EGEI - from the 10KSB,
Current Business Activities
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The Company should be considered a "shell" company and its current
business purpose is to locate and consummate a merger or acquisition with a
private entity. The purposed business activities described herein classify
the Company as a "blank check" company. Therefore, the Company faces all the
risks interest in any new business, together with those risks specifically
inherent in the search for an acquisition of business opportunities. The
Company does not propose to restrict its search for a business opportunity to
any particular industry or geographical area and may, therefore, engage in
essentially any business in any industry. The Company has unrestricted
discretion in seeking and participating in a business opportunity, subject to
the availability of such opportunities, economic conditions, and other
factors.
The selection of a business opportunity in which to participate is
complex and risky. Additionally, as the Company has no resources, it may be
difficult to find good opportunities. There can be no assurance that the
Company will be able to identify and acquire any business opportunity which
will ultimately prove to be beneficial to the Company and its shareholders.
The Company will select any potential business opportunity based on
management's business judgment.
The activities of the Company are subject to several significant risks
which arise primarily as a result of the fact that the Company has no specific
business and may acquire or participate in a business opportunity based on the
decision of management which potentially could act without the consent, vote,
or approval of the Company's shareholders. The risks faced by the Registrant
are further increased as a result of its lack of resources and its inability
to provide a prospective business opportunity with significant capital.
Because of the Company's current status having no assets and no recent
operating history, in the event the Company does successfully acquire or merge
with an operating business opportunity, it is likely that the Company's
present shareholders will experience substantial dilution and there will be a
probable change in control of the Company.
Any target acquisition or merger candidate of the Company will become
subject to the same reporting requirements as the Registrant upon consummation
of any such business combination. Thus, in the event that the Company
successfully completes an acquisition or merger with another operating
business, the resulting combined business must provide audited financial
statements for at least the two most recent fiscal years or, in the event that
the combined operating business has been in business less than two years,
audited financial statements will be required from the period of inception of
the target acquisition or merger candidate.
Sources of Business Opportunities
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The Company intends to use various sources in its search for potential
business opportunities including its officers and directors, consultants,
special advisors, securities broker-dealers, venture capitalists, members of
the financial community and others who may present management with unsolicited
proposals. Because of the Company's lack of capital, it may not be able to
retain on a fee basis professional firms specializing in business acquisitions
and reorganizations. Rather, the Company will most likely have to rely on
outside sources, not otherwise associated with the Company, that will accept
their compensation only after the Company has finalized a successful
acquisition or merger. To date, the Company has not engaged nor entered into
any discussions, negotiations, agreements nor understandings regarding
retention of any consultant to assist the Company in its search for business
opportunities, nor is management presently in a position to actively seek or
retain any prospective consultants for these purposes.
The Company does not intend to restrict its search to any specific kind
of industry or business. The Company may investigate and ultimately acquire a
venture that is in its preliminary or development stage, is already in
operation, or in various stages of its corporate existence and development.
Management cannot predict at this time the status or nature of any venture in
which the Company may participate. A potential venture might need additional
capital or merely desire to have its shares publicly traded. The most likely
scenario for a possible business arrangement would involve the acquisition of,
or merger with, an operating business that does not need additional capital,
but which merely desires to establish a public trading market for its shares.
Management believes that the Company could provide a potential public vehicle
for a private entity interested in becoming a publicly held corporation
without the time and expense typically associated with an initial public
offering.
Evaluation
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Once the Company has identified a particular entity as a potential
acquisition or merger candidate, management will seek to determine whether
acquisition or merger is warranted or whether further investigation is
necessary. Such determination will generally be based on management's
knowledge and experience, or with the assistance of outside advisors and
consultants evaluating the preliminary information available to them.
Management may elect to engage outside independent consultants to perform
preliminary analysis of potential business opportunities. However, because of
the Company's lack of capital it may not have the necessary funds for a
complete and exhaustive investigation of any particular opportunity.
In evaluating such potential business opportunities, the Company will
consider, to the extent relevant to the specific opportunity, several factors
including potential benefits to the Company and its shareholders; working
capital, financial requirements and availability of additional financing;
history of operation, if any; nature of present and expected competition;
quality and experience of management; need for further research, development
or exploration; potential for growth and expansion; potential for profits; and
other factors deemed relevant to the specific opportunity.
Because the Company has not located or identified any specific business
opportunity as of the date hereof, there are certain unidentified risks that
cannot be adequately expressed prior to the identification of a specific
business opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available
to the Company may involve new and untested products, processes or market
strategies which may not ultimately prove successful.
