<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB.
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
( ) For the transition period from __________ to __________
Commission file number: 333-28861
MIRAGE HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 95-4627685
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
233 WILSHIRE BOULEVARD, SUITE 510, SANTA MONICA, CA 90401
(Address of principal executive offices) (Zip Code)
(310) 395-4073 / (310) 395-0891
(Issuer's telephone/facsimile numbers, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The issuer had 4,002,065 shares of its $.001 par value Common Stock issued
and outstanding as of May 13, 1999.
Transitional Small Business Disclosure Format (check one)
Yes No X
--- ---
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MIRAGE HOLDINGS, INC.
INDEX
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<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE NO.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1999 3
Comparative Unaudited Consolidated Statements of
Operations for the Three Months Ended March 31,
1999 and 1998 4
Consolidated Statements of Stockholders' Equity 5
Comparative Unaudited Consolidated Statements of
Cash Flow for the Three Months Ended March 31,
1999 and 1998 6
Notes to the Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 10
(b) Reports on Form 8-K 10
</TABLE>
2
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MIRAGE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 79,375
Accounts receivable 766,304
Other receivables 142,105
-----------
Total current assets 987,784
-----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 202,719
-----------
OTHER ASSETS:
Deposits 8,279
Product license, renewals, enhancements and copyrights 5,120,000
Customer lists 1,200,000
Goodwill 3,574,490
-----------
Total other assets 9,902,769
-----------
$11,093,272
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $508,459
Notes payable 110,400
Current maturities of obligations under capital lease 6,427
Loans payable, related party 18,910
Loans payable, stockholders 193,172
-----------
Total current liabilities 837,368
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OBLIGATIONS UNDER CAPITALIZED LEASES, less current maturities 25,886
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STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 25,000,000 shares authorized,
7,202,065 shares issued and outstanding 7,202
Additional paid-in capital 12,032,024
Accumulated deficiency (1,809,208)
-----------
Total stockholders' equity 10,230,018
-----------
$11,093,272
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-----------
</TABLE>
3
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MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months Nine months Three months Three months
ended ended ended ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET SALES $3,421,582 $ 126,478 $ 897,759 $ 39,252
COST OF SALES - 95,369 - 29,597
---------- ---------- ---------- ----------
GROSS PROFIT 3,421,582 31,109 897,759 9,655
OPERATING EXPENSES 4,062,245 407,302 980,748 126,404
OTHER INCOME/(EXPENSE) 12,441 - 46,713 (38,919)
---------- ---------- ---------- ----------
NET INCOME BEFORE INCOME ALLOCATED
TO MINORITY INTERESTS (628,222) (376,193) (36,276) (155,668)
MINORITY INTEREST INCOME (305,616) - (137,470) -
---------- ---------- ---------- ----------
NET LOSS $ (933,838) $ (376,193) $ (173,746) $ (155,668)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET LOSS PER SHARE:
Basic ($0.37) ($0.21) ($0.07) ($0.09)
Diluted ($0.25) ($0.16) ($0.05) ($0.07)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 2,521,142 1,814,065 2,521,142 1,814,065
Diluted 3,668,270 2,331,065 3,668,270 2,331,065
</TABLE>
4
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MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
Total
Additional stockholders'
Common stock paid-in Accumulated equity/
Shares Amount capital Deficiency (deficiency)
------ ------ ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1997 1,814,065 $ 1,814 $ 562,021 $ (289,891) $ 273,944
Redemption of common stock
issued through private offering (40,000) (40) (19,960) - (20,000)
Net loss for the year ended June 30, 1998 (585,479) (585,479)
-------------------------------------------------------------------------
Balance at June 30, 1998 1,774,065 1,774 542,061 (875,370) (331,535)
Common stock and warrants sold through
initial public offering 251,000 251 987,733 - 987,984
Issuance of common stock relating to
stock purchase agreements 640,000 640 2,995,510 - 2,996,150
Exercise of stock options 75,000 75 94,000 - 94,075
Exercise of warrants to convert to
common stock 28,400 28 21,252 - 21,280
Exercise of stock options 25,000 25 225 250
Stock options granted and exercised 40,000 40 78,712 78,752
Issuance of common stock for legal fees 15,000 15 59,985 60,000
Exercise of warrants to convert to
common stock 153,600 154 116,746 116,900
Issuance of common stock relating to
stock purchase agreements 4,200,000 4,200 7,135,800 7,140,000
Net loss for the nine months
ended March 31, 1999 (unaudited) (933,838) (933,838)
-------------------------------------------------------------------------
Balance at March 31, 1999 (unaudited) 7,202,065 $ 7,202 $12,032,024 $(1,809,208) $10,230,018
-------------------------------------------------------------------------
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</TABLE>
5
