<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1997
------------------------------------------------------------------------
REGISTRATION NO. 333-28861
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
Amendment No. 3 to
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________
MIRAGE HOLDINGS, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
_______________________________
NEVADA 2335 95-4627685
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
_______________________________
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
18638 Pioneer Boulevard 18638 Pioneer Boulevard
Artesia, CA 90701 Artesia, CA 90701
(310) 860-5556 (310) 860-5556
(Address and telephone number of (Address of principal place of business)
principal executive office)
</TABLE>
ParaCorp, Incorporated
318 North Carson Street, Suite 208
Carson City, NV 89701
(888) 972-7273
(Name, address and telephone number of agent for service)
____________________________
COPIES TO:
Lawrence W. Horwitz, Esq. Lawrence G. Nusbaum, Esq.
Horwitz & Beam Gusrae, Kaplan & Bruno
Two Venture Plaza, Suite 350 120 Wall Street
Irvine, CA 92618 New York, NY 10005
(714) 453-0300 (212) 269-1400
___________________
Approximate Date of Proposed Sale to the Public.
As soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933 (the "Securities Act"), please
check the following box and list the Securities Act registration number of the
earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE NUMBER OF PROPOSED PROPOSED AMOUNT OF
REGISTERED SHARES OR MAXIMUM OFFERING MAXIMUM REGISTRATION
WARRANTS TO BE PRICE PER SHARE AGGREGATE OFFERING FEE
REGISTERED OR WARRANT(1) PRICE(1)(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock, $0.001 par value 500,000 $5.15 $ 2,575,000 $ 780.30
- --------------------------------------------------------------------------------------------------------------------------------
Warrants to purchase shares of Common Stock 1,000,000 $0.10 $ 100,000 $ 30.30
- --------------------------------------------------------------------------------------------------------------------------------
Representative Warrants(3) 150,000 ------ ----------- -------
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, underlying
Representative Warrants(4) 50,000 $6.18 $ 309,000 $ 93.64
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
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- --------------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE NUMBER OF PROPOSED PROPOSED AMOUNT OF
REGISTERED SHARES OR MAXIMUM OFFERING MAXIMUM REGISTRATION
WARRANTS TO BE PRICE PER SHARE AGGREGATE OFFERING FEE
REGISTERED OR WARRANT(1) PRICE(1)(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants Issuable Upon Exercise of
Representative Warrants(5) 100,000 $0.12 $ 12,000 $ 3.64
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock Issuable Upon Exercise of
Warrants Issuable Upon Exercise of
Representative Warrants(6) 100,000 $6.18 $ 618,000 $ 187.27
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, issued in
connection with bridge financing(7) 564,065 $3.50 $1,974,228 $ 598.25
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, underlying
warrants issued in connection with bridge (pound) 444,500 (pound) $0.75 (pound) $ 333,375 (pound) $ 101.02
financing(8)
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, underlying
options issued pursuant to Employee Stock (pound) 500,000 (pound) $0.01 (pound) $ 5,000 (pound) $ 1.52
Option Plan(9)
- --------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, underlying
options issued to a Consultant(10) 20,000 $2.00 $ 40,000 $ 12.12
- --------------------------------------------------------------------------------------------------------------------------------
Total 3,328,565 $5,966,603 $1,808.06
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457.
(2) The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
(3) Warrants issued to Platinum Equities, Inc., the Underwriter
("Representative Warrants").
(4) Represents Common Stock issuable upon exercise of Representative
Warrants.
(5) Represents Warrants issuable upon exercise of Representative Warrants
pursuant to Rule 416 promulgated under the Securities Act of 1933, this
Registration Statement also covers any additional Common Shares which may
become issuable by reason of the antidilution provisions of the
Representative Warrants.
(6) Represents Common Stock issuable upon exercise of Warrants included in
Representative Warrants.
(7) Represents Common Stock issued in connection with bridge financing to
the Company.
(8) Represents Common Stock issuable upon exercise of Warrants (the "Bridge
Warrants") issued in connection with bridge financing to the Company.
Pursuant to Rule 416 of the Securities Act, this Registration Statement
also covers any additional common shares which may become issuable by
reason of the antidilution provisions of the Bridge Warrants. Registration
fee calculated to Rule 457(g)(1).
(9) Registration fee calculated pursuant to Rule 457(h)(1).
(10) Represents Common Stock issuable upon exercise of options issued to
Manhattan West, Inc. as part of their Consulting Agreement with the
Company. Registration fee calculated pursuant to Rule 457(g)(1).
<PAGE>
MIRAGE HOLDINGS, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulations S-B
Showing Location in the Prospectus
of Information Required by Items of Form SB-2
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<CAPTION>
Form SB-2 Item Number and Caption Prospectus
<S> <C>
1. Forepart of Registration Statement and Outside Facing Page of Registration Statement: Outside Front
Front Cover Page of Prospectus................. Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Summary Information; Risk Factors ............ Prospectus Summary; Risk Factors
4. Use of Proceeds .............................. Prospectus Summary; Business of the Company; Use of Proceeds
5. Determination of Offering Price .............. Risk Factors; Underwriting
6. Dilution ..................................... Dilution
7. Selling Security Holders ..................... Not Applicable
8. Plan of Distribution ......................... Underwriting
9. Legal Proceedings ............................ Not Applicable
10. Directors, Executive Officers, Promoters and
Control Persons................................ Management and Principal Shareholders
11. Security Ownership of Certain Beneficial Owners
and Management................................. Management and Principal Shareholders
12. Description of Securities to be Registered..... Description of Securities
13. Interests of Named Experts and Counsel......... Not Applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. Indemnification of Directors and Officers
15. Organization Within Last Five Years............ Business of the Company
16. Description of Business........................ Business of the Company
17. Management's Discussion and Analysis of Plan of
Operation...................................... Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property........................ Business of the Company (Properties)
19. Certain Relationships and Related Transactions. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters............................ Risk Factors; Underwriting
21. Executive Compensation......................... Total Executive Compensation
22. Consolidated Financial Statements.............. Consolidated Financial Statements
23. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure......... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 2, 1997
PROSPECTUS
MIRAGE HOLDINGS, INC.
UP TO 500,000 SHARES OF COMMON STOCK AND
1,000,000 COMMON STOCK PURCHASE WARRANTS
MINIMUM OFFERING: 250,000 SHARES
Mirage Holdings, Inc., a Nevada corporation ("the Company"), hereby offers
for sale: (i) a minimum (the "Minimum Offering") of 250,000 shares of common
stock, $0.001 par value (the "Common Stock" or the "Shares"); and (ii) a maximum
(the "Maximum Offering") of 500,000 shares of Common Stock and 1,000,000 Common
Stock Purchase Warrants (the "Warrants.") The Common Stock and the Warrants
offered hereby (sometimes referred to as the "Securities") will be separately
tradeable immediately upon issuance and MAY BE PURCHASED SEPARATELY. The Common
Stock and Warrants will be sold by the Underwriters to the public at the public
offering prices set forth below. Each Warrant entitles the holder to purchase
one share of Common Stock at an exercise price $6.00 per share during the five
year period commencing on the date of this Prospectus. See "Description of
Securities."
Additionally, 564,065 shares of Common Stock (the "Private Placement
Stock") and 444,500 shares of Common Stock underlying warrants (the "Private
Placement Warrants") (collectively, the "Private Placement Securities") of the
Company are being registered herein and will be sold from time to time by the
shareholders described herein (the "Selling Shareholders") in transactions in
the national over-the-counter market or otherwise at prices prevailing at the
time of sale. The Company will not receive any of the proceeds from the sale of
any Private Placement Securities by the Selling Shareholders. All expenses
incurred in registering the Private Placement Securities are being borne by the
Company, but all selling and other expenses incurred by the Selling Shareholders
will be borne by the Selling Shareholders. See "Selling Shareholders."
The Private Placement Securities offered by the Selling Shareholders have
been acquired by the Selling Shareholders from the Company in private
transactions and are "restricted securities" under the Securities Act of 1933,
as amended (the "Act"), prior to their sale hereunder. This Prospectus has been
prepared for the purpose of registering the Private Placement Securities under
the Act to allow for future resales by the Selling Shareholders to the public
without restriction. To the knowledge of the Company, the Selling Shareholders
have made no arrangement with any brokerage firm for the sale of the Private
Placement Securities. The Selling Shareholders may be deemed to be
"underwriters" within the meaning of the Act. Any commissions received by a
broker or dealer in connection with resales of the Private Placement Securities
may be deemed to be underwriting commissions or discounts under the Act. See
"Plan of Distribution."
Prior to this Offering, there has been no public market for the Company's
securities. The public offering prices of the Common Stock and the Warrants
have been determined by negotiation between the Company and Platinum Equities,
Inc., the Managing Underwriter, and are not necessarily related to the Company's
asset value, net worth, results of operations, or other established criteria of
value. See "Underwriting." The Company is applying for quotation of the Common
Stock and Warrants on the Over-the-Counter Bulletin Board ("OTC/BB") system
under the symbols "MIRG" and "MIRGW," respectively. However, there can be no
assurance that an active public trading market for such securities will be
developed or sustained.
______________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Price to Public Underwriting Proceeds to Issuer or
Commissions/1/ Other Persons /2//3/
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $5.15 $0.515 $4.635
- ------------------------------------------------------------------------------------------------
Per Warrant $0.10 $0.01 $0.09
- ------------------------------------------------------------------------------------------------
Minimum Offering/3/ $1,287,500 $128,750 $1,158,750
(250,000 Shares)
- ------------------------------------------------------------------------------------------------
Maximum Offering $2,675,000 $267,500 $2,407,500
(500,000 Shares and 1,000,000
Warrants)
- ------------------------------------------------------------------------------------------------
</TABLE>
/1/ Does not include additional compensation to Platinum Equities, Inc. the
form of a non-accountable expense allowance equal to 3% of the gross
proceeds of the offering. See "Underwriting."
/2/ Before deduction of estimated expenses of $82,500 payable by the
Company, not including the 3% non-accountable expense allowance. See
"Underwriting":
/3/ There is no assurance that all or any of the Securities offered
hereunder will be sold. If the Company fails to receive subscriptions
for a minimum of 250,000 Shares within 120 days from the date of this
Prospectus (or 150 days if extended by the Company), the Offering will
be terminated and any subscription payments received will be promptly
refunded within 5 days to subscribers, without any deduction therefrom
or any interest thereon. If subscriptions for at least the minimum
amount are received within such period, funds will not be returned to
investors and the Company may continue the Offering until such period
expires or subscriptions for the Maximum Offering have been received,
whichever comes first. The investment funds shall be held in an Escrow
Account for up to 150 days. During this time, investors cannot demand
the return of their investments. If the Company does not meet the
required minimum number of securities to be sold (250,000 Shares), the
investors will be refunded their investment in full without interest.
Affiliates may purchase Securities in the Offering and no limits have
been imposed in this regard, but no one has made any commitment to
purchase any portion of the Offering in order to reach the minimum.
The Securities are being sold by the Company and offered by the
Underwriters on a "best efforts, minimum/maximum" basis, subject to prior sale,
when, as and if accepted by the Underwriters, and subject to certain conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer and
to reject orders in whole or in part. It is expected that the certificates
representing the Securities will be ready for delivery at the offices of
Platinum Equities, Inc., 19 Rector Street, Suite 2301, New York, NY, 10006,
within 10 business days after the date the Registration Statement is declared
effective by the SEC.
__________________________________
PLATINUM EQUITIES, INC.
THE DATE OF THIS PROSPECTUS IS DECEMBER 2, 1997
In connection with this Offering, the underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the Shares at a
level above that which might otherwise prevail in the open market. Such
stabilizing, if commenced, may be discontinued at any time.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Consolidated Financial Statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise specifically referenced, all
references to dollar amounts refer to United States dollars.
THE COMPANY
Mirage Holdings, Inc. (the "Company") was formed for the purpose of
marketing unique fashions. The Company specializes in the marketing of fashions
targeted toward the segment where discriminating customers are always looking
for unique and innovative products. The origin of these designs is mainly from
India and Pakistan but not limited to these countries. Management of the
Company is continuously in search of new ideas, regardless of the ethnic
background.
Management of the Company believed they could fill a niche in the apparel
market by importing these fashions. The economic feasibility of this idea was
studied by conducting a market research over a period of one year. The results
were very encouraging. The study identified two main areas of profitability:
the existing affluent market segments of Indian and Pakistani people living in
the United States and Canada who are always thirsty for new fashions from their
countries, as well as the growing demand in the mainstream American market for
unique, exotic fashion designs.
To explore the potential presented by these opportunities, the Company was
formed with the goal to be the dominant supplier of fashionwear in these
specialty market segments in the United States and Canada.
In the future, the Company may also pursue other business opportunities in
the United States and Canada which arise out of its relationships with the
Indian and Pakistan communities. See "Business of the Company--General."
As of September 1, 1997, the Company had 1,814,065 Common shares issued
and outstanding and 444,500 warrants to purchase one share of Common Stock for
$0.75 outstanding. The Company will have 2,064,065 shares of Common Stock
outstanding after the Offering if the minimum amount is sold hereunder and
2,314,065 Common shares outstanding if the maximum amount is sold hereunder,
without giving effect to the exercise of any warrants. Assuming exercise of all
warrants, including Warrants to be issued hereunder, the Company will have
2,508,565 shares of Common Stock outstanding after the Offering if the minimum
amount is sold hereunder and 3,758,565 shares of Common Stock if the maximum
amount is sold hereunder. The Company also has 500,000 common shares reserved
for issuance under its stock option plan, of which 120,000 options have been
issued.
From July 1, 1995 through June 30, 1997, the Company had aggregate
revenues of $412,202 from the sale of its products. The Company's cumulative
loss from operations for the respective period was $175,041. Successful
development of the Company's products and successful implementation of the
Company's marketing plan are necessary for the Company to commence generating
substantial operating revenues or to achieve profitability.
Mirage Holdings, Inc. was incorporated under the laws of the State of
Nevada on March 18, 1997. Mirage Collection, Inc., a wholly-owned subsidiary of
Mirage Holdings, Inc., began business as a partnership July 1, 1995, and was
reorganized into a corporation in the State of Nevada pursuant to Internal
Revenue Code Section 351 on April 1, 1997. The address of the Company's
principal executive offices is: 18638 Pioneer Boulevard, Artesia, CA, 90701.
The Company's telephone number is (310) 860-5556.
Unless otherwise noted, the "Company" as used in this Prospectus, will
refer to the consolidated entities described above.
1
<PAGE>
THE OFFERING
Securities Offered by
the Company.............. A minimum of 250,000 shares of Common Stock and a
maximum of 500,000 shares of Common Stock and
1,000,000 Warrants. Warrants may be purchased
separately from the Common Stock. Each Warrant
entitles the holder thereof to purchase one share of
the Company's Common Stock at an exercise price of
$6.00 per share for a term of five years. See
"Description of Securities.--
Offering Price
Common Stock........... $5.15 per Share.
Warrants............... $0.10 per Warrant.
Securities Offered by
Selling Shareholders.... 564,065 shares of Common Stock and 444,500 shares of
Common Stock underlying warrants.
Common Stock Outstanding. 1,814,065 shares as of September 1, 1997;
2,064,065 shares if the minimum amount is raised
hereunder; 2,314,065 shares if the maximum amount is
raised hereunder. In addition, the Company has
444,500 warrants outstanding as of September 1, 1997,
and will have an additional 1,000,000 Warrants
outstanding if the maximum amount is raised
hereunder. See "Description of Securities." The
Company has 500,000 common shares reserved for
issuance under its stock option plan, of which
120,000 options have been issued to date. See
"Management--Employment and Related Agreements."
Proposed OTC/BB Symbol
Common Stock.......... MIRG.
Warrants.............. MIRGW.
Use of Proceeds......... The Company intends to apply the net proceeds of this
Offering primarily to expand its sales force and
advertising activities; increase inventory; establish
distribution channels; enter the software industry of
India/Pakistan; perform market research into the
entertainment industry of India/Pakistan; and working
capital. See "Use of Proceeds."
Risk Factors............ The securities offered hereby involve a high degree
of risk and immediate substantial dilution. See "Risk
Factors."
2
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected historical financial data for the Company
derived from the Company's Consolidated Financial Statements. The historical
financial data are qualified in their entirety by reference to, and should be
read in conjunction with, the Consolidated Financial Statements and notes
thereto of the Company, which are incorporated by reference into this
Prospectus. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Three Months Ended Period July 1, 1996 Period July 1, 1995
September 30 to to
1997 1996 June 30, 1997 June 30, 1996
------------------------------ -------------------- --------------------
(unaudited)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue $55,605 $ 73,140 $ 212,972 $ 199,230
Net loss $(39,239) $(49,538) $ (289,891) $ (62,295)
Net loss per share $(0.02) $ (0.06) $ (0.22) $ ---
September 30, 1997 June 30, 1997 June 30, 1996
--------------------------- --------------- -------------------
(unaudited)
BALANCE SHEET DATA:
Current assets $ 127,646 $ 141,549 $ 70,749
Notes receivable $ 116,007 $ 113,104 $ ---
Total property and
equipment, net $ 40,131 $ 41,945 $ 39,629
Investments $ 200,000 $ 200,000 $ ---
Other $ 43,730 ------- ------
Total assets $ 527,514 $ 43,730 $ 3,730
$ 540,328 $ 114,108
======= =======
Total current liabilities $ 159,141 $ 104,842
Long term notes & loans $ 133,668
$ ---
Partner's equity $ --- $ 130,909 $ 9,266
Total liabilities and $ 135,475 --------
partner's equity $ --- $ ---
$ 114,108
$ --- =======
Stockholders equity $ 234,705 $ 273,944
-------
Total liabilities and
stockholders equity $ 527,514 $ 540,328
=================== =======
</TABLE>
3
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK AND SHOULD ONLY BE MADE BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER
CAREFULLY THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER INFORMATION CONCERNING
THE COMPANY AND ITS BUSINESS CONTAINED IN THIS PROSPECTUS, BEFORE PURCHASING THE
SECURITIES OFFERED HEREBY.
Limited Operating History. The Company began operations on April 17, 1995,
and first sold its product in April 1995. While the Company is generating some
revenues, it has not generated net income since its inception. (See Operating
Losses.) The Company's success is dependent upon the successful development and
marketing of its products, as to which there is no assurance. Unanticipated
problems, expenses, and delays are frequently encountered in establishing a new
business and marketing and developing products. These include, but are not
limited to, competition, the need to develop customer support capabilities and
market expertise, setbacks in product development, market acceptance, sales, and
marketing. The failure of the Company to meet any of these conditions would
have a materially adverse effect upon the Company and may force the Company to
reduce or curtail operations. No assurance can be given that the Company can or
will ever operate profitably. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "The Company--Marketing" and
"--Competition."
Dependence on Few Products. The Company currently derives all of its sales
revenue from the sale of its products. The Company expects that sales of such
products will continue to represent a substantial portion of its sales revenue
unless and until the Company fully develops and markets additional products. In
the event the Company's introduction of new products is delayed or is eventually
unsuccessful, the Company will be forced to rely upon revenues generated by the
products. In the event revenues generated by any one of these products
decline, the Company's financial condition could be adversely and materially
effected. See "Business of the Company--Products."
Operating Losses. The Company has not been profitable since its inception.
For the period beginning April 17, 1995 (date of inception) to June 30, 1995 and
the period beginning July 1, 1995 to June 30, 1996, the Company incurred net
operating losses of $6,305 (unaudited) and $62,295 (audited), respectively. For
the year ended June 30, 1997, the Company incurred a net loss of $289,891
(audited). For the three months ended September 30, 1997, the Company incurred
a net loss of $39,239 (unaudited) as compared to a net loss of $49,538
(unaudited) for the three months ended September 30, 1996. The Company
expects to continue to incur losses at least through fiscal 1998, and there can
be no assurance that the Company will achieve or maintain profitability or that
its revenue growth can be sustained in the future. See Financial Statements.
Future Capital Needs Could Result in Dilution to Investors; Additional
Financing Could be Unavailable or Have Unfavorable Terms. The Company's future
capital requirements will depend on many factors, including cash flow from
operations, progress in its research and development, competing market
developments, and the Company's ability to market its proposed products
successfully. Although the Company currently has no specific plans or
arrangements for financing other than this Offering and no commitments for
future financing, to the extent that the funds generated by this Offering are
insufficient to fund the Company's activities, it may be necessary to raise
additional funds through equity or debt financings. Any equity financings could
result in dilution to the Company's then-existing stockholders. Sources of debt
financing may result in higher interest expense. Any financing, if available,
may be on terms unfavorable to the Company. If adequate funds are not obtained,
the Company may be required to reduce or curtail operations. The Company
anticipates that its existing capital resources, together with the net proceeds
of this Offering, will be adequate to satisfy its operating expenses and capital
requirements for at least 12 months after the Offering. However, such estimates
may prove to be inaccurate. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business of the Company" and
Financial Statements.
Investors Could Be Without Funds and Securities for up to 150 Days. The
Units shall be held in an Escrow Account for up to 150 days. During this time,
investors cannot demand return of their investments. If the Company does not
meet the required minimum number of securities to be sold (250,000 Shares), the
investors will be refunded their investment in full without interest. See
"Underwriting."
4
<PAGE>
Economic Conditions and Consumer Spending. As with other retail businesses,
the Company's results may be adversely affected by unfavorable local, regional
or national economic conditions affecting disposable consumer income. There can
be no assurance that consumer spending will not decline in response to economic
conditions, thereby adversely affecting the Company's growth, net sales, and
profitability. Currently, the Company has a limited customer base as its sales
are focused in the Los Angeles, California region, with some sales targeted at
national conventions for Indian and Pakistani professionals, such as doctors'
and lawyers' conventions.
Unpredictable Product Acceptance; Lack of Distribution Agreements. There can
be no assurance that the Company's marketing and/or sales strategies will be
effective and that consumers will buy the Company's products. The failure of
the Company to penetrate its markets would have a material adverse effect upon
the Company's operations and prospects. Market acceptance of the Company's
products will depend in part upon the ability of the Company to demonstrate the
advantages of its products over competing products. In addition, the Company's
sales strategy for its products contemplates sales to markets yet to be
established. Also, the Company currently has no distribution agreements for any
of its products in place. See "Business of the Company--Marketing" and
"--Competition."
Competition. The retail apparel business is highly competitive and is
expected to remain so despite consolidation in the industry. The Company
competes primarily with other specialty retailers and to a lesser degree with
department stores and other retailers and catalogers engaged in the retail sale
of apparel. Most of these competitors have significantly greater financial,
marketing and other resources than the Company. The Company believes that its
emphasis on unique, ethnic fashions and its marketing focus on ethnic markets
makes it less vulnerable to changes in fashion trends than many general apparel
retailers; however, the Company's sales and profitability depend upon the
continued demand for its unique styles. See "Business of the Company--
Competition" and "--Marketing."
Difficulty of Planned Expansion; Management of Growth. The Company has
expanded its operations rapidly, and it plans to continue to further expand its
level of operations in all areas following the Offering. The Company's
operating results will be adversely affected if net sales do not increase
sufficiently to compensate for the increase in operating expenses caused by this
expansion. In addition, the Company's planned expansion of operations may cause
significant strain on the Company's management, technical, financial, and other
resources. To manage its growth effectively, the Company must continue to
improve and expand its existing resources and management information systems and
must attract, train, and motivate qualified managers and employees. There can
be no assurance, however, that the Company will successfully be able to achieve
these goals. If the Company is unable to manage growth effectively, its
operating results will be adversely affected.
Dependence Upon Key Personnel. The Company's success depends, to a
significant extent, upon a number of key employees. The loss of services of one
or more of these employees could have a material adverse effect on the business
of the Company. The Company believes that its future success will also depend
in part upon its ability to attract, retain, and motivate qualified personnel,
and consequently has entered into employment agreements with certain key
officers. Competition for such personnel is intense. There can be no assurance
that the Company will be successful in attracting and retaining such personnel.
The Company does not have "key person" life insurance on any of its key
employees. See "Management."
One Outside Director. The Company's Board of Directors presently consists of
three (3) directors: Najeeb U. Ghauri, President; Irfan Mustafa; and Gill
Champion, Vice President. Therefore, the Company's Board of Directors has only
one outside director (Mr. Mustafa) and, as they constitute a majority of the
directors, insiders may be able to control certain policies, actions, and
decisions of the Company. While the Company has agreed that, upon completion of
the Offering, the Board of Directors will increase its size to five, of which a
majority shall be outside directors, there can be no assurance that the Company
will be able to retain qualified outside directors. See "Management--Directors
and Executive Officers.
Reliance on Independent Subcontractors for Design and Manufacture of the
Company's Product Line. The Company does not maintain its own production
facilities to design and manufacture the product line and does not intend to do
so in the foreseeable future. The Company's products are designed and produced
by independent companies. In
5
<PAGE>
the event the Company were to have difficulties with its present suppliers, the
Company could experience delays in supplying products to its customers and
potentially be forced to discontinue a product line. Any negative change in the
Company's relationship with its suppliers could have a material adverse impact
on the Company's business, financial condition and results of operations unless
the Company could quickly find a replacement supplier. See "Business of the
Company--Distribution."
Risks Associates with International Business. The Company purchases
approximately 80% of its clothing line from suppliers located in India and
Pakistan. Additionally, the Company owns 10% of the outstanding capital stock
of Network Solutions (Pvt) Limited, a software development firm in Lahore,
Pakistan. In the future, the Company may also pursue other business
opportunities in the United States and Canada which arise out of its
relationship with the Indian and Pakistan communities. The Company expects that
international business will continue and will represent a substantial portion of
the Company's business. International business is subject to a number of risks,
including the following: agreements may be difficult to enforce through a
foreign country's legal system; differing regulatory requirements; the
requirement that the Company (or its customers) seek an import or export
license; foreign countries could impose additional withholding taxes or
otherwise further tax the Company's income, the imposition of tariffs or
adoption of other restrictions on foreign trade; fluctuations in exchange rates,
as well as changes in general political or economic conditions in one or more
countries, could affect product demand; and the protection of intellectual
property in foreign countries may be limited or more difficult to enforce.
