AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MIRAGE HOLDINGS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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NEVADA 2335 95-4627685
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
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225 SANTA MONICA BOULEVARD, SUITE 410 225 SANTA MONICA BOULEVARD, SUITE 410
SANTA MONICA, CA 90401 SANTA MONICA, CA 90401
(310) 395-3155 (310) 395-3155
(ADDRESS AND TELEPHONE NUMBER OF (ADDRESS OF PRINCIPAL PLACE OF BUSINESS)
PRINCIPAL EXECUTIVE OFFICE)
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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.
HORWITZ & BEAM
TWO VENTURE PLAZA, SUITE 350, IRVINE, CA 92618, (714) 453-0300
--------------
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 343,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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NUMBER OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE SHARES TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1)(2) FEE
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Common Stock, no par value................ 342,857 $5.15 $1,765,714 $ 535.06
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Representative Warrants(3)................ 342,857 -- -- --
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Common Stock, no par value, underlying
Representative Warrants(4)............... 342,857 $6.30 $2,159,999 $ 654.55
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Common Stock, no par value, underlying
warrants(3).............................. 342,857 $0.10 $ 34,286 $ 10.39
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Common Stock, no par value, issued in
connection with bridge financing(6)...... 500,000 $3.50 $1,750,000 $ 530.30
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Common Stock, no par value, underlying
warrants issued in connection with bridge
financing(8)............................. 500,000 $0.75 $ 375,000 $ 113.64
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Common Stock, no par value, underlying
options issued pursuant to Employee Stock
Option Plan(8)........................... 500,000 $0.01 $ 5,000 $ 1.52
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Total..................................... 2,538,571 $6,089,999 $1,845.46
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(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) Represents Common Stock Purchase Warrants issuable to Veera Capital, Inc.
as representative of the several underwriters ("Representative Warrants").
(4) Represents Common Stock issuable upon exercise of the 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.
(5) Represents Common Stock issuable upon exercise of Warrants (the "Unit
Warrants") issued in connection with this Offering. Pursuant to Rule 416
promulgated under the Securities Act, this Registration Statement also
covers any additional common shares which may become issuable by reason of
the anti-dilution provisions of the Unit Warrants. Registration fee
calculated pursuant to Rule 457(g).
(6) Represents Common Stock issued in connection with bridge loan financing to
the Company.
(7) Represents Common Stock issuable upon exercise of Warrants (the "Bridge
Warrants") issued in connection with bridge loan 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).
(8) Registration fee calculated pursuant to Rule 457(h)(1).
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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
FORM SB-2 ITEM NUMBER AND CAPTION PROSPECTUS
--------------------------------- ----------
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus........................... Forepart of Registration Statement
and Outside Front 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
Transaction........................... 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. Change In and Disagreements With
Accountants on Accounting and
Financial Disclosure.................. Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 9, 1997
PROSPECTUS
MIRAGE HOLDINGS, INC.
342,857 UNITS
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND ONE WARRANT
Mirage Holdings, Inc., a Nevada corporation ("the Company"), is offering a
maximum of 342,857 Units and a minimum of 240,000 Units (the "Units") for $5.25
per Unit (the "Offering"). Each Unit consists of one share of the Company's
common stock (the "Common Stock") and one warrant to purchase one share of the
Company's Common Stock at an exercise price of $4.50 for a term of five years
(the "Warrants") (collectively, the "Securities"). The Warrants are detachable
from the Units at the discretion of the Company. See "Description of
Securities--Units," "--Common Stock," and "--Warrants."
No public securities market existed for the Company's Common Stock prior to
this Offering. Although the Company intends to apply to have the Common Stock
and the Common Stock underlying the Warrants included on the Over-the-Counter
Bulletin Board ("OTC/BB"), there can be no assurance that an active public
trading market for such securities will be developed or sustained. The Company
has applied for listing on the OTC/BB under the proposed symbol: "IDEA."
-----------
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.
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UNDERWRITING PROCEEDS TO ISSUER
PRICE TO PUBLIC COMMISSIONS(1) OR OTHER PERSONS(2)
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Per Unit........................ $5.25 $0.525 $4.725
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Total(3)........................ $1,800,000.00 $180,000.00 $1,620,000
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(1) Does not include additional compensation to Veera Capital, 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."