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MIRAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Nine months Nine months Three months Three months
ended ended ended ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (933,838) $ (376,193) $ (173,746) $ (155,668)
---------- ---------- ---------- ----------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 154,331 1,814 74,640 -
Gain(loss) on sale of marketable securities - (38,919) - -
Non-cash compensation expense 644,751 - 78,751 -
Minority interest income 305,616 - 137,470 -
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable (260,383) - (38,060) 1,071
Other receivables (81,584) - (66,424) -
Loan receivable - (136,550) - 0
Inventory - 15,327 - (15,440)
Deposits (3,886) - (3,199) -
INCREASE (DECREASE) IN LIABILITIES -
accounts payable and accrued expenses (446,259) 192,907 (332,106) 136,191
---------- ---------- ---------- ----------
Total adjustments 312,586 34,579 (148,928) 121,822
---------- ---------- ---------- ----------
Net cash provided by (used for) operating activities (621,252) (341,614) (322,674) (33,846)
---------- ---------- ---------- ----------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
(Purchase) sale of investments, net (161,539) 79,999 - -
Purchase of property, plant and equipment (131,339) (5,051) (12,587) 0
---------- ---------- ---------- ----------
Net cash provided by (used for) investing activities (292,878) 74,948 (12,587) -
---------- ---------- ---------- ----------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock and warrants, net 1,127,139 - 117,150 -
Proceeds from (payments on) notes payable, net (228,300) 236,008 - -
Payments on loan payable, related party (100,000) - - -
Deferred offering costs 203,813 - - -
Payments on capital lease obligations (3,629) - (871) -
---------- ---------- ---------- ----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES: 999,023 236,008 116,279 -
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 84,893 (30,658) (218,982) (33,846)
CASH AND EQUIVALENTS, beginning of period (5,518) 33,079 298,357 36,267
---------- ---------- ---------- ----------
CASH AND EQUIVALENTS, end of period $ 79,375 $ 2,421 $ 79,375 $ 2,421
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
interest expense $ 16,840 $ 14,741 $ 4,546 $ 4,914
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of 490,000 shares of common
stock per stock purchase agreement $2,523,500 $ - $ - $ -
Issuance of 15,000 shares of common
stock for legal services $ 60,000 $ 60,000
Exercise of options to 40,000 shares of
common stock for services $ 78,750 $ 78,750
Issuance of 175,000 shares of common
stock per stock purchase agreements $ 566,000 $ - $ - $ -
Issuance of 4,200,000 shares of common
stock per stock purchase agreement $7,140,000 $ - $7,140,000 $ -
</TABLE>
6
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PART I - FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
Mirage Holdings, Inc. ("Company") was incorporated under the laws of the
state of Nevada on March 18, 1997. The Company's address is 233 Wilshire
Boulevard, Suite 510, Santa Monica, California 90401 and its telephone number is
(310) 395-4073. Mirage Collection, Inc. ("Mirage Collection"), a wholly owned
subsidiary of Mirage Holdings, Inc., 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. Recently, the Company's
board of directors determined to divest the Company from the fashion industry
due to the slowing of the apparel industry and enter into the software and
technology arena.
The Company entered into the technology industry in 1998 with the
purchase of a majority interest in Network Solutions (PVT) Limited, a
software development firm in Lahore, Pakistan ("NetSol Pvt"). The principal
business of NetSol is the development and export of software. Through its
affiliation with NetSol, the Company can assist NetSol in marketing its
software development services to North American and European clients. The
Company also purchased 43% of the outstanding capital stock of NetSol (U.K.)
Limited, a corporation organized under the laws of the United Kingdom
("NetSol UK"), which is a sister company to NetSol Pvt. The Company paid a
total purchase price for the interest in NetSol Pvt and NetSol UK of
$775,000 plus 490,000 shares of common stock of the Company.
In March 1999, the Company acquired 49% of the remaining and outstanding
capital stock of NetSol Pvt . NetSol Pvt is the first Pakistani based
software firm to be certified as "ISO 9001" which is a prestigious
accreditation for software developers. The Company specializes in lease and
finance software systems targeted for the automotive captive leasing and
financing industry.
According to a recent estimate by Equipment Leasing Association (ELA), the
size of the lease and finance industry in North America has grown to $180
billion annually. The customer base of NetSol has grown to include blue chip
companies such as Mercedes Benz Finance Companies in Australia, United Kingdom,
Singapore, Thailand, Taiwan and Europe. NetSol posted revenues of approximately
$500,000 in the first half of its fiscal year end as compared to approximately
$94,000 for the same period of 1997. NetSol has a team of over 80 IT
professionals and management staff members.
In addition, the Company acquired the remaining 57% of NetSol (UK), as
part of the same transaction. NetSol UK is the sales and marketing arm of
NetSol which has a team of over 20 IT professionals and consultants. The
acquisition of both companies provided Mirage with 100% ownership in each.