There can be no assurance that these and similar factors will not have a
material adverse effect on the Company's future international business and,
consequently, on the Company's domestic business and future prospects.
Potential Conflicts of Interest Between the Company and its Officers,
Directors, and Shareholders. The interest of Investors and Shareholders may be
inconsistent in some respects with the interests of the principals of the
Company. The risk exists that such conflicts will not be resolved in the best
interest of the Company. Further, the Company will rely on its Officers and
Directors to manage the Company's business operations. All Officers and
Directors will devote as much of their time to the business of the Company as,
in their judgment, is reasonably necessary to operate the Company in a
profitable manner. These individuals may engage for their own account, or the
account of others in other business ventures for which the Company is not
entitled to compensation. At some time in the future, the Company may compete
for the management services of the Officers of the Company. As a result, these
individuals may be placed in a position where their decision to favor other
operations in which they are associated over those of the Company will result in
a conflict of interest. In allocating their time, they will recognize their
fiduciary obligations to the Company, the prevailing industry standards, and the
financial situation of the Company. Further, the Company has accepted a loan
from one of its officers and directors as well as a loan from the brother of one
of its officers and directors. These situations create a potential conflict of
interest situation where the officers and directors could act in the best
interest of themselves and their families rather than the Company. The
Company's management believes that the terms of these transactions are no less
favorable to the Company than would have been obtained from an unaffiliated
third party in similar transactions. All future transactions with affiliates
will be on terms no less favorable than could be obtained from unaffiliated
third parties, and will be approved by a majority of the disinterested
directors. The Company has agreed with certain state regulatory authorities
that so long as the Company's securities are registered in such states, or one
year from the date of this prospectus, whichever is longer, the Company will not
make loans to its officers, directors, employees, or principal shareholders,
except for loans made in the ordinary course of business, such as travel
advances, expense account advances, relocation advances, or reasonable salary
advances. However, any of the relationships disclosed herein could result in a
conflict of interest for the Company. See "Certain Transactions," and
"Principal Shareholders."
Lack of Dividends. The Company has never paid any cash dividends on its
Common Stock and does not anticipate paying any cash dividends in the future.
The Company currently intends to retain future earnings, if any, to fund the
development and growth of its business. See "Dividend Policy."
Dilution. Purchasers of shares of Common Stock in the Offering will
experience immediate dilution of $4.53 per share (88%) if the minimum amount is
sold or $4.08 per share (79%) if the maximum amount is sold (based on the
initial public offering price of $5.15 per share) in the net tangible book value
of the shares from the initial public
6
<PAGE>
offering price. The shares sold by the Company in the Offering represent 12% of
the total shares of Common Stock outstanding following the Offering if the
minimum amount is sold or 22% of the total shares of Common Stock outstanding
following the Offering if the maximum amount is sold hereunder and represent a
cash contribution of 82% of the aggregate book value or cash contributions to
the Company if the minimum amount is sold or a cash contribution of 88% of the
aggregate book value or cash contributions to the Company if the maximum amount
is sold. See "Dilution."
Control by Existing Shareholders. Upon completion of this Offering, the
Company's existing shareholders will beneficially own approximately 88% of the
outstanding Common Stock if the minimum amount is sold or approximately 78% of
the outstanding Common Stock if the maximum amount is sold. Of these shares,
the Company's officers and directors, together with shareholders who
beneficially own more than five percent of the outstanding stock of the Company,
will beneficially own approximately 67% of the outstanding Common Stock if the
minimum amount is sold or approximately 61% of the outstanding Common Stock if
the maximum amount is sold hereunder. Investors purchasing shares pursuant to
this Offering will beneficially own approximately 12% of the outstanding Common
Stock if the minimum amount is sold or approximately 22% of the outstanding
Common Stock if the maximum amount is sold. As a result, all or certain
combinations of the Company's existing shareholders, acting in concert, will
have the ability to control the Board of Directors and policies of the Company.
See "Principal Stockholders"and "Certain Transactions."
No Prior Public Market; Possible Volatility of Share Price. No public
securities market existed prior to this Offering for the Company's
Securities. Although the Company has applied to have the Securities
included on the OTC/BB System, there can be no assurance that an active public
trading market for such securities will be developed or sustained. Accordingly,
purchasers of the Securities may experience substantial difficulty selling
such securities. The offering price of the Securities has been determined by
negotiations between the Company and the Underwriter and are not necessarily
related to the Company's existing market price, asset value, net worth, or other
established criteria of value. Additionally, potential investors should be aware
that the securities of the Company have recently sold at a substantial discount
to the public offering price herein. The Company and the Underwriter considered
the following factors in pricing the securities issued in the recent private
placement of the Company at $0.50 per share of Common Stock and $0.10 per
warrant versus the initial public offering price: at the time of the private
placement the Company was still developing its business plan, the Company had
minimal officer and director support, key personnel of the Company were not yet
in place, the Company was in the process of structuring its public offering
plan, the Company had not yet secured an underwriter for a public offering, and
there could be no assurance of a public market for the securities. See
"Underwriting."
Shares Eligible for Future Sale. Upon the closing of this Offering,
1,250,000 of the total of 1,814,065 shares of Common Stock outstanding prior to
this Offering will be "restricted securities" within the meaning of Rule 144
under the Securities Act of 1933 (the "Act"). All directors, officers, and
holders of 5% or more of the existing shares of Common Stock (whether restricted
or otherwise) have agreed not to sell any of their shares of Common Stock for a
period of 12 months after the date of this Prospectus without the prior written
consent of the Underwriter. At the end of that period, these shares will be
eligible for sale, subject in the case of restricted securities to the holding
period, volume limitations, and other conditions imposed by Rule 144.
Ordinarily, under Rule 144, a person holding restricted securities for a period
of one year may, every three months, sell in ordinary brokerage transactions or
in transactions directly with a market maker an amount equal to the greater of
one percent of the Company's then-outstanding Common Stock or the average weekly
trading volume during the four calendar weeks prior to such sale. In addition,
non-affiliates of the Company may sell unlimited amounts of restricted
securities after a holding period of one year. Future sales of such shares
could have an adverse effect on the market price of the Common Stock. See
"Description of Securities" and "Underwriting."
Risks Relating to Low-Price Stocks. The Company has applied for inclusion of
the Common Stock on the Over-the-Counter Bulletin Board ("OTC/BB") upon the
completion of this Offering. As a result, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Company's securities as compared to securities which are traded on the
Nasdaq trading market or on an exchange. In addition, trading in the
7
<PAGE>
Securities would be covered by Rules 15g-1 through 15g-100 promulgated under the
Securities Exchange Act of 1934 for non-Nasdaq and non-exchange listed
securities. Under this rule, broker-dealers who recommend such securities must
satisfy burdensome sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's written consent prior to the transaction. The
Securities Enforcement and Penny Stock Reform Act of 1990 (the "Reform Act")
also requires additional disclosure in connection with any trades involving a
stock defined as a "penny stock" (generally, according to recent regulations
adopted by the Commission, any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions), including the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining the
penny stock market and the risks associated therewith, the requirement that a
broker-dealer must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. The regulations governing low-
priced or penny stocks could limit the ability of broker-dealers to sell the
Company's securities and thus the ability of the purchasers of this Offering to
sell their securities in the secondary market.
Inexperienced Underwriter. Platinum Equities, Inc. (the "Underwriter") has
no experience in underwriting public offerings. This Offering is the first
public offering the Underwriter will underwrite. There can be no assurance that
the Underwriter's lack of experience will not adversely affect the Offering or
the market for the Company's Securities following the completion of the
Offering. Accordingly, the market for the Company's Common Stock could be
adversely affected if other firms are unwilling to make a market in the Common
Stock.
Underwriter Will Not Make a Market in the Company's Securities. Pursuant to
the terms of the Underwriter's Restriction Letter with the NASD, the Underwriter
is prohibited from acting as a "market maker" in securities. As a result
thereof, the Underwriter will not make a market in the Securities offered
hereby. The Underwriter's inability to make such a market may have a material
adverse effect on the liquidity of the Securities offered hereby, which could
make it more difficult for investors in this Offering to purchase or sell such
securities. See "Underwriting."
8
<PAGE>
DILUTION
Dilution is the difference between the public offering price of $5.15 per
share for the Common Stock offered herein, and the net tangible book value per
share of the Common Stock immediately after its purchase. The Company's net
tangible book value per share is calculated by subtracting the Company's total
liabilities from its total assets less any intangible assets, and then dividing
by the number of shares then outstanding.
The net tangible book value of the Company prior to this Offering, based on
September 30, 1997 financial statements, was $194,705. Prior to selling any
shares in this Offering, the Company has 1,814,065 shares of Common Stock
outstanding.
If the maximum Shares offered herein are sold, the Company will have
2,314,065 shares outstanding upon completion of the Offering. The post offering
pro forma net tangible book value of the Company, which gives effect to receipt
of the net proceeds from the Offering and issuance of additional Shares of
Common Stock in the Offering, but does not take into consideration the Warrants
sold in the Offering nor any other changes in the net tangible book value of the
Company after September 30, 1997, will be $2,439,455 or $1.05 per share,
approximately. This would result in dilution to investors in this Offering of
$4.10 per share or 80% from the public offering price of $5.15 per Share. Net
tangible book value per share would increase to the benefit of present
shareholders from $0.11 prior to the Offering to $1.05 after the Offering, or an
increase of $0.94 per share attributable to the purchase of the Shares by
investors in this Offering.
If only the minimum number of Shares is sold, the Company will have
2,064,065 shares outstanding upon completion of the Offering. The post offering
pro forma net tangible book value of the Company will be $1,232,330 or $0.60 per
share, approximately. This would result in dilution to investors in this
Offering of $4.55 per share or 88% from the public offering price of $5.15 per
Share. Net tangible book value per share would increase to the benefit of
present shareholders from $0.11 prior to the Offering to $0.60 after the
Offering, or an increase of $0.49 per share attributable to the purchase of the
Shares by investors in this Offering.
The following table sets forth the estimated net tangible book value per
share after the Offering and the dilution to persons purchasing Shares based on
the foregoing minimum and maximum offering assumptions
<TABLE>
<CAPTION>
MINIMUM(1) MAXIMUM(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Initial public offering price (per share) $ 5.15 $ 5.15
- --------------------------------------------------------------------------------------------------------
Net tangible book value per share before the Offering $ 0.11 $ 0.11
- --------------------------------------------------------------------------------------------------------
Increase per share attributable to payments by new investors $ 0.49 $ 0.94
- --------------------------------------------------------------------------------------------------------
Pro forma net tangible book value per share after the Offering $ 0.60 $ 1.05
- --------------------------------------------------------------------------------------------------------
Dilution per share to new investors $ 4.56(88%) $ 4.10(80)%
- --------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
COMPARATIVE DATA
The following charts illustrate the pro forma proportionate ownership in the
Company. Upon completion of the Offering under alternative minimum and maximum
offering assumptions, of present shareholders and of investors in this Offering,
compared to the relative amounts paid and contributed to capital of the Company
by present shareholders and by investors in this Offering, assuming no changes
in net tangible book value other than those resulting from the Offering.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MINIMUM OFFERING SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
PRICE PER
PERCENT PERCENT SHARE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders 1,814,065 88% $ 291,024/3/ 18% $0.16
- ---------------------------------------------------------------------------------------------------------------
New investors 250,000 12% $1,287,500/4/ 82% $5.15
- ---------------------------------------------------------------------------------------------------------------
Total 2,064,065 100% $ 1,578,524 100.0%
========= === =============== =====
- ---------------------------------------------------------------------------------------------------------------
MAXIMUM OFFERING SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
PRICE PER
SHARE
- ---------------------------------------------------------------------------------------------------------------
PERCENT PERCENT
- ---------------------------------------------------------------------------------------------------------------
Existing shareholders 1,814,065 78% $ 291,024/3/ 10% $0.16
- ---------------------------------------------------------------------------------------------------------------
New investors 500,000 22% $2,675,000/5/ 90% $5.15
- ---------------------------------------------------------------------------------------------------------------
Total 2,314,065 100% $ 2,966,024 100.0%
========= === =============== =====
- ---------------------------------------------------------------------------------------------------------
</TABLE>
__________________________
(1) Assumes $1,037,625 net proceeds from sale of 250,000 Shares.
(2) Assumes $2,244,750 net proceeds from sale of 500,000 Shares and 1,000,000
Warrants
(3) Based on capital contributions from inception to September 30, 1997
(net).
(4) Assumes gross proceeds from offering of 250,000 Shares
(5) Assumes gross proceeds from offering of 500,000 Shares and 1,000,000
Warrants
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company (at an initial public offering price of
$5.15 per Share) and $0.10 per Warrant from the sale of the Securities offered
hereby (less commissions of 10%, the Underwriter's non-accountable expense
allowance of 3% and expenses of this Offering (estimated at $82,500)) are
estimated to be approximately $1,037,625 if the minimum amount is raised
hereunder and $2,244,750 if the maximum amount is raised, excluding any proceeds
from the exercise of the Warrants.
<TABLE>
<CAPTION>
USE OF PROCEEDS
MINIMUM PERCENT MAXIMUM PERCENT
<S> <C> <C> <C> <C>
Expansion of the Company's sales force and $ 223,089 21.5% $ 406,300 18.1%
establishment of advertising and promotion
activities
Increasing the variety of product by adding $ 223,089 21.5% $ 406,300 18.1%
new designers and increasing the level of
inventory or products
Establish import/export distribution channels $ 223,089 21.5% $ 368,139 16.4%
Market research to determine viability of $ 147,343 14.2% $ 365,894 16.3%
entering entertainment industry
Market research to determine viability of $ 147,343 14.2% $ 365,894 16.3%
increasing participation in software industry
Working capital $ 73,672 7.1% $ 332,223 14.8%
TOTALS $1,037,625 100% $2,244,750 100%
</TABLE>
The allocation of net proceeds set forth above represents the Company's
current estimates based upon its current plans and upon certain assumptions
regarding the progress of development of its products, changing competitive
conditions, the ongoing evaluation and determination of the commercial potential
of the Company's products and the Company's ability to enter into agreements.
These assumptions include the facts that the Company's retail clothing line will
continue to increase its sales in order to support an expansion of its sales
force and establishment of advertising and promotional activities; the Company
will be able to attract new designers and purchase additional inventory from
such designers; the Company will be able to establish import/export distribution
channels for its retail clothing line between the United States, India, and
Pakistan. If any of these factors change, the Company may reallocate some of
the net proceeds within or between the above-described categories. The Company
believes that the funds generated by this Offering, together with current
resources, will be sufficient to fund working capital and capital requirements
for at least 12 months from the date of this Prospectus.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the future. The Company currently
intends to retain future earnings, if any, to fund the development and growth of
its business.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to give effect to the sale by the Company
of a minimum of 250,000 Shares at an offering price of $5.15 per Share and the
application of the net proceeds of $1,037,625 therefrom and as adjusted to give
effect to the sale by the Company of a maximum of 500,000 Shares at $5.15 per
Share and 1,000,000 Warrants at $0.10 per Warrant and the application of the net
proceeds of $2,244,750 therefrom.
<TABLE>
<CAPTION>
Minimum Maximum
September 30, 1997 As Adjusted As Adjusted
---------------------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Short-term debt:
Accounts payable and accrued expenses $ 25,055 $ 25,055 $ 25,055
Notes payable $ 134,086 $ 134,086 $ 134,086
Interest payable $ 5,202 $ 5,202 $ 5,202
--------- ---------- ----------
Total short-term debt $ 159,141 $ 159,141 $ 159,141
========= ========== ==========
Long term liabilities: loan payable and notes payable $ 133,668 $ 133,668 $ 133,668
Stockholders' equity:
Common Stock, $0.001 par value
25,000,000 shares authorized,
1,814,065 issued and outstanding,
2,064,065 if minimum amount is sold,
2,314,065 if maximum amount is sold $ 1,814 $ 2,064 $ 2,314
Additional paid-in capital $ 562,021 $1,599,396 $2,806,271
Accumulated deficit $(329,130) $ (329,130) $ (329,130)
Total stockholders' equity $ 234,705 $1,272,330 $2,479,455
========= ========== ==========
</TABLE>
12
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to, and
should be read in conjunction with, the Financial Statements, related Notes to
Financial Statements and Report of Independent Public Accountants, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. The following tables summarize certain
selected financial data of the Company for the three months ended September 30,
1997 (unaudited) as compared to the three months ended September 30, 1996
(unaudited), the fiscal year ended June 30, 1996 (audited), and the fiscal year
ended June 30, 1997 (audited). The data has been derived from Financial
Statements included elsewhere in this Prospectus that were audited by Hoffski &
Pisano, P.C. (June 30, 1996) and by Stonefield Josephson, Inc. (June 30, 1997).
No dividends have been paid for any of the periods presented.
<TABLE>
<CAPTION>
Three Months Ended Period July 1, 1996 Period July 1, 1995
September 30 to to
1997 1996 June 30, 1997 June 30, 1996
--------------------------- -------------------- --------------------
(unaudited)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue 55,605 $ 73,140 $ 212,972 $199,230
Net loss (39,239) $(49,538) $(289,891) $(62,295)
$(0.02) $ (0.06) $(0.22) $ ---
<CAPTION> September 30, 1997 June 30, 1997 June 30, 1996
-------------------------- ------------------- -------------------
(unaudited)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets $ 127,646 $ 141,549 $ 70,749
Notes receivable $ 116,007 $ 113,104 $ ---
Total property and
equipment, net $ 40,131 $ 41,945 $ 39,629
Investments $ 200,000 $ 200,000 $ ---
------- --------- --------
Other $ 43,730
Total assets $ 527,514 $ 43,730
======= $ 540,328
Total current liabilities $ 159,141 ========= $104,842
Long term notes & loans $ 133,668 $ ---
Partner's equity $ --- $ 130,909 $ 9,266
Total liabilities and $ 135,475 --------
partner's equity $ --- $ ---
$ --- $114,108
========
Stockholders equity $ 234,705 $ 273,944
------------------- ---------
Total liabilities and
stockholders equity $ 527,514 $ 540,328
=================== =========
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company was formed in April 1995 and incorporated on March 18, 1997 for
the purpose of marketing and selling unique clothing. The Company has
generated nominal revenues to date. It has accumulated losses from operations
of $358,491 since its initial inception in April 1995 through June 30,
1997.
Mirage Holdings, Inc. was incorporated under the laws of the State of Nevada
on March 18, 1997. Mirage Collection, Inc., a wholly-owned subsidiary of Mirage
Holdings, Inc., formally began business as a partnership July 1, 1995, and was
reorganized into a corporation in the State of Nevada pursuant to Internal
Revenue Code Section 351 on April 1, 1997. Therefore, this discussion and
analysis and the financial statements included herein are based on a partnership
entity for the year ended 1996. The year ended 1997 includes operations of the
partnership and corporation.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Year Ended
September 30 June 30
1997 1996 1997 1996
---------------------- ------------------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales $55,605 $ 73,140 $ 212,972 $ 199,230
Cost of goods sold $32,099 $ 50,808 $ 149,501 $ 160,350
Gross profit $23,506 $ 22,332 $ 63,471 $ 38,880
Selling, general &
administrative expenses $101,664 $ 71,870 $ 389,723 $ 97,192
Net Loss $(39,239) $(49,538) $(289,891) $ (62,295)
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996 (UNAUDITED)
Revenues:
The Company's sales for the three months ended September 30, 1997 were
$55,605 (average of $18,535 per month) as compared to $73,140 for the three
months ended September 30, 1996 (average of $24,380 per month).
Cost of goods sold and gross profit:
The Company's gross profit was approximately 42% for the three months ended
September 30, 1997 as compared to 31% for the three months ended September 30,
1996.
Selling, general and administrative expenses:
14
<PAGE>
Selling, general, and administrative expenses for the three months ended
September 30, 1997 were $101,664 (average of $33,888 per month) as compared to
$71,870 for the three months ended September 30, 1996 (average of $23,957 per
month).
FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
(AUDITED)
Revenues:
The Company's sales for the year ended June 30, 1997 were $212,972 (average
of $17,748 per month) as compared to $199,230 for the fiscal year ended June 30,
1996 (average of $16,603 per month). This increase is largely due to increased
advertising and marketing efforts. The Company is also targeting a broader
market by selling lower to middle end merchandise as well.
Cost of goods sold and gross profit:
The Company's gross profit was approximately 30% for the year ended June 30,
1997 as compared to 19.5% for the fiscal year ended June 30, 1996. The gross
profit percentage has increased largely because the Company is able to purchase
at a lower cost and sell its merchandise for a higher gross profit.
Selling, general and administrative expenses:
Selling, general, and administrative expenses for the year ended June 30,
1997 were $212,578 (average of $17,715 per month) as compared to $97,192 for the
fiscal year ended June 30, 1996 (average of $8,099 per month). The increase is,
in part, due to opening of a new store in Diamond Bar.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its capital requirements through
partners' contributions of cash in the cumulative amount of $165,738 since April
17, 1995 (inception) to December 31, 1996.
On February 26, 1997, the Company issued an unsecured note to Manhattan
West, Inc. in exchange for loans in the principal amount of $46,997. The note
is due on February 26, 2000 and bears interest at the rate of 10% per annum.
The note contains a conversion feature whereby Manhattan West, Inc. may, at any
time, convert the balance due and owing to it into share of Common Stock of the
Company at the rate of $0.50 per share. As of the date of this Prospectus, the
balance due on the note is $37,678 plus accrued interest. See "Certain
Transactions."
On April 10, 1997, the Company commenced a private placement (the "Private
Placement") of 564,065 shares of the Company's common stock at a purchase price
of $0.50 per share (the "Private Placement Stock") and 445,500 warrants, each
warrant to purchase one share of the Company's common stock at an exercise price
of $0.75 for a term of five years at a purchase price of $0.10 per warrant (the
"Private Placement Warrants"). The Private Placement was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act, as
transactions by an issuer not involving any public offering. The securities
issued pursuant to the Private Placement were restricted securities as defined
in Rule 144. The Private Placement Stock and the Common Stock underlying the
Private Placement Warrants are being registered herein. The offering generated
net proceeds of approximately $290,000. The Company used the net proceeds of
the private offering as follows: (1) $200,000 for the acquisition of a 10%
ownership interest of Network Solutions (PVT) Limited, a software development
firm in Lahore, Pakistan ("NetSol") (see "Business of the Company--General");
(2) $50,000 for the retainer fee for Horwitz & Beam, Inc. to prepare the
Company's Registration Statement and to act as counsel to the Company in
connection with the filing of the Registration Statement; and (3) $40,000 for
working capital.
15
<PAGE>
At June 30, 1997, the Company had outstanding current liabilities of
$130,909. The Company anticipates satisfying its current liabilities in the
ordinary course of business from revenues and notes receivable.
Capital expenditures during the period from inception through June 30, 1997
were $55,976. Over the next 12 months, the Company plans to upgrade its
management information system, telecommunications system, and office equipment
to accommodate anticipated growth plans. The Company anticipates these upgrades
and acquisitions may require estimated expenditures of approximately $50,000
over the next 12 months. The Company anticipates financing these expenditures
through revenues and working capital raised in this Offering.
The Company does not believe that inflation has had a significant impact on
its operations since inception of the Company.
CHANGE IN AUDITING FIRM
The Company terminated Hoffski & Pisano as its principal accountant as of
August 15, 1997. The principal accountant's report on the financial statements
for either of the past two years contained no adverse opinion or a disclaimer of
opinion, or was qualified nor modified as to uncertainty, audit scope, or
accounting principles. The termination of the accountant was approved by the
Board of Directors. During the Company's two most recent fiscal years and any
subsequent interim period preceding such registration, declination, or
dismissal, there were no disagreements with the former accountant on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
The Company engaged Stonefield Josephson, Inc. ("Stonefield Josephson") as
its principal accountants effective August 15, 1997. Stonefield Josephson's
business address is 1620 26th Street, Suite 400 South, Santa Monica, California
90404-4002. Stonefield Josephson replaces Hoffski & Pisano. The decision to
engage Stonefield Josephson was approved by the Board of Directors.
SEASONALITY
Like most retailers, the Company's business is subject to seasonable
fluctuations, with an increase in sales and revenues occurring during the fourth
quarter of each year, mostly due to holiday purchasing. Because of the
seasonality of the Company's business, results for any quarter are not
necessarily indicative of the results that may be achieved for the full year.
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<PAGE>
BUSINESS OF THE COMPANY
GENERAL
The Company specializes in the marketing of fashions targeted towards the
segment where discriminating customers are always looking for unique and
innovative products. The origin of these designs is mainly from India and
Pakistan but not limited to these countries. The management of the Company is
continuously in search of new ideas regardless of the ethnic background.
The idea was to fill this niche in the apparel market by importing these
fashions. The economic feasibility of this idea was studied by conducting a
market research over a period of one year. The market research consisted of
documentary research into the income, affluence, and spending habits and
preferences of the Company's target market (the Indian-Pakistani population
living in the United States), some of which follows. Additionally, a series of
fashion shows and exhibitions of the apparel were held at conventions around the
country. The locations of these shows included St. Louis, Missouri; Chicago,
Illinois; San Francisco, California; Seattle, Washington; Brea, California; and
Fullerton, California. The shows and exhibitions indicated the level of
interest and purchasing in certain lines of apparel in various areas around the
country. The results were very encouraging. The study identified two main
areas of profitability: the existing affluent market segment of Indian and
Pakistani people who are always thirsty of new fashions from their countries, as
well as the growing demand in the mainstream American market for unique, exotic
fashion designs.
To explore the potential presented by these opportunities, Mirage Collection
was formed with the goal to be the dominant supplier of fashionwear in these
specialty market segments in the United States and Canada.
