES SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN
The opinion rendered by Child & Company, our independent accountant,
on our financial statements states that we incurred a net loss of $6,368,411
during the year ended December 31, 1998, and that at the end of the same
period we reported a retained earnings deficit of $8,086,079. These factors
raise substantial doubt about our ability to continue as a going concern.
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ACQUISITION RISKS
A primary component of our growth strategy is the acquisition of
independent professional carpet cleaning companies. The successful
implementation of our acquisition strategy is dependent on our ability to
identify suitable acquisition candidates, acquire such companies on suitable
terms and integrate their operations with our operations. There can be no
assurance that we will be able to acquire such companies on suitable terms.
Acquisitions may also involve a number of special risks, including:
(i) adverse effects on our operating results, including increased goodwill
amortization related to acquired companies and interest expense related to
debt incurred to affect acquisitions; (ii) diversion of management attention;
(iii) risks associated with unanticipated problems, liabilities or
contingencies resulting from acquisitions and entries into new geographic
markets; (iv) difficulties related to the integration of acquired businesses,
some of which may have different cultures, operating strategies, margins or
business risks; (v) increased general and administrative expenses incidental
to our expansion into new geographic markets; and (vi) inability to achieve
the synergies that we believe our business plan may provide. Furthermore, if
we consummate significant acquisitions in which the consideration consists of
stock, or is financed with the net proceeds of the issuance of stock, our
shareholders could suffer a significant dilution of their equity interests.
There is no assurance that any of the factors discussed above will not have a
material adverse effect on our business.
IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, OUR BUSINESS WILL SUFFER
Our success is heavily dependent upon the continued active
participation of our current executive officers, key employees and
consultants, particularly Gaylord M. Karren and John M. Hopkins. Loss of the
services of one of these executives, employees or consultants could have a
material adverse effect upon the development of our business. We have no
employment agreement with Mr. Karren or Mr. Hopkins; however we do maintain
"key man" life insurance on their lives. We do not have employment contracts
with or life insurance on most of our other officers or employees. We cannot
guarantee that we will be able to recruit or retain other qualified personnel
should this become necessary. Our inability to retain and attract the
necessary technical, managerial, marketing and customer service personnel
could have a material adverse effect on our business, prospects, financial
condition and results of operations.
PROJECTIONS
This Prospectus contains information, such as projections, future
expectations and other "forward-looking" statements (that is, projections of
revenues, income or loss, earnings or losses, capital expenditures or other
financial items; statements of plans and objectives for future operations;
statements of future economic performance; and statements of the assumptions
on which the foregoing are based). This information and statements represent
our objectives, expectations or beliefs. Generally, such statements can be
identified by use of the words may, will, expect, believe, anticipate,
intend, estimate, continue or similar phrases. Those statements are subject
to known and unknown risks, uncertainties and other factors that could cause
the actual results to differ materially from those contemplated by the
statements.
LIMITED OPERATING HISTORY
We have a limited operating history upon which to base an evaluation
of its prospects. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in the early
stages of development. These risks include inability to sustain profit
margins, to achieve expected growth levels, to attract sufficient capital for
acquisitions and equipment purchases, and lack of experience in managing
growth.
COMPETITION
Some of our current and potential competitors in the carpet cleaning
industry have longer operating histories, larger customer bases, greater
brand name recognition and significantly greater financial, marketing and
other resources. In responding to changes in the competitive environment, we
may make decisions or acquisitions that could have a material adverse effect
on our business, prospects, financial condition and results of operations.
New technologies and the expansion of existing technologies may increase the
competitive pressures on us.
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RELIANCE ON THIRD PARTIES FOR EQUIPMENT
We rely upon third parties to manufacture certain equipment used in
our business. If any one of the manufacturers was unable or unwilling to
continue manufacturing and selling the necessary equipment, our business,
results of operations and financial condition could be materially adversely
affected. We do not maintain business interruption insurance.
MANAGEMENT OF POTENTIAL GROWTH
We have expanded our operations very quickly, and expect that further
expansion will be required to exploit the potential for growth and
consolidation in the carpet cleaning industry. This expansion has placed, and
will continue to place, a significant strain on our management, operations
and financial resources. To manage our expected growth, we must improve
existing, and implement new, transaction-processing, operational and
financial systems, procedures and controls, and expand, train and manage our
already growing employee base. We also may be required to expand our finance,
administrative and operations staff. We cannot guarantee that our current and
planned personnel, systems, procedures and controls will be adequate to
support future operations, or that we will be able to successfully identify,
manage and exploit existing and potential market opportunities. If we cannot
manage growth effectively, our business, prospects, financial condition and
results and operations could be adversely affected.
DEPENDENCE ON TRADEMARKS, PATENTS AND PROPRIETARY RIGHTS; NO ASSURANCE OF
ENFORCEABILITY
Our success will depend in part on our ability to obtain and preserve
our patents and trademarks and to operate without infringing the proprietary
rights of third parties. We cannot guarantee that our patent and trademark
applications will provide a competitive advantage or afford protection
against competitors with processes or services similar to those that we
offer. We cannot guarantee that our competitors will not circumvent, or
challenge the validity of those patents and trademarks. In addition, in the
event that another party infringes our patents or trademarks, the enforcement
of such rights is optional and can be a lengthy and costly process, with no
guarantee of success. Finally, although to date no claims have been brought
against us alleging that our patents, trademarks or other proprietary
information infringes intellectual property rights of others, there is no
guarantee that such claims will not be brought in the future or that any such
claims would not be successful. If such a claim were successful, our business
could be materially adversely affected. In addition to any potential monetary
liability for damages, we could be required to obtain a license to use the
trademarks or technology found to be infringing or could be enjoined from
utilizing its trademarks and technology if such a license were not made
available on acceptable terms.
NO DIVIDENDS ON COMMON STOCK ANTICIPATED
We have never paid any dividends on our Common Stock and, because of
our present financial condition and cash flow requirements, do not expect to
pay any dividends on our Common Stock in the foreseeable future.
YEAR 2000 RISK
We began computer automation in 1997. Our systems consist primarily of
stand-alone personal computers. We have reviewed our computer programs and
systems and believe that our programs and systems will function properly and
be in compliance for the year 2000. If any future modifications are
necessary, we do not believe that the costs to modify its programs or systems
will be material to its financial condition or results of operations. We
cannot guarantee that such costs will be nominal. Because most of our
customers are individuals, we do not believe the year 2000 problem will have
a material impact on our customers. We have contacted those third parties
with whom we have material relationships, such as banks and vendors, to
ascertain their level of preparedness for Year 2000. Based upon responses to
such inquiries, we are of the opinion that we will not experience any
significant business disruption as a result of Year 2000 issues.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles of Incorporation and Bylaws require or permit us to
indemnify and hold harmless our directors and officers from and against and
in respect of certain losses, damages, deficiencies, expenses or costs which
may be incurred or suffered by such directors and officers as a result of
their serving in such capacities.
RISK OF LOW-PRICE STOCKS
Since our Common Stock is not quoted on the NASDAQ SmallCap Market, it
is subject to Rule 15g-9 under the Securities Exchange Act of 1934, as
amended. That rule imposes additional sales practice requirements on
broker-dealers who sell such
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securities to persons other than established customers and "accredited
investors" (generally, individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 together with their spouses).
For transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
adversely affect the ability of broker-dealers to sell the Common Stock.
Securities and Exchange Commission regulations define a "penny stock"
to be any non-NASDAQ equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require delivery, prior to any transaction in a
penny stock, of a disclosure schedule prepared by the Commission relating to
the penny stock market. Disclosure is also required to be made about
commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly
statements are required to be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in
penny stocks.
The foregoing required penny stock restrictions would not apply to our
securities if they were included on the NASDAQ SmallCap Market and have
certain price and volume information provided on a current and continuing
basis or were to meet certain public float, minimum net tangible asset and
revenue criteria. We cannot guarantee that the Common Stock will qualify for
exemption from these restrictions. Therefore, the market liquidity for the
Common Stock could be severely adversely affected.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING.