The Units 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 shares of Common Stock will be ready for delivery at the
offices of Veera Capital, 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.
VEERA CAPITAL, INC.
The Date of this Prospectus is , 1997
[PHOTOS]
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.
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") is a development stage company. 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 of
designs that are different than the usual.
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 May 31, 1997, the Company had 1,750,000 Common shares issued and
outstanding and 500,000 warrants to purchase one share of Common Stock for
$0.75 outstanding. The Company will have 1,990,000 shares of Common Stock
outstanding after the Offering if the minimum amount is sold hereunder and
2,092,857 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 the Unit Warrants, the Company will have 2,730,000 shares
of Common Stock outstanding after the Offering if the minimum amount is sold
hereunder and 2,935,714 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 December 31, 1996, the Company had aggregate
revenues of $300,190 from the sale of its products. The Company's cumulative
loss from operations for the respective period was $141,496. 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: 225 Santa Monica Boulevard, Suite 410, Santa
Monica, CA, 90401. The Company's telephone number is (310) 395-3155.
Unless otherwise noted, the "Company" as used in this Prospectus, will refer
to the consolidated entities described above.
1
THE OFFERING
Securities Offered............
A maximum of 342,857 Units and a minimum of
240,000 Units. Each Unit consists of one share
of Common Stock and one Warrant to purchase one
share of the Company's Common Stock at an
exercise price of $4.50 for a term of five
years. See "Description of Securities--Units,
--Common Stock, and --Warrants."
Offering Price................ $5.25 per Unit.
Common Stock.................. Outstanding 1,750,000 shares as of May 31,
1997; 1,990,000 shares if the minimum amount is
raised hereunder; 2,092,857 shares if the
maximum amount is raised hereunder. In
addition, the Company has 500,000 warrants
outstanding as of May 31, 1997, and will have
an additional 240,000 warrants outstanding if
the minimum amount is raised hereunder and an
additional 342,857 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: IDEA.
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
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.
PERIOD
JULY 1, NINE MONTHS
1995 TO ENDED
JUNE 30, MARCH 31,
1996 1997
-------- -----------
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $199,230 $158,144
Net loss............................................... $(62,295) $(95,666)
JUNE 30, MARCH 31,
1996 1997
-------- -----------
BALANCE SHEET DATA:
Current assets......................................... $ 70,749 $174,795
Total property and equipment, net...................... $ 39,629 $ 42,521
-------- --------
Total assets........................................... $114,108 $221,046
======== ========
Total current liabilities.............................. $104,842 $188,316
Partner's equity....................................... $ 9,266 $ 1,472
-------- --------
Total liabilities and partner's equity................. $114,108 $221,046
======== ========
3
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 and Negative Working Capital Position.) 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.
See "Business of the Company--Research and Development." 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 and Negative Working Capital Position. 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 six months ended December 31,
1996, the Company incurred a net loss of $79,201. At December 31, 1996, the
Company had ending partners' capital of $17,936. In addition, the Company had
current liabilities in excess of current assets of $28,647 at December 31,
1996. The Company expects to continue to incur losses at least through fiscal
1997, 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.
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
4
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.
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 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
5
the Company's business, financial condition and results of operations unless
the Company could quickly find a replacement supplier. See "Business of the
Company--Manufacturing--Biodegradable Absorbent Products."
