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 March 31, 1999
[ ] 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 86-0853635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1327 NORTH STATE STREET 84047
OREM, UTAH (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 235-9552
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 May 1, 1999, Registrant had outstanding 8,679,976 shares of Common
Stock.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
ASSETS
March 31,
1999
----------
Current Assets:
Cash and cash equivalents $ 292,479
Accounts receivable, net 599,450
Prepaid expenses and other 33,307
Deposits 156,163
----------
Total Current Assets 1,078,399
Property, Plant and Equipment, net 2,719,495
Income taxes benefit 3,560,658
Other Assets 650,702
----------
Total Assets $8,009,256
----------
----------
The accompanying notes are an integral
part of these consolidated financial statements.
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
March 31,
1999
-----------
Current Liabilities:
Short-term debt $ 156,557
Payroll taxes payable 853,400
Accounts payable 1,812,960
Preferred dividends payable 57,218
Accrued liabilities 170,409
Customer Deposits 30,060
-----------
Total Current Liabilities 3,080,604
-----------
Long-term Notes payable 3,008,074
-----------
Total Liabilities 6,088,678
-----------
Shareholders' Equity:
Common stock, $0.001 par value, 20,000,000 shares authorized; 8,766
8,765,976 shares issued
Preferred Stock 877
Additional Paid In Capital 10,537,434
Preferred dividend 0
Retained earnings (loss) (7,923,576)
Year-to-date earnings (loss) (702,923)
-----------
Total shareholders' Equity 1,920,578
-----------
Total Liabilities and Equity $ 8,009,256
-----------
-----------
The accompanying notes are an integral
part of these consolidated financial statements.
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31
------------------------------
1999 1998
----------- -----------
REVENUE $ 1,671,490 $ 555,298
COSTS AND EXPENSES:
Cost of Goods sold 286,825 43,953
Direct wages and costs 616,406 180,184
----------- -----------
903,231 224,137
----------- -----------
GROSS PROFIT 768,259 331,161
----------- -----------
OPERATING EXPENSES 1,020,136 192,852
----------- -----------
NET OPERATING INCOME (251,877) 138,308
----------- -----------
GENERAL AND ADMINISTRATIVE 829,542 639,067
----------- -----------
INCOME BEFORE INCOME TAXES (1,081,419) (500,759)
----------- -----------
PROVISION FOR INCOME TAXES (378,496) (175,265)
----------- -----------
NET INCOME $ (702,923) $ (325,494)
----------- -----------
NET INCOME PER COMMON SHARE $ (0.08) $ (0.07)
----------- -----------
COMMON SHARES OUTSTANDING 8,765,976 4,495,375
----------- -----------
----------- -----------
The accompanying notes are an integral
part of these consolidated financial statement.
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended
March 31
--------------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,629,471 $ 510,418
Cash paid to suppliers and employees (2,410,680) (1,216,735)
Interest paid (133,378) (2,938)
Interest received 8,750 0
Income taxes paid 0 0
----------- -----------
Net Cash Provided by Operating Activities (905,837) (708,255)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (440,987) (165,336)
----------- -----------
Net Cash Used in Investing Activities (440,987) (165,336)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividends 0 (25,963)
Proceeds from selling of preferred stock 841,400 73,868
Proceeds from Capital leases and notes 530,972 (32,608)
900,022
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,548 41,929
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 266,931 (21,718)
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 292,479 $ 20,179
----------- -----------
----------- -----------
The accompanying notes are an integral
part of these consolidated financial statements.
VENTURI TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Reconciliation of Net Income to Net Cash Provided by Operating Activities
Three Months Ended
March 31,
--------------------------
1999 1998
--------- ---------
NET INCOME $(702,923) $(325,494)
--------- ---------
Depreciation and amortization 180,000 75,000
(Increase) decrease in accounts receivable (33,269) (10,125)
Increase in prepaid expenses and other assets (44,084) 0
Increase in accrued liabilities (80,280) (261,273)
Increase (decrease) in accounts payable 153,215 (11,099)
Increase (decrease) in deferred income tax benefit (378,496) (175,264)
--------- ---------
Total Adjustments (202,914) (382,361)
--------- ---------
Net Cash Provided by Operating Activities $(905,837) $(708,255)
--------- ---------
--------- ---------
The accompanying notes are an integral
part of these consolidated financial statements
VENTURI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(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.
Footnote 1- Equipment Purchases
During the first quarter of 1999, the company ordered an additional 140
trucks equipped with carpet cleaning equipment. These trucks will be delivered
throughout the months until March 2000. After all the trucks are in service,
Venturi's truck mounted carpeting cleaning fleet will total 192 trucks. These
trucks are financed using capital leases with five- year terms. The effective
implicit interest rate in the leases is 18%.
Footnote 2- Subsequent Events
In April, Beaulieu Group, LLC acquired 2,303,738 shares of Series D Preferred
Stock at a price of $3,000,000, all of which is available for Ventura operating
capital. The Series D Preferred Stock does not carry a dividend preference, but
it does provide for a liquidation preference equal to the original issue price
plus a cumulative return of 8% per annum. The Series D Preferred Stock is
convertible into common stock at a conversion ratio of two shares of common
stock for each share of Series D Preferred Stock. Following the issuance of the
Series D Preferred Stock, Beaulieu Group, LLC owned approximately 25.75% of the
Company's common stock on a fully diluted basis. With this investment comes a
relationship with one of the largest carpet manufacturers in the world. Venturi
expects to realize important advantages from this relationship as it expands
operations throughout the United States.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS.