We may require substantial funds in addition to the net proceeds of
this Offering for various reasons, including continuing our growth strategy
of acquiring independent professional carpet cleaning companies. Most of the
proceeds of this Offering will be paid to the selling securityholders, and
the portion of the Offering from the exercise of the Warrants and Options
that will be received by us is expected to be minimal. Even if this Offering
is successful, we will need to seek additional capital, possibly through
public or private sales of our securities, in order to fund our activities on
a long-term basis. Adequate funds may not be available when needed or on
terms acceptable to us. Insufficient funds may require us to delay, scale
back the implementation of our growth strategy.
POSSIBLE VOLATILITY OF STOCK PRICE.
Our Common Stock is currently traded on the NASD OTC Electronic
Bulletin Board. The stock is thinly traded and has a relatively small public
float. Consequently, it is subject to great price volatility, and may be
significantly affected by several factors such as announcements by us of
acquisitions, quarterly variations in its financial results, the gain or loss
of material contracts, changes in management, trends in the industry or stock
market, and announcements by competitors, among other things.
ADVERSE EFFECTS OF BOARD OF DIRECTOR CONTROL OF PREFERRED STOCK.
Our Articles of Incorporation authorize the issuance of shares of
"blank check" preferred stock, which will have such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the board is empowered, without shareholder approval (but
subject to applicable government regulatory restrictions), to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which
could adversely affect the voting power or other rights of the holders of our
Common Stock. Those terms and conditions may include preferences on an equal
or prior rank to existing series of preferred stock. Those shares may be
issued on such terms and for such consideration as the board then deems
reasonable and such stock shall then rank equally in all aspects of the
series and on the preferences and conditions so provided, regardless of when
issued. In the event of such issuance, the preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the company.
BOARD DISCRETION AS TO USE OF PROCEEDS.
All of the net proceeds of the Offering, if any, have been allocated
to working capital (and not otherwise allocated for a specific purpose) and
will be used for such purposes as management may determine in its sole
discretion without the need for shareholder approval with respect to any such
allocations.
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DILUTION RISK
The value of existing shares of Common Stock will be diluted upon the
conversion of the preferred stock and upon exercise of the warrants.
Additionally, the sale of Common Stock into which the preferred stock is
convertible or which will be issued upon exercise of warrants could have a
negative impact on the trading price of our Common Stock and could increase
the volatility in the trading price of the Common Stock. Moreover, if the
trading price of the Common Stock were to decrease significantly, the
issuance of the shares upon conversion of the Series E Preferred Stock, which
conversion price is tied directly to the trading price, could conceivably
effect a change of control of the company.
As of the date of this prospectus, we have reserved an aggregate of
approximately 5.8 million shares of Common Stock for issuance upon exercise
of options and warrants to purchase shares of our Common Stock at exercise
prices between $.01 and $6.00 per share. The number of shares issuable upon
exercise of certain of the warrants may be adjusted pursuant to the terms of
these warrants. During the terms of the options and warrants, we must give
their holders the opportunity to profit from a rise in the market price of
our Common Stock. The existence of the warrants may adversely affect the
terms on which we may obtain additional funds in return for the issuance of
our equity. Moreover, the holders of these securities are likely to exercise
their rights to acquire our Common Stock at a time when we would otherwise be
able to obtain capital with more favorable terms than we could obtain through
the exercise of such securities.
Additionally, the Board of Directors has the inherent right under
applicable Nevada law, for whatever value the board deems adequate, to issue
additional shares of Common Stock up to the limit of shares authorized by the
Articles of Incorporation, and, upon such issuance, all holders of shares of
Common Stock, regardless of when it is issued, thereafter generally rank
equally in all aspects of that class of stock, regardless of when issued. The
board likewise has the inherent right, limited only by applicable Nevada law
and provisions of the Articles of Incorporation to increase the number of
shares of Preferred Stock in a series, to create a new series of Preferred
Stock and to establish preferences and all other terms and conditions in
regard to such newly-created series. Any of those actions will dilute the
holders of Common Stock and also affect the relative position of the holders
of any series of any class. Current shareholders have no rights to prohibit
such issuances nor inherent preemptive rights to purchase any such stock when
offered.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of shares
of Common Stock upon conversion of the Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock or the Series E Preferred
Stock, or the sale of Common Stock by the selling shareholders holding Common
Stock. The holders of Aspen Warrants, Franklin Warrants, Sentry Warrants and
ESL Options are not obligated to exercise any of their warrants or options.
However, assuming exercise of all of the warrants and options covered by this
prospectus, the net proceeds from this Offering that we would receive from
the issuance of 1,433,333 shares of Common Stock covered by this Prospectus
and issuable upon the exercise of the Warrants are estimated to be
$3,393,383. The closing bid price of the Common Stock on the NASD OTC
Bulletin Board was $2.50 on January 5, 2000. Approximately 22.7% of the
Warrants are exercisable at prices above $2.50. There is no assurance that
any of the Warrants will be exercised and we may not receive any proceeds
from this Offering.
SECURITYHOLDERS REGISTERING SHARES
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of January 31, 2000, by each of the holders
of Series A Preferred Stock (the "Selling Series A Preferred Stockholders")
assuming each Selling Series A Preferred Stockholder elects to exercise his
conversion rights to convert the Series A Preferred Shares (the "Series A
Preferred Shares") into shares of Common Stock, at a conversion rate of
1.093585771 shares of Common Stock for each share of Series A Preferred
Stock, the number of shares of Common Stock to be sold by each Selling Series
A Preferred Stockholder, and the percentage of each Selling Series A
Preferred Stockholder after the sale of Common Stock included in this
Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED --------
------------
STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
------------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Bruce E. Axtell 83,649 * 2,734 80,925 *
Carroll Kennedy Burgess, IRA 2,734 * 2,734 0 *
Angie P. Danna 2,187 * 2,187 0 *
Rebecca J. Das 2,187 * 2,187 0 *
8
<PAGE>
Robert F. Davidson 2,734 * 2,734 0 *
Walter Wayne Farlow 2,297 * 2,297 0 *
A. Ken Flake 776 * 776 0 *
Paul B. Fletcher 2,187 * 2,187 0 *
Edward J. Gallatin, IRA 2,734 * 2,734 0 *
Bennett Ernest Greenfield 1,640 * 1,640 0 *
Don and Katherine Halsey Living Trust 1,367 * 1,367 0 *
Jerry and Maurine Hamilton Living Trust 1,094 * 1,094 0 *
Mary Kirk Living Trust 1,094 * 1,094 0 *
George E. Kugler 1,640 * 1,640 0 *
M.F. Long II 1,367 * 1,367 0 *
David Mangum Pension Plan 1,422 * 1,422 0 *
Marjorie H. McCray 3,828 * 3,828 0 *
Vikki R. Minadeo 2,734 * 2,734 0 *
James H. Moyle II 3,281 * 3,281 0 *
RSBCO 2,734 * 2,734 0 *
Rhone Living Trust 2,734 * 2,734 0 *
Suelema M. Roman 2,734 * 2,734 0 *
Henry Ross, IRA 3,828 * 3,828 0 *
Marybess Salvaggio 2,187 * 2,187 0 *
David B. Sartain, IRA 1,367 * 1,367 0 *
William C. and Evelyn Sass 2,734 * 2,734 0 *
Raymond Earl Sloan 1,640 * 1,640 0 *
Leo Smith, IRA 1,640 * 1,640 0 *
Robert D. Stephens, IRA 2,734 * 2,734 0 *
Jack J. Stephens 1,422 * 1,422 0 *
John Towers 273 * 273 0 *
Theorore J. Tuinstra 1,094 * 1,094 0 *
George R. and Frances A. Tyler 1,640 * 1,640 0 *
George R. Tyler, IRA 1,640 * 1,640 0 *
TOTAL
</TABLE>
- ----------------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of January 31, 2000, by the sole holder of
Series B Preferred Stock (the "Selling Series B Preferred Stockholder")
assuming the Selling Series B Preferred Stockholder elects to exercise its
conversion rights to convert the Series B Preferred Shares (the "Series B
Preferred Shares") into shares of Common Stock, at a conversion rate of five
shares of Common Stock for each share or Series B Preferred Stock, the number
of shares of Common Stock to be sold by the Selling Series B Preferred