NetSol UK has been in operation since 1997. The customer base in Europe
has allowed NetSol UK to post revenues of over $2.1 million for the first
half of fiscal year 1999. The transaction proposes issuance of 4.2 million
shares of Mirage Stock in exchange for the remaining 49% of NetSol Pvt and
57% stock of NetSol UK. There was no cash component required for this
transaction.
The Company engaged the services of an independent nationally recognized
valuation expert to assist it in this transaction.
7
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RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 as compared to the Three Months Ended
March 31, 1999.
NET SALES
Net sales of $897,759 were reported for the third quarter of fiscal
1999, which ended March 31, 1999. This is an increase of $858,507 from
$39,252 in the same period of fiscal 1998. The sales increase is solely
attributed to the 100% acquisition of NetSol Pvt and NetSol UK in April 1999.
Management concludes the continued growth of NetSol Pvt and NetSol UK
produced the revenue increases. Both of these software companies have a
strong customer base in Europe and Asia Pacific regions.
The net sales of the Company for nine months ended March 31, 1999 were
$3,421,582 in comparison with $126,478 for the same period the previous year.
Again, the management finds the increase in sales was solely attributable to the
100% acquisition of NetSol Pvt and NetSol UK.
COST OF SALES, GROSS PROFIT AND NET LOSS
The gross profit was $897,759 in the quarter ending March 31, 1999 in
comparison with a loss of $9,654 for the same quarter the previous year. The
gross profit for the nine months ended March 31, 1999 was $3,421,582 in
comparison with $31,108. The cost of sales for the quarter ending March 31,
1999 was zero as compared to $29,597 for the same quarter last year. The
cost of sales for the nine months ended in March 31, 1999 was nothing as
compared to the previous year at $95,369. The net loss in the quarter ending
March 31, 1999 was $933,838 in comparison with net loss of $173,746 for same
quarter last year.
The Company issued 4,200,000 shares of restricted Company stock to
consummate the acquisition of NetSol Pvt and NetSol UK. Again, the management
concludes the significance in the loss is due to the issuance of shares
discussed above.
OPERATING EXPENSES
Operating expenses were $980,748 of net sales during the quarter ending
March 31, 1999. This compares with $126,404 for the quarter ending March 31,
1998.
Operating expenses for the quarter ending March 31, 1999 increased $854,344
compared to the same time period in 1998. The difference was primarily due to an
increase in expenses due to the acquisition of NetSol which increased profits
but also increased expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses, including labor costs, raw materials purchases, and funding
of accounts receivable. The Company's primary sources of cash have been from
operations of NetSol.
Accounts receivable was $766,304 in the quarter ending March 31, 1999.
Other receivables in the quarter ending March 31, 1999, were $142,105. There
were no accounts receivable in the same quarter of the previous year due to
the nature of the Company's business at that time. During the nine months
ended March 31, 1998, there was an increase of $326,807 in the accounts
receivable compared with a 104,484 decrease for the same period. During
fiscal year 1998, the Company's retail operation was under the cash and carry
method of accounting and the Company did not have any specific type of
accounts receivable.
The increase in the receivables is due to the increase in sales volume with
the acquisition of NetSol.
8
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The Company's current plans require additional capital expenditures for the
remainder of the year of approximately 1,500,000. Year to date, the Company has
expended approximately $600,000. The Company believes the additional funds
received from the sale of shares and warrants from the initial Public Offering
will generate sufficient capital to finance its operations and anticipated
capital expenditures through fiscal 1999.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 26, 1998 the Company's Board of Directors terminated Mr. Gill
Champion as the Company's Chief Financial Officer. There is currently a dispute
between Mr. Champion and the Company regarding the status of certain options and
shares of the Company's stock.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Acquisition of NetSol (UK) and NetSol (Pvt). The Company plans to change
its name from Mirage Holdings, Inc. to NetSol International, Inc.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K:
Filed January 13, 1999 Company moved its headquarters to new
premises.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MIRAGE HOLDINGS, INC.
(Registrant)
Date: May 14, 1999
/s/ Najeeb Ghauri
-----------------------------------------
NAJEEB U. GHAURI
President, Chief Executive Officer, Chief
Financial Officer, and Secretary
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 79,375
<SECURITIES> 0
<RECEIVABLES> 908,409
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 987,784
<PP&E> 202,719
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,093,272
<CURRENT-LIABILITIES> 837,368
<BONDS> 25,886
0
0
<COMMON> 7,202
<OTHER-SE> 10,230,018
<TOTAL-LIABILITY-AND-EQUITY> 11,093,272
<SALES> 3,421,582
<TOTAL-REVENUES> 3,434,023
<CGS> 0
<TOTAL-COSTS> 4,062,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 305,616
<INCOME-PRETAX> (933,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (933,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (933,838)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.25)
</TABLE>
