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Preliminary Information Statement
Dated: January 24, 1999
ENG ENTERPRISES, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 2000
TO THE SHAREHOLDERS OF ENG ENTERPRISES, INC.:
A special meeting of the shareholders (the "Special Meeting") of ENG
Enterprises, Inc.,(formerly Energetics, Inc., hereinafter the "Company"), will
be held at 3090 East 3300 South, Suite 400, Salt Lake City, Utah 84109, at
10:00 a.m., Mountain Time, to ratify and approve the following:
(A) the implementation of a 1-for-200 reverse split of all of the
Company's issued and outstanding shares of common stock;
(B) the election of John Chymboryk and Shauna Chymboryk as directors of
the Company, to serve until the next annual meeting of shareholders or until
their successors are duly elected and qualified;
(C) the ratification of the appointment of Andersen and Andersen, L.C.,
as independent auditors for the period ending December 31, 1999.
At the Special Meeting the shareholders will also transact such other
business as may properly come before the Special Meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSALS WHICH
ARE DESCRIBED IN MORE DETAIL IN THE ACCOMPANYING INFORMATION STATEMENT.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON JANUARY 18, 2000 (THE
"RECORD DATE"), ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE SPECIAL MEETING.
MEMBERS OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS WHO, COLLECTIVELY HOLD IN
EXCESS OF 50% OF THE COMPANY'S ISSUED AND OUTSTANDING SHARES, HAVE INDICATED
THEIR INTENTION TO VOTE IN FAVOR OF THE PROPOSALS. AS A RESULT, THE PROPOSALS
WILL BE APPROVED WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER SHAREHOLDERS.
ALTHOUGH MANAGEMENT IS NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY, SHAREHOLDERS MAY BE PRESENT AT THE SPECIAL MEETING AND VOTE
THEIR SHARES IN PERSON OR BY PROXY. MANAGEMENT DOES, HOWEVER, ENCOURAGE ALL
SHAREHOLDERS TO ATTEND THE SPECIAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
/S/John Chymboryk, President
Salt Lake City, Utah
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ENG ENTERPRISES, INC.
INFORMATION STATEMENT
This Information Statement is furnished to the shareholders of the
Company in connection with a Special Meeting to be held on February 24, 2000,
at 10:00 a.m., Mountain Time, at 3090 East 3300 South, Suite 400, Salt Lake
City, Utah 84109, and at any adjournment(s) thereof.
At the Special Meeting, the shareholders will consider and vote on the
following:
(A) the implementation of a 1-for-200 reverse split of all of the
Company's issued and outstanding shares of common stock;
(B) the election of John Chymboryk and Shauna Chymboryk as directors of
the Company, to serve until the next annual meeting of shareholders or until
their successors are duly elected and qualified;
(C) the ratification of the appointment of Andersen and Andersen, LC, as
independent auditors for the period ending December 31, 1999.
At the Special Meeting the shareholders will also transact such other
business as may properly come before the Special Meeting or any adjournment
thereof.
MANAGEMENT IS NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY, HOWEVER SHAREHOLDERS MAY BE PRESENT AT THE SPECIAL MEETING AND VOTE
THEIR SHARES IN PERSON OR BY PROXY. MANAGEMENT ENCOURAGE ALL SHAREHOLDERS TO
ATTEND THE SPECIAL MEETING IN PERSON.
THIS INFORMATION STATEMENT IS BEING MAILED ON OR ABOUT FEBRUARY 4, 2000 TO ALL
SHAREHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETING.
Only holders of record of the 94,821,394 shares of Common Stock and 2,801
shares of Preferred Stock of the Company outstanding as of January 18, 2000
(the "Record Date"), are entitled to vote at the Special Meeting. Each
shareholder has the right to one vote for each share of the Company's common
stock and 5,000 votes for each share of the Company's Preferred Stock owned.