In the future, the Company may also pursue other business opportunities in
the United States and Canada which arise out of its relationships with the
Indian and Pakistan communities. India ranks as one of the ten largest emerging
markets in the world, according to the U.S. Department of Commerce. India has
been called the "Silicon Valley of the East" and houses many high-tech
corporations, including Motorola and Hewlett Packard. (National Geographic, May
1997.) The Company anticipates that such opportunities may arise in the
software and entertainment industries.
On March 30, 1997, the Company purchased 10% of the outstanding capital
stock of Network Solutions (PVT) Limited, a software development firm in Lahore,
Pakistan ("NetSol"), in exchange for the payment of $200,000. The cash
consideration of $200,000 was paid by the Company from the net proceeds of the
Private Placement. NetSol was incorporated in Pakistan on August 22, 1996,
under the Companies Ordinance, 1984, as a private company limited by shares.
The principal business of NetSol is the development and export of software. At
June 30, 1997, NetSol had net assets of $336,086, sales of $258,282, and a net
profit of $45,853 for the period of August 22, 1996 (date of inception) through
June 30, 1997. Through its 10% ownership interest in NetSol, the Company can
assist NetSol in marketing its software development services to North American
and European clients.
The Company has also identified a niche market existing in the entertainment
industry in that, currently, there are no significant entertainment venues
catering to the Indian/Pakistani communities in the United States. Management
of the Company believes that a significant opportunity exists in the development
of theme parks, virtual reality games, theme restaurants, and other
entertainment venues to serve this market. However, the Company has yet to
perform significant market research into this sector, no formal agreements have
been reached, and there can be no assurance as to the terms of any such
potential agreements nor that any agreements will ever be reached nor that the
Company will ever into this market.
Mirage Holdings, Inc. was incorporated under the laws of the State of Nevada
on March 18, 1997. Mirage Collection, Inc., a wholly-owned subsidiary of Mirage
Holdings, Inc. which actively conducts the retail clothing business of the
Company, began business as a partnership in July 1995, and was reorganized into
a corporation in the State of Nevada pursuant to Internal Revenue Code Section
351 on April 1, 1997.
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<PAGE>
OVERVIEW OF THE COMPANY'S MARKETS
The United States is India's largest single trading partner. Between 1987
and 1993, United States exports to India rose 11% annually, slightly faster than
imports to the United States from India, which measured 10% a year. India's
exports to the United States increased 15% in 1994 and management of the Company
expects that India's exports will probably remain strong in subsequent years.
In 1994, India's exports totaled $24 billion, of which $5.3 billion in goods was
exported to the United States. Annual growth rates of 5% to 10% are expected
between 1995 and 2000. (U.S. Global Trade Outlook: 1995 - 2000, U.S. Dept. of
Commerce.)
Pakistan's single largest trading partner is also the United States.
Pakistan's total exports in 1993 were $6.7 billion. Both India's and Pakistan's
exports include clothing. (1997 Information Please Almanac, Atlas, and
Yearbook, Houghton Mifflin Company, Boston and New York, 1997.)
[GRAPH APPEARS HERE]
Estimated annual retail and wholesale sales of apparel and accessory stores
in the United States were $109.962 billion in 1995, a slight increase over 1994
sales of $109.881 billion. Imports of clothing and footwear in the United
States in 1995 were $51.632 billion, an increase over 1994 imports of $48.46
billion. (1997 Information Please Almanac, Atlas, and Yearbook, Houghton
Mifflin Company, Boston and New York, 1997.)
The total Indian-Pakistani population in the United States (the "U.S. I-P
population") has been estimated at 4 million. There are large populations in
most major states with significant populations in New York, New Jersey,
California, Illinois, Florida, Washington, D.C., Maryland, North Carolina,
Pennsylvania, Connecticut, Texas, Massachusetts, Georgia, Ohio, Michigan, South
Carolina, and Tennessee. The average annual household income of the U.S. I-P
population is $80,000+. Thirteen percent earn more than $100,000 per year; 46%
have an annual income of $75,000 or greater; and nearly half earn at least
$50,000 per year. Ninety percent of the U.S. I.P. population own homes of which
more than half (51%) own their homes outright. More than half (53%) own two
cars and 12% own more than three cars. The U.S. I-P population is also educated
as 70% have college degrees and 35% have advanced degrees (i.e., Master's,
Ph.D.'s, etc.). Seventy-nine percent of the U.S. I-P population is employed in
professional capacities (28%: executives or managers; 21%: doctors or dentists;
17%: engineers or scientists; and 13%: lawyers or accountants). (Zarposh
International, Trabuco Canyon, California, January 1, 1997.) Therefore,
management of the Company believes that its target market, the U.S. I-P
population, can afford to purchase unique fashions.
Due to the large U.S. I-P population, there is a high demand for ethnic
fashions. Most of these people are not able to travel to India or Pakistan
often due to professional commitments. Even when they do travel, it is hard for
them to find the right designers or boutiques. The Company conducted market
research over a one-year period before the
18
<PAGE>
opening of its first store and is constantly reviewing opinions and needs of its
customers to provide the products that best suit their needs.
Reasons for seeking ethnic fashions:
. Desire of the I-P people to preserve and maintain their culture.
. Social commitments such as community events and casual gatherings
where the people like to wear the latest ethnic fashions.
BUSINESS STRATEGY
. The Company is researching the feasibility of setting up a production
facility in Pakistan. This can reduce costs and increase profit margins.
. To explore new designers in India and Pakistan by traveling to these
countries every quarter. This will also help the Company to stay in touch
with the latest trends and fashions.
. To work with existing designers for a product line of everyday wear and
occasional wear to provide a variety to customers.
. Research the potential of opening stores in other major cities highly
populated by the I-P people such as Houston, Chicago, Atlanta, and New
York.
. To introduce the luxurious fabrics and intricate embroidered fashions
to the "entertainment industry," an affluent market which requires a
need for unique fashions due to social commitments.
. To introduce a modified/modern version of the shalwar-qamiz (long shirt
draped over loose palazzo-style pants) through department stores such as
Bloomingdales and Nordstrom catering to the mainstream middle class and
upper class.
. To aggressively market our products to the younger generation of the
ethnic market.
PRODUCTS
Most Indians wear light, loose clothing because of the hot climate. Bright
colors and white are common. Most Indian women wear a sari, a straight piece of
cloth draped around the body as a long dress. They place its loose end over the
head or shoulder. Wealthy women in India wear saris made of silk, with borders
of gold thread. Many of the women of northern India wear full trousers with a
long blouse and veil. (World Book Encyclopedia, World Book, Inc., 1995.)
Traditional Indian fashions have evolved over the years to compete with
western clothes which are also accessible to the younger generation of Indian
people. Modern Indian fashions include the lengha/cholis (skirt and short top),
and sarecs (six yards of fabric wrapped around the waist similar to a skirt with
the loose end draped over the shoulder) worn in different ways from traditional
to modern.
In Pakistan, the most common garment of both men and women is the shalwar-
qamiz, which consists of loose trousers and a long overblouse. Women may wear a
dupatta, a scarf, over their shoulders and head. Outside the home, women
usually cover themselves with a tent-like garment called a burqa. (World Book
Encyclopedia, World Book, Inc., 1995.)
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<PAGE>
Pakistani fashions have also evolved over the years as designers who are
exposed to western fashions have created traditional clothes in modern forms.
The trend these days is influenced by the Moguls who ruled in regions of
Afghanistan, Pakistan, and India from 1483 to 1739. The Mogul women adorn
themselves with elaborate costumes and precious jewels. The designers display
these traditions in the use of luxurious fabrics and intricate embroidery. The
Company offers shararas, ghararas, and peshwaz - traditional fashions with
contemporary hints, and shalwar/qamiz -traditional to modern versions.
The average retail price charged by the Company for one outfit is $150, but
prices range from under $100 to over $1,500. The Company also sells accessories
and costume jewelry.
COMPETITION
The retail apparel business is highly competitive and is expected to remain
so despite consolidation in the industry. The Company competes primarily with
other specialty retailers and to a lesser degree with department stores and
other retailers and catalogers engaged in the retail sale of apparel. Most of
these competitors have significantly greater financial, marketing and other
resources than the Company. The Company believes that its emphasis on unique,
ethnic fashions and its marketing focus on ethnic markets makes it less
vulnerable to changes in fashion trends than many general apparel retailers;
however, the Company's sales and profitability depend upon the continued demand
for its unique styles.
The Company's primary competitors are Yasmin which has four locations and
its principal store at 18161 Pioneer Boulevard, Artesia, California; Memsahib,
18161 Pioneer Boulevard, Artesia, California; and Raaz, Inc., Chicago, Illinois.
However, the Company's specific market is very fragmented and there may exist
numerous other small and large competitors.
COMPETITIVE ADVANTAGES
. The accessibility to top designers from both India and Pakistan.
. Involvement of buyers working with designers to understand the U.S.
market.
. The customer comes first approach gives people a level of comfort and
confidence which they may not find at other ethnic stores. This is
especially appealing to the younger generation who is exposed to the
western store concepts like greeting customers when they walk in.
. Due to detailed designs such as type of fabric or type of embroidery, the
Company trains the employees about the products so they are confident
when the customers ask questions.
MARKETING
Management of the Company devised a marketing strategy aimed at achieving
its goal of being the dominant supplier of fashionwear in the specialty market
segments in the United States and Canada. The main focus of the strategy was to
penetrate the market with products that have strong appeal to customers who
enjoy exclusivity.
The following activities were carried out in order to accomplish the
objectives:
1. Top designers were identified and agreements for exclusive supply to the
Company were signed for representation in the local markets.
2. The Company identified Fashion Shows and Exhibitions to be effective
distribution channels and thus hosted and participated in these events
successfully.
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3. The Company opened its first showroom in October 1995 in the Los Angeles
area. This showroom occupies an area of approximately 2,500 square feet. The
decor was done to create the ambiance with a touch of class so that the customer
can appreciate not only the products but the way they are presented and has
proven to be successful in attracting the customers.
4. An advertising and promotion campaign was launched targeting the
potential groups.
5. The Company made contacts with the designer boutiques in the mainstream
market which cater to these selective customers.
In the future, the management plans to focus on the following areas:
1. Enhance the advertising and promotion activities in line with the
expected growth in sales.
2. Increase the variety of product offering by adding new designers.
3. Provide custom tailoring to the customers. This area not only enhances
sales, but provides another avenue of generating revenues.
4. Increase the sales and marketing activities by adding to the existing
sales staff for developing contacts with the potential customers which includes
a variety of parties including the film industry as well as high end boutiques.
5. Increase the product exposure by attending reputable designer shows.
6. Aggressive participation in medical conventions which provide an
excellent sales opportunity as well as added exposure with the most affluent of
the customers.
7. Increase the level of inventory of its products.
8. Establish a chain of Mirage stores in different metropolitan markets as
well as studying the possibility of franchising the Mirage concept.
9. Introduce the Mirage catalogue for sales through mail order.
DISTRIBUTION
Currently, the Company purchases its products wholesale and sells them for
retail at the Company's stores. The Company has one supplier in the U.S. which
imports products from India and Pakistan, Raaz Collection, Los Angeles,
California. The Company obtains approximately 20% of all of its products from
Raaz Collection. All of the Company's other suppliers are located in India and
Pakistan. Representatives of the Company make approximately one trip per month
to India and Pakistan to purchase products.
The Company anticipates that it will have a centralized distribution center
in the future which will purchase products and distribute the products to the
Company's stores for retail sale. However, such plan is dependent upon the
Company raising sufficient capital, increasing its revenues, and opening more
stores and therefore there can be no assurance that this plan for the Company
will ever come to fruition.
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<PAGE>
EMPLOYEES
As of the date of this Prospectus, the Company employed three full-time
employees and one consultant. The Company hires independent contractors on an
"as needed" basis only. The Company has no collective bargaining agreements
with its employees. The Company believes that its employee relationships are
satisfactory. The Company plans on hiring additional part-time sales staff in
the immediate future. Long term, the Company will hire additional employees as
needed based on its growth rate.
Mr. Ghauri will become employed by the Company as its President and
Secretary upon completion of this Offering. Mr. Champion will become employed
by the Company as its Chief Financial Officer and Vice President on May 15,
1997. See "Management--Directors and Executive Officers."
PROPERTIES
The Company leases a 2,500 square feet showroom and office in Artesia,
California. The lease expires on August 31, 2000 and requires monthly payments
of approximately $3,200. The Company has an option to renew the lease for an
additional five year term, beginning September 1, 2000 to August 31, 2005; the
terms of such renewal shall be agreed upon prior to execution of the lease
option.
The Company also leases a 1,150 square feet showroom in Diamond Bar,
California. The lease expires on September 30, 2001 and requires monthly
payments of approximately $1,150. Prior to its termination, the Company has an
option to renew the lease for an additional five year term at the then fair
market value of the property.
LITIGATION
To the knowledge of management, there is no material litigation pending of
threatened against the Company.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company as of the date of this Prospectus
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- --------------------------------------------------------------
<S> <C> <C>
Najeeb U. Ghauri 43 President, Secretary, Director of Mirage Holdings, Inc.;
Chief
Financial Officer of Mirage Collection, Inc.
Gill Champion 55 Vice President, Chief Financial Officer, Director of Mirage
Holdings, Inc.
Irfan Mustafa 46 Director of Mirage Holdings, Inc.
Saima Khan 26 President, Secretary, Director of Mirage Collection, Inc.
</TABLE>
The number of directors may be fixed from time to time by the Board of
Directors. The Board of Directors presently consists of 3 directors. Each of
the Company's directors hold office until their respective successors are
elected at the next annual meeting of shareholders. Vacancies in the Board of
Directors are filled by a majority vote of the remaining directors or by a
shareholder vote called expressly for such purpose.
NAJEEB U. GHAURI - Mr. Ghauri, President, Secretary, and Director of Mirage
Holdings, Inc. and Chief Financial Officer of Mirage Collection, Inc., has an
M.B.A. in Marketing Management from the Claremont Graduate School (1983) and a
B.S. degree in Management/Economics from Eastern Illinois University (1980).
Mr. Ghauri has been employed by Arco Petroleum Products Co. since 1987 and
continuing through the present. His current position at Arco is Territory
Manager. Mr. Ghauri is fluent in English, Urdu, and Indian languages and has a
working knowledge of mid-eastern languages.
IRFAN MUSTAFA - Mr. Mustafa, a director of the Company, has an M.B.A. from IMD
(formerly Imede), Lausanne, Switzerland (1975); an M.B.A. from the Institute of
Business Administration, Karachi, Pakistan (1974); and a B.S.C. in Economics,
from Punjab University, Lahore, Pakistan (1971). Mr. Mustafa has been employed
by Pepsicola Company since 1990 and continuing through the present. His current
position at Pepsicola is as a leader of the Executive Designate Program. He was
Area Vice President for Egypt and Sudan from 1994 through 1995 and Area Vice
President for West Asia from 1990 through 1994. Mr. Mustafa is the Chairman and
Founder Member of the Pepsi Education Foundation, Pakistan; Founder Member of
the Market Research Society, Pakistan; and a member of the Board of Trustees of
Educational and Charitable Organizations in Pakistan.
GILL CHAMPION - Mr. Champion, Vice President, Chief Financial Officer, and a
director of Mirage Holdings, Inc., has a B.A. degree from New York University;
attended Rutgers University; and attended the American Academy of Dramatic Arts.
Mr. Champion was C.E.O. of American Cinema Stores, Inc., a public company, from
1990 through 1996 where he established domestic and international sales and
marketing strategies and distribution channels for licensed entertainment
products. He was Executive Vice President of Reel Treasures, Inc. from 1985
through 1989; Vice President of Gaylord Broadcasting from 1981 through 1984; and
Vice President of Production of Producer Circle Co. from 1976 through 1981.
SAIMA KHAN - Ms. Khan, President, Secretary, and Director of Mirage Collection,
Inc., the Company's wholly-owned subsidiary, is the original founder of Mirage
Collection Inc., and commenced full-time employment at Mirage Collection in 1992
as its sole proprietor. Prior to that, Ms. Khan was employed in financial
public relations.
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<PAGE>
TOTAL EXECUTIVE COMPENSATION
The Company's Board of Directors authorized the compensation of several of its
officers with restricted shares of the Company's Common Stock and options. The
following officers of the Company receive the following annual cash salaries and
other compensation:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal Position Year Annual Awards(2)
Salary(1) ----------------------------------------------
Restricted Stock Securities
Awards(3) Underlying Options(4)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Najeeb U. Ghauri, President and 1997 $33,500 200,000 50,000
Secretary of Mirage Holdings, Inc.
- ----------------------------------------------------------------------------------------------------------
Gill Champion, Vice President and 1997 $39,500 50,000 50,000
Chief Financial Officer of Mirage
Holdings, Inc.
- ----------------------------------------------------------------------------------------------------------
Saima Khan, President of Mirage 1997 $24,000 5,000 -0-
Collection, Inc.
- ----------------------------------------------------------------------------------------------------------
All Officers as a Group (3 persons) 1997 $97,000 255,000 100,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
(1) No officers received or will receive any bonus or other annual compensation
other than salaries during fiscal 1997. The table does not include any
amounts for personal benefits extended to officers of the Company, such as
the cost of automobiles, life insurance and supplemental medical insurance,
because the specific dollar amounts of such personal benefits cannot be
ascertained. Management believes that the value of non-cash benefits and
compensation distributed to executive officers of the Company individually
or as a group during fiscal year 1996 did not exceed the lesser of $50,000
or ten percent of such officers' individual cash compensation or, with
respect to the group, $50,000 times the number of persons in the group or
ten percent of the group's aggregate cash compensation.
(2) No officers received or will receive any long term incentive plan (LTIP)
payouts or other payouts during fiscal 1997.
(3) All stock awards are shares of Common Stock of the Company.
(4) All securities underlying options are shares of Common Stock of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Name Number of securities Percent of total options Exercise Expiration
underlying options granted to employees in price ($/Sh) date
granted fiscal year
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Najeeb U. Ghauri 50,000 42% $0.01 May 12, 2002
per share
- ------------------------------------------------------------------------------------------------------------------
Gill Champion 50,000 42% $0.01 May 12, 2002
per share
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The laws of the State of Nevada and the Company's Bylaws provide for
indemnification of the Company's directors for liabilities and expenses that
they may incur in such capacities. In general, directors and officers are
indemnified with respect to actions taken in good faith in a manner reasonably
believed to be in, or not opposed to, the
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<PAGE>
best interests of the Company, and with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were
unlawful.
The Company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
EMPLOYMENT AND RELATED AGREEMENTS
INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN
On April 1, 1997, the Company enacted an Incentive and Nonstatutory Stock
Option Plan (the "Plan") for its employees and consultants under which a maximum
of 500,000 option may be granted to purchase Common Stock of the Company. Two
types of options may be granted under the Plan: (1) Incentive Stock Options
(also known as Qualified Stock Options) which only may be issued to employees of
the Company and whereby the exercise price of the option is not less than the
fair market value of the Common Stock on the date it was reserved for issuance
under the Plan; and (2) Nonstatutory Stock Options which may be issued to either
employees or consultants of the Company and whereby the exercise price of the
option is less than the fair market value of the Common Stock on the date it was
reserved for issuance under the plan. Grants of options may be made to
employees and consultants without regard to any performance measures. All
options listed in the Summary Compensation Table were issued pursuant to the
Plan. All options issued pursuant to the Plan vest over an 18-month period from
the date of the grant per the following schedule: 33% of the Options vest on the
date which is six months from the date of the grant; 33% of the Options vest on
the date which is 12 months from the date of the grant; and 34% of the Options
vest on the date which is 18 months from the date of the grant. All options
issued pursuant to the Plan are nontransferable and subject to forfeiture. As
of the date of this Prospectus, the Company had issued 120,000 Incentive Stock
Options of which none have vested nor been exercised.
DIRECTORS COMPENSATION
Directors of the Company do not receive any cash compensation, but are
entitled to reimbursement of their reasonable expenses incurred in attending
Directors' Meetings. In addition, the Company has granted to its three
directors 20,000 options to purchase common stock of the Company under the
Company's Incentive and Nonstatutory Stock Option Plan each.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Saima Khan, President
of Mirage Collection, Inc. on July 1, 1996. Ms. Khan commenced her employment
with the Company in July 1995. Pursuant to that Agreement, Ms. Khan receives a
salary of $2,000 per month, a $500 monthly auto allowance, and is entitled to
20% of the net profits of Mirage Collection, Inc. on an annual basis. Ms. Khan
shall also be granted stock options in the Company based on performance and
profits generated at the discretion of the board of directors. To date, no such
options have been granted. The Agreement is terminable at will by either party
upon notice to the other and contains no severance provisions. An anti-
competition clause is in effect for a period of six months after termination of
the Agreement that Ms. Khan will not accept employment with any and all direct
competitors of the Company. However, a court of competent jurisdiction could
determine not to enforce or only partially enforce such non-competition clause.
Ms. Khan devotes 100% of her working hours to serving Mirage Collection, Inc.
The Company entered into an Employment Agreement with Gill Champion, Vice
President, and Chief Financial Officer of the Company on May 15, 1997. Mr.
Champion commenced his employment with the company on May 15, 1997. Pursuant to
his Employment Agreement, Mr. Champion receives initial compensation of $4,000
per month for four months or until the Company successfully completes its IPO
(whichever occurs first) (the "Initial Compensation
25
<PAGE>
Term"), base compensation of $5,500 per month after the Initial Compensation
Term, an award of 30,000 options to purchase common stock under the Company's
Incentive and Nonstatutory Stock Option Plan, and is entitled to participate in
all insurance and benefit plans which may be adopted by the Company. Mr.
Champion's Employment Agreement is for a term of one year with an automatic
extension of one year thereafter, unless either party elects to terminate the
Agreement at that time. The Agreement is terminable at will by Mr. Champion or
for cause by the Company. The Agreement contains no severance or anti-
competition provisions. Mr. Champion devotes 100% of his working hours to the
Company.
The Company entered into an Employment Agreement with Najeeb U. Ghauri,
President and Secretary of the Company on May 15, 1997. Mr. Ghauri commenced
his employment with the company on May 15, 1997. Pursuant to his Employment
Agreement, Mr. Ghauri receives initial compensation of $2,000 per month for four
months or until the Company successfully completes its IPO (whichever occurs
first) (the "Initial Compensation Term"), base compensation of $5,500 per month
after the Initial Compensation Term, an award of 30,000 options to purchase
common stock under the Company's Incentive and Nonstatutory Stock Option Plan,
and is entitled to participate in all insurance and benefit plans which may be
adopted by the Company. Mr. Ghauri's Employment Agreement is for a term of one
year with an automatic extension of one year thereafter, unless either party
elects to terminate the Agreement at that time. The Agreement is terminable at
will by Mr. Ghauri or for cause by the Company. The Agreement contains no
severance or anti-competition provisions. Mr. Ghauri currently devotes 50% of
his working hours to the Company, however, if this Offering is successful (i.e.,
the minimum amount is raised hereunder), Mr. Ghauri has committed to devote 100%
of his working time to the Company commencing at that time.
CERTAIN TRANSACTIONS
On February 13, 1997, the Company entered into a Consulting Agreement with
Manhattan West, Inc. Under the Consulting Agreement, Manhattan West, Inc. shall
provide business and financial consulting services to the Company in exchange
for a maximum of 50,000 options to purchase common stock of the Company (20,000
options exercisable at $2.00 per share for five years and, if the Company
completes an initial public offering, 30,000 options exercisable at $2.50 per
share for five years) and reimbursement of expenses. The Consulting Agreement
has a term of two years with automatic renewal after the termination of the two-
year period on a month-to-month basis unless either party elects to terminate.
Tariq Khan is the Managing Director of Manhattan West, Inc. and the brother of
Saima Khan, President of Mirage Collection, Inc.
On February 26, 1997, Mirage Collection, Inc. issued an unsecured note to
Manhattan West, Inc. in exchange for loans in the principal amount of $46,997.
The note is due on February 26, 2000 and bears interest at the rate of 10% per
annum. The note contains a conversion feature whereby Manhattan West, Inc. may,
at any time, convert the balance due and owing to it into share of Common Stock
of the Company at the rate of $0.50 per share. As of the date of this
Prospectus, the balance due on the note is $46,997 plus accrued interest. Tariq
Khan is the Managing Director of Manhattan West, Inc. and the brother of Saima
Khan, President of Mirage Collection, Inc. Manhattan West, Inc. is an
"affiliate" of the Company in that Manhattan West, Inc. is the beneficial owner
of more than 5% of the Company's outstanding common stock. See "Principal
Shareholders."
In April 1996, Najeeb U. Ghauri loaned $10,000 to Mirage Collection, Inc.
This sum is repayable to Mr. Ghauri upon demand without interest. Mr. Ghauri is
President, Secretary, and a Director of Mirage Holdings, Inc. and Chief
Financial Officer of Mirage Collection, Inc.
The Company's management believes that the terms of these transactions are
no less favorable to the Company than would have been obtained from an
unaffiliated third party in similar transactions. All future transactions with
affiliates will be on terms no less favorable than could be obtained from
unaffiliated third parties, and will be approved by a majority of the
disinterested directors.
The Company has agreed with certain state regulatory authorities that so
long as the Company's securities are registered in such states, or one year from
the date of this prospectus, whichever is longer, the Company will not make
26
<PAGE>
loans to its officers, directors, employees, or principal shareholders, except
for loans made in the ordinary course of business, such as travel advances,
expense account advances, relocation advances, or reasonable salary advances.
CONFLICTS OF INTEREST
Other than as described herein, the Company is not expected to have
significant further dealings with affiliates. However, if there are such
dealings, the terms of such transactions will be no less favorable to the
Company than would have been obtained from an unaffiliated third party in
similar transactions. All future transactions with affiliates will be on terms
no less favorable than could be obtained from unaffiliated third parties, and
will be approved by a majority of the disinterested directors.