Stockholder, and the percentage of the Selling Series B Preferred Stockholder
after the sale of Common Stock included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY D
OWNED PRIOR TO OWNED AFTER
OFFERING(1) -----------
-------- NUMBER OFFERING(1)
OF --------
SHARES
BEING
STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
----------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Entrepreneurial Investors, Inc. 1,242,000 4.7% 1,190,000 52,000 *
</TABLE>
- --------------------------------
* Less than 1%
9
<PAGE>
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of January 31, 2000, by the sole holder of
Series D Preferred Stock (the "Selling Series D Preferred Stockholder") assuming
the Selling Series D Preferred Stockholder elects to exercise its conversion
rights to convert the Series D Preferred Shares (the "Series D Preferred
Shares") into shares of Common Stock, at a conversion rate of two shares of
Common Stock for each share of Series B Preferred Stock, the number of shares of
Common Stock to be sold by the Selling Series D Preferred Stockholder, and the
percentage of the Selling Series D Preferred Stockholder after the sale of
Common Stock included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO NUMBER OF -----------
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED
------------
STOCKHOLDER NUMBER PERCENT NUMBER PERCENT
----------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Beaulieu Group, LLC 4,607,476 17.5% 4,607,467 0 *
</TABLE>
- --------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of January 31, 2000, by the sole holder of
Series E Preferred Stock (the "Selling Series E Preferred Stockholder")
assuming the Selling Series E Preferred Stockholder elects to exercise the
conversion rights to convert the Series E Preferred Shares (the "Series E
Preferred Shares") into shares of Common Stock, at a conversion rate of one
share of Common Stock for each share or Series E Preferred Stock, the number
of shares of Common Stock to be sold by the Selling Series E Preferred
Stockholder, and the percentage of the Selling Series E Preferred Stockholder
after the sale of Common Stock included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO NUMBER OF -----------
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED
------------
STOCKHOLDER NUMBER PERCENT NUMBER PERCENT
----------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Aspen Capital Resources, LLC 2,033,333 8.1% 1,000,000 1,033,333 3.8%
</TABLE>
- --------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of January 31, 2000 by each of the
holders of Warrants (the "Selling Securityholders"), assuming each of the
Selling Securityholders elects to exercise the Warrants held by such Selling
Securityholder to purchase shares of Common Stock at exercise prices of
ranging from $.01 to $3.00 per share, the number of shares to be sold by each
Selling Securityholder, and the percentage of each Selling Securityholder
after the sale of the shares included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO NUMBER OF -----------
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED
------------
WARRANTHOLDERS NUMBER PERCENT NUMBER PERCENT
-------------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Aspen Capital Resources, LLC 2,033,333(2) 8.1% 10,333,330 1,000,000 4.3 %
Franklin Funding 430,090 1.6% 430,090 0 *
Sentry Financial Corporation 98,955 * 83,333 15,622 *
</TABLE>
- --------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
(2) Assumes all Series E Preferred Stock is converted to 1,000,000 shares of
Common Stock.
10
<PAGE>
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of January 31, 2000, by the holder
of Options (the "Selling Optionholders"), assuming the Selling Optionholder
elects to exercise its Options to purchase shares of Common Stock at an
exercise price equal to $3.00 per share, the number of shares to be sold by
the Selling Optionholder, and the percentage of each Selling Optionholder
after the sale of the shares included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO NUMBER OF -----------
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED
------------
OPTIONHOLDERS NUMBER PERCENT NUMBER PERCENT
------------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Equity Services, Ltd. 147,000 * 100,000 47,000 *
</TABLE>
- --------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of January 31, 2000, by each of
the shareholders registering shares of Common Stock for resale (the "Selling
Shareholders") pursuant to registration rights granted to such Selling
Shareholders, the number of shares to be sold by each Selling Shareholder,
and the percentage of each Selling Shareholder after the sale of the shares
included in this Prospectus.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO NUMBER OF -----------
OFFERING(1) SHARES BEING OFFERING(1)
-------- OFFERED
------------
STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
------------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Aspen Investments 12,500 * 12,500 0 *
Entrepreneurial Investors, Ltd. 1,242,000(2) 4.7% 52,000 1,190,000 4.5%
Equity Services, Ltd. 147,000 * 47,000 100,000 *
Greenwich A.G. 1,600,000 6.1% 1,600,000 0 *
Helmut Heinzel 50,000 * 50,000 0 *
Thomas Heinzel 50,000 * 50,000 0 *
Michael Jahr 450,000 1.7% 450,000 0 *
Peninsular Corp. 25,000 * 25,000 0 *
Prism, Inc. 25,000 * 25,000 0 *
Securitron, Ltd. 12,500 * 12,500 0 *
James and Patrice Stone (3) 15,000 * 15,000 0 *
</TABLE>
- --------------------------------
* Less than 1%
(1) Assumes the conversion of all Series A, Series B, Series C, Series D and
Series E Preferred Stock into shares of Common Stock and the exercise of
all outstanding warrants and options, including those whose underlying
Common Stock is not included in this Prospectus.
(2) Assumes all Series B Preferred Stock is converted to 1,190,000 shares of
Common Stock
(3) James Stone is Executive Vice President of Operations and a director of
the Company.
DESCRIPTION OF SECURITIES
The following description is a summary and is qualified in its
entirety by the provisions of our Articles of Incorporation and Bylaws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part.
COMMON STOCK.
GENERAL. We are authorized to issue 27,000,000 shares of Common Stock,
$.001 par value per share. At January 5, 2000, there were 11,179,532 shares
issued and outstanding. All shares of Common stock outstanding are validly
issued, fully paid and non-assessable. At January 5, 2000, there were
warrants outstanding or committed to be issued to acquire a total of
2,561,719 shares of Common Stock, and there were outstanding options to
acquire a total of 4,256,532 shares of Common Stock. We have also committed
to issue additional warrants to the holders of Series E Preferred Stock
between January and March of 2000 to
11
<PAGE>
purchase up to an additional 750,000 shares of Common Stock based on
currently market prices. At January 5, 2000, there was preferred stock
outstanding or committed to be issued that is convertible into a total of
7,352,231 shares of Common Stock. On a fully diluted basis, as of January 5,
2000, there were 26,287,514 shares of Common Stock issued or reserved for
issuance.
VOTING RIGHTS. Each share of Common Stock entitles the holder thereof
to one vote, either in person or by proxy, at meetings of stockholders. The
holders are not permitted to vote their shares cumulatively.
DIVIDEND POLICY. All shares of Common Stock are entitled to
participate ratably in dividends when and as declared by our Board of
Directors out of the funds legally available therefore and subject to the
rights, if any, of the holders of outstanding shares of preferred stock. Any
such dividends may be paid in cash, property or additional shares of Common
Stock. We have not paid any dividends on its Common Stock since its inception
and presently anticipate that all earnings, if any, will be retained for
development of our business and that no dividends on the Common Stock will be
declared in the foreseeable future. Any future dividends will be subject to
the discretion of our Board of Directors and will depend upon, among other
things, the future earnings, our operating and financial condition, our
capital requirements, general business conditions and other pertinent facts.
Therefore, there can be no assurance that any dividends on the Common Stock
will be paid in the future.
MISCELLANEOUS RIGHTS AND PROVISIONS. Holders of Common Stock have no
preemptive or other subscription rights or conversion rights, and the Common
Stock is not subject to any redemption or sinking fund provisions. In the
event of the dissolution by us, whether voluntary or involuntary, each share
of Common Stock is entitled to share ratably in any assets available for
distribution to holders of our equity after satisfaction of all liabilities
and payment of the applicable liquidation preference of any outstanding
shares of Preferred Stock.
CERTAIN PROVISIONS OF NEVADA LAW AND OF OUR ARTICLES OF INCORPORATION
AND BYLAWS. Our Articles of Incorporation and Bylaws require us to indemnify
its directors and officers to the fullest extent permitted by Nevada law.