Cumulative voting is not provided for. Holders of more than 50% of the
94,821,394 shares of Common Stock and 2,801 shares of Preferred Stock issued
and outstanding must be represented at the Special Meeting to constitute a
quorum for conducting business. Approval of the proposals discussed above
requires the affirmative vote of a majority of the Company's issued and
outstanding shares of Common Stock represented in person or by proxy at the
Special Meeting.
The Company's officers, directors, and principal shareholders owning or
controlling, in the aggregate, greater than 50% of the issued and outstanding
shares of Common Stock on the Record Date have indicated their intention to
vote in favor of the proposals. Accordingly, the proposals will be approved
without the affirmative vote of any other shares.
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INTRODUCTION
Organization and Corporate History
- ----------------------------------
Energetics, Inc. (the "Company" or "Issuer") was incorporated in the
state of Delaware on August 2, 1982. From inception to January 1, 1995, the
Company was engaged in the business of exploration, development and production
of oil and natural gas. The Company discontinued operations by the loss of its
remaining assets and its three subsidiaries leaving the Company with the debt
reflected in the Company's balance sheet and has since remained inactive. The
Company is considered to have been in the development stage since January 1,
1995.
In July 1999, Jordan Smith, the sole remaining director of the Company,
appointed John Chymboryk to serve as director and President of the Company.
Mr. Smith subsequently resigned. Since July, Mr. Chymboryk has been actively
involved in moving the Company forward. In connection with his activities,
Mr. Chymboryk reviewed the historical documents of the Company and determined
that certain actions were necessary to position the Company to seek out
business opportunities.
In September 1999, the Company entered into an Interim Funding Agreement
with Milagro Holdings, Inc., a Delaware corporation ("Milagro"), in which
Milagro agreed to advance funds to the Company, up to a total of $75,000, in
exchange for equity securities. At December 31, 1999, the Company had
received approximately $60,000 under this agreement. See CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Chymboryk determined that the Company's Delaware corporate charter
had been revoked, and was able to reinstate the Company in early November
1999. However, in the interim, another Delaware corporation had taken the
name Energetics, Inc., and Mr. Cymboryk procured the reinstatement under a new
name, ENG Enterprises, Inc. In addition, the Company's CUSIP number was
changed from 292929106 to 268741105, its symbol on the OTCBB was changed form
EJTX to EGEI, it was assigned a new Employer Identification Number by the IRS,
and it changed stock transfer agent from AST in Colorado to Interwest Stock
Transfer Company in Salt Lake City, Utah.
Concurrent with these changes, Mr. Chymboryk was able to bring the
financial information of the Company current, and engaged counsel to file the
Company's periodic reports with the SEC so that the Company was current in its
filings. In addition, Mr. Chymboryk was instrumental in negotiating
settlements for approximately $2.3 million in outstanding notes and debt
obligations of the Company, and obtaining conversion agreements for most of
the Company's Preferred Stock outstanding.
Current Business Activities
- ---------------------------
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.
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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.
Proposal A - Implementation of 1-for-200 Reverse Split
------------------------------------------------------
Management of the Company believes that the number of shares issued and
outstanding present an obstacle to potential mergers or acquisitions, and
intends to effect the reverse split in order to make the Company more
attractive to potential merger or acquisition candidates.
The Reverse Split will not change the par value or authorized
capitalization of the Company. The rights of the Company's existing
shareholders will not be altered and no shareholders will be eliminated as a
result of the Acquisition Agreement and the Reverse Split. The Reverse Split
will have no effect on the stockholders' equity of the Company, other than the
transfer, as of the Record Date, of approximately $97,148 in stated capital to
additional paid-in capital.
If, as a result of implementation of the Reverse Split, any common stock
shareholder would be entitled to receive a fractional share, the Company will
not issue any fractional shares of common stock. Instead, shares will be
rounded up to the next higher whole number. All shares turned in to the
Company as a result of the Reverse Split will be canceled and returned to the
status of authorized but unissued shares. Therefore, after the Reverse Split
is implemented, the Company will still have an authorized capitalization of
100,000,000 shares of Common Stock, of which approximately 474,107 shares will
be issued and outstanding, and 7,000 shares of Preferred Stock, of which 2,801
will be issued and outstanding.
