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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File Number 000-25183
VENTURI TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
NEVADA 87-0580279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6295 EAST 56TH AVENUE 80022
COMMERCE CITY, COLORADO (ZIP CODE)
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 444-4444
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 10, 2000, Registrant had outstanding 13,840,607 shares of
Common Stock.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
UNAUDITED
<TABLE>
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,168,387
Accounts receivable, net of $348,975 allowance
for doubtful accounts 1,767,512
Inventory 162,899
Other current assets 45,257
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Total current assets 3,144,055
Fixed assets
Capital lease equipment 8,628,248
Machinery and equipment 1,128,717
Computer and office equipment 286,135
Automobiles and trucks 1,113,394
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Total fixed assets 11,156,493
Less accumulated depreciation (3,222,684)
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Net fixed assets 7,933,809
Deferred tax asset, net of valuation allowance of $3,827,408 3,648,000
Goodwill, net of amortization of $337,460 6,587,786
Lease and rent deposits 385,721
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Total assets $ 21,699,371
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,211,834
Accrued liabilities 1,794,062
Notes payable to stockholders (see Note 2) 2,557,718
Current portion long-term debt and capital leases 2,327,578
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Total current liabilities 8,891,193
Long-term liabilities
Notes payable 3,231,795
Capital lease obligations 5,272,817
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Total long-term liabilities 8,504,612
Total Liabilities 17,395,805
============
Stockholders' equity
Preferred stock, Series A through E, $.001 par
value, cumulative, convertible, 5,000,000 shares
authorize, 3,408,993 issued and outstanding 3,408
Common stock,$.001 par value, 20,000,000 shares
authorized, 13,840,607 issued and
13,837,907 outstanding 15,041
Additional Paid-in capital 28,665,869
Common shares held in treasury (13,091)
Retained earnings (deficit) (24,367,661)
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Total stockholders' equity 4,303,565
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Total liabilities and stockholders' equity $ 21,699,371
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</TABLE>
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VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
September 30
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
Carpet cleaning $ 4,987,849 $ 3,532,301
Expenses:
Carpet cleaning 4,041,908 2,593,261
Other selling, general & administrative 1,184,768 883,346
Depreciation and amortization 622,255 299,719
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Total expenses 5,848,931 3,776,326
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Net (loss) from operations (861,082) (244,025)
Other income and expense:
Interest expense (413,839) (120,984)
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Net (loss) from continuing operations,
before income tax benefit (1,274,921) (365,009)
Income tax benefit -- 128,000
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Net (loss) $ (1,274,921) $ (237,009)
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Per share amounts (basic and diluted):
Net loss from continuing operations before
income tax benefit $ (.09) $ (.08)
Income tax benefit $ -- $ .03
------------ ------------
Net (loss) $ (.09) $ (.05)
============ ============
Weighted average shares used in computing
per share amounts 13,840,607 4,656,804
============ ============
</TABLE>
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VENTURI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three months ended
September 30
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,274,921) $ (237,009)
Adjustments to reconcile net loss to net cash used
in operating activities:
Provision for allowance on accounts receivable 228,975 --
Depreciation and amortization 622,254 299,719
Changes in operating assets and liabilities:
Accounts receivable (564,092) (645,500)
Other current assets 73,670 374,954
Inventory (3,662) --
Lease and rent deposits (23,239) --
Accounts payable and accrued liabilities 447,302 (316,359)
Deferred taxes, net of valuation allowance -- 128,000
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NET CASH USED IN OPERATING ACTIVITIES (493,713) (396,195)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and other fixed assets (10,367) (298,642)
Proceeds from Sales of Fixed Assets 117,178 --
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NET CASH USED IN INVESTING ACTIVITIES 106,811 (298,642)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit 75,000 --
Payments on capital lease obligations (33,652) --
Payments on notes payable to stockholders (124,589) (384,000)
Issuances of Notes Payable to stockholders (see Note 2) 1,100,000 --
Issuance of Preferred Stock -- 880,000
Net Proceeds from Lease Line -- (1,357,186)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,016,759 (861,186)
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NET INCREASE (DECREASE) IN CASH 629,858 (1,556,023)
Cash at Beginning of Period 538,530 2,103,568
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CASH AT END OF PERIOD $ 1,168,388 $ 547,545
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Supplemental disclosures - Cash interest paid $ 174,987 $ 137,117
NONCASH INVESTING AND FINANCING ACTIVITY:
Fixed assets acquired under capital lease obligations $ 783,520 --
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
UNAUDITED
1. INTERIM FINANCIAL STATEMENT POLICIES AND DISCLOSURES
The unaudited, consolidated, condensed financial statements of Venturi
Technologies included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote Disclosures normally required in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading.