Nevada law presently provides that in the case of a nonderivative action
(that is, an action other than by or in the right of a corporation to procure
a judgment in its own favor), a corporation has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that the person is or was an agent of the
corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with the proceeding if
that person acted in good faith and in a manner the person reasonably
believed to be in the best interests of the corporation and, in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct of
the person was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent does not, of itself, create a presumption that the person did not
act in good faith and in a manner that the person reasonably believed to be
in the best interests of the corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
With respect to derivative actions, Nevada law provides that a
corporation has the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was an agent of the corporation,
against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of the action if the person acted
in good faith, in a manner the person believed to be in the best interests of
the corporation and its stockholders. Indemnification is not permitted to be
made in respect of any claim, issue, or matter as to which the person shall
have been adjudged to be liable to the corporation in the performance of that
person's duty to the corporation and its stockholders, unless and only to the
extent that the court in which the proceeding is or was pending determines
that, in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for expenses, and then only to the extent
that the court shall determine.
We do not maintain director and officer liability insurance.
TRANSFER AGENT. Our transfer agent and registrar for our Common Stock
is Zions First National Bank, Salt Lake City, Utah 84111.
PREFERRED STOCK. Our Articles of Incorporation authorize the issuance
of up to 5,000,000 shares of Preferred Stock with a par value of $.001 per
share. The Articles of Incorporation provide that the Board of Directors has
the authority to prescribe classes, series and number of shares of each class
or series of Preferred Stock and the voting powers, designations,
preferences, limitations, restrictions and relative rights of each class or
series of Preferred Stock. Our board has created five separate series of
Preferred Stock: 10% Cumulative Convertible Series A Preferred Stock ("Series
A Preferred Stock"), 6% Cumulative Convertible Series B Preferred Stock
("Series B Preferred Stock"), 6% Cumulative Convertible Series C Preferred
Stock (Series C Preferred Stock") 8% Cumulative Series D Convertible
Preferred Stock ("Series D Preferred Stock"), and 6% Cumulative Convertible
Series E Preferred Stock ("Series E Preferred Stock").
SERIES A PREFERRED. Our Board of Directors has authorized the issuance
of up to 150,000 shares of Series A Preferred Stock, by resolution dated
December 24, 1997, although the exchange of the Series A Preferred for the
Series A Preferred of the Texas Corporation was approved June 30, 1997. As of
January 31, 2000, there were 64,410 shares of Series A Preferred Stock
outstanding. The Series A Preferred Stock is entitled to receive, when and as
declared by the board, out of funds legally available for the payment of
dividends, cumulative quarterly cash dividends at the annual rate of $1.00
per share, in preference to and in priority over any dividends with respect
to the Common Stock. Dividends on the Series A Preferred Stock accumulate
from and including their original issue date and are payable on the tenth day
after the end of each calendar quarter. In the event funds are not legally
available to pay such dividends in cash, such dividends shall, at our option,
cumulate and be paid in cash at such time as funds are then legally available
to pay such dividends, or be paid in shares of our Common Stock valued at the
greater of $10.00 per share or 90% of the then market value of our Common
Stock if such Common Stock is then traded on a
12
<PAGE>
national exchange. As long as shares of the Series A Preferred Stock are
outstanding, if we are in default or in arrears in respect to the payment of
dividends on the Series A Preferred Stock or any stock subsequently issued
that is of equal priority to the Series A Preferred Stock, or with respect to
the optional redemption with respect to the Series A Preferred Stock or any
parity stock, we may not declare, pay or set apart any funds for the payment
of dividends, redemption, repurchase, retirement or sinking fund payments on
any of the Common Stock.
In the event of any liquidation, dissolution or winding up of our
company, either voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, after all debts are paid, out
of our assets the sum of $10.00 per share plus an amount equal to all
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment may be made or any assets
distributed to the holders of Common Stock. If, upon any such liquidation,
dissolution or winding up of our company the assets to be distributed among
the holders of the Series A Preferred Stock are insufficient to permit the
payment to such holders of the full amount of the liquidation preference,
then our entire assets legally available for distribution will be distributed
with equal priority and pro rata among the holders of the Series A Preferred
Stock and parity stock. After payment of the full $10.00 liquidation
preference plus any accumulated and unpaid dividends, the holders of the
Series A Preferred Stock will not share in any other assets of our assets to
holders of equity securities.
We have the option to call the Series A Preferred Stock for redemption
at any time. The price paid to the holders of the Series A Preferred Stock by
us 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 shares of Common
Stock for each share of Series A Preferred Stock.
The holders of the Series A Preferred Stock have the right to convert
any or all of such shares into shares of Common Stock at a conversion ratio
of 1.093585771 shares of Common Stock for each share of Series A Preferred
Stock. The conversion option may be exercised at any time, except that if the
Series A Preferred Stock is called for redemption, the conversion rights
pertaining thereto terminate at the close of business on the date fixed for
redemption unless we default on the payment of the redemption price plus
accumulated and unpaid dividends. All shares of Series A Preferred Stock
shall automatically be converted into shares of Common Stock at a conversion
ratio of 1.09358571 shares of Common Stock for one share of Series A
Preferred Stock prior to the consummation of a firmly underwritten public
offering of our Common Stock. We are required to reserve and keep available
out of its authorized but unissued shares of Common Stock such number of
shares of Common Stock as shall be sufficient to effect the conversion of all
then outstanding shares of the Series A Preferred Stock.
Each holder of Series A Preferred Stock is entitled to the number of
votes equal to the number of shares of Common Stock into which such shares of
Series A Preferred Stock are convertible (without regard to any fractional
shares issuable upon such conversion), and they are entitled to vote on all
matters on which the Common Stock is entitled to vote, unless otherwise
required by applicable law or in cases where the rights and privileges of the
Common Stockholders may be altered or diminished. The holders of the Series A
Preferred Stock are entitled to notice of stockholders meetings in accordance
with our Bylaws.
Without the prior consent of a majority of the total number of shares
of the Series A Preferred Stock and Common Stock then outstanding, we may not
(a) alter or change the rights, preferences or privileges of the Series A
Preferred Stock materially or adversely; or (b) increase the authorized
number of shares of Series A Preferred Stock; or (c) create any new class of
shares having rights, preferences or privileges senior to the Series A
Preferred Stock holders as to dividend rights, redemption rights or
liquidation rights.
SERIES B PREFERRED. We authorized the issuance of up to 315,000 shares
of Series B Preferred Stock by resolution dated December 24, 1997. As of
January 31, 2000, there were 238,000 shares of Series B Preferred Stock
outstanding. The Series B Preferred Stock is entitled to receive cumulative
quarterly stock dividends at the annual rate of 6% per annum, payable by
issuance of shares of our Common Stock, based on the 30 day average closing
bid price of the Common Stock prior to the dividend date. If there is no
trading in the Common Stock for 30 days prior to the dividend date, the
dividend shall be calculated using a value of the Common Stock of $5.00 per
share. As of January 5, 2000, no shares of Common Stock had been issued to
the holders of the Series B Preferred Stock as dividends. As long as shares
of the Series B Preferred Stock are outstanding, if we are in default or in
arrears in respect to the payment of dividends on the Series B Preferred
Stock or any stock subsequently issued that is of equal priority to the
Series B Preferred Stock, we may not declare, pay or set apart any funds for
the payment of dividends, redemption, repurchase, retirement or sinking fund
payments on any of the Common Stock. The Series B Preferred Stock has equal
priority with the Series A, C, D and E Preferred Stock with respect to the
payment of dividends.
In the event of any liquidation, dissolution or winding up of our
company, either voluntary or involuntary, the holders of the Series B
Preferred Stock shall be entitled to receive, after all debts are paid, out
of our assets, the sum of $10.00 per share plus an amount equal to all
accumulated and unpaid stock dividends thereon to the date fixed for
liquidation, dissolution or winding up, before any payment may be made or any
assets distributed to the holders of Common Stock. If, upon any such
liquidation, dissolution or winding up of our company, the assets to be
distributed among the holders of the Series B Preferred Stock are
insufficient to permit the payment to such holders of the full amount of the
liquidation preference, then our entire assets legally available for
distribution shall be distributed with equal priority and pro rata among the
holders of the Series A, B, C, D and E Preferred Stock in proportion to the
numbers of Preferred Stock held by them. After payment of the full $10.00
liquidation preference plus any accumulated and unpaid dividends, the holders
of the Series B Preferred Stock will not share in any of our assets
distributed to holders of equity securities.