Following the implementation of the Reverse Split, each holder of shares
of the Company's Common Stock shall, upon the surrender of the certificate or
certificates representing such shares to the Company's registrar and transfer
agent, be entitled to receive a certificate or certificates evidencing shares
of the Company's Common Stock, reflecting the new shares.
Holders of Preferred Stock do not need to surrender certificates. The
Reverse Split will not affect the terms and provisions of the Preferred Stock.
Proposal B - Election of Board of Directors
-------------------------------------------
The names of the Company's current executive officers and directors and
the positions held by each of them are set forth below:
Position with Director and/or
Name Age the Company Officer Since
- -------------------- --- --------------------- ------------------
John Chymboryk 45 President and Chairman 1999
Shauna Chymboryk 42 Secretary and Director 1999
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The Company's officers and directors have served in such positions since
the dates indicated above. Certain biographical information with respect to
each of such persons is set forth herein below. Each director, if elected by
the shareholders, will serve until the next annual meeting and until his
successor is duly elected and qualified.
Mr. John Chymboryk has a financial and marketing background. He received
a bachelor's degree with emphasis in accounting and economics in 1982. After
graduation he worked for a large international accounting firm until 1984. He
then taught courses in finance, marketing and management in the business
department of a Community College from 1984 to 1992. Concurrent with his
teaching experience he operated an accounting business that specialized in
preparing financial statements, tax returns and business plans for small
business. Mr. Chymboryk co-founded a company that specialized in marketing,
customer retention and management training. Mr. Chymboryk served as Vice
President and was responsible for the financial operations and in developing
and delivering management training. Mr. Chymboryk was instrumental in
designing and presenting the sales management workshop that was contracted
with Lexus, the Toyota Motor Corporation luxury car line, for over a 5-year
period. In 1997, Mr. Chymboryk played a major role in designing, developing
and helping implement a new application that assists companies in following up
and retaining their existing customer base. This application is currently
being used throughout the market place with special emphasis in the automotive
industry.
Ms. Shauna Cymboryk has a background in administration, secretarial
services and teaching. Her work experience includes: 1975 to 1977 courthouse
secretary for the city of Lethbridge, 1977 to 1979, administrative assistant
at the University of Lethbridge, Alberta, Canada, 1980 to 1982, program
administrator for the Lethbridge Youth Community Program, 1982 to 1986,
elementary school teacher, 1986 to 1988, President, Lethbridge Stake Young
Women's Program, and 1995 to 1998, President, LDS Primary Organization for the
Altaview, Utah Seventh Ward. Ms. Chymboryk has developed strong
organizational skills, clerical proficiency and ability to effect efficient
office system designs. She has been responsible for administering and
monitoring work programs, preparing materials, and facilitating staff
meetings, both as an employee and as a volunteer in community and church
organizations. Ms. Chymboryk earned a Bachelor of Sciences degree from
Brigham Young University in 1982.
Proposal C - Ratification of the Appointment of Andersen and Andersen, L.C.
---------------------------------------------------------------------------
The Board of Directors has selected Andersen & Andersen, L.C. as
independent auditors for the fiscal year ending December 31, 1999. To the
knowledge of the Company, at no time has Andersen & Andersen, L.C. had any
direct or indirect financial interest in or any connection with the Company
other than as independent public accountants. Representatives of Andersen &
Andersen, L.C. may be present at the Special Meeting and will be provided the
opportunity to make a statement, if they desire to do so, and be available to
respond to appropriate questions.
Recommendation of the Company's Management
- ------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE PROPOSALS
CONTAINED HEREIN ARE DESIRABLE AND IN THE BEST INTERESTS OF THE COMPANY'S
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSALS.
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Interest of Certain Persons in the Proposals
- --------------------------------------------
In considering the recommendation of the Company's management with
respect to the Proposals, the Company's management will not receive any
benefits arising from their ownership of the Company's common stock as a
result of the Proposals that will not be equally extended to all of the
Company's shareholders.