Form of Potential Acquisition or Merger
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Presently, the Company cannot predict the manner in which it might
participate in a prospective business opportunity. Each separate potential
opportunity will be reviewed and, upon the basis of that review, a suitable
legal structure or method of participation will be chosen. The particular
manner in which the Company participates in a specific business opportunity
will depend upon the nature of that opportunity, the respective needs and
desires of the Company, and the relative negotiating strength of the parties
involved. Actual participation in a business venture may take the form of an
asset purchase, lease, joint venture, license, partnership, stock purchase,
reorganization, merger or consolidation. The Company may act directly or
indirectly through an interest in a partnership, corporation, or other form of
organization, however, the Company does not intend to participate in
opportunities through the purchase of minority stock positions.
Because of the Company's inactive status and its concomitant lack of
assets or relevant operating history, it is likely that any potential merger
or acquisition with another operating business will require substantial
dilution of the Company's existing shareholders. There will probably be a
change in control of the Company, with the incoming owners of the targeted
merger or acquisition candidate taking over control of the Company. Management
has not established any guidelines as to the amount of control it will offer
to prospective business opportunity candidates, since this issue will depend
to a large degree on the economic strength and desirability of each candidate,
and corresponding relative bargaining power of the parties. However,
management will endeavor to negotiate the best possible terms for the benefit
of the Company's shareholders as the case arises.
Management does not have any plans to borrow funds to compensate any
persons, consultants, promoters, or affiliates in conjunction with its efforts
to find and acquire or merge with another business opportunity. Management
does not have any plans to borrow funds to pay compensation to any prospective
business opportunity, or shareholders, management, creditors, or other
potential parties to the acquisition or merger. In either case, it is
unlikely that the Company would be able to borrow significant funds for such
purposes from any conventional lending sources. In all probability, a public
sale of the Company's securities would also be unfeasible, and management does
not contemplate any form of new public offering at this time.
In the event of a successful acquisition or merger, a finder's fee, in
the form of cash or securities of the Company, may be paid to persons
instrumental in facilitating the transaction. The Company has not
established any criteria or limits for the determination of a finder's fee,
although most likely an appropriate finder's fee will be negotiated between
the parties, including the potential business opportunity candidate, based
upon economic considerations and reasonable value as estimated and mutually
agreed at that time. A finder's fee would only be payable upon completion of
the proposed acquisition or merger in the normal case, and management does not
contemplate any other arrangement at this time. Management has not actively
undertaken a search for, nor retention of, any finder's fee arrangement with
any person. It is possible that a potential merger or acquisition candidate
would have its own finder's fee arrangement, or other similar business
brokerage or investment banking arrangement, whereupon the terms may be
governed by a preexisting contract; in such case, the Company may be
limited in its ability to affect the terms of compensation, but most likely
the terms would be disclosed and subject to approval pursuant to submission of
the proposed transaction to a vote of the Company's shareholders.
Management cannot predict any other terms of a finder's fee arrangement
at this time. It would be unlikely that a finder's fee payable to an
affiliate of the Registrant would be proposed because of the potential
conflict of interest issues. If such a fee arrangement was proposed,
independent management and directors would negotiate the best terms available
to the Company so as not to compromise the fiduciary duties of the affiliate
in the proposed transaction, and the Company would require that the proposed
arrangement would be submitted to the shareholders for prior ratification in
an appropriate manner.
Management does not contemplate that the Registrant would acquire or
merge with a business entity in which any affiliates of the Company have an
interest and no present potential for such a merger or acquisition exists.
Any such related party transaction, however remote, would be submitted for
approval by an independent quorum of the Board of Directors and the proposed
transaction would be submitted to the shareholders for prior ratification in
an appropriate manner. If such an opportunity arose, however, the Company
would not seek to obtain an independent appraisal of the value of the business
or company with which the related party transaction was contemplated. In that
circumstance, management's ability to effectively evaluate such a non-arms
length transaction might be compromised, and any remedy available to
dissenting shareholders in such a transaction would most likely be
prohibitively expensive and time consuming. None of the Company's managers,
directors, or other affiliated parties have had any contact, discussions, or
other understandings regarding any particular business opportunity at this
time, regardless of any potential conflict of interest issues. Accordingly,
the potential conflict of interest is merely a remote theoretical possibility
at this time.
Rights of Shareholders
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It is presently anticipated by management that prior to consummating a
possible acquisition or merger, the Company will seek to have the transaction
ratified by shareholders in the appropriate manner. Most likely, this would
require a general or special shareholder's meeting called for such purpose.
Competition
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Because the Company has not identified any potential acquisition or
merger candidate, it is unable to evaluate the type and extent of its likely
competition. The Company is aware that there are several other public
companies with only nominal assets that are also searching for operating
businesses and other business opportunities as potential acquisition or merger
candidates. The Company will be in direct competition with these other public
companies in its search for business opportunities and, due to the
Registrant's lack of funds, it may be difficult to successfully compete with
these other companies.
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