The holders of the Series B Preferred Stock have the right to convert
any or all of such shares into shares of Common Stock at a conversion ratio
of five shares of Common Stock for each share of Series B Preferred Stock,
adjusted to take into
13
<PAGE>
account any unpaid dividends. As of January 31, 2000, 22,000 shares of Series
B Preferred Stock had been converted into 110,000 shares of Common Stock.
We are required to reserve and keep available out of its authorized
but unissued shares of Common Stock such number of shares of Common Stock as
shall be sufficient to effect the conversion of all then outstanding shares
of the Series B Preferred Stock. Holders of Series B Preferred Stock have no
voting rights, except that for a period of five years from the original issue
date or December 31, 1997, the holders of the Series B Preferred Stock have
the right to designate one member of the Board of Directors, and we agree to
cause such designee to be elected to the board. The holders of the Series B
Preferred Stock have not exercised such designation right.
Without the prior consent of a majority of the total number of shares
of the Series B Preferred Stock and Common Stock then outstanding, we may not
(a) alter or change the rights, preferences or privileges of the Series B
Preferred Stock materially or adversely; or (b) increase the authorized
number of shares of Series B Preferred Stock; or (c) create any new class of
shares having rights, preferences or privileges senior to the Series B
Preferred Stock holders as to dividend rights, redemption rights or
liquidation rights.
SERIES C PREFERRED. We authorized the issuance of up to 1,000,000
shares of Series C Preferred Stock by resolution dated July 28, 1998. There
were 552,845 shares of Series C Preferred Stock outstanding as of January 31,
2000. The Series C Preferred Stock was created for issuance pursuant to a
Stock Purchase Agreement dated as of April 10, 1998, between us and CDL
Capital Corp. (now known as Invest Linc Capital Corp., a Nevada corporation)
and CDL Emerging Growth Equity Fund I, L.L.C. (now known as Invest Linc
Emerging Growth Equity Fund I, L.L.C., a Nevada limited liability company).
These entities paid $2.05 per share for the Series C Preferred Stock
The Series C Preferred Stock is entitled to receive, when and as
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cumulative quarterly cash dividends at the annual rate
of 6% per annum, payable quarterly in cash or in the equivalent number of
shares of Common Stock, at the rate of $2.05 per share.
We are required to reserve and keep available out of its authorized
but unissued shares of Common Stock such number of shares of Common Stock as
shall be sufficient to effect the conversion of all then outstanding shares
of the Series C Preferred Stock. The Series C Preferred Stock is convertible
into Common Stock on a share for share basis, at any time. The holder of the
Series C Preferred Stock have the right to piggyback on any registration of
our Common Stock. Holders of Series C Preferred Stock have no voting rights.
Without the prior consent of a majority of the total number of shares
of the Series C Preferred Stock and Common Stock then outstanding, we may not
(a) alter or change the rights, preferences or privileges of the Series C
Preferred Stock materially or adversely; or (b) increase the authorized
number of shares of Series C Preferred Stock; or (c) create any new class of
shares having rights, preferences or privileges senior to the Series C
Preferred Stock as to dividend rights, redemption rights or liquidation
rights.
SERIES D PREFERRED. We authorized the issuance of up to 3,000,000
shares of Series D Convertible Preferred Stock by resolution dated April 6,
1999. As of January 31, 2000, there were 2,303,738 shares of Series D
Preferred Stock outstanding, all of which is held by Beaulieu Group, LLC. The
Series D Preferred Stock has no dividend preference, but it is entitled to a
liquidation preference equal to the original purchase price plus an amount
equal to an 8% cumulative annual return on the original purchase price. The
holders of Series D Preferred Stock have both demand and piggyback
registration rights, and the Series D Preferred Stock is entitled to the
number of votes equal to the number of shares of Common Stock into which such
shares are convertible. Each one share of Series D Preferred Stock is
convertible into two shares of Common Stock.
We are required to reserve and keep available out of its authorized
but unissued shares of Common Stock such number of shares of Common Stock as
shall be sufficient to effect the conversion of all then outstanding shares
of the Series D Preferred Stock. Holders of Series D Preferred Stock have the
right, voting as a separate class, to elect not less than 20% of the
directors serving on our board of directors. The holder of the Series D
Preferred Stock has not yet exercised such election right.
Without the prior consent of a majority of the total number of shares
of the Series D Preferred Stock and Common Stock then outstanding, we may not
(a) alter or change the rights, preferences or privileges of the Series D
Preferred Stock materially or adversely; or (b) take any action on which the
holders of the Series D Preferred Stock shall be entitled to vote separately
as a class; or (c) create any new class of shares having rights, preferences
or privileges senior to the Series D Preferred Stock as to dividend rights,
redemption rights or liquidation rights; or (d) issue any shares of Common
Stock or preferred stock; or (e) issue any options, warrants or other rights
to acquire Common Stock or preferred stock; or (f) redeem, repurchase or
otherwise acquire any shares of its Common Stock or a parity stock.
SERIES E PREFERRED. We authorized the issuance of up to 30,000 shares
of Series E Cumulative Convertible Preferred Stock by resolution dated
December 13, 1999. As of January 31, 2000, there were 20,000 shares of Series
E Preferred Stock outstanding, all of which is owned by Aspen Capital
Resources, LLC ("Aspen Capital"). The Series E Preferred Stock is entitled to
receive cumulative quarterly stock dividends at the annual rate of 6% per
annum, payable in either cash or Common Stock, at the election of the holder.
The Series E Preferred Stock has equal priority with the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock with
respect to the payment of dividends.
The Series E Preferred Stock may be redeemed by us at any time by
payment to the holders of $125.00 cash per share of Series E Preferred Stock.
14
<PAGE>
In the event of any liquidation, dissolution or winding up of our
company, either voluntary or involuntary, the holders of the Series E
Preferred Stock shall be entitled to receive, after all debts are paid, out
of our assets, the sum of $100.00 per share plus an amount equal to all
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, before any payment may be made or any assets
distributed to the holders of Common Stock.
Each share of Series E Preferred Stock may be converted, at the option
of the holder, into that number of shares of Common Stock equal to $100.00
divided by 80% of the average of the three lowest closing prices for the
Common Stock in the immediately preceding 15 trading days, provided, however,
that the conversion price shall be not less than $2.00 per share nor greater
than $3.00 per share.
We are required to reserve and keep available out of its authorized
but unissued shares of Common Stock such number of shares of Common Stock as
shall be sufficient to effect the conversion of all then outstanding shares
of the Series E Preferred Stock. Each holder of Series E Preferred Stock is
entitled to the number of votes equal to the number of shares of Common Stock
into which such shares of Series E Preferred Stock are then convertible
(without regard to any fractional shares issuable upon such conversion), and
they are entitled to vote on all matters on which the Common Stock is
entitled to vote, unless otherwise required by applicable law or in cases
where the rights and privileges of the Common Stockholders may be altered or
diminished. The holders of the Series E Preferred Stock are entitled to
notice of stockholders meetings in accordance with our Bylaws.
WARRANTS AND OPTIONS
SENTRY WARRANTS. The Sentry Warrants entitle the holder to purchase
83,333 shares of Common Stock at an exercise price of $.10 per share, was
granted to Sentry Financial Corporation as partial consideration for certain
equipment lease financing provided to our company by Sentry. The Sentry
Warrants contain a net issuance provision, meaning that it may be exercised
in part by surrendering to the Company that portion of the warrant with a
value equal to the exercise price of the portion desired to be exercised. The
Sentry Warrants are exercisable through June 2006. The Sentry Warrants
contain provisions that protect the holder thereof against dilution by
adjustment of the exercise price per share and the number of shares issuable
upon exercise thereof upon the occurrence of certain events including stock
dividends, stock splits, mergers, sale of substantially all of our assets,
and for other extraordinary events. We are not required to issue fractional
shares of Common Stock, and in lieu thereof will make a cash payment based
upon the current market value of such fractional shares. The holder of any
Sentry Warrant will not possess any right as a shareholder of the company
unless or until he or she exercises such Sentry Warrant. As of January 31,
2000, none of the Sentry Warrants had been exercised.