Vote Required
- -------------
The vote of a majority of the issued and outstanding shares of Common
Stock and Preferred Stock represented in person or by proxy at the Special
Meeting is required to approve the Acquisition Proposal. Members of
management and other principal shareholders holding or controlling the vote of
in excess of fifty percent (50%) of the issued and outstanding stock entitled
to vote at the Special Meeting have indicated their intention to vote in favor
of the Proposals.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Information Statement contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
with respect to the financial condition, results of operations, business
strategies, operating efficiencies or synergies, competitive positions, growth
opportunities for existing products, plans and objectives of management, and
other matters. Statements in this Information Statement that are not
historical facts are hereby identified as "forward-looking statements" for the
purpose of the safe harbor provided by Section 21E of the Exchange Act and
Section 27A of the Securities Act. Such forward-looking statements, including,
without limitation, those relating to the future business prospects, revenues
and income, wherever they occur in this Information Statement, are necessarily
estimates reflecting the best judgment of the management of the Company and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those suggested by the forward-looking statements. Such
forward-looking statements should, therefore, be considered in light of
various important factors, including those set forth in this Information
Statement.
Words such as 'estimate', 'project', 'plan,' 'intend', 'expect', 'believe' and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this
Information Statement. The Company's stockholders are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date they were made.
Business of the Company
- -----------------------
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.
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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
- ---------------------------------
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.
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Evaluation
- ----------
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
- ---------------------------------------
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.
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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.
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Rights of Shareholders
- ----------------------
It is presently anticipated by management that prior to consummating a
possible acquisition or merger, the Company will not seek to have the
transaction ratified by shareholders, unless such ratification is necessary to
to comply with statutory or regulatory requirements.
Competition
- -----------
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.
Employees
- ---------
As of the date hereof, the Company does not have any employees and has no
plans for retaining employees until such time as the Company's business
warrants the expense, or until the Company successfully acquires or merges
with an operating business. The Company may find it necessary to hire
part-time clerical help on an as-needed basis.
Facilities
- ----------
The Registrant is currently using as its principal place of business the
business office its President and Director located in Salt Lake City, Utah.
The cost of the utilization of the office space is provided free of charge to
the Company and the value of such use is considered nominal. Although the
Company has no written agreement and pays no rent for the use of this
facility, it is contemplated that at such future time as an acquisition or
merger transaction may be completed, the Company will secure commercial office
space from which it will conduct its business. Until such an acquisition or
merger, the Company lacks any basis for determining the kinds of office space
or other facilities necessary for its future business. The Company has no
current plans to secure such commercial office space. It is also possible
that a merger or acquisition candidate would have adequate existing facilities
upon completion of such a transaction, and the Company's principal offices may
be transferred to such existing facilities.
Year 2000 Computer Problem
- --------------------------
The Year 2000, or Y2K problem concerns potential failure of certain
computer software to correctly process information because of the software's
inability to calculate dates. The Company has no operations or current
equipment which were affected by the Year 2000 computer glitch. The
Registrant will make every effort to determine the Y2K status and effects
experienced by any potential merger or acquisition candidate.
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Discussion and Analysis of Financial Condition and Results of Operations
- ------------------------------------------------------------------------
Overview
- --------
The Company is considered a development stage company with no assets
or capital and with no operations or income since January 1, 1995. The
It is anticipated that the Company will require only nominal capital to
maintain the corporate viability and necessary funds will most likely
be provided by the Company's existing shareholders or its management in the
immediate future.
The Company has no other financing means in place and unless the Company
is able to facilitate an acquisition of or merger with an operating business
or is able to obtain significant outside financing, there is substantial doubt
about the Company's ability to continue as a going concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the
Company successfully completes an acquisition or merger. At that time,
management will evaluate the possible effects of inflation on the Company
as it relates to its business and operations following a successful
acquisition or merger.