These consolidated, condensed financial statements reflect all adjustments
which, in the opinion of management, are necessary to present a fair statement
of the results of operations for the interim periods presented. All of the
adjustments which have been made in these consolidated, condensed financial
statements are of a normal recurring nature.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-KSB.
2. NOTES PAYABLE - BRIDGE LOAN
In response to an acute need for capital, during August 2000, three of the
Company's largest shareholders and members of the Company's board of directors,
Bruce E. Ranck, Daniel Dornier and Beaulieu Group, LLC (the "Significant
Shareholders"), contributed (or agreed to contribute) to the Company a total of
$1,500,000 (the "Bridge Loan"). A total of $1,100,000 was received during the
quarter. The Bridge Loan is shown on the Company's balance sheet as a Current
Note Payable. The terms of Bridge Loan have been tentatively agreed to by all
parties, and the agreements are being finalized. The Company and the Significant
Shareholders have agreed in principle that upon closing of the financing
transaction between Saugatuck Capital Company Limited Partnership IV
("Saugatuck"), which the Company presently anticipates will occur within ninety
days, the Bridge Loan will be converted into a newly created Series H Redeemable
Preferred Stock ("Series H Preferred Stock") with Warrants for common stock.
Certain other debt of the Company, which combined with the Bridge Loan equals
approximately $3,750,000, will simultaneously be converted into Series H
Preferred Stock with Warrants. The warrants attached to the $3,750,000 of Series
H Preferred Stock will be exercisable into a total of 26.25% of the Company's
voting common stock. Additional information concerning the conversion of the
Bridge Loan may be found in the Letter of Intent between the Company and
Saugatuck which was an exhibit to a report on Form 8-K filed with the Securities
Exchange Commission on October 27, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Form 10-QSB may contain trend information and forward-looking
statements that involve risks and uncertainties. The actual results of
operations of the Company could differ materially from the Company's historical
results of operations and those discussed in such forward-looking statements as
a result of certain factors set forth in this section and elsewhere in this Form
10-QSB, including information incorporated by reference.
RESULTS OF OPERATIONS
The following table shows a quarterly trend summary of unaudited carpet cleaning
operating results for the three quarters ended September 30, 2000:
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<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Quarter Ended
3/31/00 6/30/00 9/30/00
<S> <C> <C> <C>
Revenues $ 3,885,699 $ 4,924,491 $ 4,987,849
Operating Expense 1,956,533 4,502,503 4,041,908
% of Revenue 50% 91% 81%
Other, Selling, General & Admin. Exp 4,210,542 1,359,970 1,184,768
% of Revenue 108% 28% 24%
Other Expense (Primarily Interest) 719,477 479,653 413,839
Net Loss from Continuing Operations (3,585,065) (2,175,308) (1,274,921)
</TABLE>
Management has taken many actions during the past six months to improve the
company's results. Some of these actions are listed below:
- Renegotiation of terms for a significant portion of the company
capital lease obligations.
- Replacement of the debt secured by the company's accounts receivable.
- Divestiture of restoration business
- Closure of four unprofitable operating locations
- Closure of the corporate office in Orem, Utah.
- Reduction of overhead employees throughout the company.
- Implementation of a technician incentive plan to improve productivity.
- Implemented centralized processes surrounding cash receipts and
disbursements.
Management is continuing to take steps to improve the operating results of the
company. Currently, there are several initiatives underway that will continue to
improve these results. The following are examples of some of these initiatives:
- Building an experienced sales team to drive revenue growth in existing
markets.
- Conducting technician training to develop value added skills in order
to enhance revenue of each job, when appropriate.
- Developing an incentive plan for base managers that will align the
manager's goals with shareholder expectations.
- Planning for the implementation of a new integrated customer service
and billing software, enabling the company to further leverage its
corporate overhead, and to improve customer service.
In addition to improving the current operations, management is committed to
growing the company through acquisition. Management has recently signed a letter
of intent with Saugatuck Capital Company, of Stamford Connecticut, that would
provide the company with between $5 million and $7 million in capital. This
capital would be used to fund acquisitions of carpet cleaning companies in
strategic markets throughout the United States. Management expects to finalize
this agreement within ninety days. Additional information concerning the Letter
of Intent between the Company and Saugatuck may be found in a report on Form 8-K
filed with the Securities Exchange Commission on October 27, 2000.
REVENUES. Revenues increased by 41% to $4,987,849 for the quarter ended
September 30, 2000, compared to $3,532,301 for the quarter ended September 30,
1999. This increase was attributable primarily to the Company's growth into new
geographic areas by virtue of acquisitions of carpet cleaning companies,
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and to increased market penetration in geographic areas where the company has
acquired new bases of operations.