FRANKLIN WARRANTS. The Franklin Warrants consist of four separate
warrants that were granted to Franklin Funding at different times as partial
consideration of certain lease financing provided to us by Franklin Funding.
The First Franklin Warrant entitles the holder to purchase up to 20,000
shares of Common Stock at an exercise price of $.50 per share, and is
exercisable through October 2008. The Second Franklin Warrant entitles the
holder to purchase up to 200,000 shares of Common Stock at an exercise price
of $3.00 per share, and is exercisable through May 2009. The Third Franklin
Warrant entitles the holder to purchase up to 5,000 shares of Common Stock at
an exercise price of $.01 per share, and is exercisable through January 2009.
The Fourth Franklin Warrant entitles the holder to purchase up to 25,000
shares of Common Stock at an exercise price of $3.00 per share, and is
exercisable through August 2009. The Franklin Warrants contain provisions
that protect the holders thereof against dilution by adjustment of the
exercise price per share and the number of shares issuable upon exercise
thereof upon the occurrence of certain events including stock dividends,
stock splits, mergers, sale of substantially all of the Company's assets, and
for other extraordinary events. We are not required to issue fractional
shares of Common Stock, and in lieu thereof will make a cash payment based
upon the current market value of such fractional shares. The holders of the
Franklin Warrants will not possess any right as a shareholder of the company
unless or until he or she exercises the Franklin Warrants. As of January 5,
2000, none of the Franklin Warrants had been exercised.
ESL OPTIONS. The ESL Options consist of two separate options granted
to Equity Services, Ltd. ("ESL") as partial consideration for ESL's services
as placement agent of our Series B Preferred Stock. Each ESL Option entitles
the holder to purchase 50,000 shares of Common Stock at an exercise price of
$3.00 per share. Each of the ESL Options is exercisable through June 2003.
The ESL Options contain provisions that protect the holder thereof against
dilution by adjustment of the exercise price and the number of shares
issuable upon exercise thereof upon the occurrence of certain events
including stock dividends, stock splits, mergers, sale of substantially all
of our assets, and for other extraordinary events. We are not required to
issue fractional shares of Common Stock, and in lieu thereof will make a cash
payment based upon the current market value of such fractional shares. The
holder of the ESL Options will not possess any rights as a shareholder of the
company unless or until the ESL Options are exercised. As of January 5, 2000,
no part of the ESL Options had been exercised.
ASPEN CAPITAL WARRANTS. The Aspen Capital Warrants, entitle the holder
to purchase an aggregate of 1,033,333 shares of Common Stock at exercise
prices of $2.40 per share (250,000 warrants), $2.80 per share (250,000
warrants) and $3.00 per share (533,333 warrants). The Aspen Capital Warrants
to purchase a total of 1,033,333 were granted to Aspen Capital Resources, LLC
("Aspen Capital") in consideration for Aspen Capital's purchase of a total of
20,000 shares of Series E Preferred Stock for a total of $2,000,000 and the
$1,000,000 line of credit provided to the Company by Aspen Capital. The Aspen
Capital Warrants contain a net issuance provision, meaning that they may be
exercised in part by surrendering to us that portion of the warrants with a
value equal to the exercise price of the portion desired to be exercised. The
Aspen Warrants are not exercisable until six months after they are initially
granted, and are exercisable until four years after the date they are
granted. The Aspen Capital Warrants contain provisions that protect the
holder thereof against dilution by adjustment of the exercise price per share
and the number of shares issuable upon exercise thereof upon the occurrence
of certain events including stock dividends, stock splits, mergers, sale of
substantially all of our assets, and for other extraordinary events. We are
is not required to issue fractional
15
<PAGE>
shares of Common Stock, and in lieu thereof will make a cash payment based
upon the current market value of such fractional shares. The holder of the
Aspen Capital Warrants will not possess any rights as a shareholder unless or
until he or she exercises the Aspen Capital Warrant.
PLAN OF DISTRIBUTION
We do not plan to solicit Series A, B, D or E Preferred Stockholders
regarding the conversion of their preferred shares into shares of Common
Stock which have been registered for resale upon conversion, nor do we intend
to solicit holders of warrants or options to exercise their respective
warrants or options to acquire shares of Common Stock that have been
registered for resale.
The resale of the Common Stock by the holders of Series A, B, D and E
Preferred Stock that elect to convert their shares of preferred stock to
shares of Common Stock and the holders of Sentry Warrants, Franklin Warrants,
Aspen Capital Warrants, or ESL Options that elect to exercise their
respective warrants or options and purchase our Common Stock and the holders
of Common Stock being registered for resale (collectively, the "Selling
Securityholders"), may be effected from time to time in transactions (which
may include block transactions by or for the account of the Selling
Securityholders) in the NASD Over-the- Counter Bulletin Board Market or in
negotiated transactions, a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
Selling Securityholders may effect such transactions by selling their
shares of Common Stock directly to purchasers in private transactions,
through broker-dealers acting as agents for the Selling Securityholders or to
broker-dealers who may purchase securities as principals and thereafter sell
the Common Stock from time to time in the over-the-counter market, in
negotiated transactions or otherwise. Such broker-dealers, if any, may
receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholders and/or the purchasers for whom such
broker-dealers act as agents or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions). The Selling Securityholders will pay all commissions,
transfer taxes, and other expenses associated with the sale of Common Stock
by them.
The Selling Shareholders and broker-dealers, if any, acting in
connection with such sales may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities by them might be deemed
to be underwriting discounts and commissions under the Securities Act. We
have agreed to indemnify certain of the Selling Shareholders against certain
liabilities under the Securities Act.
From time to time this Prospectus will be supplemented and amended as
required by the Securities Act of 1933. During any time when a supplement or
amendment is so required, the Selling Securityholders are to cease sales
until the Prospectus has been supplemented or amended. Pursuant to the
registration rights granted to certain of the Selling Securityholders, we
have agreed to update and maintain the effectiveness of this Prospectus.
Certain of the Selling Securityholders also may be entitled to sell their
Shares without the use of this Prospectus, provided that they comply with the
requirements of Rule 144 promulgated under the Securities Act of 1933.
EXPERTS
Our consolidated financial statements appearing in our Annual Report
(Form 10-K) for the year ended December 31, 1998, have been audited by Child
& Company, independent auditors, as indicated in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in auditing and
accounting. The consent of Child & Company to being named as our independent
auditor in Exhibit 23.2 to this Registration Statement includes an
explanatory paragraph that discusses our ability to continue as a going
concern.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby and certain other legal matters in connection thereto have been passed
upon for us by Mackey Price & Williams, Salt Lake City, Utah.
16
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION........................................... 2
PROSPECTUS SUMMARY.............................................. 2
THE COMPANY..................................................... 2
DOCUMENTS INCORPORATED BY REFERENCE ...................... 4
RISK FACTORS .................................................. 4
USE OF PROCEEDS................................................. 8
SECURITYHOLDERS REGISTERING SHARES.............................. 8
DESCRIPTION OF SECURITIES ...................................... 11
PLAN OF DISTRIBUTION............................................ 16
EXPERTS.......................................................... 16
LEGAL MATTERS................................................... 16
</TABLE>
10,673,579 SHARES OF COMMON STOCK
VENTURI TECHNOLOGIES, INC.