Potential Conflicts of Interest Between the Company and its Officers,
Directors, and Shareholders. Any of these relationships 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 $4.73 per share (90%) if the minimum amount
is sold or $4.53 per share (86%) if the maximum amount is sold (based on the
initial public offering price of $5.25 per share) in the net tangible book
value of the shares from the initial public offering price. The shares sold by
the Company in the Offering represent a 12.1% of the total shares of Common
Stock outstanding following the Offering if the minimum amount is sold or
16.4% of the total shares of Common Stock outstanding following the Offering
if the maximum amount is sold hereunder and represent a cash contribution of
88.38% of the aggregate book value or cash contributions to the Company if the
minimum amount is sold or a cash contribution of 91.57% 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 87.9% of
the outstanding Common Stock if the minimum amount is sold or approximately
83.6% 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 80% of the outstanding Common
Stock if the minimum amount is sold or approximately 76% of the outstanding
Common Stock if the maximum amount is sold hereunder. Investors purchasing
shares pursuant to this Offering will beneficially own approximately 12.1% of
the outstanding Common Stock if the minimum amount is sold or approximately
16.4% 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 Common
Stock. Although the Company has applied to have the Common Stock 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 Common Stock may experience substantial difficulty selling
such securities. The offering price of the shares of Common Stock has been
determined by negotiations between the Company and the Representative and are
not necessarily related to the Company's existing market price, asset value,
net worth, or other established criteria of value. See "Underwriting."
Shares Eligible for Future Sale. Upon the closing of this Offering,
1,250,000 of the total of 1,750,000 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 Representative. 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 two years 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. Future sales of such shares could have an adverse effect on the
market price of the Common Stock. See "Description of Securities" and
"Underwriting."
6
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. In addition, trading in the Common Stock
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. 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 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.
7
DILUTION
Dilution is the difference between the public offering price of $5.25 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
December 31, 1996 financial statements, was $17,936. Prior to selling any
shares in this Offering, the Company has 1,750,000 shares of Common Stock
outstanding.
If the maximum Shares offered herein are sold, the Company will have
2,092,857 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 Unit Warrants sold in the Offering nor any other changes in the net
tangible book value of the Company after December 31, 1996, will be $1,501,436
or $0.72 per share, approximately. This would result in dilution to investors
in this Offering of $4.53 per share or 86% from the public offering price of
$5.25 per Share. Net tangible book value per share would increase to the
benefit of present shareholders from $0.01 prior to the Offering to $0.72
after the Offering, or an increase of $0.71 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
1,990,000 shares outstanding upon completion of the Offering. The post
offering pro forma net tangible book value of the Company will be $1,031,636
or $0.52 per share, approximately. This would result in dilution to investors
in this Offering of $4.73 per share or 90% from the public offering price of
$5.25 per Share. Net tangible book value per share would increase to the
benefit of present shareholders from $0.01 prior to the Offering to $0.52
after the Offering, or an increase of $0.51 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
MINIMUM(1) MAXIMUM(2)
---------- ----------
Initial public offering price (per share)......... $5.25 $5.25
Net tangible book value per share before the
Offering......................................... $0.01 $0.01
Increase per share attributable to payments by new
investors........................................ $0.51 $0.71
Pro forma net tangible book value per share after
the Offering..................................... $0.52 $0.72
Dilution per share to new investors............... $4.73(90%) $4.53(86%)
8
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.
MINIMUM OFFERING
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
----------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
Existing shareholders...... 1,750,000 88% $ 165,738(3) 11.62% $0.09
New investors.............. 240,000 12% 1,260,000(4) 88.38% $5.25
--------- --- ---------- -----
Total.................... 1,990,000 100% $1,425,738 100.0%
========= === ========== =====
MAXIMUM OFFERING
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
----------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
Existing shareholders...... 1,750,000 84% $ 165,738(3) 8.43% $0.09
New investors.............. 342,857 16% 1,800,000(5) 91.57% $5.25
--------- --- ---------- -----
Total.................... 2,092,857 100% $1,965,738 100.0%
========= === ========== =====
- --------
(1) Assumes $1,013,700 net proceeds from sale of 240,000 Units.
(2) Assumes $1,483,500 net proceeds from sale of 342,857 Units.
(3) Based on capital contributions from inception to December 31, 1996.
(4) Assumes gross proceeds from offering of 240,000 Units.
(5) Assumes gross proceeds from offering of 342,857 Units.
9
USE OF PROCEEDS
The net proceeds to the Company (at an initial public offering price of
$5.25 per Unit) from the sale of the Units offered hereby (less commissions of
10%, the Representative's non-accountable expense allowance of 3% and expenses
of this Offering (estimated at $82,500)) are estimated to be approximately
$1,013,700 if the minimum amount is raised hereunder and $1,483,500 if the
maximum amount is raised, excluding any proceeds from the exercise of the Unit
Warrants.