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 Company's revenue for the first three months of 1999 increased 201% over
revenue for the same three month period in 1998. This increase was primarily
attributable to several acquisitions by the Company of independent carpet
cleaning and restoration businesses during 1998.
The Company's cost of goods sold and direct wages and costs increased
approximately 303% from the first quarter of 1998 to the first quarter of 1999.
This increase was also primarily attributable to the acquisition of several
independent carpet cleaning and restoration businesses. The increase was also
attributable to an increase in direct wages primarily to employees of
independent businesses acquired by the Company during the assimilation period
following acquisition.
Operating costs increased approximately 429% in the first quarter of 1999 as
compared to the first quarter of 1998, again primarily as a result of the
Company's acquisitions and its marketing
efforts to increase market penetration. The operating costs also increased as
a result of increased costs incurred in assimilating acquired businesses, and
in investigating potential acquisition candidates.
General and administrative expenses increased 30% from the first quarter of 1998
to the first quarter of 1999, primarily because of increased costs and expenses
associated with financing activities undertaken by the Company.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Management of
the Company does not anticipate that any significant modification or replacement
of the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company is not able to determine, however, whether any of its suppliers,
lenders, or service providers will need to make any such software modifications
or replacements or whether the failure to make such software corrections will
have an effect on the Company's operations or financial condition.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(d) REPORT ON REGISTRATION OF COMMON STOCK ON FORM SB-2
On December 3, 1998 a Registration Statement on Form SB-2 filed by the Company
was declared effective by the Securities and Exchange Commission (file no.
333-60491). The Registration Statement registered 750,000 shares of Common
Stock, which the Company intended to offer to the public for $2.00 per share.
As of May 1, 1999, no securities had been sold pursuant to the Registration
Statement, and the Company had not yet decided how to proceed with that
offering.
ITEM 5. OTHER INFORMATION.
On April 14, 1999, the Company sold and issued 2,303,738 shares of
Series D Convertible Preferred Stock ("Series D Preferred Stock") to Beaulieu
Group, LLC, a Georgia
limited liability company ("Beaulieu"), in exchange for the cash payment of
$3,000,000, in a transaction that was exempt from registration with the
Securities and Exchange Commission pursuant to Rules 505 and 506 promulgated
under the Securities Act of 1933. The Series D Preferred Stock does not carry
a dividend preference, but it does provide for a liquidation preference in
the amount of the original issue price plus a cumulative return of 8% per
annum. The liquidation preference is on an equal footing with the Series A,
Series B, and Series C Preferred Stock.
The Series D Preferred Stock is convertible into common stock at any
time on the basis of two (2) shares of common stock for each one (1) share of
Series D Preferred Stock. On a fully diluted basis, Beaulieu is now the
beneficial owner of approximately 25.75% of the Company's common stock.
Concurrently with the closing of the sale of Series D Preferred Stock,
the Company and Beaulieu entered into a Marketing agreement that provides, among
other things, that Beaulieu will promote and endorse the Company's VenturiClean
System and that the Company will not endorse or recommend goods manufactured by
any carpet or fiber manufacturer other than Beaulieu.
Beaulieu and its affiliates are privately owned companies that are
among the largest manufacturers of carpet and rugs in the world.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) (a) EXHIBITS
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.
Exhibit No. Document
- ----------- --------
3.6 Amendment to Bylaws adopted April 14, 1999
4.11 Certificate of Designation of Series D Convertible Preferred
Stock ($0.001 par value) filed with Nevada Secretary of
State on April 13, 1999
10.50 Stock Purchase Agreement, dated April 14, 1999 between
Venturi Technologies, Inc. and Beaulieu Group, LLC
10.51 Marketing Agreement, dated April 14, 1999 between Venturi
Technologies, Inc.
and Beaulieu Group, LLC
10.52 Registration Rights Agreement, dated April 14, 1999 between
Venturi Technologies, Inc. and Beaulieu Group, LLC
10.53 Lock-up Agreement, dated April 14, 1999, executed by Gaylord
Karren in favor of Beaulieu Group, LLC
10.54 Lock-up Agreement, dated April 14, 1999, executed by John
Hopkins in favor of Beaulieu Group, LLC
27 Financial Data Schedule for electronic filers pursuant to
Item 601(c) of Regulation S-B
b) No reports were filed on Form 8-K during the quarter for which this
report is filed.
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: May 14, 1999 By: /s/Gaylord M. Karren
--------------------------------------
Gaylord M. Karren, Chairman of the Board
and Chief Executive Officer
By: /s/Merril L. Littlewood
--------------------------------------
Merril L. Littlewood
Chief Financial Officer
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: May 14, 1999 By:
--------------------------------------
Gaylord M. Karren, Chairman of the Board
and Chief Executive Officer
By:
--------------------------------------
Merril L. Littlewood
Chief Financial Officer