Plan of Operation
- -----------------
During the next twelve months, the Company's officers and directors
will contact business brokers, consultants, and other business professionals
in an effort to actively seek out and investigate possible business
opportunities with the intent to acquire or merge with one or more business
ventures. In its search for business opportunities, management will follow the
procedures outlined in Item 1 above. Because the Company lacks funds, it
may be necessary for the shareholders and/or management to either advance
funds to the Company or to accrue expenses until such time as a successful
business consolidation can be made. Management intends to hold expenses to a
minimum and to obtain services on a contingency basis when possible. The
Company's directors may receive compensation for services provided to the
Company until such time as an acquisition or merger can be accomplished.
However, if the Company engages outside advisors or consultants in its search
for business opportunities, it may be necessary for the Company to attempt to
raise additional funds. As of the date hereof, the Company has not made any
arrangements or definitive agreements to use outside advisors or consultants
or to raise any capital.
In the event the Company does need to raise capital most likely the only
method available to the Company would be the private sale of its securities.
It is unlikely that it could make a public sale of securities or be able to
borrow any significant sum from either a commercial or private lender. There
can be no assurance that the Company will be able to obtain additional funding
when and if needed, or that such funding, if available, can be obtained on
terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is confident that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
<PAGE> 12
Market Price of the Company's Common Stock and Dividends
- --------------------------------------------------------
The table on the following page sets forth, for the respective periods
indicated, the prices for the Company's common stock in the over-the-counter
market as reported by the NASD's OTC Bulletin Board. Beginning January 1,
1995, the Company entered the development stage and has had little if any
trading activity in its securities. The bid prices represent inter-dealer
quotations, without adjustments for retail mark-ups, mark-downs or commissions
and may not necessarily represent actual transactions.
High Bid Low Bid
-------- -------
Fiscal Year Ended December 31, 1999
- -----------------------------------
First, Second, Third and Fourth Quarters 0.12 0.00
Fiscal Year Ended December 31, 1998
- -----------------------------------
First, Second, Third and Fourth Quarters 0.06 0.01
Fiscal Year Ended December 31, 1997
- -----------------------------------
First, Second, Third and Fourth Quarters 0.00 0.00
Fiscal Year Ended December 31, 1996
- -----------------------------------
First, Second, Third and Fourth Quarters 0.00 0.00
Since its inception, the Registrant has not paid any dividends on its
Common Stock, and the Registrant does not anticipate that it will pay
dividends in the foreseeable future. The Company's preferred stock carries a
cumulative dividend rate of 8%. No dividends can be declared on the common
stock until the cumulative dividends are paid on the shares of outstanding
preferred stock.
The Company's common stock has traded intermittently during the past
three years. As of January 18, 2000 there were 94,821,394 shares of common
stock outstanding held by approximately 660 stockholders of record, as
reported by the Registrant's transfer agent.
The Company has converted all preferred stock outstanding other than
2,374 shares of Series A 8% Convertible Preferred and 67 shares of Series B 8%
Convertible Preferred. Both classes of preferred stock are eligible for
voting at a conversion rate of 5,000 shares of common stock for each share of
preferred stock.
<PAGE>
<PAGE> 13
EXECUTIVE COMPENSATION
The Company has not had a bonus, profit sharing, or deferred compensation
plan for the benefit of its employees, officers or directors. The Company has
not paid any salaries or other compensation to its officers, directors or
employees for the years ended December 31, 1999, 1998, 1997, and 1996, nor at
any time during 1999, 1998, 1997 or 1996. Further, the Company has not entered
into an employment agreement with any of its officers, directors or any other
persons. As of the date hereof, no such persons have accrued any compensation
from the Company.
Employment Contracts, Termination of Employment, and Changes in Control
Arrangements
- -----------------------------------------------------------------------
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named as a director,
executive officer, promoter or control person above which would in any way
result in payments to any such person because of his resignation, retirement,
or other termination of such person's employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities following a changing in control of the Company.