USE OF PROCEEDS
MINIMUM PERCENT MAXIMUM PERCENT
---------- ------- ---------- -------
Expansion of the Company's sales force
and establishment of advertising and
promotion activities................... $ 104,567 10.3% $ 152,801 10.3%
Increasing the variety of product by
adding new designers and increasing the
level of inventory or products......... $ 104,567 10.3% $ 152,801 10.3%
Establish import/export distribution
channels............................... $ 104,567 10.3% $ 152,801 10.3%
Acquisition of 10% of NetSol
International, Inc..................... $ 183,333 18.1% $ 268,513 18.1%
Market research to determine viability
of entering entertainment industry..... $ 183,333 18.1% $ 268,513 18.1%
Market research to determine viability
of increasing participation in software
industry............................... $ 104,567 18.1% $ 268,513 18.1%
Working capital......................... $ 150,000 14.8% $ 219,558 14.8%
---------- ---- ---------- ----
TOTALS................................ $1,013,700 100% $1,483,500 100%
========== ==== ========== ====
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, technological advances
and 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. 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.
10
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 and as adjusted to give effect to the sale by the Company of
a minimum of 240,000 Units at an offering price of $5.25 per Unit and the
application of the net proceeds of $1,013,700 therefrom and as adjusted to
give effect to the sale by the Company of a maximum of 342,857 Units at an
offering price of $5.25 per Unit and the application of the net proceeds of
$1,483,500 therefrom.
DECEMBER 31, MINIMUM AS MAXIMUM AS
1996(1) ADJUSTED ADJUSTED
------------ ---------- ----------
Short-term debt:
Accounts payable......................... $ 8,304 $ 8,304 $ 8,304
Notes payable............................ 86,514 86,514 86,514
Interest payable......................... 4,907 4,907 4,907
Accrued expenses......................... 9,778 9,778 9,778
---------- ---------- ----------
Total short-term debt.................. $ 109,503 $ 109,503 $ 109,503
========== ========== ==========
Stockholders' equity:
Common Stock, no par value
shares authorized..................... 25,000,000 25,000,000 25,000,000
issued and outstanding................ 1,750,000 1,990,000 2,092,857
Additional paid-in capital............... $ 165,738 $1,425,738 $1,965,738
Accumulated deficit...................... (147,802) (147,802) (147,802)
---------- ---------- ----------
Total stockholders' equity (deficit)... $ 17,936 $1,277,936 $1,817,936
========== ========== ==========
- --------
(1) Please note all calculations are based upon Company as a corporation as of
December 31, 1996 for purposes of calculating these charts even though the
Company was a partnership until April 1, 1997.
11
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 period from July 1, 1995 to
June 30, 1996 (audited), and the nine months ended March 31, 1997 (unaudited).
The data has been derived from Financial Statements included elsewhere in this
Prospectus that were audited by Hoffski & Pisano, P.C., except for the
financial statements for March 31, 1997 which were reviewed by Stonefield
Josephson, Inc. No dividends have been paid for any of the periods presented.
PERIOD
JULY 1, NINE MONTHS
1995 TO ENDED
JUNE 30, MARCH 31,
1996 1997
-------- -----------
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $199,230 $158,144
Net loss............................................... (62,295) (95,666)
JUNE 30, MARCH 31,
1996 1997
-------- ---------
BALANCE SHEET DATA:
Current assets......................................... $ 70,749 $174,795
Total property and equipment, net ..................... 39,629 42,521
-------- --------
Total assets .......................................... $114,108 $221,046
======== ========
Total current liabilities ............................. $104,842 $188,316
Partner's equity ...................................... 9,266 1,472
-------- --------
Total liabilities and partner's equity................. $114,108 $221,046
======== ========
12
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 fashions. The Company has
generated nominal revenues to date. It has accumulated losses from operations
of $147,801 since its initial inception in April 1995 through December 31,
1996. Such losses are expected to continue through fiscal 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. The Company was a
partnership during the periods presented herein. Therefore, this discussion
and analysis and the financial statements included herein are based on a
partnership entity.