A director of the Company owes fiduciary duties to the Company which
may conflict with other interests. The Company has not entered into any
noncompete, confidentiality, or similar agreements with its directors. The
fiduciary duties that directors owe to a Company include the duty not to
withhold from the Company, or appropriate, any corporate opportunity which the
Company may be able to exploit, the duty not to use for their personal benefit
or the benefit of any other individual or entity any information not generally
known which they acquire through their association with the Company, and in
short, the duty to deal fairly with the Company. The Company's current director
intends to submit to the Company any potential business they become aware of
which may constitute a corporate opportunity to the Company. The Company's
policy is that all transactions between the Company and any affiliates be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
27
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of September 1, 1997 and as adjusted
to reflect the sale of the Shares offered hereby by (i) each shareholder known
by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each director of the Company, (iii) each officer
of the Company, and (iv) all directors and officers as a group. Unless
otherwise indicated, the address for each stockholder is 18638 Pioneer
Boulevard, Artesia, CA, 90701.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED/14/
-------------------------------------------------------------------
NUMBER OF AFTER AFTER
NAME SHARES/1/ BEFORE MINIMUM MAXIMUM
OFFERING OFFERING OFFERING
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Whittington Investments, Ltd./(2)/ 895,000 49.3% 43.4% 38.7%
Suite M2 Charlotte House
P.O. Box N4825
Nassau, Bahamas
- -----------------------------------------------------------------------------------------------------------------------------------
Najeeb U. Ghauri /(3)/ 250,000/4/ 13.4% 11.8% 10.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Manhattan West, Inc., a California 142,856/6/ 7.9% 6.5% 5.8%
corporation/(5)/
233 Wilshire Blvd., Ste. 930
Santa Monica, CA 90401
- -----------------------------------------------------------------------------------------------------------------------------------
Irfan Mustafa/(7)/ 120,000/8/ 6.6% 5.8% 5.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Damson Investments Limited/(9)/ 113,600/10/ 6.3% 5.2% 4.7%
P.O. Box N8318
Nassau, Bahamas
- -----------------------------------------------------------------------------------------------------------------------------------
Gill Champion/(11)/ 100,000/12/ 5.5% 4.7% 4.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Saima Khan/(13)/ 5,000 * * *
- -----------------------------------------------------------------------------------------------------------------------------------
All officers and directors as a group (4 persons) 475,000 26.1% 21.8% 19.5%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
__________
* Less than one percent
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. Shares of Common Stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding
such options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(2) The principals of Whittington Investments, Ltd. are: John King, President
and Director; and Niaz Ahmad Khan, Sole Shareholder.
(3) Mr. Ghauri is the President, Secretary, and a Director of the Company (see
"Management") and is married to Aiesha Ghauri. Ms. Ghauri is an employee
of Manhattan West, Inc. Manhattan West, Inc. has a Consulting Agreement
with the Company. See "Certain Transactions."
(4) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(5) The principals of Manhattan West, Inc. are: Tariq S. Khan, Director; David
F. Bahr, President; and Manhattan West, Intl., a B.V.I. corporation, Sole
Shareholder. Manhattan West, Inc. has a Consulting Agreement with the
Company. See "Certain Transactions."
(6) Includes approximately 75,356 shares which could be issued pursuant to the
conversion feature of Manhattan West, Inc.'s unsecured note with the
Company having a current balance of $37,678 and convertible at $0.50 per
share; 47,500 Bridge Warrants; and 20,000 options each to purchase one
share of common stock for $2.00 pursuant to its Consulting Agreement with
the Company.
(7) Mr. Mustafa is on the Board of Directors of the Company. See "Management."
(8) Includes 20,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(9) The principals of Damson Investments Limited are: Akin Shackleford,
President, Director, and Majority Shareholder; Dellareese Dorsett,
Secretary and Director.
28
<PAGE>
(10) Includes 102,000 Bridge Warrants.
(11) Mr. Champion is the Vice President and C.F.O. and a Director of the
Company. See "Management."
(12) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(13) Ms. Khan is the President of the Company's wholly-owned subsidiary, Mirage
Collection, Inc. (see "Management."). Ms. Khan is the sister of Tariq
Khan, Managing Director of Manhattan West, Inc. Manhattan West, Inc. has a
Consulting Agreement with the Company. See "Certain Transactions."
(14) Following is the beneficial ownership of each principal shareholder giving
effect to the sale of all of the securities held by the Selling
Shareholders (see "Selling Shareholders"):
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
NUMBER OF --------------------------------------------------
NAME SHARES
---------------------------------------------------------------------------------------------------------------------
AFTER MINIMUM AFTER MAXIMUM
OFFERING AND SALE BY OFFERING AND SALE BY
SELLING SHAREHOLDERS SELLING SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Whittington Investments, Ltd. 796,600 26.0% 24.0%
Suite M2 Charlotte House
P.O. Box N4825
Nassau, Bahamas
- ----------------------------------------------------------------------------------------------------------------------
Najeeb U. Ghauri 250,000/i/ 8.0% 7.4%
- ----------------------------------------------------------------------------------------------------------------------
Manhattan West, Inc., a California corporation 95,356/ii/ 3.0% 2.8%
233 Wilshire Blvd., Ste. 930
Santa Monica, CA 90401
- ----------------------------------------------------------------------------------------------------------------------
Irfan Mustafa 120,000/iii/ 3.9% 3.6%
- ----------------------------------------------------------------------------------------------------------------------
Damson Investments Limited -0- -0-% -0-%
P.O. Box N8318
Nassau, Bahamas
- ----------------------------------------------------------------------------------------------------------------------
Gill Champion 100,000/iv/ 3.2% 3.0%
- ----------------------------------------------------------------------------------------------------------------------
Saima Khan 5,000 * *
- ----------------------------------------------------------------------------------------------------------------------
All officers and directors as a group (4 persons) 475,000 14.9% 13.8%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
__________
* Less than one percent
(i) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(ii) Includes approximately 75,356 shares which could be issued pursuant to
the conversion feature of Manhattan West, Inc.'s unsecured note with the
Company having a current balance of $37,678 and convertible at $0.50 per
share; and 20,000 options each to purchase one share of common stock for
$2.00 pursuant to its Consulting Agreement with the Company.
(iii) Includes 20,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(iv) Includes 50,000 options issued under the Company's stock option plan
exerc isable at $0.01 for five years from May 12, 1997.
29
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock which
may be offered for sale from time to time by the Selling Shareholders. The
shares offered for sale constitute all of the shares of Common Stock known to
the Company to be beneficially owned by the Selling Shareholders. To the best
of management's knowledge, none of the Selling Shareholders has or have any
material relationship with the Company, except as otherwise set forth below.
NAME OF SHARES OF
SELLING SHAREHOLDER COMMON STOCK OFFERED/(1)/
- ------------------- --------------------
Horwitz & Beam, Inc., a California corporation/(3)/ 9,500
Horwitz & Beam, Inc., a California corporation/(3)/ 2,500/(2)/
Normaco Capital, Inc., a corporation 10,000
Clarence W. Coffey, an individual 20,000
Frederick T. Hull, an individual 20,000
Rockspitz Stiftung 9,500
Rockspitz Stiftung 5,000/(2)/
Richard Houlihan, an individual 20,000
Clearweather Investments 98,065
Clearweather Investments 259,500/(2)/
Ian R. Hendry, an individual 15,000
Damson Investments Limited, a corporation 11,600
Damson Investments Limited, a corporation 102,000/(2)/
John C. Accetta, an individual 8,000
Manhattan West, Inc., a corporation/(4)/ 47,500/(2)/
Harold Mendoza and Donna Mendoza, JTWROS 20,000
Bernard Collura and Stella Collura, JTWROS 4,000
Dennis R. Johnson, an individual 5,000
Trinalta Group, LLC 20,000
Graham Thorogood, an individual 3,000
Richard D. David, Esq. 10,000
Ronald W. Tupper TTEE of the Winthrup Trust 40,000
Stanley Decker, an individual 40,000
Sean Kelly, an individual 6,000
Moncrieff Capital Corporation, a corporation 10,000
Whittington Investments, Ltd. 75,400
Whittington Investments, Ltd. 23,000/(2)/
Damask International, Ltd. 9,500
Damask International, Ltd. 2,500/(2)/
Hawk's Nest Investments, Ltd. 9,500
Hawk's Nest Investments, Ltd. 2,500/(2)/
Winthrop Venture Fund, Ltd. 50,000
Equitrade Securities Corp. 10,000
Noreen S. Khan, an individual/(5)/ 10,000
Abdul S. Khan, an individual/(6)/ 20,000
Total 1,008,565
- ---------------
(1) All of these Shares are currently restricted under Rule 144 of the 1933
Act.
(2) Represents Shares underlying Private Placement Warrants.
30
<PAGE>
(3) Legal counsel to the Company. Horwitz & Beam, Inc. acquired the
securities in the Private Placement as an investor on April 24, 1997
pursuant to a subscription agreement and the payment of $5,000.
(4) Manhattan West, Inc., a California corporation, has a Consulting Agreement
with the Company. See "Certain Transactions."
(5) Noreen Khan is the mother of Tariq Khan, who is the Managing Director of
Manhattan West, Inc. Manhattan West, Inc. has a Consulting Agreement with
the Company. See "Certain Transactions."
(6) Abdul Khan is the father of Tariq Khan, who is the Managing Director of
Manhattan West, Inc. Manhattan West, Inc. has a Consulting Agreement with
the Company. See "Certain Transactions."
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Shareholders for their
own accounts. The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Shareholders pursuant to this Prospectus. The Company
will pay all of the expenses of the registration of the Shares, but shall not
pay any commissions, discounts, and fees of underwriters, dealers, or agents.
The Selling Shareholders may offer and sell the Shares from time to time in
transactions in the over-the-counter market or in negotiated transactions, at
market prices prevailing at the time of sale or at negotiated prices. The
Selling Shareholders have advised the Company that they have not entered into
any agreements, understandings, or arrangements with any underwriters or broker-
dealers regarding the sale of their Shares, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of Shares by the
Selling Shareholders. Sales may be made directly or to or through broker-
dealers who may receive compensation in the form of discounts, concessions, or
commissions from the Selling Shareholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions).
The Selling Shareholders and any broker-dealers acting in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be deemed
underwriting compensation under the Act.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Shares offered by this Prospectus may not
simultaneously engage in market making activities with respect to the Common
Stock of the Company during the applicable "cooling off" periods prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of Common Stock by the Selling Shareholders.
Selling Shareholders may also use Rule 144 under the Act to sell the Shares
if they meet the criteria and conform to the requirements of such Rule.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of twenty-five million
shares of Common Stock, $0.001 par value. The Company's Transfer Agent is
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, Suite 444,
Denver, Colorado, 80202.
The following summary of certain terms of the Company's securities does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Articles of Incorporation and Bylaws, which are
included as exhibits to the Registration Statement of which this Prospectus is a
part, and the provisions of applicable law.
31
<PAGE>
COMMON STOCK
As of the date of this Prospectus, there are 1,814,065 shares of Common
Stock outstanding, and after completion of this Offering, 2,064,065 shares of
Common Stock will be issued and outstanding if the minimum amount hereunder is
sold and 2,314,065 shares of Common Stock if the maximum amount hereunder is
sold (without giving effect to the exercise of any warrants). Holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders. At all elections of directors of the
Company, each holder of stock possessing voting power is entitled to as many
votes as equal to the number of his or her shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes for
a single director or may distribute them among the number to be voted for or any
two or more of them, as he or she may see fit (cumulative voting). Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding Preferred Stock. Holders of Common Stock have no right to
convert their Common Stock into any other securities. The Common Stock has no
preemptive or other subscription rights. There are no redemption or sinking
fund provisions applicable to the Common Stock. All outstanding shares of
Common Stock are, and the Common Stock to be outstanding upon completion of this
Offering will be, duly authorized, validly issued, fully paid and nonassessable.
WARRANTS
As of the date of this Prospectus, there are 444,500 warrants outstanding
(the "Private Placement Warrants"). These warrants were issued by the Company to
private individuals in connection with the Company's Private Placement Bridge
Financing commenced on April 10, 1997. The Private Placement Warrants are each
exercisable for one share of Common Stock of the Company at $0.75 per share.
The term of the Private Placement Warrants is five years from the date of
issuance.
The Company is also offering hereunder a maximum of 1,000,000 warrants (the
"Warrants"). The Warrants are each exercisable for one share of Common Stock of
the Company at $6.00 per share. The term of the Warrants is five years from the
date of issuance.
If the minimum amount is raised hereunder, the Company will have a total of
444,500 warrants outstanding (the Private Placement Warrants). If the maximum
amount is raised hereunder, the Company will have a total of 1,444,500 warrants
outstanding (the Private Placement Warrants plus the Warrants issued hereunder).
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
2,064,065 shares of Common Stock if the minimum amount is sold hereunder and
2,314,065 shares if the maximum amount is sold hereunder (without giving effect
to the exercise of any warrants). All shares acquired in this Offering, other
than shares that may be acquired by "affiliates" of the Company as defined by
Rule 144 under the Securities Act, will be freely transferable without
restriction or further registration under the Securities Act.
All of the 1,814,065 shares outstanding prior to this offering were shares
issued by the Company and sold by the Company in private transactions in
reliance on an exemption from registration. Accordingly, such shares are
"restricted shares" within the meaning of Rule 144 and cannot be resold without
registration, except in reliance on Rule 144 or another applicable exemption
from registration.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including any affiliate of the
Company, who beneficially owns "restricted shares" for a period of at least one
year is entitled to sell within any three-month period, shares equal in number
to the greater of (i) 1% of the then outstanding shares of Common Stock, or (ii)
the average weekly trading volume of the Common Stock during the four
32
<PAGE>
calendar weeks preceding the filing of the required notice of sale with the
Securities and Exchange Commission. The seller also must comply with the notice
and manner of sale requirements of Rule 144, and there must be current public
information available about the Company. In addition, any person (or persons
whose shares are aggregated) who is not, at the time of the sale, nor during the
preceding three months, an affiliate of the Company, and who has beneficially
owned restricted shares for at least two years, can sell such shares under Rule
144 without regard to notice, manner of sale, public information or the volume
limitations described above.
The Private Placement Stock and the shares underlying the Private Placement
Warrants are being registered herein. Therefore, 564,065 shares of stock and
444,500 shares of stock issuable upon exercise of warrants will be freely
tradeable upon the effective date hereof.
UNDERWRITING
The Company has entered into an Underwriting Agreement with Platinum
Equities, Inc. ("Underwriter"). Pursuant to the Underwriting Agreement, the
Company has retained the Underwriter as its exclusive agent and the Underwriter
has agreed to use its best efforts to offer the Securities to the public. The
Securities are offered on a "best efforts 250,000 share minimum -- 500,000 share
and 1,000,000 Warrant maximum" basis. There is no minimum number of Warrants
that must be sold. The price of the Shares is $5.15 per Share and the price of
the Warrants if $0.10 per Warrant. The Underwriter does not intend to sell the
Securities to any accounts for which they exercise discretionary authority.
The Underwriter shall receive 10% commission for the sale of the
Securities.
The Company has agreed to pay to the Underwriter at the closing of the
Offering a non-accountable expense allowance of 3% of the aggregate public
offering price to cover expenses incurred by the Underwriter in connection with
this Offering. The Company has also agreed to issue the Underwriter at the
closing of the Offering warrants (the "Representative Warrants") to purchase
common stock of the Company at an exercise price of 120% of the public offering
price in an amount equal to 10% of the number of Shares actually sold
herein.
The Underwriter has the right to offer the Securities through members of
the National Association of Securities Dealers, Inc. ("NASD"), and will pay such
dealers a concession out of its commissions of $0.2575 per Share and/or $0.005
per Warrant for any Securities sold by it.
The Company has agreed with the Underwriter that, without the Underwriter's
consent (which may not be unreasonably withheld), it will not issue any
additional Common Stock between the effective date of this Offering and the
expiration of 12 months thereafter if such issuance would cause any provision
made in the Registration Statement to be materially misleading or would
otherwise subject the Underwriter to any reasonable likelihood of liability
under the Act.
The directors, officers, and employees of the Company who are also
shareholders of the Company have entered into a contractual agreement with
Platinum Equities, Inc. that restricts, for a period of 12 months from the
effective date of the registration statement for the Units being offered hereby,
their ability to sell the Common Stock beneficially owned by them including
stock registered pursuant to any Form SB-2 Registration Statement.
Prior to this Offering, there was no public securities market for the
Company's Securities and the price of such securities may be volatile to a
degree that might not occur in securities that are more widely held or more
actively traded. The initial public offering price was negotiated by the Company
and the Underwriter. In determining the offering price, the Underwriter
considered, among other things, the business potential and earning prospects of
the Company and prevailing market conditions. Additionally, potential investors
should be aware that the securities of the Company have recently sold at a
substantial discount to the public
33
<PAGE>
offering price herein. The Company and the Underwriter considered the following
factors in pricing the securities issued in the recent private placement of the
Company at $0.50 per share of Common Stock and $0.10 per warrant versus the
initial public offering price: at the time of the private placement the Company
was still developing its business plan, the Company had minimal officer and
director support, key personnel of the Company were not yet in place, the
Company was in the process of structuring its public offering plan, the Company
had not yet secured an underwriter for a public offering, and there could be no
assurance of a public market for the securities.
The Company has agreed to indemnify the Underwriters, any controlling
person of an Underwriter, and other persons related to the Underwriters and
identified in the Underwriting Agreement, against certain liabilities, including
liabilities arising (i) under the Securities Act, (ii) out of any untrue
statement or material fact contained in the Registration Statement, this
Prospectus, any amendments thereto, and certain other documents, or (iii) out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless the statement or omission is
made in reliance upon and in conformity with written information furnished to
the Company or on behalf of the Underwriters for use in the document in which it
was used. However, the Company has been advised that in the opinion of the
Securities and Exchange Commission, indemnification for liabilities arising
under the Securities Act is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
There is no assurance that all or any of the Securities will be sold. If
the Company fails to receive subscriptions for a minimum of 250,000 Shares
within 120 days from the date of this Prospectus (or 150 days if extended by the
Company), the Offering will be terminated and any subscription payments received
will be promptly refunded within 5 days to subscribers, without any deduction
therefrom or any interest thereon. If subscriptions for at least the minimum
amount are received within such period, funds will not be returned to investors
and the Company may continue the Offering until such period expires or
subscriptions for all 500,000 Shares and 1,000,000 Warrants have been received,
whichever comes first.
Subscribers should make their subscription checks payable to "American
Securities Transfer & Trust Corporation, Escrow Agent - Mirage Holdings, Inc."
All funds received as subscriptions for the Securities will be immediately
deposited in an escrow account (the "Escrow Account") with American Securities
Transfer & Trust Corporation ("Escrow Agent") by noon of the next business day
after receipt. The investment funds may be held in the Escrow Account for up to
150 days. During this time, investors cannot demand the return of their
investments. If the Company does not meet the required minimum number of
Securities to be sold (250,000 Shares), the investors will be refunded their
investment in full without interest.
Pursuant to the terms of the Underwriter's Restriction Letter with the
NASD, the Underwriter is prohibited from acting as a "market maker" in
securities. As a result thereof, the Underwriter will be prohibited from making
a market in the Securities offered hereby. The Underwriter's inability to make
such a market may materially affect the liquidity of the Securities offered
hereby, which could make it more difficult for investors in this Offering to
purchase or sell their Securities. The Underwriter, however, may execute buy
and sell orders for its customers in the Common Stock offered hereby on an
agency basis. See "Risk Factors -- Underwriter Will Not Make a Market in the
Company's Common Stock."
The Issuer has agreed with the California Department of Corporations that
it will offer and sell the Securities only to investors who meet the following
suitability standards: (1) The investor (either alone or with his or her spouse)
has a net worth of not less than $250,000 (exclusive of home, home furnishings,
and automobile) plus at least $65,000 gross annual income; or (2) not less than
$500,000 net worth (exclusive of home, home furnishings, and automobile); or (3)
not less than $1,000,00 net worth (inclusive of home, home furnishings, and
automobile); or (4) not less than $200,000 gross annual income.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Horwitz & Beam, Irvine, California. Certain legal matters in
connection with this Offering will be passed upon for the Underwriters by
Gusrae, Kaplan & Bruno. Horwitz & Beam, Inc., a California corporation, is the
owner of 9,500 shares of
34
<PAGE>
Private Placement Stock and 2,500 Private Placement Warrants. Horwitz & Beam,
Inc. acquired securities in the Private Placement as an investor on April 24,
1997 pursuant to a subscription agreement and the payment of $5,000.
EXPERTS
The Financial Statements of the Company for the fiscal year ended June 30,
1996 and the fiscal year ended June 30, 1997 included herein and elsewhere in
the registration statement, have been included herein and in the registration
statement in reliance on the reports of Hoffski & Pisano, P.C. and Stonefield
Josephson, Inc., appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is not presently subject to the reporting requirements of the
Securities Exchange Act of 1934. The Company has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form SB-2
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement on file with the Commission pursuant to
the Securities Act and the rules and regulations of the Commission thereunder.
The Registration Statement, including the exhibits thereto, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of such material
may be obtained by mail at prescribed rates from the Public Reference Branch of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.
This Prospectus contains a complete summary of the terms of the contracts
or other documents filed as exhibits to the Registration Statement which the
Company believes are material to an investor. However, statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
35
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997
CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheets 2
Statements of Operations 3
Statement of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-13
<PAGE>
[LETTERHEAD OF STONEFIELD JOSEPHSON, INC.]
Board of Directors
Mirage Holdings, Inc.
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Mirage Holdings,
Inc. as of June 30, 1997, and the related consolidated statement of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mirage Holdings,
Inc. as of June 30, 1997, and the results of its consolidated operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in note 2, certain factors are present which raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying consolidated financial statements do not include any adjustments to
the financial statements that might be necessary should the Company be unable to
continue as a going concern.
/s/ STONEFIELD JOSEPHSON, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
August 26, 1997
1
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS September 30, June 30,
1997 1997
-------------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 21,274 $ 33,079
Accounts receivable 4,258 4,009
Loan receivable 57,116 -
Inventory 31,411 46,891
Marketable securities 13,587 57,570
--------- ---------
Total current assets 127,646 141,549
--------- ---------
NOTE RECEIVABLE 116,007 113,104
--------- ---------
PROPERTY, PLANT AND EQUIPMENT 40,131 41,945
--------- ---------
OTHER ASSETS:
Investment 200,000 200,000
Deferred offering costs 40,000 40,000
Deposits 3,730 3,730
--------- ---------
Total other assets 243,730 243,730
--------- ---------
$ 527,514 $ 540,328
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 25,055 $ 38,630
Current maturities of notes payable 134,086 92,279
--------- ---------
Total current liabilities 159,141 130,909
--------- ---------
LOAN PAYABLE, RELATED PARTY 116,007 113,104
--------- ---------
NOTES PAYABLE, less current maturities 17,661 22,371
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 25,000,000 shares
authorized, 1,814,065 shares issued and outstanding 1,814 1,814
Additional paid-in capital 562,021 562,021
Accumulated deficit (329,130) (289,891)
--------- ---------
Total stockholders' equity 234,705 273,944
--------- ---------
$ 527,514 $ 540,328
========= =========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
2
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Year ended
ended September 30, June 30, 1997
------------------------- --------------
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
NET SALES $ 55,605 $ 73,140 $ 212,972
COST OF SALES 32,099 50,808 149,501
---------- -------- ----------
GROSS PROFIT 23,506 22,332 63,471
OPERATING EXPENSES 101,664 71,870 389,723
OTHER INCOME 38,919 - 36,361
---------- -------- ----------
NET LOSS $ (39,239) $(49,538) $ (289,891)
========== ======== ==========
NET LOSS PER SHARE $ (.02) $ (.06) $ (.22)
========== ======== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,814,065 895,000 1,297,005
========== ======== ==========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
3
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock Additional Total
------------------ paid-in stockholders'
Shares Amount capital Deficiency equity
--------- ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1996 895,000 $ 895 $ 9,266 $ - $ 10,161
Capital contributions 86,400 - 86,400
Issuance of common stock for cash 564,065 564 244,760 - 245,324
Issuance of common stock, non-cash 355,000 355 177,145 - 177,500
Issuance of warrants for cash
(convertible to common stock) - - 44,450 - 44,450
Net loss - - - (289,891) (289,891)
--------- ------ -------- --------- ---------
Balance at June 30, 1997 1,814,065 1,814 562,021 (289,891) 273,944
Net loss for the three months
ended September 30, 1997 - - - (39,239) (39,239)
--------- ------ -------- --------- ---------
Balance at September 30, 1997 1,814,065 $1,814 $562,021 $(329,130) $ 234,705
========= ====== ======== ========= =========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
4
<PAGE>
MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended Year ended
ended September 30, June 30, 1997
------------------------- --------------
1997 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (39,239) $ (49,538) $(289,891)
--------- --------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 1,814 2,645 7,254
Gain on sale of marketable securities (38,919) - (36,219)
Non-cash compensation expense - - 177,500
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable (249) 5,180 4,040
Loan receivable (57,116) - -
Inventory 15,480 (5,965) 15,724
INCREASE (DECREASE) IN LIABILITIES -
accounts payable and accrued expenses (13,575) (8,082) 27,254
--------- --------- ---------
Total adjustments (92,565) (6,222) 195,553
--------- --------- ---------
Net cash used for operating activities (131,804) (55,760) (94,338)
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
(Purchase) sale of investments 79,999 (200,000) (334,455)
Purchase of property, plant and equipment - (227) (9,570)
--------- --------- ---------
Net cash provided by (used for) investing activities 79,999 (200,227) (344,025)
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock and warrants, net - 289,774 289,774
Proceeds from note payable 40,000 3,602 135,183
Deferred offering costs - (40,000) (40,000)
Capital contributions - 25,862 86,400
--------- --------- ---------
Net cash provided by financing activities 40,000 279,238 471,357
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH (11,805) 23,251 32,994
CASH AND CASH EQUIVALENTS, beginning of period 33,079 85 85
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 21,274 $ 23,336 $ 33,079
========= ========= =========
</TABLE>
NON-CASH FINANCING ACTIVITY:
During the year ended June 30, 1997, the Company issued 355,000 shares of
common stock at a value of $177,500 for services rendered.