-----------------
PROSPECTUS
-----------------
FEBRUARY 11, 2000
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by the Company in
connection with the issuance and distribution of the securities being
registered, other than underwriting discount (all amounts except the
Securities and Exchange Commission filing fee and the NASD fee are estimated):
<TABLE>
<S> <C>
Filing fee - Securities and Exchange Commission.................. $7,102
NASD fee......................................................... 0
Printing and engraving expenses.................................. 500
Legal fees and disbursements..................................... 5,000
Accounting fees and disbursements................................ 0
Blue Sky fees and expenses (including legal fees)................ 0
Miscellaneous.................................................... 500
--------
Total expenses................................................... $ 13,102
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and the Bylaws of the Company contain
provisions providing for the indemnification by the Company of all past and
present directors, officers, employees or agents of the Company. Such parties
are indemnified from and against any and all liability and expense that may
be imposed upon or incurred by such person in connection with or resulting
from any claim, action, suit, or proceeding, civil or criminal, in which the
person has become involved, as a party or otherwise, by reason of being or
having been a director, officer or employee of the corporation, whether or
not the person continues to be such at the time of such liability or expense
shall have been imposed or incurred. However, no such director, officer or
employee shall be entitled to claim such indemnity with respect to any matter
as to which there shall have been a final adjudication that the person has
committed or allowed some act or omission, (a) otherwise than in good faith
in what the person considered to be the best interests of the corporation,
and (b) without reasonable cause to believe that such act or omission was
proper and legal. In addition, there shall be no indemnity in the event of a
settlement of such claim, action, suit, or proceeding unless (a) the court
having jurisdiction of the matter shall have approved of such settlement with
knowledge of the indemnity provided in the Articles, or (b) a written opinion
of independent legal counsel, selected by or in manner determined by the
Board of Directors, shall have been rendered substantially concurrently with
such settlement. A conviction or judgment (whether based on a plea of guilty,
or nolo contendere or its equivalent, or after trial) in a criminal action,
suit or proceeding shall not be deemed an adjudication that such director,
officer or employee has committed or allowed some act or omission as provided
above if independent legal counsel, selected as set forth above, shall
substantially concurrently with such conviction or judgment give to the
corporation a written opinion that such director, officer or employee was
acting in good faith in what he or she considered to be the best interests of
the corporation or was not without reasonable cause to believe that such act
or omission was proper and legal.
ITEM 16. EXHIBITS
(a) EXHIBITS
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.
<TABLE>
<CAPTION>
Exhibit No. Document
---------- --------
<S> <C>
3.0 Articles of Incorporation (Nevada), as amended (1)
3.1 Bylaws (Nevada)(1)
3.2 Amended and Restated Articles of Incorporation (Texas)
dated May 23, 1996 (1)
3.3 Amended and Restated Articles of Incorporation (Texas)
dated August 15, 1994 (1)
3.4 Amended Bylaws (Texas)(1)
3.5 Articles of Incorporation of T-Co Manufacturing, Inc.(1)
3.6 Amendment to Bylaws adopted April 14, 1999 (3)
4.0 Specimen Stock Certificate(1)
4.1 Amended Articles of Incorporation (Nevada) pp. 4-5 (See
above Exhibit 3.0)(1)
4.2 Amended Bylaws, pp. 12-13 (See above Exhibit 3.0)(1)
4.3 Certificate of Designations, Powers, Preferences and
Rights of Series A and Series B Convertible
Preferred Stock (1)
4.4 Action by Unanimous Written Consent of Board of Directors
Creating Series C Preferred Stock dated July 1998(1)
4.5 Registration Rights Agreement with Equity Services,
Ltd.(1)
4.6 Registration Rights Agreement with Entrepreneurial
Investors, Ltd.(1)
4.7 Lock up Agreement with Equity Services, Ltd.(1)
II-2
<PAGE>
4.8 Lock Up Agreement with Invest Linc Emerging Growth Equity
Fund I, L.L.C.(1)
4.9 Master Equipment Financing Agreement with Sentry
Financial Corp.(1)
4.10 Master Lease Agreement with Northstar Capital LLC(1)
4.11 Certificate of Designations, Powers, Preferences and
Rights of Series D Convertible Preferred Stock (3)
4.12 Certificate of Designations, Powers, Preferences and
Rights of Series E Convertible Preferred Stock
5.0 Form of Opinion Letter of Mackey Price & Williams
10.0 Dual Stock Option Plan with key employees, officers,
directors and consultants(1)
10.1 Form of Incentive Stock Option Agreement(1)
10.2 Form of Non-Statutory Stock Option Agreement with
consultants(1)
10.3 Non-statutory Stock Option Agreement with Merril
Littlewood(1)
10.4 Requirements Agreement with DT Enterprises(1)
10.5 Exclusive Use and Purchase Agreement with Primicide,
LLC(1)
10.6 Placement Agent's Option Certificate with Equity
Services, Ltd. (1)
10.7 Agreement of Collateral between Gaylord Karren, John
Hopkins and HiTek Carpet Care Inc.(1)
10.8 Patent Application Assignment with John Hopkins(1)
10.9 Patent Application Assignment with Gaylord Karren(1)
10.10 Patent Assignment with John Hopkins(1)
10.11 Verified Statement Claiming Small Entity Status by John
Hopkins(1)
10.12 Verified Statement Claiming Small Entity Status by
Gaylord Karren(1)
10.13 Master Equipment Financing Agreement with Sentry
Financial Corp.(See above Exhibit 4.9)(1)
10.14 Master Lease Agreement with Northstar Capital LLC (See
above Exhibit 4.10)(1)
10.15 Warrant Purchase Agreement with Northstar Capital, LLC(1)
10.16 Letter from Capital Partners Extending Lease Funding to
Venturi Technology Enterprises, Inc.(1)
10.17 Agreement of Purchase and Sale of Assets with Bill
Thomas, d.b.a. T-Co Carpet Cleaning and T-Co Heating
Systems(1)
10.18 Agreement of Purchase and Sale of Assets with Michael
Shurtliff, d.b.a. Protech Carpet Cleaning and Flood
Restoration(1)
10.19 Bill of Sale and Assignment with Michael Shurtliff,
d.b.a. Protech Carpet Cleaning and Flood Restoration(1)
10.20 Liabilities Undertaking with Michael Shurtliff, d.b.a.
Protech Carpet Cleaning and Flood Restoration(1)
10.21 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking with Michael Shurtliff,
d.b.a. Protech Carpet Cleaning and Floor Restoration(1)
10.22 Agreement of Purchase and Sale of Assets with Reed T.
and Lana B. Buley, d.b.a. Complete Carpet Service(1)
10.23 Bill of Sale and Assignment with Reed T. and Lana B.
Buley, d.b.a. Complete Carpet Service(1)
10.24 Liabilities Undertaking with Reed T. and Lana B. Buley
d.b.a. Complete Carpet Service(1)
10.25 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking with Reed T. and Lana B.
Buley, d.b.a. Complete Carpet Service(1)
10.26 Letter of Intent re: Proposed Acquisition of Carpet and
Upholstery Cleaning Assets of Daniel M. Levine(1)
10.27 Agreement of Purchase and Sale of Assets with Daniel M.
and Kathleen L. Levine, d.b.a. All Valley Carpet, All
Valley Carpet & Upholstery and All Valley Restoration
Service(1)
10.28 Bill of Sale and Assignment with Daniel M. and Kathleen
L. Levine, d.b.a. All Valley Carpet, All Valley Carpet &
Upholstery and All Valley Restoration Service(1)