RESULTS OF OPERATIONS
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1996 MARCH 31, 1997
------------- -----------------
Net sales................................... 199,230 158,144
Cost of goods sold.......................... 160,350 116,313
Gross profit................................ 38,880 41,831
Selling, general and administrative expenses
........................................... 97,192 137,497
Net (Loss).................................. (62,295) (95,666)
NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Revenues:
The Company's sales for the nine months ended March 31, 1997 were $158,144
(average of $17,572 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 26.5% for the nine months ended
March 31, 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 nine months ended
March 31, 1997 were $137,496 (average of $15,277 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 quarterly starting on May 26, 1997 and bears interest at the rate of
10% per annum. The note contains a conversion feature whereby Manhattan West,
Inc. may, at any
13
time, convert the balance due and owing to it into share of Common Stock of
the Company at the rate of $0.45 per share. As of the date of this Prospectus,
the balance due on the note is $46,997 plus accrued interest.
On April 10, 1997, the Company commenced a private placement (the "Private
Placement") of 500,000 shares of the Company's common stock at a purchase
price of $0.50 per share (the "Private Placement Stock") and 500,000 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 $300,000.
At December 31, 1996, the Company had outstanding current liabilities of
$109,503. 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 December 31,
1996 were $54,516. 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 in excess of
$100,000 over the next 12 months.
The Company does not believe that inflation has had a significant impact on
its operations since inception of the Company.
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.
14
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 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 of designs that are different than the usual.
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.
The Company has entered into a letter of intent to acquire a 10% ownership
interest in NetSol International, Inc., a software development firm in Lahore,
Pakistan. Through its 10% ownership interest in NetSol International, Inc.
("NetSol"), the Company can assist NetSol in marketing its software
development services to North American and European clients. However, there
can be no assurance that this acquisition will ever be completed and this
potential acquisition should not be relied upon in making an investment
decision.
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.
OVERVIEW OF THE COMPANY'S MARKETS
The United States is India's largest single trading partner. Between 1987
and 1993, United States exports rose 11% annually, slightly faster than United
States import growth, 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.)
15
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.)
[CHART OF U.S. TRADE WITH INDIA, 1987-94]
PERFORMANCE GRAPH APPEARS HERE
- --------------------------------------------------
Legend G H
- --------------------------------------------------
Labels 93 94
- --------------------------------------------------
Exports 4.6 5.4
- --------------------------------------------------
Imports 2.76 2.5
- --------------------------------------------------
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 are
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 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.
16
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.)
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
17
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.
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.
18
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. The Company obtains approximately
20% of all of its products from the U.S. supplier. 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.
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 Office and Vice President on May 15,
1997. See "Management--Directors and Executive Officers."
PROPERTIES
The Company subleases 700 square feet of executive office space in Santa
Monica, California on a month-to-month basis. The sublease requires monthly
payments of approximately $416.67.
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, 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.
19
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company as of the date of this Prospectus
are as follows:
NAME AGE POSITION
---- --- --------
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.
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 1992 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. Prior to that, Ms. Khan was employed in financial
public relations.
20
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
AWARDS(2)
--------------------------------------
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK SECURITIES
POSITION YEAR SALARY(1) AWARDS(3) UNDERLYING OPTIONS(4)
- ------------------ ---- --------- ---------------- ---------------------
Najeeb U. Ghauri,
President and Secretary
of Mirage Holdings,
Inc..................... 1997 $33,500 200,000 50,000
Gill Champion, Vice
President and Chief
Financial Officer of
Mirage Holdings, Inc.... 1997 $39,500 50,000 50,000
Saima Khan, President of
Mirage Collection, Inc.. 1997 $24,000 5,000 -0-
All Officers as a Group
(3 persons)............. 1997 $97,000 255,000 100,000
- --------
(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.
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 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 make to
21
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.
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 February 17, 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 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.
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 February 17, 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.
22
CERTAIN TRANSACTIONS
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.
Tarig Khan is the Managing Director of Manhattan West, Inc. and the brother of
Saima Khan, President of Mirage Collection, Inc.
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 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 unafilliated third parties.