See accompanying independent auditors' report and notes to financial statements.
5
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997
(1) GENERAL:
Mirage Holdings, Inc. was incorporated under the laws of the State of
Nevada on March 18, 1997. Mirage Collection, Inc., a wholly-owned
subsidiary of Mirage Holdings, Inc., began business as a partnership July
1, 1995, and was reorganized into a corporation in the State of Nevada
pursuant to Internal Revenue Code Section 351 on April 1, 1997.
Accordingly, the accompanying consolidated financial statements have been
presented as though the acquisition of Mirage Collection, Inc. occurred
at the beginning of the period (July 1, 1996).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ACTIVITY:
The operating subsidiary of the Company was formed for the purpose of
marketing unique fashions. The subsidiary Company specializes in the
marketing of fashions targeted toward the segment where discriminating
customers are always looking for unique and innovative products.
PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary, Mirage Collection, Inc. All material
intercompany accounts have been eliminated in consolidation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments, none of which are
held for trading purposes, approximate carrying values of such amounts.
REVENUE RECOGNITION:
Revenues for the Company are recognized upon the sale of the merchandise
to the customer.
See accompanying independent auditors' report.
6
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH EQUIVALENTS:
For purposes of the statement of cash flows, cash equivalents include all
highly liquid debt instruments with original maturities of three months
or less which are not securing any corporate obligations.
EARNINGS PER SHARE:
Earnings per share have been calculated based upon the weighted average
number of shares outstanding during the period. Shares issued for
services are treated as outstanding for earnings per share purposes for
all periods. Common stock equivalents have been excluded since their
effect would be anti-dilutive.
The Financial Accounting Standards Board (FASB) has issued a new
statement recently (FASB No. 128) which requires companies to report
"basic" earnings per share, which will exclude options, warrants and
other convertible securities. The accounting and disclosure requirements
of this statement are effective for financial statements for fiscal years
beginning after December 15, 1997, with earlier adoption encouraged.
Management does not believe that the adoption of this pronouncement will
have a material impact on the financial statements.
REALIZATION OF ASSETS:
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles which
contemplates continuation of the Company as a going concern. However, the
Company has incurred a net loss of $289,891 for the year ended June 30,
1997 and has been dependent on proceeds from its private common stock
offerings (see note 12) to finance its operating needs. Management
believes continuation as a going concern is dependent upon maintaining
sufficient cash flow from the sale of its common stock as part of an
initial public offering.
ACCOUNTING FOR STOCK-BASED COMPENSATION:
During October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, which applies the fair-value method of
accounting for stock-based compensation plans. In accordance with this
recently issued standard, the Company expects to continue to account for
stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. Proforma
information regarding net income and earnings per share under the fair-
value method has not been presented as the amounts are immaterial.
See accompanying independent auditors' report.
7
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES:
Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF:
On April 1, 1997, the Company adopted the provision of FASB No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. This statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amounts of the assets exceed
the fair values of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
Adoption of this statement did not have a material impact on the
Company's financial position, results of operations or liquidity.
INVENTORY:
Inventory, consisting principally of finished goods, is valued at the
lower of cost (first-in, first-out) or market.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The accompanying unaudited condensed financial statements for the interim
periods ended September 30, 1997 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Regulation SB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months
ended September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending June 30, 1998.
See accompanying independent auditors' report.
8
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(3) BASIS OF PRESENTATION:
On April 1, 1997, the Company entered into an acquisition agreement whereby
the Company acquired 100% of the outstanding capital stock of Mirage
Collection, Inc. ("Collection"), a Nevada Corporation. In full consideration
and exchange for the Collection stock, the Company issued and delivered
895,000 shares of its restricted common stock. Accordingly, the accompanying
financial statements present the combined operating results of both entities
for the entire year accounted for as a reorganization of businesses under
common control in a manner similar to pooling of interest accounting.
Upon completion of the merger and acquisition agreement, Collections'
stockholder became a director and stockholder of the Company.
(4) STOCK SUBSCRIPTION RECEIVABLE:
Proceeds relating to stock subscription receivable at June 30, 1997 were
received totaling $20,316 prior to August 26, 1997 from the issuance of
stock relating to the private placement (Note 12). Accordingly, the balance
sheet and the statement of cash flows present this transaction as part of
cash and cash equivalents at June 30, 1997.
(5) NOTE RECEIVABLE:
The note receivable is a bridge loan to a product development company and is
unsecured and bears interest at 10% per annum. The note is due the earlier
of the development company's completion of an initial public offering or
March 19, 1999. The purpose of the loan is to provide bridge financing to
an unrelated company. In the event of default there will be no obligation
to repay the note payable referred to in note 9. The product development
company is not a related party to the loan payable holder.
(6) PROPERTY AND EQUIPMENT:
A summary is as follows:
Leasehold improvements $43,277
Machinery and equipment 6,381
Furniture and office equipment 6,368
-------
56,026
Less accumulated depreciation 14,081
-------
$41,945
=======
See accompanying independent auditors' report.
9
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
A summary is as follows:
<TABLE>
<S> <C>
Fees relating to private offering $ 15,474
Accrued interest 8,675
Month end bills 8,417
Sales tax 6,064
--------
$ 38,630
========
</TABLE>
(8) NOTES PAYABLE:
A summary is as follows:
<TABLE>
<S> <C>
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.25%). $ 37,500
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.25%) to a stockholder
and unsecured to all notes of Mirage Holdings, Inc. 10,000
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.25%). 8,272
Note payable, unsecured, payable on demand, with interest
at approximate Prime Base Rate (8.25%) to a party
related to a stockholder of Mirage Holdings, Inc. 21,200
On February 26, 1997, Mirage Collection, Inc. issued an
unsecured note to a related party. The note is due on
February 26, 2000 and bears interest at the rate of 10%
per annum. The note contains a conversion feature whereby
the holder of the note may, at any time, convert the balance
due and owing to it into shares of common stock of the
Company at the rate of $0.50 per share. The holder of the
note is a related party to a stockholder of Mirage Holdings, Inc. 37,678
--------
114,650
Less current maturities 92,279
--------
$ 22,371
========
</TABLE>
Interest on these obligations amounted to $5,202 for the year ended June 30,
1997.
See accompanying independent auditors' report.
10
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(9) LOAN PAYABLE, RELATED PARTY:
The loan payable, related party is secured by, and due upon payment of the
bridge loan receivable from the product development company (referred to in
note 5) and bears interest at 10% per annum. Knightrider Investments, Ltd.,
a related party through a common stockholder, is the holder of the loan.
(10) COMMITMENTS:
The Company leases a 2,500 square feet showroom in Artesia, California. The
lease expires on August 31, 2000 and requires monthly payments of
approximately $3,200. The Company has an option to renew the lease for an
additional five year term, from September 1, 2000 to August 31, 2005. The
terms of such renewal shall be agreed upon prior to execution of the lease
option.
The Company also leases a 1,150 square feet showroom in Diamond Bar,
California. The lease expires on September 30, 2001 and requires monthly
payments of approximately $1,150. Prior to its termination, the Company has
an option to renew the lease for an additional five year term at the then
fair market value of the property.
The following is a schedule by years of future minimum rental payments
required under operating leases that have noncancellable lease terms in
excess of one year as of June 30, 1997:
Year ending June 30,
1998 $ 52,200
1999 52,200
2000 39,400
2001 10,350
--------
$154,150
========
Rent expense amounted to $46,759 for the year ended June 30, 1997.
See accompanying independent auditors' report.
11
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(11) INCENTIVE AND NONSTATUTORY STOCK OPTION PLAN:
On April 1, 1997, the Company adopted an Incentive and Nonstatutory Stock
Option Plan (the "Plan") for its employees and consultants under which a
maximum of 500,000 options may be granted to purchase common stock of the
Company. Two types of options may be granted under the Plan: (1) Incentive
Stock Options (also know as Qualified Stock Options) which may only be
issued to employees of the Company and whereby the exercise price of the
option is not less than the fair market value of the common stock on the
date it was reserved for issuance under the Plan; and (2) Nonstatutory
Stock Options which may be issued to either employees or consultants of the
Company and whereby the exercise price of the option is less than the fair
market value of the common stock on the date it was reserved for issuance
under the plan. Grants of options may be made to employees and consultants
without regard to any performance measures. All options listed in the
summary compensation table ("Securities Underlying Options") were issued
pursuant to the Plan. An additional 20,000 Incentive Stock Options were
issued to a non-officer-stockholder of the Company. All options issued
pursuant to the Plan vest over an 18 month period from the date of the
grant per the following schedule: 33% of the options vest on the date which
is six months from the date of the grant; 33% of the options vest on the
date which is 12 months from the date of the grant; and 34% of the options
vest on the date which is 18 months from the date of the grant. All options
issued pursuant to the Plan are nontransferable and subject to forfeiture.
As of June 30, 1997, the Company has issued 120,000 Incentive Stock Options
with an exercise price of $0.01 per share, of which 39,600 have vested but
have not been exercised.
Proforma net income and earnings per share, as if the fair value method of
accounting were used, has not been presented because the amounts are
immaterial for the period presented. The period for which related employee
services are to be rendered in connection with the stock options granted is
largely related to the fiscal year end June 30, 1998.
(12) PRIVATE PLACEMENT:
On April 10, 1997, the Company commenced a private placement (the "Private
Placement") of 564,065 shares of the Company's common stock at a purchase
price of $0.50 per share (the "Private Placement Stock") and 444,500
warrants, each warrant to purchase one share of the Company's common stock
at an exercise price of $0.75 for a term of five years at a purchase price
of $0.10 per warrant (the "Private Placement Warrants"). The Private
Placement was exempt from the registration provisions of the Act by virtue
of Section 4(2) of the Act, as transactions by an issuer not involving any
public offering. The securities issued pursuant to the Private Placement
were restricted securities as defined in Rule 144. The offering generated
gross proceeds of approximately $326,500.
See accompanying independent auditors' report.
12
<PAGE>
MIRAGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1997
(13) INVESTMENT:
On March 30, 1997, the Company purchased 10% of the outstanding capital
stock of Network Solutions (PVT) Limited, a software development firm in
Lahore, Pakistan ("NetSol"), in exchange for the payment of $200,000. The
cash consideration of $200,000 was paid by the Company from the net
proceeds of the Private Placement (note 12). NetSol was incorporated in
Pakistan on August 22, 1996, under the Companies Ordinance 1984, as a
private company limited by shares. The principal business of NetSol is the
development and export of software. A stockholder of the Company is a
related party to the officers of NetSol.
(14) DEFERRED ACQUISITION COSTS:
The Company is in the registration process of a proposed public offering.
Deferred stock offering costs of $40,000 will be charged against the
proceeds of the proposed public offering when, and if, it becomes
effective.
See accompanying independent auditors' report.
13
<PAGE>
[LETTERHEAD OF AMIN, MUDASSAR & CO.]
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Network Solutions (Pvt) Limited as
at June 30, 1997 and the related statements of income, stockholders' equity and
cash flows for the period August 22, 1996 (inception) to June 30, 1997. We
conducted our audit in accordance with International Standards on Auditing which
are comparable in all respects with U.S. generally accepted auditing standards
and we state that we have obtained all the information and explanations which to
the best of our knowledge and belief were necessary for the purposes of our
audit and, after due verification thereof, we report that:
(a) in our opinion, proper books of account have been kept by the company
as required by the Companies Ordinance, 1984;
(b) in our opinion:
(i) the balance sheet and income statement together with the notes
thereon have been drawn up in conformity with the Companies
Ordinance, 1984 and are in agreement with the books of account
and are further in accordance with accounting policies
consistently applied.
(ii) the expenditure incurred during the year was for the purpose of
Company's business; and
(iii) the business conducted, investments made and the expenditure
incurred during the year were in accordance with the objects of
the company;
(c) in our opinion and to the best of our information and according to the
explanations given to us, the balance sheet, income statement,
statement of stockholders' equity and cash flow statement, together
with the notes forming part thereof, give the information required by
the Companies Ordinance, 1984 in the manner so required and
respectively give a true and fair view of the state of the Company's
affairs as at June 30, 1997 and of the income and the cash flows for
the period August 22, 1996 (inception) to June 30, 1997 in accordance
with International Accounting Standards which are similar in all
material respects to U.S. generally accepted accounting principles,
and
(d) In our opinion, no Zakat was deductible at source under the Zakat and
Ushr Ordinance, 1980.
/s/ Amin Mudassar
CHARTERED ACCOUNTANTS
Lahore, Pakistan:
Dated: July 23, 1997
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED AMIN MUDASSAR & CO.
NETWORK SOLUTIONS (PVT) LIMITED
BALANCE SHEET AS AT JUNE 30, 1997
<TABLE>
<CAPTION>
1997 1997
NOTE RUPEES US DOLLARS
<S> <C> <C> <C>
TANGIBLE FIXED ASSETS
Property and equipment, Net 4 3,562,010 87,818
Assets under capital lease 5 744,000 18,343
---------- --------
4,306,010 106,161
Long Term Deposits and Deferred Cost 6 226,200 5,577
CURRENT ASSETS
-------------- ------------
---------- --------
Accounts receivable 7 948,742 23,390
Advances, prepaid expenses and other receivables 8 845,646 20,849
Cash and bank balances 9 12,405,880 305,856
---------- --------
14,200,268 350,095
LESS: CURRENT LIABILITIES
---------- --------
Current portion of obligations under capital lease 12 272,606 6,721
Short term borrowing 10 3,288,128 81,066
Accrued and other liabilities 11 829,454 20,449
Provision for taxation 104,762 2,583
---------- --------
(4,494,950) (110,819)
-------------- ------------
9,705,318 239,276
---------- --------
NET CURRENT ASSETS 14,237,528 351,014
CONTINGENCIES AND COMMITMENTS 12
LESS: OBLIGATIONS UNDER CAPITAL LEASE 13 (605,093) (14,918)
---------- --------
NET ASSETS 13,632,435 336,096
========== ========
REPRESENTED BY
STOCKHOLDERS' EQUITY
Share Capital and Reserve
Authorised capital
20,000 ordinary shares of Rs. 100 each 2,000,000 49,308
========== ========
Issued, subscribed and paid up capital
400 ordinary shares of Rs. 100 each
fully paid in cash 40,000 986
Retained earnings 1,859,847 45,853
---------- --------
1,899,847 46,839
DEPOSIT FOR SHARES 14 11,732,588 289,257
---------- --------
13,632,435 336,096
========== ========
</TABLE>
The annexed notes from 1 to 22 form an integral part of these accounts.
/s/ ILLEGIBLE /s/ ILLEGIBLE
Chief Executive Director
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED AMIN, MUDASSAR & CO.
NETWORK SOLUTIONS (PVT) LIMITED
INCOME STATEMENT
FOR THE PERIOD AUGUST 22, 1996 (INCEPTION) TO JUNE 30, 1997
<TABLE>
<CAPTION>
AUGUST 22, 1996
TO JUNE 30, 1997
NOTE RUPEES US DOLLARS
<S> <C> <C> <C>
SALES 15 10,476,209 258,282
Operating Expenses
Administration and selling 16 7,542,381 185,951
---------- -------
Operating income 2,933,828 72,331
Other income 17 165,704 4,085
---------- -------
3,099,532 76,416
---------- -------
Financial charges 18 92,139 2,272
Expenses prior to incorporation 19 1,042,784 25,709
---------- -------
1,134,923 27,981
---------- -------
income before taxation 1,964,609 48,436
Provision for taxation 20 104,762 2,583
---------- -------
Retained earnings carried forward 1,859,847 45,853
========== =======
</TABLE>
The annexed notes from 1 to 22 form an integral part of these accounts.
/s/ ILLEGIBLE /s/ ILLEGIBLE
Chief Executive Director
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED AMIN, MUDASSAR & CO.
NETWORK SOLUTIONS (PVT) LIMITED
NOTES TO THE ACCOUNTS
FOR THE PERIOD AUGUST 22, 1996 (INCEPTION) TO JUNE 30, 1997
1. THE COMPANY AND NATURE OF BUSINESS
Network Solutions (Pvt) Limited was incorporated in Pakistan on August 22,
1996 under the Companies Ordinance, 1984 as a private company limited by
shares. The principal business of the Company is development and export of
software.
2. COMPLIANCE WITH IAS
The accounts comply with international Accounting Standards which are
comparable in all material respect to U.S. General Accepted Accounting
Principles.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 ACCOUNTING CONVENTION
These accounts have been prepared under the historical cost convention.
3.2 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is charged by applying reducing balance method to write off
the cost over the remaining useful life of the assets. Rates of
depreciation are stated in note 4.
Full annual rate of depreciation is applied on the cost of additions while
no depreciation is charged on assets deleted during the year.
Maintenance and normal repairs are charged to income as and when incurred.
Major renewals and improvements are capitalised.
Gain and losses on disposal of assets, if any, are included in the income.
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (2) AMIN, MUDASSAR & CO.
3.3 ASSETS UNDER CAPITAL LEASE
Assets acquired under finance leases are capitalized and are stated at the
lower of present value of minimum lease payments under the lease agreements
and the fair value of the assets. The related obligations of the leases are
accounted for as liabilities.
Assets acquired under finance leases are amortised over the useful life of
the assets on a reducing balance method at the rates given in note 5.
3.4 TAXATION
The income of the company from export of computer software and its related
services developed in Pakistan is exempt from tax as per clause 179 of the
Second Schedule to the Income Tax Ordinance, 1979. The export proceeds
shall, however, be liable to deduction of tax at source under section 80CC
of the Income Tax Ordinance, 1979 in accordance with the rates prescribed
in Eight Schedule to the Ordinance.
3.5 DEFERRED COSTS
Expenses, the benefits of which is expected to spread over several years,
are deferred and amortised/written off over their useful life not exceeding
five years commencing from the year in which the costs were incurred.
3.6 FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated in Pak Rupees
at the rates of exchange prevailing at the balance sheet date except those
covered under forward exchange contract which are translated at cover rate.
Exchange differences are included in current income.
3.7 REVENUE RECOGNITION
Revenue is recognised on issue of sale invoices.
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (3) AMIN. MUDASSAR & CO.
4. PROPERTY AND EQUIPMENT
The following is the statement of property and equipment:
<TABLE>
<CAPTION>
RUPEES US DOLLARS
--------------------------------------------------------------------------------------------------------- -----------
Cost DEPRECIATION Net book Net book
-------------------------------------
PARTICULARS To Rate Charge for To value as at value as at
June 30, % the period June 30, June 30, June 30,
1997 1997 1997 1997
--------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computers 1,828,655 10 182,866 182,866 1,645,789 40,576
Air conditioners 510,907 10 51,091 51,091 459,816 11,336
Furnitures, carpets and
telephones 1,119,427 10 111,943 111,943 1,007,484 24,839
Electric fittings 211,690 10 21,169 21,169 190,521 4,697
Vehicles 323,000 20 64,600 64,600 258,400 6,371
-------------------------------------------------------------------------- ------
3,993,679 431,669 431,669 3,562,010 87,818
========================================================================== ======
</TABLE>
The depreciation charge on operating assets has been allocated to
administration expenses as referred to in note 16.
5. ASSETS UNDER CAPITAL LEASE
The following is the statement of leased assets:
<TABLE>
<CAPTION>
RUPEES US DOLLARS
--------------------------------------------------------------------------------------------------------- -----------
Cost AMORTIZATION Net book Net book
-------------------------------------
PARTICULARS To Rate Charge for To value as at value as at
June 30, % the period June 30, June 30, June 30,
1997 1997 1997 1997
--------------------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Vehicles 930,000 20 186,000 186,000 744,000 18,343
------------------------------------------------------------------------ ------
930,000 186,000 186,000 744,000 18,343
======================================================================== ======
</TABLE>
The amortisation charge on leased assets has been allocated to
administration expenses referred to in note 16.
<PAGE>
NETWORK SOLUTIONS (FVT) LIMITED (4) AMIN, MUDASSAR & CO.
<TABLE>
<CAPTION>
1997 1997
RUPEES US DOLLARS
6. LONG TERM DEPOSITS AND DEFERRED COST
<S> <C> <C>
Long term deposits 226,200 5,577
Deferred costs
Preliminary expenses 49,315 1,216
Less: written off during the year - charged to
administration expenses note 16 (49,315) (1,216)
0 0
---------- -------
226,200 5,577
========== =======
Deferred cost is being fully written off curing the year.
7. ACCOUNTS RECEIVABLE
These are unsecured but considered good.
8. ADVANCES, PREPAID EXPENSES
AND OTHER RECEIVABLES
Advances - considered good
Employees 27,340 674
Due from directors and associates 606,970 14,964
Prepayments 211,336 5,210
---------- -------
845,646 20,849
========== =======
9. CASH AND BANK BALANCES
These balances were held
At banks
on deposit accounts
US$ 160,000 note 9.1 6,467,120 159,441
on current accounts including
US$ 13,948 and (L)31,935 respectively 3,088,360 76,141
on saving accounts including
US$ 62,727 and (L)4,768 respectively 2,850,400 70,274
---------- -------
12,405,880 305,856
========== =======
</TABLE>
9.1 The foreign currency deposit account is under lien with Citibank N.A.
against credit facility given to the company by the bank as referred
to in note 10.
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (5) AMIN, MUDASSAR & CO.
<TABLE>
<S> <C> <C>
Significant terms and condition are as under:
Principal and finance charges 1,122,732 27,680
Installment payment rest monthly monthly
Each installment (Rs.) 31,187 769
No. of installments 36 36
Commenced from May 13, 1997 May 13, 1997
Applicable rate of interest 13.45% p.a. 13.45% p.a.
</TABLE>
The future minimum lease payments to which the company is committed as
at June 30, 1997 are as under:
<TABLE>
<CAPTION>
1997 1997
RUPEES US DOLLARS
<S> <C> <C>
Year ending June 30,
1998 374,244 9,227
1999 374,244 9,227
2000 311,870 7,689
---------- -------
1,060,358 26,142
Less: Financial charges allocated to
future periods (182,659) (4,503)
---------- -------
877,699 21,639
========== =======
14. DEPOSIT FOR SHARES
Sponsors 3,648,688 89,955
Foreign investment against 10% shareholding
BO Miraj Holding Inc. USA 8,083,900 199,302
---------- -------
11,732,588 289,257
========== =======
This represents deposit against the further issue of shares of the company.
</TABLE>
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (7) AMIN, MUDASSAR & CO.
<TABLE>
<CAPTION>
AUGUST 22, AUGUST 22,
1996 1996
TO JUNE 30, TO JUNE 30,
1997 1997
15. SALES RUPEES US DOLLARS
<S> <C> <C>
Export of Software 10,476,209 258,282
---------- -------
10,476,209 258,282
========== =======
16. ADMINISTRATION AND SELLING EXPENSES
ADMINISTRATION
Directors remuneration 762,000 18,786
Staff salaries and benefits 2,991,256 73,747
Staff training 249,443 6,150
Rent, rates and taxes 206,150 5,082
Electricity charges 50,667 1,249
Telephone charges 348,885 8,601
Printing and stationery 196,909 4,855
Staff teas and refreshment 79,815 1,968
Computer maintenance 27,852 687
Fee and subscription 6,400 158
Insurance 21,402 528
Vehicle running expenses 201,640 4,971
Repairs and maintenance 9,859 243
Legal and professional charges 15,000 370
Auditors' remuneration 25,000 616
Depreciation note 4 431,669 10,642
Amortization on leased assets note 5 186,000 4,586
Deferred costs written off note 6 49,315 1,216
Miscellaneous expenses 229,600 5,661
---------- -------
6,088,862 150,116
SELLING
---------- -------
Travelling and conveyance 1,191,645 29,379
Guest house expenses 200,074 4,933
Advertisement 61,800 1,524
---------- -------
1,453,519 35,835
---------- -------
7,542,381 185,951
========== =======
</TABLE>
17. OTHER INCOME
This represents the net exchange fluctuation gain arises on conversion of
assets and liabilities, to Pak Rupees on the balance sheet date.
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (8) AMIN, MUDASSAR & CO.
<TABLE>
<CAPTION>
AUGUST 22, AUGUST 22,
1996 1996
TO JUNE 30, TO JUNE 30,
1997 1997
RUPEES US DOLLARS
<S> <C> <C>
18. FINANCIAL CHARGES
Interest on short term secured finance 32,038 790
Central excise duty on short term secured finance 3,860 95
Interest on liabilities under finance lease 10,073 248
Frontend fee and lease processing charges 15,486 382
Bank charges 30,682 756
------ -----
92,139 2,272
====== =====
<CAPTION>
MARCH 01, MARCH 01,
1996 1996
TO JULY 31, TO JULY 31,
1996 1997
RUPEES US DOLLARS
<S> <C> <C>
19. EXPENSES PRIOR TO INCORPORATION
Staff salaries and benefits 530,642 13,083
Rent, rates and taxes 64,500 1,590
Electricity charges 4,891 121
Telephone charges 26,739 659
Printing and stationery 21,025 518
Travelling and conveyance 174,354 4,299
Staffing tea and refreshment 9,961 246
Computer maintenance 6,450 159
Vehicle running 44,017 1,085
Advertisement 83,630 2,062
Miscellaneous expenses 76,575 1,888
--------- ------
1,042,784 25,709
========= ======
</TABLE>
20. TAXATION
Rate of deduction of tax on export sales of computer software has not been
prescribed in Eighth Schedule to the Income Tax Ordinance, 1979. However,
provision of tax at the maximum rate of 1% of export sales has been
provided in the accounts under section 80CC.
<PAGE>
NETWORK SOLUTIONS (PVT) LIMITED (9) AMIN, MUDASSAR & CO.
<TABLE>
<CAPTION>
1997 1997
RUPEES US DOLLARS
<S> <C> <C>
21. CASH AND CASH EQUIVALENTS
These comprise of
Cash and bank balances 12,405,880 305,856
Short term borrowing (3,288,128) (81,066)
---------- -------
9,117,752 224,790
========== =======
</TABLE>
22. GENERAL
22.1 There are no comparative figures as the company is incorporated since
August 22, 1996.