OPERATING EXPENSES. Operating expenses increased by 56% to $4,041,908 for the
quarter ended September 30, 2000, compared to $2,593,261 for the quarter ended
September 30, 1999. This increase is attributable to the acquisitions made
during the past year. During the third quarter of 2000 management continued with
its aggressive plan to reduce operating expenses. In July 2000, an incentive
compensation plan for technicians was implemented throughout the company. As
expected, the plan led to improved productivity within its bases. Operating
expenses as a percentage of revenue was approximately 91% for the second quarter
of 2000, while during the third quarter of 2000, this ratio improved to 81%.
Management is continuing its efforts to reduce and control costs and is
optimistic that additional improvements will be achieved.
OTHER SELLING, GENERAL AND ADMINISTRATIVE. Other selling, general and
administrative expenses increased 34% to $1,184,768 for the quarter ended
September 30, 2000 compared to $883,346 for the quarter ended September 30,
1999. This increase is primarily attributed to corporate overhead expenses.
During the quarter the company completed the relocation of its corporate office
from Orem, Utah, to Commerce City, Colorado. This process included the
implementation of an internal control structure that will enable the company to
better manage its cash collection and disbursement activities. All accounts
receivable and accounts payable processes have been centralized in Commerce
City. Additionally, intensive credit and collection activities began during the
quarter. During the quarter, the following items were recorded: $228,975
provision for bad debt expense; $40,025 provision due to the uncertainty of the
realizable value of certain current assets; $99,000 provision related to unpaid
wages dating back to May 1998 as a result of an audit completed during the
quarter by the US Department of Labor.
OTHER INCOME AND EXPENSE. Other income and expense increased 242% to $413,839
for the quarter ended September 30, 2000 compared to $120,984 for the quarter
ended September 30, 1999. This is primarily an increase in interest expense
associated with the additional truck lease obligations entered into during the
last year. Approximately $60,000 was accrued during the quarter for interest
expense related to both notes payable and capital lease obligations dating back
to January 2000.
LIQUIDITY AND CAPITAL RESOURCES
a. On November 6, 2000, the company paid $472,000 to the Internal Revenue
Service, to settle in full the company's obligations for unpaid federal payroll
tax withholdings dating back to 1997. The company expects to be released from
the tax liens previously filed by the IRS before November 17, 2000.
On August 29, 2000, the company paid $40,000 to the State of Texas, to settle in
full the company's obligations for unpaid State of Texas payroll tax
withholdings dating back to 1997.
The company still has various unpaid state tax obligations in the approximate
amount of $492,000 dating back to 1997. This amount is fully accrued and
management believes that it will be able to settle these obligations from
current resources.
The company has withheld and remitted all applicable federal and state payroll
taxes for the quarter ended September 30, 2000
b. The company is negotiating with its primary provider of financing, to allow
the Company to delay
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monthly lease payments on a substantial amount of its operating equipment until
April 1, 2001. The company has not made a substantial capital lease payment to
this creditor since April 2000.
c. In response to an acute need for capital, during August 2000, three of the
Company's largest shareholders and members of the Company's board of directors,
Bruce E. Ranck, Daniel Dornier and Beaulieu Group, LLC (the "Significant
Shareholders"), contributed (or agreed to contribute) to the Company a total of
$1,500,000 (the "Bridge Loan"). A total of $1,100,000 was received during the
quarter. The Bridge Loan is shown on the Company's balance sheet as a Current
Note Payable. The terms of Bridge Loan have been tentatively agreed to by all
parties, and the agreements are being finalized. The Company and the Significant
Shareholders have agreed in principle that upon closing of the financing
transaction between Saugatuck Capital Company Limited Partnership IV
("Saugatuck"), which the Company presently anticipates will occur within ninety
days, the Bridge Loan will be converted into a newly created Series H Redeemable
Preferred Stock ("Series H Preferred Stock") with Warrants for common stock.
Certain other debt of the Company, which combined with the Bridge Loan equals
approximately $3,750,000, will simultaneously be converted into Series H
Preferred Stock with Warrants. The warrants attached to the $3,750,000 of Series
H Preferred Stock will be exercisable into a total of 26.25% of the Company's
voting common stock. Additional information concerning the conversion of the
Bridge Loan may be found in the Letter of Intent between the Company and
Saugatuck which was an exhibit to a report on Form 8-K filed with the Securities
Exchange Commission on October 27, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) The Company filed a Form 8-K on October 27, 2000, to report that the
company had entered into a letter of intent with Saugatuck Capital Company
Limited Partnership IV.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VENTURI TECHNOLOGIES, INC.
Dated: November 9, 2000 By: /s/ Michael F. Dougherty
---------------------------------
Michael F. Dougherty
Chief Executive Officer
By: /s/ Stephen S. Abate
---------------------------------
Stephen S. Abate
Chief Financial Officer
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