10.29 Liabilities Undertaking with Daniel M. Levine, d.b.a.
All Valley Carpet, All Valley Carpet & Upholstery and
All Valley Restoration Service(1)
10.30 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking with Daniel M. Levine(1)
10.31 Agreement of Purchase and Sale of Assets with Video
Aire(1)
10.32 Letter of Intent re: Proposed Acquisition of Assets with
Dirt Free Carpet & Upholstry Cleaning Inc.(1)
10.33 Letter of Intent re: Proposed Acquisition of Assets with
Rob Bleyl, d.b.a. Disaster Plus(1)
10.34 Letter of Intent re: Proposed Acquisition of Duct
Cleaning Business of Bob L. Allen(1)
10.35 Stock Purchase Agreement with CDL Capital Corp., CDL
Emerging Growth Equity Fund I, L.L.C., Gaylord Karren and
John Hopkins(1)
10.36 Placement Agreement with Equity Services, Ltd.(1)
10.37 Investor Subscription Agreement with Entrepreneurial
Investors, Ltd.(1)
10.38 Soliciting Dealer Agreement with Dominion Capital(1)
10.39 Agreement and Plan of Reorganization with HiTek Carpet
Care Inc.(1)
10.40 Stock-for-Stock Reorganization Agreement between HiTek
Carpet Care, Inc. and stockholders of Venturi
Technologies, Inc.(1)
10.41 Promissory Note with HiTek Carpet Care, Inc.(1)
10.42 Business and Financial Advisory Agreement with CDL
Capital Corp.(1)
10.43 Application for Certificate of Authority to Transact
Business in Texas(1)
10.44 Consent of Combustion Resources, L.L.C.(2)
10.45 Agreement of Purchase and Sale of Assets re Dirt Free
Carpet and Upholstery Cleaning, Inc.(2)
10.46 Non-Competition, Confidentiality and Continuity of
Business Dealings Undertaking(2)
10.47 Employment Agreement with Robert Bleyl(2)
10.48 Employment Agreement with David J. Bleyl(2)
10.49 Agreement of Purchase and Sale Assets with Disaster Plus
Corp., Robert D. Bleyl and David J. Bleyl(2)
10.50 Stock Purchase Agreement with Beaulieu Group, LLC (3)
II-3
<PAGE>
10.51 Marketing Agreement with Beaulieu Group, LLC (3)
10.52 Registration Rights Agreement with Beaulieu Group,
LLC (3)
10.53 Lock-up Agreement executed by Gaylord Karren in favor of
Beaulieu Group, LLC (3)
10.54 Lock-up Agreement executed by John Hopkins in favor of
Beaulieu Group, LLC (3)
10.55 Securities Purchase Agreement with Greenwich A.G. (4)
10.56 Registration Rights Agreement with Greenwich A.G. (4)
10.57 License Right of First Refusal Agreement with Greenwich
A.G. (4)
10.58 Lock-up Agreement executed by Gaylord Karren in favor of
Greenwich A.G. (4)
10.59 Lock-up Agreement executed by John Hopkins in favor of
Greenwich A.G. (4)
10.60 Lock-up Agreement executed by Greenwich A.G. in favor of
Venturi Technologies, Inc. (4)
10.61 Warrant to Purchase Shares of Common Stock with Greenwich
A.G. (4)
10.62 Restated Global Agreement for Purchase and Sale with
various seller entities(5)
10.63 Agreement for Purchase and Sale of Assets with MPI of
Nevada, a Colorado general partnership(5)
10.64 Stock Purchase Agreement with All Fours Distributing,
Inc. and Jason Dupuis (as the shareholders of 593693
B.C. LTD.)(5)
10.65 Agreement for Purchase and Sale of Assets with MPI of
Arizona, an Arizona general partnership (6)
10.66 Agreement for Purchase and Sale of Assets with MPI of
Northern Florida, a Colorado general partnership(7)
23.1 Consent of Mackey Price & Williams
23.2 Consent of Child & Co.
</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.
(3) Incorporated by reference from Quarterly Report on Form
10-QSB, as filed on May 17, 1999.
(4) Incorporated by reference from Quarterly Report on Form
10-QSB, as filed on August 16, 1999.
(5) Incorporated by reference from Current Report on Form 8-K, as
filed on November 17, 1999.
(6) Incorporated by reference from Current Report on Form 8-K, as
filed on November 30, 1999.
(7) Incorporated by reference from Current Report on Form 8-K, as
filed on December 30, 1999.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes (a) subject to the terms
and conditions of Section 15(d) of the Securities Exchange Act of 1934, to
file with the Securities and Exchange Commission such supplementary and
periodic information, documents and reports as may be prescribed by any rule
or regulation of the Commission heretofore or hereafter duly adopted pursuant
to authority conferred in that section; (b) to provide the Underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in the names as required by the Underwriters to
permit prompt delivery to each purchaser; (c) if any public offering by the
Underwriters is to be made on terms differing from those set forth on the
cover page of the Prospectus, to file a post-effective amendment setting
forth the terms of such offering; and (d) to deregister, by means of a
post-effective amendment, any securities covered by this Registration
Statement that remain unsold at the termination of this offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or preceding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant also undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering of those securities.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned Registrant further undertakes that it will file,
during any period in which it offers or sells securities, a post-effective
amendment to this Registration Statement to (i) include any prospectus
required by Section
II-4
<PAGE>
10(a)(3) of the Securities Act, (ii) reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information in the Registration Statement, and (iii) include any additional
or changed material information on the plan of distribution.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, in Salt
Lake City, State of Utah, on February 10, 2000.
VENTURI TECHNOLOGIES, INC.
By: /s/Gaylord M. Karren
-----------------------------------
Gaylord M. Karren, Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gaylord M. Karren as his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement,
and to file the same, with all Exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Gaylord M. Karren Chairman of the Board and February 10, 2000
---------------------------------- Chief Executive Officer
Gaylord M. Karren (Principal Executive Officer)
/s/John M. Hopkins * President and Director February 10, 2000
----------------------------------
John M. Hopkins
/s/James K. Stone * Director February 10, 2000
----------------------------------
James K. Stone
/s/B. J. Mendenhall * Controller February 10, 2000
---------------------------------- (Principal Financial and
B. J. Mendenhall Accounting Officer)
/s/ Gaylord M. Karren
----------------------------------
By: Gaylord M. Karren
Attorney-in-Fact
</TABLE>
<PAGE>
[LETTERHEAD]
February 10, 2000
Venturi Technologies, Inc.
763 North 530 East
Orem, Utah 84097
Re: Form S-3 Registration Statement
Ladies and Gentlemen:
We have acted as your counsel in connection with the registration for
resale on a Form S-3 Registration Statement (the "Registration Statement") of
Venturi Technologies, Inc. of (i) an aggregate of 70,437 shares of common
stock, $.001 par value (the "Common Stock") issuable upon conversion of its
Series A Convertible Preferred Stock (the "Series A Preferred Stock"); (ii)
an aggregate of 1,190,000 shares of Common Stock issuable upon conversion of
its Series B Convertible Preferred Stock (the "Series B Preferred Stock");
(iii) an aggregate of 4,607,476 shares of Common Stock issuable upon
conversion of its Series D Convertible Preferred Stock (the "Series D
Preferred Stock"); (iv) an aggregate of 1,000,000 shares of Common Stock
Issuable upon conversion of its Series E Convertible Preferred Stock (the
"Series E Preferred Stock"); (v) an aggregate of 1,366,666 shares of Common
Stock issuable upon the exercise of Warrants issued to Sentry Financial
Corporation ("Sentry Warrants"), Franklin Funding ("Franklin Warrants") and
Aspen Capital Resources LLC ("Aspen Capital Warrants"); (vi) 100,000 shares
of Common Stock issuable upon the exercise of options granted to Equity
Services, Ltd ("ESL Options"); and (vii) an aggregate of 2,339,000 shares of
Common Stock pursuant to registration rights granted to certain individuals
and entities.
In such connection, we have examined certain corporate records and
proceedings of the Company, including the proceedings taken in connection
with the authorization and issuance of the securities described above,
including the shares of Common Stock issuable upon the exercise of the
Sentry, Franklin and Aspen Capital Warrants; the shares of Common Stock
issuable upon the conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock; the
shares of common stock issuable upon the exercise of the ESL Options; and the
shares of Common Stock with registration rights granted to certain
individuals and entities
<PAGE>
Venturi Technologies, Inc.
February 10, 2000
Page 2
- --------------------------
(hereinafter collectively referred to as the "Securities") and such other
investigation as we deemed necessary. Based upon the foregoing, we are of
the opinion that when sold or registered as contemplated by the Registration
Statement, the Securities will be validly issued, fully paid and
nonassessable.
Very truly yours,
/s/ Mackey Price & Williams
Mackey Price & Williams
<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) 359-2320
CONSENT OF INDEPENDENT ACCOUNTANTS
February 10, 2000
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 9, 1999 relating to the
financial statements, which includes a qualification paragraph relating to
the company's ability to continue as a going concern, and which appears in
Venturi Technologies, Inc.'s Annual Report on Form 10-KSB for the year ended
December 31, 1998.
/s/ Child & Company, PC