22.2 The amount in US Dollars shown in the accounts is solely stated for
convenience and do not represent Pakistani Rupees that could be converted
into US Dollars. These amounts have been arrived at by converting rupee
amounts at the rate of Rs.40.56115 = US$ 1. The average rate of the
period August 22, 1996 (inception) to June 30, 1997 is not materially
different.
/s/ ILLEGIBLE /s/ ILLEGIBLE
Chief Executive Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Mirage Collection
Artesia, California
We have audited the accompanying balance sheet of Mirage Collection, a
Partnership, as of June 30, 1996, and the related statements of operations,
partnership equity, and cash flows for the twelve month period then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mirage Collection at June
30, 1996, and the results of its operations and its cash flows for the twelve
month period then ended in conformity with generally accepted accounting
principles.
Our examination was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages
9-11, is presented for purposes of additional information and is not a
required part of the basic financial statements. Such information has been
subjected to auditing procedures applied in the examination of the basic
financial statements, and in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ HOFFSKI & PISANO, P.C.
Irvine, California
September 30, 1996
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
BALANCE SHEET
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash................................................................ $ 85
Accounts Receivable................................................. 8,049
Inventory........................................................... 62,615
--------
Total Current Assets.............................................. 70,749
PROPERTY, PLANT, AND EQUIPMENT, AT COST:
Equipment........................................................... 5,191
Furniture And Fixtures.............................................. 703
Leasehold Improvements.............................................. 40,562
--------
Total Property, Plant, And Equipment.............................. 46,456
Less Accumulated Depreciation (Note A)............................ (6,827)
--------
Net Property, Plant, And Equipment................................ 39,629
--------
OTHER ASSETS:
Deposits............................................................ 3,730
--------
Total Other Assets................................................ 3,730
--------
Total Assets...................................................... $114,108
========
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
Bank Overdraft...................................................... $ 14,664
Accounts Payable.................................................... 12,848
Accrued Expenses.................................................... 5,640
Interest Payable.................................................... 1,490
Notes Payable (Note B).............................................. 70,200
--------
Total Current Liabilities........................................... 104,842
--------
Partners' Equity.................................................... 9,266
--------
Total Liabilities and Partners' Equity.............................. $114,108
========
</TABLE>
See accompanying notes and independent auditors' report.
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF OPERATIONS
FOR YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
Sales................................................................ $199,230
Costs of Sales
Beginning Inventory................................................ 5,000
Purchases.......................................................... 217,058
Customs............................................................ 907
Less: Ending Inventory............................................. (62,615)
--------
Total Costs of Sales............................................. 160,350
--------
Gross Profit......................................................... 38,880
General & Administrative Expenses.................................... 97,192
--------
Income From Operations............................................... (58,312)
Other Income (Expense):
Interest Expense................................................... (4,000)
Interest Income.................................................... 17
--------
Total Other Income (Expense)..................................... (3,983)
--------
Net Income/(Loss).................................................... $(62,295)
========
</TABLE>
See accompanying notes and independent auditors' report.
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
FOR YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
BEGINNING PARTNERS' EQUITY............................................ $ 5,950
Capital Contributions............................................... 65,611
Net Loss............................................................ (62,295)
--------
ENDING PARTNERS' EQUITY............................................... $ 9,266
========
</TABLE>
See accompanying notes and independent auditors' report.
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF CASH FLOWS
JUNE 30, 1996
<TABLE>
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net Loss............................................................ $ (62,295)
Non Cash Items Included In Net Loss:
Depreciation.................................................... 6,827
Changes In:
Accounts Receivable............................................. (8,049)
Inventory....................................................... (57,615)
Deposits........................................................ (3,730)
Accounts Payable................................................ 12,848
Accrued Expenses................................................ 5,640
Interest Payable................................................ 1,490
---------
Net Cash Used In Operating Activities......................... (104,884)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of Fixed Assets.......................................... (46,406)
---------
Net Cash Used In Investing Activities......................... (46,406)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes Payable..................................................... 70,200
Capital Contributions............................................. 65,611
---------
Net Cash From Financing Activities............................ 135,811
---------
Net Change In Cash............................................ (15,479)
Cash at Beginning of the Year....................................... 900
---------
Cash at End of the Year............................................. $ (14,579)
=========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid..................................................... $ 2,510
=========
Income Taxes Paid................................................. $ 0
=========
</TABLE>
See accompanying notes and independent auditors' report.
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) NATURE OF BUSINESS
Mirage Collection, A Partnership is engaged in the retail clothing business.
The Company's financial statements are presented in accordance with generally
accepted accounting principles.
(2) BASIS OF ACCOUNTING
The Company uses the accrual method of accounting for financial statement
purposes. Revenue is recognized at the point of sale.
(3) PROPERTY, PLANT, AND EQUIPMENT
Depreciable assets are stated at cost; major improvements and betterments
are capitalized. Maintenance and repairs are expensed as incurred. For
financial statement purposes, assets are depreciated using the straight line
method of depreciation over lives of five to seven years.
(4) INVENTORY
Inventory consists primarily of clothing garments held for resale and are
valued at the lower of actual cost or market. Cost is determined by specific
identification of each unit.
(5) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B: NOTES PAYABLE
Notes Payable consists of four notes to various individuals all maturing
within the next six months. Interest has been accrued in accordance with the
terms of the loan agreements.
NOTE C: COMMITMENTS
The Company leases its store facilities under a five-year operating lease
for $3,200 per month. The lease expires on August 31, 2000 and requires
minimum annual lease rentals as follows:
<TABLE>
<S> <C>
1996-97.......................................................... $ 38,400
1997-98.......................................................... 38,400
1998-99.......................................................... 38,400
1999-00.......................................................... 38,400
2000............................................................. 6,400
--------
$160,000
========
</TABLE>
Rent expense for the year ended June 30, 1996 totaled $28,800.
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
SCHEDULE OF REVENUE
FOR YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
REVENUE:
Sales Revenue....................................................... $204,482
Less: Sales Returns................................................. (5,252)
--------
TOTAL REVENUE......................................................... $199,230
========
</TABLE>
<PAGE>
MIRAGE COLLECTION, A PARTNERSHIP
SCHEDULE OF GENERAL & ADMINISTRATIVE EXPENSES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
<TABLE>
<S> <C>
GENERAL & ADMINISTRATIVE EXPENSES:
Advertising........................................................... $ 6,315
Alterations........................................................... 292
Bad Debt.............................................................. 1,869
Bank Charges.......................................................... 389
Commissions........................................................... 75
Contributions......................................................... 50
Credit Card Expense................................................... 1,321
Depreciation.......................................................... 6,827
Dues & Subscriptions.................................................. 155
Entertainment......................................................... 95
Exhibition............................................................ 13,687
Freight............................................................... 38
Insurance............................................................. 1,891
Miscellaneous......................................................... 336
Office Expenses....................................................... 263
Office Supplies....................................................... 2,846
Outside Services...................................................... 5,205
Postage............................................................... 53
Printing.............................................................. 755
Rent.................................................................. 28,800
Repairs & Maintenance................................................. 262
Tax & License......................................................... 109
Telephone............................................................. 3,973
Travel................................................................ 19,760
Utilities............................................................. 1,826
-------
Total General & Administrative Expenses............................. $97,192
=======
</TABLE>
<PAGE>
===============================================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
ORDINARY SHARES TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
____________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary 1
Risk Factors 4
Dilution 9
Comparative Data 10
Use of Proceeds 11
Dividend Policy 11
Capitalization 12
Selected Financial Data 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Business of the Company 17
Management 23
Employment and Related Agreements 25
Certain Transactions 26
Principal Shareholders 28
Selling Shareholders 30
Plan of Distribution 31
Description of Securities 31
Shares Eligible for Future Sale 32
Underwriting 33
Legal Matters 34
Experts 35
Additional Information 35
Index to Financial Statements F-1
---------------------------------------------------
</TABLE>
UNTIL ________________, ____ (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE DISTRIBUTION MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
===============================================================================
===============================================================================
UP TO 500,000 SHARES OF COMMON
STOCK AND 1,000,000 WARRANTS TO
PURCHASE ONE SHARE OF COMMON
STOCK FOR $6.00
MINIMUM OFFERING: 250,000 SHARES
OF COMMON STOCK
$5.15 PER SHARE
$0.10 PER WARRANT
MIRAGE HOLDINGS, INC.
______________
PROSPECTUS
______________
_________________________________
December 2, 1997
===============================================================================
<PAGE>
MIRAGE HOLDINGS, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
- -------- ------------------------------------------
The Nevada Corporation Law and the Company's Certificate of Incorporation
and Bylaws authorize indemnification of a director, officer, employee or agent
of the Company against expenses incurred by him or her in connection with any
action, suit, or proceeding to which such person is named a party by reason of
having acted or served in such capacity, except for liabilities arising from
such person's own misconduct or negligence in performance of duty. In addition,
even a director, officer, employee or agent of the Company who was found liable
for misconduct or negligence in the performance of duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
- -------- -------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 1,808
NASD Fee $ 680
Accounting Fees and Expenses $ 10,000
Legal Fees and Expenses $ 50,000
Printing Expenses $ 10,000
Blue Sky Fees and Expenses $ 10,000
Underwriters' Non-accountable Expense Allowance $ 37,500
Miscellaneous $ 1,012
--------
Total $121,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
- -------- ---------------------------------------
On April 1, 1997, in connection with the reorganization of the Company from
a partnership to a corporation, the Company issued 895,000 shares of its Common
Stock, to Whittington Investments, Ltd., the owner of the limited partnership in
exchange for ownership of the Company. This transaction was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act, as
transactions by an issuer not involving any public offering. The securities
issued pursuant to this transaction were restricted securities as defined in
Rule 144.
Also on April 1, 1997, in connection with the reorganization of the Company
from a partnership to a corporation, the Company issued 5,000 shares of its
Common Stock, to Saima Khan, in consideration of past services rendered for the
Company and to entice Ms. Khan to continue working with the Company in its new
corporate form. This transaction was exempt from the registration provisions of
the Act by virtue of Section 4(2) of the Act, as transactions by an issuer not
involving any public offering. The securities issued pursuant to this
transaction were restricted securities as defined in Rule 144.
Also on April 1, 1997, in connection with the reorganization of the Company
from a partnership to a corporation, the Company issued the following
denominations of shares of its Common Stock to the following individuals to
entice such individuals to work with the Company in its new corporate form:
II-1
<PAGE>
Najeeb Ghauri 200,000 shares
Irfan Mustafa 100,000 shares
Gill Champion 50,000 shares
These transactions were exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not involving
any public offering. The securities issued pursuant to these transactions were
restricted securities as defined in Rule 144.
On April 10, 1997, the Company commenced a private placement (the "Private
Placement") of 564,065 shares of the Company's common stock at a purchase price
of $0.50 (the "Private Placement Stock") and 444,500 warrants, each warrant to
purchase one share of the Company's common stock at an exercise price of $0.75
for a term of five years at a purchase price of $0.10 (the "Private Placement
Warrants"). The Private Placement was exempt from the registration provisions
of the Act by virtue of Section 4(2) of the Act, as transactions by an issuer
not involving any public offering. The securities issued pursuant to the
Private Placement were restricted securities as defined in Rule 144. The
Private Placement Stock and the Common Stock underlying the Private Placement
Warrants are being registered herein. The offering generated net proceeds of
approximately $300,000. All investors in the Private Placement were accredited
investors as that term is defined in Rule 501 of Regulation D adopted under the
Securities Act of 1933.
ITEM 27. EXHIBITS
- -------- --------
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
1.1 Underwriting Agreement (form)
1.2 Agreement Among Underwriters (form)
3.1 Articles of Incorporation of Mirage Holdings, Inc., a Nevada
corporation, dated March 18, 1997*
3.2 Bylaws of Mirage Holdings, Inc., dated March 18, 1997*
4 Lock-Up Agreement (form)*
5 Opinion of Horwitz & Beam*
10.1 Employment Agreement, dated July 1, 1996, between Mirage Collection,
Inc., and Saima Khan*
10.2 Lease Agreement, dated August 1, 1995*
10.3 Lease Agreement, dated September 19, 1996*
10.4 Lease Agreement, dated March 12, 1997*
10.5 Company Stock Option Plan, dated April 1, 1997*
10.6 Employment Agreement, dated May 15, 1997 between Mirage Holdings, Inc.
and Najeeb U. Ghauri*
10.7 Employment Agreement, dated May 15, 1997 between Mirage Holdings, Inc.
and Gill Champion*
10.8 Consulting Agreement, dated February 13, 1997, between Mirage Holdings,
Inc. and Manhattan West, Inc.*
10.9 Unsecured Promissory Note, dated February 26, 1997, between Mirage
Collection, Inc. and Manhattan West, Inc.*
10.10 Agreement of Purchase and Sale of Stock, dated March 30, 1997, between
Mirage Holdings, Inc. and Network Solutions (PVT), Ltd.*
24.1 Consent of Horwitz & Beam (included in their opinion set forth in
Exhibit 5 hereto)*
24.2 Consent of Hoffski & Pisano, P.C.*
24.3 Consent of Stonefield Josephson, Inc., Certified Public Accountants
24.4 Consent of Amin, Mudassar & Co., Chartered Accountants
25 Power of Attorney (see signature page)
28 Specimen of Common Stock Certificate of Mirage Holdings, Inc.*
____________
</TABLE>
* Previously Filed
II-2
<PAGE>
ITEM 28. UNDERTAKINGS
- -------- ------------
The undersigned registrant hereby undertakes to:
(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(2) File, during any period in which it offers or sells securities, a post
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
For determining liability under the Securities, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Santa
Monica, State of California on November 29, 1997.
MIRAGE HOLDINGS, INC.
BY: *
---------------------------------------------------
NAJEEB U. GHAURI, PRESIDENT
POWER OF ATTORNEY
Each person whose signature appears appoints Najeeb U. Ghauri and Gill
Champion, in the alternative, as his agents and attorneys-in-fact, with full
power of substitution to execute for him and in his name, in any and all
capacities, all amendments (including post-effective amendments) to this
Registration Statement to which this power of attorney is attached. In
accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* President, Secretary, Director November 29, 1997
- ------------------
Najeeb U. Ghauri
* Vice President, Chief Financial Officer, Director November 29, 1997
- ------------------
Gill Champion
* Director November 29, 1997
- ------------------
Irfan Mustafa
</TABLE>
*By: /s/ Najeeb U. Ghauri
-------------------------------------
Najeeb U. Ghauri
Attorney in Fact
II-4
<PAGE>
EXHIBIT 1.1
UNDERWRITING AGREEMENT (FORM)
<PAGE>
UNDERWRITING AGREEMENT
_________, 1997
PLATINUM EQUITIES, INC.
19 Rector Street, Suite 2301
New York, NY 10006
Dear Ladies and Gentlemen:
Mirage Holdings, Inc., a Nevada corporation (the "Company"), proposes to
issue and sell on a best efforts basis a minimum of 250,000 shares of Common
Stock (the "Common Stock" or the "Shares") and a maximum of 500,000 shares of
Common Stock and 1,000,000 Common Stock Purchase Warrants (the "Warrants")
(collectively, the "Securities") for a purchase price of $5.15 per Share and
$0.10 per Warrant. Each Warrant entitles the holder to purchase one share of
the Company's Common Stock for $6.00. The Company confirms as follows its
agreement with you.
1. Registration Statement and Prospectus: The Company has prepared and
--------------------------------------
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the Securities Act of 1933, as amended (the "Act") and the rules
and regulations of the Commission promulgated thereunder (the "Rules and
Regulations"), a registration statement on Form SB-2, including a preliminary
prospectus, relating to the Securities. As used in this Agreement, the term
"Registration Statement" means such registration statement, including exhibits,
financial statements and schedules, as amended, when it becomes effective and
any information (if any) contained in the prospectus subsequently filed with the
Commission pursuant to Rule 424(b) under the Act, and the term "Prospectus"
means such prospectus in the final form filed on behalf of the Company with the
Commission pursuant to Rule 424(b) under the Act.
2. Agreement to Sell: Upon the basis of the representations, warranties
------------------
and agreements herein contained and subject to all the terms and conditions of
this Agreement, you agree to use best efforts to sell on behalf of the Company
the aggregate principal amount of Securities which are offered in this Offering.
The Securities sold and the proceeds therefrom will be placed in an escrow
account. However, that if the Company fails to receive subscriptions for a
minimum of 250,000 Shares within 120 days from the date of the final Prospectus
(or 150 days, if extended by the Company), the Offering will be terminated and
any subscriptions received will be promptly refunded within 5 days to
subscribers, without any deduction therefrom or any interest thereon and this
Agreement shall terminate. You shall receive a 10% cash commission for the sale
of the Securities after the minimum offering has been sold.
It is understood that you currently intend to execute an Agreement Among
Underwriters providing for the purchase of a portion of the principal amount, at
whatever price you may elect, at your own discretion (the "Agreement Among
Underwriters").
The Company also agrees to pay to you a non-accountable expense allowance
equal to 3% of the aggregate principal amount of Securities sold. In the event
that the Company's public offering of the Securities is terminated for any
reason, the Company shall pay you for any reasonable accountable expenses you
have incurred.
In addition to the sums payable to you, as provided elsewhere herein,
Platinum Equities, Inc., in its individual capacity and not as representative of
the several Underwriters, shall be entitled to receive, as partial compensation
for its services, warrants (the "Warrants") for the purchase of an amount of
shares of Common Stock and Warrants of the Company equal to 10% of the number of
Securities actually sold in the public offering. The Warrants shall be issued
pursuant to the Underwriter's Warrant in the form of Exhibit B attached hereto
and shall be exercisable, in whole or in part, for a period of four years
commencing one year from the date of the completion of the Offering at an
exercise price
1
<PAGE>
of $6.18 per share and $0.12 per Warrant. The Warrants shall be non-exercisable
for one year from the issuance of the Warrants, and non-transferable (whether by
sale, transfer, assignment, or hypothecation) except for (i) transfers to
officers of Platinum Equities, Inc. who are also shareholders of Platinum
Equities, Inc.; and (ii) transfers occurring by operation of law.
3. Delivery and Payment: Delivery of and payment for any securities
---------------------
purchased in the Offering shall be made at 10:00 A.M., Eastern time, on [____],
1997 or at such other time and date as may be agreed between you and the
Company, but not less than seven nor more than ten full business days after the
effective date of the Registration Statement (such time and date are referred to
herein as the "Closing Date"). Delivery of and payment for the Securities shall
take place at the office of Platinum Equities, Inc., 19 Rector Street, Suite
2301, New York, NY, 10006. The Closing Date and the place of delivery of and
payment for the Securities may be varied by agreement between you and the
Company.
Delivery of the Securities (in temporary or definitive form and registered
in such names and in such denominations as you shall request at least two
business days prior to the Closing Date by written notice to the Company) shall
be made to you against payment of the purchase price therefor in good (same day)
funds, to the order of the Company. For the purpose of expediting the checking
and packaging of the Securities, the Company agrees to make such Securities
available for inspection at least 24 hours prior to the Closing Date.
4. Agreements of the Company: The Company agrees with you as follows:
--------------------------
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments to become effective as promptly as practicable and
will not at any time, whether before or after the effective date of the
Registration Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") before
termination of the offering of the Securities by you of which you and your
counsel shall not previously have been advised and furnished with a copy, or to
which you or your counsel shall have objected (except if deemed necessary by
counsel for the Company, in which case you shall have the right to terminate
this Agreement upon prompt notice to the Company), or which is not in compliance
with the Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the Rules and Regulations.
As soon as the Company is advised or obtains knowledge thereof, the
Company will advise you, and as soon as practicable, confirm in writing, (i)
when the Registration Statement, as amended, becomes effective and, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any post-
effective amendment to the Registration Statement becomes effective, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission, and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order or suspension.
(b) The Company will furnish to you, without charge, three signed copies of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and all exhibits.
(c) The Company will give you advance notice of its intention to file any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus, and will not file any such amendment or supplement to which you
shall reasonably object in writing or which is not in compliance with the Act.
2
<PAGE>
(d) From the date hereof, and thereafter from time to time, the Company
will deliver to you, without charge, as many copies of the Prospectus, or any
amendment or supplement thereto as you may reasonably request. The Company
consents to the use of the Prospectus or any amendment or supplement thereto by
you and by all dealers to whom the Securities may be sold, both in connection
with the offering or sale of the Securities and for such period of time
thereafter as the Prospectus is required to be delivered under the Act in
connection therewith. If during such period of time any event shall occur which
in the reasonable judgment of the Company or your counsel should be set forth in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement or
amendment thereto and will deliver to you, without charge, such number of copies
thereof as you may reasonably request.
(e) Prior to any public offering of the Securities by you, the Company will
cooperate with you and your counsel in connection with the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of such jurisdictions as you request. The Company will pay all
reasonable fees and expenses (including reasonable fees and expenses of counsel)
relating to qualification of the Securities under such securities or Blue Sky
laws and in connection with the determination of the eligibility of the
Securities for investments under the laws of such jurisdictions as you may
designate, including the reasonable expenses of any opinion of local counsel
required by any state securities or Blue Sky authorities.
(f) So long as any of the Securities remain outstanding, the Company will
furnish to its securityholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants), and
will deliver to you, as representative for the underwriters:
(i) concurrently with furnishing such quarterly reports to its
securityholders, statements of income of the Company for each quarter in the
form furnished to the Company's securityholders and certified by the Company's
principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
securityholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, stockholders' equity and
cash flows of the Company for such fiscal year, accompanied by a copy of the
report thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any state
securities commission, NASDAQ/SCMS, the NASD or any securities exchange;
(v) every press release and every material news item regarding each of
the Company and the Subsidiaries or their respective affairs which were released
or prepared by or on behalf of the Company or any of the Subsidiaries; and
(vi) any additional information of a public nature concerning the
Company or any of the Subsidiaries (and any future subsidiaries) or their
respective businesses which you may request.
During such period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will pay all expenses in connection with (1) the
preparation, printing and filing of the Registration Statement, each preliminary
prospectus, the Prospectus, any legal investment memoranda and the Blue Sky
Survey, (2) the issuance and delivery of the Securities (other than transfer
taxes), (3) the rating of the Securities by rating agencies, (4) furnishing such
copies of the Registration Statement, the Prospectus and any preliminary
prospectus, all amendments and supplements thereto, as may reasonably be
requested for use in connection with the offering and sale
3
<PAGE>
of the Securities by you or by dealers to whom Securities may be sold, and (5)
filings with the National Association of Securities Dealers, Inc. ("NASD").
(h) The Company will use the net proceeds from the sale of the Securities
in the manner specified in the Prospectus under the caption "Use of Proceeds."
No portion of the net proceeds will be used, directly or indirectly, to acquire
or redeem any securities issued by the Company.
(i) The Company will appoint and retain, while any of the Securities remain
outstanding, a transfer agent for the Securities, and, if necessary, a registrar
for the Securities (who may be the transfer agent), and will make arrangements
to have available at the offices of the transfer agent certificates for the
Securities in such quantities as may, from time to time, be necessary. As of
the date of this Agreement, the transfer agent for the securities of the Company
is American Securities Transfer and Trust Corporation, 1825 Lawrence Street,
Suite 1825, Denver, CO 80202.
(j) For a period of five years from the date hereof, the Company shall use
its best efforts to maintain the listing of its common stock on the National
Association of Securities Dealers, Inc. ("NASD") over-the-counter market.
(k) Neither the Company nor any of the Subsidiaries nor any of their
respective executive officers, directors, principal stockholders or affiliates
(within the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company in violation of the Exchange Act.
(l) Until the completion of the distribution of the Securities, neither the
Company nor any of the Subsidiaries shall, without prior written consent of you
and your counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company, any of
the Subsidiaries, their respective activities or the offering contemplated
hereby, other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's
operations.
5. Representations and Warranties of the Company: The Company
----------------------------------------------
represents and warrants to you that:
(a) Each preliminary prospectus filed as part of any Registration Statement
as originally filed or as part to any amendment thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with the
Act, and when the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date, the Registration Statement and the
Prospectus, and any supplements or amendments thereto, will comply in all
material respects with the provisions of the Act and the Registration Statement
and the Prospectus, and any such supplement or amendment thereto, at all such
times will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated herein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements or omissions in the Registration Statement or the
Prospectus or any preliminary prospectus made in reliance upon information
furnished to the Company in writing by you expressly for use therein.
(b) This Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except that (i) the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, relating to
creditors' rights generally, (ii) the enforceability thereof may be limited by
the application of equitable principles (whether such enforceability is
considered in a proceeding at law or in equity) and (iii) rights to indemnity
and contribution hereunder may be limited by Federal or state securities laws.
(c) The Securities have been duly authorized, validly issued, fully paid
and nonassessable, and the Company has duly authorized and reserved for issuance
the number of shares of common stock required for the firm commitment offering
and the over-allotment option. The Securities are not and will not be subject to
any preemptive or other similar rights of any security holder of the Company or
any of the Subsidiaries (as defined below); the holders thereof will not be
subject to any liability for the Company's acts or omissions solely as such
holders; all corporate action
4
<PAGE>
required to be taken for the authorization, issuance and sale of the Securities
has been duly and validly taken; and the certificates representing the
Securities will be in due and proper form. Upon the issuance and delivery of the
Securities pursuant to the terms of this Agreement, you will acquire good and
marketable title thereto free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever resulting from the affirmative act of the Company or from a judgment
or nonconsensual lien rendered against the Company.