Board Compensation
- ------------------
The Company's directors receive no compensation or cost reimbursement for
attendance at board meetings.
<PAGE>
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 18, 2000, the name and the
number of shares of the Company's Common Stock held of record or beneficially
by each person who held of record, or was known by the Company to own
beneficially, more than 5% of the issued and outstanding shares of the
Company's Common Stock, and the name and shareholdings of each director and of
all officers and directors as a group.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
Title
of Name and Address Amount and Nature of Percentage
Class Beneficial Owner Beneficial Ownership(1) of Class
- ----- ---------------- -------------------- ----------
Common Jordan R. Smith D 4,665,569 4.92
13111 E. Briarwood Ave, #300 I 12,106,537 (2) 12.76
Englewood, CO 80112
Common Marsha Smith D 7,439,053 7.85
7000 East Quincy Ave., #F416 I 4,665,569 (3) 4.92
Denver, CO 80237
Common Robert L. Mehl D 1,993,484 2.10
13111 E. Briarwood Ave, #300 I 10,469,308 (4) 11.04
Englewood, CO 80112
Common Milagro Holdings, Inc. D 24,000,000 25.31
57 West 200 South, #310
Salt Lake City, UT 84111
Security Ownership of Management of the Company
- -----------------------------------------------
Title
of Name and Position of Amount and Nature of Percentage
Class Officer and/or Director Beneficial Ownership(1) of Class
- ----- ----------------------- -------------------- ----------
Common John Chymboryk, President 0 0
Common Shauna Chymboryk, Secretary 0 0
---------- -----
All Officers and Directors
as a Group (2 persons) 0 0
========== =====
(1) Indirect and Direct ownership are referenced by an "I" or "D",
respectively. All shares owned directly are owned beneficially and of record
and such shareholder has sole voting, investment, and dispositive power,
unless otherwise noted.
(2) Represents 7,439,053 shares held of record by Marsha S. Smith, the spouse
of Jordan R. Smith, and 4,667,484 shares held of record by the Jordan Smith
Trust, of which Mr. Smith is trustee, all of which shares may be deemed to be
beneficially owned by Jordan Smith.
(3) Represents shares held of record by Jordan Smith, spouse of Marsha Smith,
which shares may be deemed to be beneficially owned by Marsha Smith.
(4) Represents shares held of record by the Mehl Family Limited Partnership,
of which Mr. Mehl may be deemed to be the beneficial owner.
<PAGE>
<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In September 1999, the Company entered into an Interim Funding Agreement
with Milagro Holdings, Inc., a Delaware corporation ("Milagro"), in which
Milagro agreed to advance funds to the Company, up to a total of $75,000, in
exchange for equity securities priced at $0.0025 per share. At December 31,
1999, the Company had received approximately $60,000 under this agreement. At
the record date, the Company had issued a total of 24,000,000 shares of Common
Stock to Milagro for conversion of the funds advanced at December 31, 1999.
The breakdown of the amounts advanced is outlined below.
Certain principal shareholders have signed proxies giving their voting
rights to Capital Consulting, a Utah corporation. Robert Mehl and the Mehl
Family Limited Partnership have granted voting proxies for common and
preferred shares totaling a minimum of 20,219,108 votes, and Jordan and Marsha
Smith have granted voting proxies for common and preferred shares totaling a
minimum of 12,477,236 votes. Capital Consulting has been assisting the
Company in its efforts to locate a suitable business opportunity.
In December 1999, the above shareholders also agreed to settle certain
outstanding debts owed to them by the Company. Robert Mehl and the Mehl
Family Limited Partnership have signed a Debt Settlement in the amount of
$25,000, and Jordan and Marsha Smith have signed a Debt Settlement Agreement
in the amount of $10,000, each in exchange for forgiveness of any and all
outstanding monies and obligations owed to each by the Company. Funds for the
debt settlement were advanced to the Company pursuant to the Interim Funding
Agreement by Milagro, an unaffiliated investor. To secure these funds, the
Company has issued to Milagro 14,000,000 shares of the Company's Common Stock,
at a price of $0.0025 per share.