23
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of May 31, 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 225 Santa Monica
Boulevard, Suite 410, Santa Monica, California, 90401.
PERCENTAGE BENEFICIALLY
OWNED
--------------------------
AFTER AFTER
NUMBER OF BEFORE MINIMUM MAXIMUM
NAME SHARES(1) OFFERING OFFERING OFFERING
- ---- --------- -------- -------- --------
Whittington Investments, Ltd............ 895,000 51.1% 45.0% 42.8%
Suite M2 Charlotte House
P.O. Box N4825
Nassau, Bahamas
Najeeb U. Ghauri........................ 250,000(2) 13.9% 12.8% 11.7%
Damson Investments Limited ............. 220,000(3) 11.5% 10.2% 7.1%
P.O. Box N8318
Nassau, Bahamas
Irfan Mustafa........................... 120,000(4) 6.8% 6.0% 5.7%
Gill Champion........................... 100,000(5) 5.6% 4.9% 4.7%
Saima Khan.............................. 5,000 * * *
All officers and directors as a group
(4 persons)............................ 475,000 25.4% 22.5% 21.5%
- --------
* 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) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(3) Includes 160,000 Bridge Warrants.
(4) Includes 20,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
(5) Includes 50,000 options issued under the Company's stock option plan
exercisable at $0.01 for five years from May 12, 1997.
24
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of twenty-five million
shares of Common Stock, no 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.
UNITS
The Company is offering a maximum of 342,857 Units and a minimum of 240,000
Units for $5.25 per Unit. Each Unit consists of one share of the Company's
Common Stock and one warrant to purchase one share of the Company's Common
Stock at an exercise price of $4.50 for a term of five years. The Warrants are
detachable from the Units at the discretion of the Company.
COMMON STOCK
As of the date of this Prospectus, there are 1,750,000 shares of Common
Stock outstanding, and after completion of this Offering, 1,990,000 shares of
Common Stock will be issued and outstanding if the minimum amount hereunder is
sold and 2,092,857 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 500,000 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, as part of the Units, a minimum of
240,000 warrants and a maximum of 342,857 warrants (the "Warrants"). The
Warrants are each exercisable for one share of Common Stock of the Company at
$4.50 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
740,000 warrants outstanding. If the maximum amount is raised hereunder, the
Company will have a total of 842,857 warrants outstanding.
25
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
1,990,000 shares of Common Stock if the minimum amount is sold hereunder and
2,092,857 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 1,750,000 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 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, 500,000 shares of stock and
500,000 shares of stock issuable upon exercise of warrants will be freely
tradeable upon the effective date hereof.
26
UNDERWRITING
The Underwriters named below, acting through Veera Capital, Inc. as
Representative, have jointly and severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to offer to the public on a "best
efforts, 240,000 Unit minimum, 342,857 Unit maximum" basis, at a price of
$5.25 per Unit.
The underwriters shall receive 10% commission for the sale of the
securities.
The Company has agreed to pay to the Representative 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 Representative in connection
with this Offering.
The Company has agreed with the Representative that, without the
Representative'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 Representative 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
Veera Capital, 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 Common Stock 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 Representative. In determining the offering price, the
Representative considered, among other things, the business potential and
earning prospects of the Company and prevailing market conditions.
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.
There is no assurance that all or any of the Units will be sold. If the
Company fails to receive subscriptions for a minimum of 350,000 Units 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 Units have been received, whichever comes
first.
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
Horwitz & Beam. Horwitz & Beam, Inc., a California corporation, is the owner
of 9,500 shares of Private Placement Stock and 2,500 Private Placement
Warrants.
27
EXPERTS
The Financial Statements of the Company for the period from July 1, 1995 to
June 30, 1996, included herein and elsewhere in the registration statement,
have been included herein and in the registration statement in reliance on the
report of Hoffski & Pisano, P.C., appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The Financial
Statements of the Company for the nine months ended March 31, 1997 included
herein and elsewhere in the registration statement, have been included herein
and in the registration statement in reliance on the report of 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. 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.