(d) The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Nevada. The Company and each of
its subsidiaries listed on Exhibit A hereto (the "Subsidiaries") have full
corporate power and authority to own and occupy its properties and carry on its
business as presently conducted and as described in the Prospectus and holds all
licenses and permits and is duly registered or qualified to conduct business,
and is in good standing, in each jurisdiction in which it owns or leases
property or transacts business and in which such licensing, registration or
qualification is necessary except where the failure to be so licensed,
registered or qualified would not have a material adverse effect on the Company
and its Subsidiaries, taken as a whole. The Company has a duly authorized,
issued and outstanding capitalization as set forth in the Registration
Statement. All of the outstanding capital stock or other equity securities of
the Company and each of the Subsidiaries has been duly and validly authorized
and issued, is fully paid and nonassessable; the holders thereof have no rights
of rescission with respect thereto and are not subject to personal liability for
the Company's acts or omissions solely by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of any
security holder of the Company or any of the Subsidiaries or similar contractual
rights granted by the Company or any of the Subsidiaries. There are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of, any shares of capital stock or other equity interest in any
Subsidiary. Neither the Company nor any of the Subsidiaries is a party to or
bound by any material instrument, agreement or other arrangements, including,
but not limited, to any voting trust agreement, stockholders' agreement or other
agreement or instrument, affecting the securities or options, warrants or rights
or obligations of security holders of the Company or any of the Subsidiaries or
providing for any of them to issue, sell, transfer or acquire any capital stock,
rights, warrants, options or other securities of the Company or any of the
Subsidiaries, except for this Agreement and as described or referred to in the
Registration Statement and the Prospectus.
(e) There are no legal or governmental proceedings pending, or to the
knowledge of the Company, threatened or contemplated to which the Company or any
of its Subsidiaries is a party or of which the business or property of the
Company or any of its Subsidiaries is the subject which are material to the
Company and its Subsidiaries, taken as whole and which are not disclosed in the
Registration Statement and the Prospectus, and there is no contract or document
concerning the Company or any of its Subsidiaries of a character required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.
(f) Neither the Company nor any of its Subsidiaries is in violation of its
charter or bylaws or is in default in any respect in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any indenture, mortgage, deed of trust or
any other agreement or instrument of the Company or of any such Subsidiary,
which default would be material to the Company and its Subsidiaries, taken as a
whole and there exists, and at the Closing Date shall exist, no condition which,
with the passage of time or otherwise, would constitute a default under any such
document or instrument or result in the imposition of any penalty or
acceleration of any indebtedness which would be material to the Company and its
Subsidiaries, taken as a whole. The execution and delivery by the Company of
this Agreement, the authorization, issuance and sale of the Securities, the
fulfillment by the Company of this Agreement and the consummation by the Company
of the transactions contemplated by this Agreement will not conflict with or
constitute a breach of, or default (with the passage of time or otherwise)
under, or result in the imposition of a lien on any properties of the Company or
its Subsidiaries or an acceleration of indebtedness pursuant to, the certificate
of incorporation or bylaws of the Company or any of its Subsidiaries, or any
bond, debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or any of its Subsidiaries is a party to or by which it or any of
them is bound or to which any of the property or assets of the Company or any of
its Subsidiaries is subject, or any law, administrative regulation or order of
any court or governmental agency or authority applicable to
5
<PAGE>
the Company or any of its Subsidiaries which in any event would be material to
the Company and its Subsidiaries, taken as a whole. No consent, approval,
authorization or other order of any regulatory body, administrative agency, or
other governmental body is legally required by the Company or its Subsidiaries
for the valid issuance and sale of the Securities, except such as may be
required by the NASD or under the Act or the securities or blue sky laws of any
jurisdiction.
(g) The consolidated financial statements of the Company and its
Subsidiaries together with the related notes and schedules included in the
Registration Statement and Prospectus comply in all material respects with the
requirements of the Act and fairly present the financial position, income,
change in stockholder's equity, cash flow and the results of operations of the
Company and the Subsidiaries at the respective dates and for the respective
periods to which they apply. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company or any
of the Subsidiaries, whether or not arising in the ordinary course of business,
since the date of the financial statements included in the Registration
Statement and the Prospectus, except as set forth in the Registration Statement
and the Prospectus, and the outstanding debt, the property, both tangible and
intangible, and the businesses of each of the Company and the Subsidiaries
described in the Registration Statement and the Prospectus conform in all
material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Such consolidated financial statements (including
the related notes and schedules) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved except as otherwise stated therein.
(h) Each of the Company and the Subsidiaries (i) has paid all federal,
state and local taxes for which it is currently liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through 24
of the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes that are not due and payable and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against its respective business or assets.
(i) Each of the Company and the Subsidiaries maintains insurance policies,
including, but not limited to, general liability, property and product liability
insurance and surety bonds which insures the Company and the Subsidiaries and
their respective professional staffs against such losses and risks generally
insured against by comparable businesses. Neither the Company nor any of the
Subsidiaries (A) has failed to give notice or present any insurance claim with
respect to any matter, including, but not limited to, the Company's or any of
the Subsidiaries' businesses, property or professional staff under any insurance
policy or surety bond in a due and timely manner, (B) has any disputes or claims
against any underwriter of such insurance policies or surety bonds or has failed
to pay any premiums due and payable thereunder or (C) has failed to comply with
all conditions contained in such insurance policies and surety bonds. The
Company has not received notice or facts or circumstances under any insurance
policy or surety bond which would relieve any insurer of its obligation to
satisfy in full any valid claim of the Company or any of the Subsidiaries.
(j) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, neither the Company nor any of the
Subsidiaries has (i) entered into any material transaction other than in the
ordinary course of business or (ii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock of any class and there
has not been any change in the capital stock, debt (long or short term) or
liabilities or any material change in or affecting the general affairs,
management, financial operations, stockholders' equity or results of operations
of the Company or any of the Subsidiaries.
(k) Each of the Company and its Subsidiaries is in material compliance with
all federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions or employment and wages and
hours. The Company has not received notice of any pending investigations
involving the Company or any of the Subsidiaries by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. The Company has not
received notice of any
6
<PAGE>
unfair labor practice charge or complaint against the Company or any of the
Subsidiaries pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or any of the subsidiaries or any predecessor entity of
the Company or any of the Subsidiaries, and none has ever occurred. No
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of the Subsidiaries. No material labor dispute
with the employees of the Company or any of the Subsidiaries exists, or to the
best of the Company's knowledge, is imminent.
(l) The Company hereby agrees that it will not nor shall it permit any of
the Subsidiaries to, for a period of twelve months from the effective date of
the Registration Statement, adopt, propose to adopt or otherwise permit to exist
any employee, officer, director, consultant or other benefit or compensation
plan or arrangement (i) permitting the grant, issue, sale or entry into any
agreement to grant, issue or sell any capital stock at a price that is less
than, or permitting the grant, issue, sale or entry into any agreement to grant,
issue or sell any option, warrant or other contract right with respect to
capital stock at an exercise price that is less than, the greater of (x) the
market price of the Company's common stock on the effective date of the
Registration Statement (being $5.15 per Share and $0.10 per Warrant) and (y)
the fair market value per share of common stock on the date of grant or sale or
to any of its or the Subsidiaries' executive officers or directors or to any
holder of five percent or more of the common stock; (ii) permitting the maximum
number shares of common stock or other securities of the Company purchasable at
any time pursuant options, warrants or other contract rights issued or granted
by the Company to exceed shares of common stock; (iii) permitting the payment
for the securities covered thereby with any form of consideration other than
cash; or (iv) permitting the existence of stock appreciation rights, phantom
options or similar arrangements.
(m) Each of the Company and the Subsidiaries (i) has not received any
notice of infringement of or conflict with asserted rights of others with
respect to any copyrights, trademarks, service marks and trade names, together
with all applications for any of the foregoing, presently used or held for use
by it in connection with its businesses as described in the Registration
Statement, which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition, financial or otherwise, or the business taken as a whole, and (ii) is
not obligated or under any liability whatsoever to make any material payments by
way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any trademark, service mark, trade name or copyright or other
intangible asset with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(n) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940.
6. Indemnification: The Company agrees to indemnify you and hold you
----------------
harmless, and each person, if any, who controls you, within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act from and against
any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated herein or necessary to make the statements therein not misleading.
If any action or proceeding (including any governmental investigation)
shall be brought or asserted against you or any person controlling you in
respect of which indemnity may be sought from the Company, you or such
controlling person shall promptly notify the Company in writing, and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to you or such controlling person, as the case may be and the
payment of all expenses. You or any such controlling person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof at your own cost. The Company shall not be liable for any
settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
as provided in the preceding paragraph to indemnify you and hold you or such
controlling person harmless from and against any loss or liability by reason of
such settlement or judgment.
7
<PAGE>
You agree, severally and not jointly, to indemnify and hold harmless the
Company, its directors and officers, and each person, if any, who controls the
Company within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
you, but only with respect to information furnished in writing by you or on your
behalf expressly for use in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person, in respect of which indemnity may be
sought against you, you shall have the rights and duties given to the Company,
and the Company or its directors or officers or such controlling person shall
have the rights and duties given to you, by the preceding paragraph.
7. Conditions of Your Obligations: Your obligations hereunder shall be
-------------------------------
subject to the continuing accuracy of the representations and warranties of the
Company herein as of the date hereof and as of the Closing Date as if they had
been made on and as of the Closing Date; the accuracy on and as of the Closing
Date of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of the Closing
Date of its covenants and obligations hereunder and to the following further
conditions:
(a) Notification that the Registration Statement has become effective and
that the Prospectus has been filed with the Commission on a timely basis
pursuant to Rule 424(b) under the Act shall be received by you;
(b) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or contemplated by the Commission; and you shall have received a
certificate, dated the Closing Date and signed by the Chairman or President of
the Company (who may, as to proceedings contemplated, rely upon the best of his
information and belief), to that effect and to the effect set forth in clause
(g) of this Section 7;
(c) On or prior to the Closing Date, you shall have received from
Underwriter's Counsel, such opinion or opinions with respect to the organization
of the Company, the validity of the Securities, the Registration Statement, the
Prospectus and other related mattes as you may request and Underwriter's Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, you shall have received from counsel to the Company,
dated the Closing Date, addressed to the Underwriters an opinion in the form
attached hereto as Exhibit C. In rendering such opinion, such counsel may rely:
(A) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; and (B) as to matters of facts, to the extent they deem proper,
on certificates and written statements of responsible officers of the Company
and certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and the Subsidiaries, provided copies
of any such statements or certificates shall be delivered to Underwriters'
Counsel if requested. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel and that the Underwriters and they are justified in relying thereon.
(e) At the time this Agreement is executed, you shall have received a
letter, dated such date, addressed to you in form and substance satisfactory in
all respects (including the nonmaterial nature of the changes or decreases, if
any, referred to in clause (iii) below) to you and your counsel, from Stonefield
Josephson, Inc., Certified Public Accountants:
(i) confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the Exchange Act
and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the consolidated financial
statements and supporting schedules of the Company and the Subsidiaries, as
applicable, included in the Registration Statement comply as to form
8
<PAGE>
in all material respects with the applicable accounting requirements of the Act
and the Exchange Act and the Rules and Regulations thereunder;
(iii) and stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim consolidated
financial statements of the Company and the Subsidiaries, as applicable, (with
an indication of the date of the latest available unaudited interim consolidated
financial statements of the Company and the Subsidiaries, as applicable), a
reading of the latest available minutes of the stockholders and board of
directors and the various committees of the board of directors or each of the
Company and the Subsidiaries, consultations with officers and other employees of
each of the Company and the Subsidiaries responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the Rules and Regulations or
are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
consolidated financial statements and supporting schedules of the Company and
the Subsidiaries, as applicable, included in the Registration Statements, (B) at
a specified date not more than five days prior to the later of the date of this
Agreement or the effective date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the Company or any of the
Subsidiaries, or any decrease in the stockholders' equity or net current assets
or net assets of the Company, as compared with amounts shown in the June 30,
1997 balance sheet included in the Registration Statement other than as set
forth in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or decrease, and (C)
during the period from June 30, 1997 to a specified date not more than five days
prior to the later of the date of this Agreement or the effective date of the
Registration Statement, there was any decrease in net revenues, net earnings or
net earnings per common share of the Company and its consolidated Subsidiaries
or any of the Company's unconsolidated Subsidiaries, in each case as compared
with the corresponding period beginning June 30, 1997, other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and/or other
financial information pertaining to the Company and the Subsidiaries set forth
in the Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and/or the
Subsidiaries and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures need not constitute
an examination in accordance with generally accepted auditing standards) set
forth in the letter and found them to be in agreement; and
(v) statements as to such other matters incident to the transaction
contemplated hereby as you may reasonably request.
(f) At the Closing Date you shall have received from Stonefield Josephson,
Inc., Certified Public Accountants, a letter, dated as of the Closing Date to
the effect that they reaffirm that statements made in the letter furnished
pursuant to subsection (f) of this Section 7, except that the specified date
referred to shall be a date not more than five days prior to the Closing Date
and, if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of subsection (f) of this Section 7 with respect to
certain amounts, percentages and financial information as specified by you and
deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and
have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (v).
(g) At the Closing Date you shall have received a certificate of the
Company signed by the principal executive officer and by the chief financial or
chief accounting officer of the Company, dated the Closing Date, to the effect
that each of such persons has examined the Registration Statement, the
Prospectus, and this Agreement, and that:
9
<PAGE>
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date and the
Company has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of such
person's knowledge after due inquiry, are contemplated or threatened under the
Act;
(iii) the Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and information
required to be included therein, and none of the Registration Statement, the
Prospectus or any amendment or supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and none of
the Preliminary Prospectus or any supplement thereto included any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus: (a) neither the Company
nor any of the Subsidiaries has incurred up to and including the Closing Date,
other than in the ordinary course of its business, any material liabilities or
obligations, direct or contingent (except as otherwise contemplated in subclause
(d) of this clause (iv)); (b) neither the Company nor any of the Subsidiaries
has paid or declared any dividends or other distributions on its capital stock;
(c) neither the Company nor any of the Subsidiaries has entered into any
material transactions not in the ordinary course of business (except as
otherwise contemplated in subclause (d) of this clause (iv)); (d) there has not
been any material change in the capital stock or long-term debt or any increase
in the short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of the Company or any of the
Subsidiaries; (e) neither the Company nor any of the Subsidiaries has sustained
any material loss or damage to its property or assets, whether or not insured;
(f) there is no material litigation which is pending or, to the best of the
Company's knowledge, threatened against the Company, any of the Subsidiaries or
any affiliated party of any of the foregoing which is required to be set forth
in an amended or supplemented Prospectus which has not been set forth; and (g)
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
Subsection (h) are to such documents as amended and supplemented at the date of
such certificates.
(h) The Company shall maintain its Board of Directors to at least three of
which one director shall be an outside director. The Company shall cause such
persons to be nominated, and to use its best efforts to cause them to be elected
to its Board. The Company will have an authorized number of directors totaling
three as of the date of the filing of the Registration Statement. All directors
must have such qualifications as would generally be found for directors of
similarly situated public companies.
(i) Prior to the Closing Date: (i) there shall have been no materially
adverse change nor development involving a prospective change in the condition,
financial or otherwise, prospects, stockholders' equity or the business
activities of the Company and the Subsidiaries taken as a whole, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company or any of the Subsidiaries, from the latest date as of which
the financial condition of the Company and the Subsidiaries is set forth in the
Registration Statement and Prospectus which is adverse to the Company and the
Subsidiaries taken as a whole; (iii) neither the Company nor any of the
Subsidiaries shall be in material default under any provision of any instrument
relating to any outstanding indebtedness; (iv) neither the Company nor any of
the Subsidiaries shall have issued any securities (other than the Securities or
underlying common stock from the exercise of options or warrants) or declared or
paid any dividend or made any distribution in respect of its capital stock of
any class and there has not been any change in the capital stock, or any change
in the debt (long or short term) or liabilities or obligations (contingent or
otherwise) of the Company or any of the Subsidiaries; (v) no material amount of
the assets of the Company or any of the Subsidiaries
10
<PAGE>
shall have been pledged or mortgaged other than in the ordinary course of the
Company's business, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or, to the best of the Company's knowledge, threatened against the
Company or any of the Subsidiaries, or affecting any of their respective
properties or businesses, before or by any court or federal, state or foreign
commission board or other administrative agency wherein an unfavorable decision,
ruling or finding may materially adversely affect the business, operations,
prospects, financial condition or income of the Company and the Subsidiaries
taken as a whole, except as set forth in the Registration Statement and
Prospectus; and (vii) no stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission or any state regulatory authority.
(j) At the Closing Date, you shall have received a letter from Stonefield
Josephson, Inc., Certified Public Accountants, dated as of the Closing Date,
substantially in the form heretofore approved by you.
If any condition to your obligations hereunder to be fulfilled prior to or
at the Closing Date, is not so fulfilled you may terminate this Agreement or, if
you so elect, you may waive any such conditions which have not been fulfilled or
extend the time for their fulfillment. In the event you so elect to terminate,
you shall have no recourse against the Company for any expenses incurred by
you. However, the Company shall remain liable for all reasonable Blue Sky
counsel fees of the Company and expenses and Blue Sky filing fees of the
Company.
8. Effective Date of Agreement: This Agreement shall become effective
----------------------------
(i) if Rule 430A under the Act is not used, when you shall have received
notification of the effectiveness of the Registration Statement or (ii) if Rule
430A under the Act is used, when the parties hereto have executed and delivered
this Agreement.
9. Notice: Notice given pursuant to any of the provisions of this
------
Agreement shall be in writing and shall be mailed or delivered (a) to the
Company at its office at 18638 Pioneer Boulevard, Artesia, CA, 90701, Attention:
Najeeb U. Ghauri; and (b) to you, at 19 Rector Street, Suite 2301, New York, NY,
10006, Attention: John Kenney. Any notice under Section 7(a) hereof may be
given by facsimile or telephone, but if so given shall be subsequently confirmed
in writing.
10. Termination.
-----------
(a) Subject to Subsection (b) of this Section 10, you shall have the right
to terminate this Agreement (i) if any domestic or international event or act or
occurrence has or in your reasonable opinion will in the immediate future have a
material adverse effect on the Company or the securities market in general or
(ii) if trading on the New York Stock Exchange, the American Stock Exchange or
in the over-the-counter market shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD
or by order of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities, or there shall have been an escalation in an existing war
or major hostilities, or a national emergency shall have been declared in the
United States; or (iv) if a banking moratorium has been declared by a state or
federal authority; or (v) if a moratorium in foreign exchange trading has been
declared; or (vi) if the Company or any of the Subsidiaries shall have sustained
a loss material or substantial to the Company or any of the Subsidiaries by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in your reasonable opinion, make it inadvisable to proceed with the delivery of
the Securities; or (vii) if there shall have been such a material adverse change
in the conditions or prospects of the Company or any of the Subsidiaries, or
such material adverse change in the general market, political or economic
conditions in the United States or elsewhere, as in your judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the
Securities.
(b) If this Agreement is terminated by you in accordance with the
provisions of Section 4(a), Section 10(a)(i), 10(a)(ii), Section 10(a)(iii),
Section 10(a)(iv), Section 10(a)(v), Section 10(a)(vi), Section 10(a)(vii), or
Section 11 or if this Agreement shall not be carried out within the time
specified herein, or any extension thereof granted to you, by reason of any
failure on the part of the Company to perform any material undertaking or
satisfy any material condition of this Agreement by it to be performed or
satisfied (including without limitation, pursuant to Section 7,
11
<PAGE>
Section 10(a) or Section 11), then you shall not be entitled to any
compensation. However, the Company shall remain liable for all reasonable Blue
Sky counsel fees of the Company and expenses and Blue Sky filing fees of the
Company. Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 7, 10 and 11 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Section 6 shall not be in
any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Default by the Company. If the Company shall fail at the Closing Date
----------------------
to sell and deliver the number of Securities which it is obligated to sell
hereunder on such date, then this Agreement shall terminate, you may, at your
option, by notice from you to the Company, terminate your obligation to purchase
the Securities from the Company on such date without any liability on the part
of any non-defaulting party other than pursuant to Sections 5, 7 and 10 hereof.
No action taken pursuant to this Section 11 shall relieve the Company from
liability, if any, in respect of such default.
12. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Closing
Date, and such representations, warranties and agreements of the Company and the
respective indemnity agreements contained in Section 6 hereof shall remain
operative and in full force and effect as of such dates, regardless of any
investigation made by or on behalf of you, the Company, any of the Subsidiaries
or any controlling person, and shall survive termination of this Agreement or
the issuance and delivery of the Securities to you.
13. Entire Agreement; Amendments. This Agreement constitutes the entire
----------------------------
agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing signed by you and
the Company.
14. Miscellaneous. This Agreement has been and is made solely for the
-------------
benefit of you and the Company and of the controlling persons, directors and
officers referred to in Section 6 hereof, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of Securities from you.
This Agreement may be signed in various counterparts which together shall
constitute one and the same agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
MIRAGE HOLDINGS, INC.
------------------------
By: Najeeb U. Ghauri
Its: President
Confirmed as of the date first above mentioned:
PLATINUM EQUITIES, INC.
- -------------------------
By: John Kenney
Its: President
12
<PAGE>
EXHIBIT A
SUBSIDIARIES
------------
<TABLE>
<CAPTION>
STATE OR COUNTRY IN WHICH PERCENTAGE OF CAPITAL STOCK
NAME INCORPORATED OWNED BY MIRAGE HOLDINGS, INC.
- ---- ------------------------- -------------------------------
<S> <C> <C>
Mirage Collection, Inc. Nevada, U.S. 100%
</TABLE>
A-1
<PAGE>
EXHIBIT B
MIRAGE HOLDINGS, INC.
(A NEVADA CORPORATION)
UNDERWRITERS WARRANT ("WARRANT") TO PURCHASE
SHARES OF COMMON STOCK
1. Grant of Warrant. For value received in connection with the offering
----------------
(the "Offering") of a minimum of 250,000 Shares and a maximum of 500,000 Shares
and 1,000,000 Warrants for $5.15 per Share and $0.10 per Warrant, on a best-
efforts basis. Mirage Holdings, Inc., a Nevada corporation (the "Company"),
hereby grants to Platinum Equities, Inc., a corporation, or its registered
assigns ("Holder"), the right to purchase from the Company ("Warrant") an amount
of shares of Common Stock of the Company (the "Shares"), $0.001 par value, and
warrants equal to 10% of the number of Securities issued in the public offering
upon the Closing Date (as defined in Section 3 of the Underwriting Agreement,
dated ___________, 1997, between the Company and Platinum Equities, Inc.) of the
Offering on the terms and conditions set forth herein. The Exercise Price for
such Warrant shall be $6.18 per share and $0.12 per warrant. The Exercise Price
is subject to adjustment as provided in Section 6 below.
2. Right and Manner of Exercise. This Warrant shall be exercisable at
----------------------------
any time from and after the first anniversary of the date hereof and ending at
5:00 p.m. California time on the fifth anniversary of the date hereof (the
"Exercise Period"). The Holder may elect to exercise this Warrant anytime
during the Exercise Period as to any or all of the Shares by delivering written
notice, or successive written notices, of exercise to the Company (as provided
in Section 11) in the form attached hereto as Exhibit A accompanied by payment
of an amount equal to the product of (i) the number of Shares being purchased
and (ii) the Exercise Price, as each may have been adjusted pursuant to the
terms of this Agreement.
3. Issuance of Securities and New Warrant. If the purchase rights
--------------------------------------
evidenced by this Warrant are exercised in whole or in part, one or more
certificates for the Securities so purchased shall be issued at the Company's
expense as soon as practicable thereafter to the Holder exercising such rights.
Such Holder shall also be issued at such time at the Company's expense a new
Warrant on the same terms and conditions as this Warrant, but representing the
number of Securities (if any) for which the purchase rights under this Warrant
remain unexercised.
4. Privilege of Stock Ownership. The Holder shall for all purposes be
----------------------------
deemed to have become the holder of record of Shares issued upon an exercise of
this Warrant on, and the certificate evidencing such Shares shall be dated, the
date upon which the Holder presents to the Company each of notice of an intent
to exercise this Warrant pursuant to Section 2 and payment of the Exercise
Price. Holder shall receive good and marketable title to all Shares that Holder
purchases and the Company delivers upon the exercise of any or all of the
Warrants. Prior to exercise of this Warrant, the Holder shall not be entitled
to any rights as a shareholder of the Company, including (without limitation)
the right to vote, receive dividends or other distributions, exercise preemptive
rights or be notified of shareholder meetings, and such Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company except as otherwise provided herein.
5. Reservation and Availability of Shares. The Company will at all times
--------------------------------------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Stock for the purpose of enabling it to
satisfy any obligation to issue Shares upon exercise of this Warrant and the
underlying warrant, the full number of Shares deliverable upon the exercise or
conversion of the entire outstanding amount of this Warrant and the underlying
warrant. Before taking any action which would cause an adjustment pursuant to
Section 6 reducing the Exercise Price, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and non-assessable Shares at
the Exercise Price as to adjusted. The Company covenants that all Shares which
may be issued upon exercise of this Warrant will, upon issue, be fully paid and
non-assessable, free and clear of all voting and other trust arrangements,
liens, encumbrances, equities and claims whatsoever, and the Company shall have
paid all taxes, if any, in respect of the issuance thereof.
B-1
<PAGE>
6. Adjustment of Exercise Price/Anti-Dilution. The Exercise Price and
------------------------------------------
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of the
events enumerated in this Section 6.
6.1 Stock Splits and Combinations. If the Company shall at any time
-----------------------------
subdivide or combine its outstanding Common Stock, or fix a record date for
payment of a dividend in Common Stock or other securities of the Company
exercisable, convertible or exchangeable for Common Stock (in which latter event
the maximum number of shares of Common Stock issuable upon the exercise,
conversion or exchange of such securities shall be deemed to have been
distributed), after that subdivision, combination or dividend, the number of
Shares subject to purchase shall be adjusted to that number of Shares which is
determined by (A) multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment by the Exercise Price in effect immediately
prior to such adjustment, and then (B) dividing that product by the Exercise
Price in effect immediately after such adjustment. If the Company shall at any
time subdivide the outstanding shares of Common Stock or fix a record date for
payment of a dividend in Common Stock or other securities exercisable,
convertible or exchangeable into Common Stock, the Exercise Price then in effect
immediately before that subdivision or dividend shall be proportionately
decreased, and, if the Company shall at any time combine the outstanding shares
of Common Stock, then the Exercise Price in effect immediately before that
combination shall be proportionately increased. Any adjustment under this
Section 6.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective or the dividend is distributed.