Milagro has advanced additional funds to the Company for expenses
incurred in connection with the Company's Delaware reinstatement, payments for
legal and accounting fees for preparing and bringing current the Company's
financial statements and SEC filings, and legal fees in connection with the
preparation of this Information Statement. The total amount of these advances
at December 31, 1999 was $25,000. To secure these funds, the Company has
issued to Milagro 10,000,000 shares of the Company's Common Stock, valued at
$0.0025 per share.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
None
SHAREHOLDER PROPOSALS
None
LEGAL MATTERS
None
OTHER MATTERS
None
Management does not know of any business other than referred to in the
Notice which may be considered at the meeting. If any other matters should
properly come before the Special Meeting, such matters will be properly
addressed and resolved and those in attendance will vote on such matters in
accordance with their best judgment.
ENG ENTERPRISES, INC.
By order of the Board of Directors
/S/ John Chymboryk, President
Salt Lake City, Utah
January 19, 2000
<PAGE> 16
FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheets of the Company as of September 30, 1999 and
December 31, 1998, and the related unaudited statements of operations for the
three and nine month periods ended September 30, 1999 and 1998, and the period
from January 1, 1995 (inception of development stage) to September 30, 1999,
the unaudited statement of stockholders' equity for the period from January
1,1995 (inception of development stage) through September 30, 1999, and the
unaudited statements of cash flows for the nine month periods ended September
30, 1999 and 1998, and the period from January 1, 1995 (inception of
development stage) through September 30, 1999, are attached hereto and
incorporated herein by this reference.
Operating results for the nine months ended September 30, 1999, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1999.
<PAGE>
<PAGE> 17
ENERGETICS, INC.
(Development Stage Company)
BALANCE SHEETS
September 30, 1999, and December 31, 1998
September 30, December 31,
1999 1998
------------- ------------
ASSETS
CURRENT ASSETS
Cash $ - $ -
------------- ------------
Total Current Assets $ - $ -
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,568,662 $ 2,568,662
------------- ------------
Total Current Liabilities 2,568,662 2,568,662
------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock
10,000,000 shares authorized, at
$1.00 par value; 2,317 shares
issued and outstanding 2,317 2,317
Common stock
100,000,000 shares authorized, at
$0.001 par value; 56,573,601
shares issued and outstanding 565,736 565,736
Capital in excess of par value 5,998,594 5,998,594
Accumulated deficit (9,135,309) (9,136,309)
------------ ------------
Total Stockholders' Equity (2,568,662) (2,568,662)
------------ ------------
$ - $ -
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 18
ENERGETICS, INC.
(Development Stage Company)
Statement of Operations
For the Three and Nine Months Ended September 30, 1999 and 1998
and the Period from January 1, 1995 to September 30, 1999
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months January 1, 1995
September 30, September 30, September 30, September 30 to
1999 1998 1999 1998 September 30, 1999
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
EXPENSES - - - - 1,351,491
------------ ------------ ------------ ------------ ------------
NET LOSS $ - $ - $ $ $ (1,351,491)
============ ============ ============ ============ ============
GAIN (LOSS) PER COMMON SHARE
Basic $ - $ - $ - $ -
============ ============ ============ ============
Diluted $ - $ - $ - $ -
============ ============ ============ ============
AVERAGE OUTSTANDING SHARES
Basic 56,573,601 56,573,601 56,573,601 56,573,601
============ ============ ============ ============
Diluted 68,160,701 68,160,701 68,160,701 68,160,701
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 19
ENERGETICS, INC.
(Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period from January 1, 1995 (date of inception
of development stage) to September 30, 1999
<TABLE>
<CAPTION>
Capital in
Preferred Stock Common Stock Excess of Accumulated
Shares Amount Shares Amount Par Value Deficit
------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995
(note 1) 2,317 $ 2,317 56,573,601 $ 565,736 $5,998,594 $ (7,783,818)
Net loss for the year ended - - - - - (1,055,475)
December 31, 1995
Net loss for the year ended
December 31, 1996 - - - - - (98,672)
Net loss for the year ended
December 31, 1997 - - - - - (98,672)
Net loss for the year ended
December 31, 1998 - - - - - (98,672)
------- --------- --------- --------- ---------- -----------
Balance December 31, 1998 2,317 2,317 56,573,601 565,736 5,998,594 (9,135,309)
Net loss for the nine
months ended September 30,
1999 - - - - - -
------- --------- --------- --------- ---------- -----------
Balance September 30, 1999 2,317 $ 2,317 56,573,601 $ 565,736 $5,998,594 $(9,036,637)
======= ========== ========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 20
ENERGETICS, INC.
(Development Stage Company)
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
and the Period from January 1, 1995 to June 30, 1998
Nine Months Nine Months January 1, 1995
September 30, September 30, to
1999 1998 September 30, 1999
------------ ------------ ------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net profit (loss) $ - $ - $ (1,351,491)
Adjustments to reconcile net
loss to net cash provided by
operating activities
Loss of assets - - 956,803
Changes in accounts payable - - 296,016
------------ ------------ ------------
Net Cash Used by Operations - - -
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES
- - -
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
- - -
------------ ------------ ------------
Net Increase (Decrease) in Cash - - -
Cash at Beginning of Period - - -
------------ ------------ ------------
Cash at End of Period $ - $ - $ -
============ ============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 21
ENERGETICS, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the state of Delaware on August
2, 1982 with authorized common stock of 10,000,000 shares at a par value of
$.01 and 10,000,000 preferred stock at a par value of $1.00. Since inception
the Company has been engaged in the business of the exploration, development,
and production of oil and natural gas through three wholly owned subsidiaries.
During 1995 the Company ceased operations resulting from the loss of its
remaining assets leaving the Company with the debt shown in the balance sheet
.and has since remained inactive.
The company is considered to have been in the development stage since January
1, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
- ------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
- ---------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
- ------------
On December 31, 1998, the Company had a net operating loss carry forward of
$9,135,309. The tax benefit from the loss carry forward has been fully
offset by a valuation reserve because the use of the future tax benefit is
doubtful since the Company has no operations. The loss carryover will expire
beginning in years 1998 though 2019.
Estimates and Assumptions
- -------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
Financial instruments
- ---------------------
The carrying amounts of financial instruments, including accounts payable, are
considered by management to be their estimated fair values. These values are
not necessarily indicative of the amounts that the Company could realize in a
current market exchange.
<PAGE>
<PAGE> 22
ENERGETICS, INC.
(Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding using the treasury stock method in
accordance with FASB No. 128.
3. ACCOUNTS PAYABLE
The Company issued various notes payable for advances to the Company by
related parties and the notes were not timely paid which resulted in default
and are now considered as current accounts payable and including the accrued
interest payable.
4. PREFERRED STOCK
The preferred stock is convertible into common stock at the rate of one share
of preferred stock for 5,000 shares of common stock at the option of the
stockholder. The preferred shares carry a cumulative dividend rate of 8%. No
dividends can be declared on the common stock until the cumulative dividends
are paid on the preferred.
5. RELATED PARTY TRANSACTIONS
Related parties own 82% of the outstanding common stock.
6. GOING CONCERN
The Company does not have the necessary working capital to service its
liabilities for the coming year and may be forced into bankruptcy.
The Company intends to acquire interests in various business opportunities
which, in the opinion of management, will provide a profit to the Company but
it does not have the working capital to be successful in this effort.
Continuation of the Company as a going concern is dependent upon obtaining the
working capital to service its debt and to provide working capital for its
planned activity. All of the debt shown in the balance sheet is due to related
parties and they have agreed to withheld any collection action during the
coming year and the management of the Company has developed a strategy, which
they believe can obtain the needed working capital through additional equity
funding and long term debt which will enable the Company to continue
operations for the coming year.