6.2 Reclassification, Exchange and Substitution. If the Shares
-------------------------------------------
issuable upon exercise of the Warrant shall be changed into the same or a
different number of shares of any other class or classes of securities, whether
by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination or payment of dividend of securities provided for
above), the Holder of this Warrant shall, on its exercise, be entitled to
purchase for the same aggregate consideration, in lieu of the Shares which the
Holder would have become entitled to purchase but for such change, a number of
shares of such other class or classes of securities which such Holder would have
been entitled to receive as the holder of that number of Shares subject to
purchase by the Holder on exercise of this Warrant immediately before that
change.
6.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If
------------------------------------------------------------
at any time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, payment of dividend, reclassification or
exchange of Common Stock provided for above), or merger or consolidation of the
Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation or sale, lawful
provision shall be made so that the Holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
in this Warrant and upon payment of the Exercise Price then in effect, the
number of Shares or other securities or property of the Company, or of the
successor corporation resulting from such merger or consolidation, to which a
Holder of the Shares issuable upon exercise of this Warrant would have been
entitled in such capital reorganization, merger, or consolidation or sale if
this Warrant had been exercised immediately before that capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of the Holder of this Warrant after the reorganization, merger,
consolidation, or sale such that the provisions of this Warrant (including
adjustment of the Exercise Price then in effect and number and kind of
securities purchasable upon exercise of this Warrant) shall be applicable after
that event in relation to any securities purchasable after that event upon
exercise of this Warrant.
6.4 Minimum Exercise Price Adjustment. No adjustment in the Exercise
---------------------------------
Price shall be required unless such adjustment would require in increase or
decrease of at least one-half of one percent (0.5%) or more of the Exercise
Price, provided, however, that any adjustments which by reason of this
Subsection 6.4 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
6 shall be made to the nearest cent or to the nearest one-hundredth of a Share
as the case may be.
7. Notices to Holder. Upon any adjustment of the Exercise Price pursuant
-----------------
to Section 6, the Company within 20 days thereafter shall cause to be given to
the Holder pursuant to Section 11 hereof written notice of such
B-2
<PAGE>
adjustment, which notice shall set forth in a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 7.
In the event of any of the following:
7.1 the Company shall authorize the issuance of its holders of shares
of Common Stock of rights or warrants to subscribe for or purchase shares of
Common Stock or of any other subscription rights or warrants; or
7.2 the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other than
cash dividends not exceeding [$_________] per share of Common Stock payable
during any three-month period or distributions or dividends payable in shares of
Common Stock); or
7.3 any consolidation or merger to which the Company is a party and
for which approval of any shareholder of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company as, or
substantially as, en entirety, or of any reclassification or change of
outstanding shares of Common Stock issuable upon exercise of this Warrant (other
than a change in par value, or from par value to $0.001 par value, or from
$0.001 par value to par value, or as a result of a subdivision or combination);
or
7.4 the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
7.5 the Company proposes to take any action (other than actions of
the character described in Subsection 6.1 except as required under Subsection
7.3 above) which would require an adjustment of the Exercise Price pursuant to
Section 6;
then the Company shall cause to be given to the Holder, at least 20 days (or ten
days in any case specified in Subsections 7.1 and 7.2 above) prior to the
applicable record date hereinafter specified, a written notice stating (i) the
date as of which the holders of record of shares of Common Stock to be entitled
to receive any such rights, warrants, or distribution are to be determined, or
(ii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up is expected to become effective, and the
date as of which it is that holders of record of shares of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation, or winding up. The failure to
give the notice required by this Section 7 or any defect therein shall not
affect the legality or validity of any distribution, right, warrant,
consolidation, merger, conveyance, merger, dissolution, liquidation, or winding
up, or the vote upon any such action.
8. Transfers. The Holder acknowledges and agrees that this Warrant and
---------
the Common Stock underlying this Warrant may not be sold, pledged, assigned,
transferred or otherwise hypothecated without registration under the Act except
in certain limited circumstances where an exemption from registration exists,
supported by an opinion of counsel satisfactory to the Company and its counsel
that registration is not required thereunder. The Warrants are non-transferable
(whether by sale, transfer, assignment or hypothecation) except for (i)
transfers to officers of Platinum Equities, Inc. who are also shareholders of
Platinum Equities, Inc., (ii) transfers occurring by operation of law.
9. Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued in connection with any exercise of this Warrant. In lieu of the issuance
of such fractional share, the Company shall make a cash payment equal to the
then fair market value of such fractional share as determined in good faith by
the Company's Board of Directors.
10. Successors and Assign. The terms and provisions of this Warrant shall
---------------------
inure to the benefit of, and be binding upon the Company and the Holder hereof
and their respective successors and assigns.
11. Notices. All notices, requests, demands and other communications
-------
(collectively, "Notices") under this Warrant shall be in writing and shall be
deemed to have been duly given on the date of service if served personally on
the party to whom Notice is to be given, or on the third business day after the
date of mailing if mailed to the party
B-3
<PAGE>
to whom Notice is to be given, by first class mail, registered to the Holder, at
his address as shown in the Company records; and if to the Company, at its
principal office. Any party may change its address for purposes of this Section
by giving the other party written Notice of the new address in the manner set
forth above.
12. Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California without regard to principles
of conflicts of laws.
13. Loss or Mutilation of Warrant. Upon receipt of evidence reasonably
-----------------------------
satisfactory to the Company regarding the loss, theft, mutilation or destruction
of this Warrant and upon delivery of appropriate indemnification with respect
thereto or upon surrender or cancellation of the mutilated Warrant, the Company
will make and deliver to the Holder a new Warrant of like tenor.
MIRAGE HOLDINGS, INC.
------------------------------
By: Najeeb U. Ghauri
Its: President
Attest:
- --------------------------
By: Najeeb U. Ghauri
Its: Secretary
B-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sell(s), assign(s), and
transfer(s) unto _________________, of _________________, the right to purchase
Securities evidenced by the within Warrant, and does hereby irrevocable
constitute and appoint ________________ to transfer such right on the books on
the Company, with full power of substitution.
DATED: ______________, 199__
- ---------------------
SIGNATURE
- -------------------------------------------------------------------
The signature to this Assignment must correspond with the name as written upon
the fact of the within Warrant, in every particular, without alteration or
enlargement, or any change whatsoever.
B-5
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Mirage Holdings, Inc.
18638 Pioneer Boulevard
Artesia, CA 90701
Ladies and Gentlemen:
________________________ (the "Undersigned") hereby elects to purchase,
pursuant to the provisions of the Mirage Holdings, Inc. Underwriter's Warrant
dated __________________, held by the undersigned, ______ shares of the Common
Stock of Mirage Holdings, Inc. and/or ____________ Warrants of Mirage Holdings,
Inc.
As an inducement to your acceptance hereunder, the undersigned certifies
that the Securities are being purchased for the undersigned's own account, for
investment purposed, and not with a view toward a public distribution in
violation of the registration requirements of the Securities Act of 1933, as
amended.
Payment of the purchase price of $6.18 per share of Common Stock and/or
$0.12 per Warrant is being purchased for the undersigned's own account, for
investment purposed, and not with a view toward a public distribution in
violation of the registration requirements of the Securities Act of 1933, as
amended.
Payment of the purchase price of $6.18 per share of Common Stock and/or
$0.12 per Warrant in U.S. funds required under such Warrant accompanies this
subscription.
DATED: _______________, 199__
Company: _________________________
Signature:_________________________
Address: _________________________
_________________________
<PAGE>
EXHIBIT 1.2
AGREEMENT AMONG UNDERWRITERS (FORM)
<PAGE>
A MAXIMUM OF 500,000 SHARES OF COMMON STOCK AND
1,000,000 WARRANTS TO PURCHASE
ONE SHARE OF COMMON STOCK
FOR $6.00 OF
MIRAGE HOLDINGS, INC.
$5.15 PER SHARE
$0.10 PER WARRANT
AGREEMENT AMONG UNDERWRITERS
_______ ___, 1997
Platinum Equities, Inc.
19 Rector Street, Suite 2301
New York, NY 10006
Ladies and Gentlemen:
1. Underwriting Agreement. We understand, Mirage Holdings, Inc. (the
"Company"), proposes to enter into an underwriting agreement in substantially
the form attached hereto as Exhibit A (the "Underwriting Agreement") with
Platinum Equities, Inc. (the "Lead Underwriter") providing for the purchase by
the Lead Underwriter and certain other underwriters (collectively, the
"Underwriters") of a minimum of 250,000 Shares and a maximum of 500,000 Shares
and 1,000,000 Warrants to purchase one share of the Company's Common Stock for
$6.00, on a best-efforts basis all upon the terms stated in the Underwriting
Agreement. We agree in accordance with the terms thereof to purchase from the
Company the amount of Securities set forth opposite our name in Exhibit B
hereto, subject to increase as provided in the Underwriting Agreement. The
amount of Securities to be purchased by us pursuant to the Underwriting
Agreement is herein referred to as "our Securities."
2. Registration Statement and Prospectus. The Securities are described
in a registration statement relating thereto filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"). One or more amendments to such registration
statement have been or will be filed in which, with our consent hereby
confirmed, we have been named as one of the Underwriters of the Securities. A
copy of the registration statement as filed and of each amendment as filed
(excluding exhibits) has heretofore been delivered to us. The registration
statement and the related prospectus may be further amended or supplemented, but
no such amendment or supplement shall release or affect our obligations
hereunder or under the Underwriting Agreement. The registration statement as
amended at the time when it becomes effective and the final prospectus relating
to the Securities as filed by the Company with the Commission pursuant to Rule
424(b) under the Securities Act are hereinafter respectively referred to as the
"Registration Statement" and the "Prospectus."
We hereby agree to deliver all preliminary and final prospectuses required
for compliance with the provisions of Rule 15c2-8 under the Securities Exchange
Act of 1934, as amended (the "1934 Act"). The Company has heretofore delivered
to us such preliminary prospectuses as have been requested by us, receipt of
which is hereby acknowledged.
We represent to you that we have taken all action on our part required to
have been taken to satisfy the applicable rules and regulations under the
Securities Act, including the distribution of copies of the preliminary
prospectus relating to the Securities (or, if you have so requested, copies of
any amended preliminary prospectus) to all persons to whom we expect to mail
confirmations of sale. We understand that we are not authorized to give any
information or to make any representations in connection with the sale of the
Securities other than as contained in the Prospectus.
1
<PAGE>
3. Authority of the Representative. We authorize you as our
representative (the "Representative"): (a) to complete, execute and deliver the
Underwriting Agreement in substantially the form attached hereto as Exhibit A,
with such changes, if any, as in your judgment are appropriate, provided that
the amount of Securities set forth opposite our name in Schedule I thereto shall
not be increased without our consent, except as provided herein and in the
Underwriting Agreement; (b) to waive any conditions to the obligations of the
Underwriter under the Underwriting Agreement; and (c) to take such action as in
your discretion may be necessary or advisable to carry out the Underwriting
Agreement, this Agreement and the transactions for the accounts of the several
Underwriters contemplated thereby and hereby, including the date the Securities
are to be released for sale to the public. We also authorize you to determine
all matters relating to the public advertisement of the Securities, including
the determination of the form and manner of any public advertisement, and we
agree that we will not commence any public advertising until you shall have done
so and that any such advertisement we may then make will be on our own
responsibility and at our own expense.
4. Public Offering. You agree to sell the amount of Securities set forth
adjacent to the name of each of the Underwriters in Exhibit A hereto, at the
price set forth in Exhibit A hereto.
After notice from you that the Securities are released for sale to the
public, we will offer to the public, in conformity with the terms of the
offering set forth in the Prospectus, such of our Securities as you advise us
are not reserved. We authorize you after the Securities are released for sale
to the public, in your discretion, to change at any time and from time to time
the public offering price of the Securities.
5. Purchase Price to Underwriters, Payment and Delivery. It is
understood that the Securities shall be sold at a price equal to the initial
offering price, less a total concession to you not in excess of $0.2575 per
share and/or $0.005 per Warrant with respect to the total Securities so sold of
which $0.2575 per share and/or $0.005 per Warrant will be the selling concession
to the Underwriters. As compensation to you for your services to each of the
Underwriters in connection herewith, each Underwriter agrees to pay to you the
management fee set forth in Section 8 hereof.
At your request, we will deliver to you the funds needed to make payment
pursuant to the Underwriting Agreement for the Securities being purchased by us
in such manner, at such time and place, and in such form as you may advise, and
we authorize you to deliver such funds, or otherwise make payment for such
Securities, pursuant to the Underwriting Agreement. It is understood that the
current closing date for sales of the Securities shall be as soon as practicable
after the effective date of the Registration Statement;
Unless we notify you at least three full business days prior to the closing
date, to make other arrangements, you may, in your discretion, advise the
Company to prepare certificates for our Securities in our name and, so far as
possible, in denominations to be determined by you. If you have not received
our funds as required, you may in your discretion make such payment on our
behalf, in which event we will reimburse you promptly. Any such payment by you
shall not relieve us from any of our obligations hereunder or under the
Underwriting Agreement.
We authorize you for our account to accept delivery of our Securities from
the Company and to hold such of our Securities as you have reserved for sale to
Dealers and others and to deliver such Securities against such sales. You will
deliver to us our unreserved Securities as promptly as practicable.
As promptly as practicable after you receive payment for reserved
Securities sold for our account, you will remit to us the purchase price paid by
us for such Securities and credit or debit our account with the difference
between the sale price and such purchase price.
6. Authority to Borrow. In connection with the transactions contemplated
in the Underwriting Agreement or this Agreement, we authorize you, in your
discretion, to advance your own funds for our account, charging current interest
rates, and to arrange loans for our account, and in connection therewith to
execute and deliver any notes or other instruments and hold or pledge as
security any of the Shares, Warrants or Securities purchased for our account.
Any lender may rely upon your instructions in all matters relating to any such
loan.
2
<PAGE>
Any of our Securities purchased for our account and held by you may, from
time to time, be delivered to us for carrying purchases, and any such securities
will be redelivered to you upon demand.
7. Stabilization and Other Matters. We authorize you, in your
discretion, to make purchases and sales of the Securities and the Shares in the
open market or otherwise, for long or short account, on such terms and at such
prices as you may determine, and to over-allot in arranging for sales of the
Securities to retail purchasers and Dealers. We authorize you, during the term
of this Agreement or for such longer periods as you may determine, to cover any
short position incurred pursuant to this section by purchasing Securities or
shares of the Common Stock of the Company on such terms and in such manner as
you deem advisable. All purchases and sales under this section shall be made
for the accounts of the several Underwriters as nearly as practicable in
proportion to their respective underwriting obligations. On demand by you, we
will take up and pay for at cost any Securities purchased for our account,
deliver any Securities, or shares of common stock so sold or over-allotted for
our account, and we will pay you on demand by you the amount of any losses or
expenses incurred for our account pursuant to this section. In the event of
default by one or more Underwriters in respect to their obligations under this
section, each non-defaulting Underwriter shall assume its proportionate shares
of the obligations of such defaulting Underwriter without relieving such
defaulting Underwriter of its liability hereunder. The existence of this
provision is no assurance that the price of the Securities or the Shares will be
stabilized or that stabilizing, if commenced, may not be discontinued at any
time.
We agree to advise you, from time to time upon your request, during the
term of this Agreement, of the number of Shares retained by us remaining unsold,
and will, upon your request, sell to you for the accounts of one or more of the
several Underwriters, the number of such Securities as you may designate at a
price, not less than the net price to Dealers nor more than the public offering
price as you may determine.
If any Securities sold by us (otherwise than through you), shall be
purchased or contracted for purchase by you during the term of this Agreement,
you are authorized in your discretion to charge our account with an amount equal
to the Dealer's concession with respect to such Securities, or to require us to
repurchase such Securities at a price equal to the total cost of your purchase,
including commission and transfer taxes on the redelivery.
In the event you effect any stabilizing purchase pursuant to this section,
you will notify us promptly of the date and time when the first stabilizing
purchase is effected and the date and time when stabilizing is terminated. We
agree that if stabilizing is effected we will, not later than five business days
following the day on which stabilizing is terminated, file in duplicate with you
all documentation required by the Commission pursuant to the 1934 Act. We
authorize you to file with the Commission any such documentation (not as
manager) and any notices and reports which may be required as a result of any
transactions made by you for the accounts of the Underwriters pursuant to this
section.
We represent that we have not effected any transaction in violation of the
provisions of Rule 10b-6 under the 1934 Act applicable to this offering. We and
you agree, during the term of this Agreement, not to bid for, purchase, attempt
to induce others to purchase, or sell, directly or indirectly, any Securities or
Shares of the Company: (a) except offers to sell or the solicitation of offers
to buy Securities or Shares to be acquired by an Underwriter pursuant to the
Underwriting Agreement; (b) except as brokers pursuant to unsolicited orders;
(c) except that with your consent any of the Underwriters may make purchases and
sales of Securities or Shares from or to any of the other Underwriters; and (d)
except as otherwise provided in this Agreement.
8. Settlement. It is agreed that you shall retain from your account an
amount equal to $0.08 per $5.25 Unit purchased by us which amount represents
your management fee in connection with the services provided to each Underwriter
pursuant to the transaction contemplated hereby as well as any and all expenses
incurred by you in performing hereunder, including, but not limited to: (a) all
transfer taxes on Securities purchased by us pursuant to the Underwriting
Agreement and sold by you for our account; (b) any and all expenses incurred by
you as our Representative, in connection with the purchase, carrying, offering,
sale and distribution of the Securities for our account; and (c) all expenses
incurred by you under this Agreement and in connection with the purchase,
carrying, offering, sale and distribution of the Securities. Your determination
of the amount and allocation of such expenses shall be conclusive. In the event
of the default of any Underwriter in carrying out its obligations hereunder, as
well as any
3
<PAGE>
additional losses or expenses arising from such default, you may proportionately
charge against the other Underwriters not so defaulting, without, however,
relieving such defaulting Underwriter from its liability therefor.
As soon as practicable after termination of this Agreement, the accounts
established hereunder will be settled, but you may reserve for distribution such
amount as you may deem necessary to cover possible additional expenses. You may
at any time make partial distributions of credit balances or call for payment of
debit balances. Any of our funds in your hands may be held with your general
funds without accountability for interest. Notwithstanding the termination of
this Agreement or any settlement, we will pay: (a) our proportionate share
(based on our underwriting obligation) of all expenses and liabilities which may
be incurred by or for the accounts of the Underwriters, including any liability
based on the claim that the Underwriters constitute a partnership or an
association, unincorporated business or other separate entity, and of any
expenses incurred by you or any other Underwriter with your approval in
contesting any such claim or liability; and (b) any transfer taxes paid after
such settlement on account of any sale or transfer for our account.
9. Termination. This Agreement shall terminate 30 business days after
the earlier to occur of either: (a) a written notice sent by you of your
intention to terminate the offering of the Securities; (b) December 31, 1997; or
(c) the sale of the maximum amount of Securities pursuant to the Prospectus.
You may in your discretion, on notice to us prior to such time, terminate the
effectiveness of this Agreement or any portion of it. You are authorized to
extend this Agreement for an additional period or periods not exceeding an
aggregate of 30 business days with the concurrence of a majority in interest of
the Underwriters (including you).
10. Default by Underwriters. Default by one or more Underwriters in
respect of their obligations hereunder or under the Underwriting Agreement shall
not release us from any of our obligations or in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
such default. In case of such default by one or more Underwriters, you are
authorized to arrange, but shall not be obligated to arrange, for the purchase
by other persons, who may include you or other Underwriters, of all or a portion
of any Securities not purchased. In the event any such arrangements are made,
or if non-defaulting Underwriters are required pursuant to the provisions of
this Agreement to purchase Securities not purchased by defaulting Underwriters,
the respective number of Securities to be purchased by the non-defaulting
Underwriters and by any such other persons shall be taken as the basis for the
underwriting obligations under this Agreement.
11. Position of the Representative. Except as in this Agreement otherwise
specifically provided, you shall have full authority to take such action as you
may deem advisable in respect of all matters pertaining to the Underwriting
Agreement and this Agreement and in connection with the purchase, carrying, sale
and distribution of the Securities (including authority to terminate the
Underwriting Agreement or to prevent it from becoming effective as provided
therein), but you shall not be under any liability to us except for your own
want of good faith, for obligations expressly assumed by you in this Agreement
and for any liabilities imposed upon you by the Securities Act or applicable
rules, laws or regulations. No obligations on your part shall be implied or
inferred herefrom. Authority with respect to matters to be determined by you,
or by you and the Company, pursuant to the Underwriting Agreement, shall survive
the termination of this Agreement.
Nothing herein contained shall constitute the several Underwriters a
partnership, association, unincorporated business or other separate entity, and
the rights and liabilities of the Underwriters (including you) are several and
not joint.
12. Acknowledgment of Registration Statement, Etc. We hereby confirm that
we have examined the Registration in Statement (including all amendments
thereto) relating to the Securities as heretofore filed with the Commission,
that we are familiar with the amendment or amendments to the Registration
Statement and the final form of the Prospectus proposed to be filed, that we are
willing to accept the responsibilities of an Underwriter thereunder, and that we
are willing to proceed as therein contemplated. We further reconfirm that the
statements made under the heading "Underwriting" in such proposed final form of
the Prospectus are correct and we authorize you so to advise the Company on our
behalf. We understand that the aforementioned documents are subject to further
change and that we will be supplied with copies of any amendment or amendments
to the Registration Statement and of any amended
4
<PAGE>
prospectus promptly, if and when received by you, but the making of such changes
and amendments will not release us or affect our obligations hereunder or under
the Underwriting Agreement.
13. Indemnification. We agree to indemnify and hold harmless each other
Underwriter (including you) and each person, if any, who controls such
Underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the 1934 Act to the extent, for any and all liabilities related to or arising
from our performance hereunder, including, but not limited to, liabilities
arising under the federal and state securities laws.
In the event that at any time any claim or claims shall be asserted against
you, as Representative, or otherwise involving the Underwriters generally,
relating to any preliminary prospectus relating to the Securities, the
Prospectus, the Registration Statement, the public offering of the Securities,
or any of the transactions contemplated by this Agreement, we authorize you to
make such investigation, to retain such counsel and to take such other action as
you may deem necessary or desirable under the circumstances, including
settlement of any such claim or claims if such course of action shall be
recommended by counsel retained by you. We agree to pay to you, on request, our
proportionate share (based on our underwriting obligations) of all expenses
incurred by you (including, but not limited to, the disbursements and fees of
counsel retained by you) in investigating and defending against such claim or
claims, and our proportionate share (based on our underwriting obligations) of
any liability incurred by you in respect of such claim or claims, whether such
liability shall be the result of a judgment against you, as a result of any such
settlement or otherwise.
14. Capital Requirements. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and pursuant
to Rule 15c3-1 promulgated by the Commission under the 1934 Act and in
accordance with the "net capital" rules of each governmental and self-regulatory
agency having jurisdiction over us for such purposes, agree to purchase the
number of Shares we may be obligated to purchase under any provision of this
Agreement.
15. NASD Membership. Each of us represents that it is a member in good
standing of the NASD or that we are exempt from the rules and regulations of the
NASD and will, in making sales of Securities, comply with the Rules of Fair
Practice of the NASD. In connection with our sale of the Securities, and
without limiting the foregoing, we specifically agree to comply with Section 24
of Article III of the NASD Rules of Fair Practice.
16. Underwriters' Questionnaire. Each Underwriter represents and warrants
that all of the information contained in the Underwriters' Questionnaire which
it has furnished in connection with the offering of the Securities, as updated
pursuant to the terms of the Questionnaire, is true and correct as of the date
hereof.
17. Notices, etc. Any notice from you to us shall be duly given if mailed
or telegraphed to us at our address as set forth in the Underwriters'
Questionnaire previously furnished by us to you. This Agreement shall be
governed by, and construed and enforced in accordance with the laws of the State
of California.
This instrument may be signed by the Underwriters in various counterparts
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective at such time as all the Underwriters
shall have signed such counterparts and you shall have confirmed all such
counterparts. Such confirmations may be by facsimile signature.
SIGNATURE PAGE FOLLOWS
5
<PAGE>
Please confirm that the foregoing correctly states the understanding between
us by signing and returning to us a counterpart hereof.
Very truly yours,
PLATINUM EQUITIES, INC.
______________________________
By: John Kenney
Its: President
Confirmed as of the date first above written:
NAME OF UNDERWRITER:_______________________________
By:_________________________________
Title:______________________________
6
<PAGE>
EXHIBIT 24.3
CONSENT OF
STONEFIELD JOSEPHSON, INC., CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
CONSENT OF STONEFIELD JOSEPHSON, INC.
CERTIFIED PUBLIC ACCOUNTANTS
The undersigned independent certified public accounting firm hereby
consents to the inclusion of its report on the financial statements of Mirage
Holdings, Inc. for the year ending June 30, 1997, and to the reference to it as
experts in accounting and auditing relating to said financial statements, in the
Registration Statement for Mirage Holdings, Inc.
/s/ Stonefield Josephson, Inc.
- ------------------------------
STONEFIELD JOSEPHSON, INC.
Certified Public Accountants
Santa Monica, California
Dated: November 20, 1997
<PAGE>
EXHIBIT 24.4
CONSENT OF
AMIN, MUDASSAR & CO., CHARTERED ACCOUNTANTS
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CONSENT OF AMIN, MUDASSAR & CO.,
CHARTERED ACCOUNTANTS
The undersigned independent certified public accounting firm hereby
consents to the inclusion of its report on the financial statements of Network
Solutions (Pvt) Limited as at June 30, 1997, and to the reference to it as
experts in accounting and auditing relating to said financial statements, in the
Registration Statement for Mirage Holdings, Inc.
/s/ Amin, Mudassar & Co.
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AMIN, MUDASSAR & CO.
Chartered Accountants
Lahore, Pakistan
Dated: November 25, 1997