28
MIRAGE COLLECTION
(A PARTNERSHIP)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
NINE MONTHS ENDED MARCH 31, 1997
Accountants' Review Report................................................. F-2
Financial Statements:
Balance Sheet............................................................ F-3
Statement of Operations.................................................. F-4
Statement of Partners' Capital........................................... F-5
Statement of Cash Flows.................................................. F-6
Notes to Financial Statements............................................ F-7
Accountants' Review Report on Supplemental Information..................... F-9
Supplemental Information:
Schedule of Net Sales and Cost of Sales.................................. F-10
Schedule of Operating Expenses........................................... F-11
YEAR ENDED JUNE 30, 1996
Accountants' Review Report................................................. F-12
Financial Statements:
Balance Sheet............................................................ F-13
Statement of Operations.................................................. F-14
Statement of Partners' Equity............................................ F-15
Statement of Cash Flows.................................................. F-16
Notes to Financial Statements............................................ F-17
Supplemental Information:
Schedule of Revenue...................................................... F-18
Schedule of General and Administrative Expenses.......................... F-19
F-1
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Mirage Collection (A Partnership)
Artesia, California
We have reviewed the accompanying balance sheet of Mirage Collection (A
Partnership) as of March 31, 1997, and the related statements of operations,
partners' capital and cash flows for the nine months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included
in these financial statements is the representation of the Partners and
management of Mirage Collection.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
/s/ Stonefield Josephson, Inc.
ACCOUNTANCY CORPORATION
Santa Monica, California
May 28, 1997
F-2
MIRAGE COLLECTION
(A PARTNERSHIP)
BALANCE SHEET
MARCH 31, 1997
ASSETS
------
CURRENT ASSETS:
Cash................................................................ $ 2,437
Inventory........................................................... 62,358
Loan receivable..................................................... 110,000
--------
Total current assets.............................................. $174,795
Property, plant and equipment, net of accumulated depreciation........ 42,521
Deposits.............................................................. 3,730
--------
$221,046
========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses............................... $ 23,205
Notes payable, current portion...................................... 55,111
Loan payable........................................................ 110,000
--------
Total current liabilities......................................... $188,316
Notes payable, less current portion................................... 31,258
Partners' capital..................................................... 1,472
--------
$221,046
========
See accompanying accountants' review report and notes to financial statements.
F-3
MIRAGE COLLECTION
(A PARTNERSHIP)
STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1997
AMOUNT PERCENT
-------- -------
Net sales.................................................... $158,144 100.0 %
Cost of sales................................................ 116,313 73.5
-------- -----
Gross profit................................................. 41,831 26.5
Operating expenses........................................... 137,497 87.0
-------- -----
Net loss..................................................... $(95,666) (60.5)%
======== =====
See accompanying accountants' review report and notes to financial statements.
F-4
MIRAGE COLLECTION
(A PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
NINE MONTHS ENDED MARCH 31, 1997
Beginning partners' capital........................................... $ 9,266
Capital contribution.................................................. 87,872
Net loss for the nine months ended March 31, 1997..................... (95,666)
--------
Balance at March 31, 1997............................................. $ 1,472
========
See accompanying accountants' review report and notes to financial statements.
F-5
MIRAGE COLLECTION
(A PARTNERSHIP)
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss.......................................................... $ (95,666)
Adjustments to reconcile net loss to net cash provided by (used
for) operating activities--depreciation.......................... $ 7,254
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable............................................. 8,049
Inventory....................................................... 257
Increase (decrease) in liabilities--accounts payable and accrued
expenses......................................................... (11,437)
---------
Total adjustments........................................... 4,123
---------
Net cash used for operating activities............................ (91,543)
CASH FLOW USED FOR INVESTING ACTIVITIES:
Payments to acquire property and equipment........................ (10,146)
Payments on loan receivable....................................... (110,000)
---------
Net cash used for investing activities...................... (120,146)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from notes payable....................................... 16,169
Proceeds from loan payable........................................ 110,000
Proceeds from capital contribution................................ 87,872
---------
Net cash provided by financing activities................... 214,041
---------
Net increase in cash................................................ 2,352
Cash, beginning of period......................................... 85
---------
Cash, end of period............................................... $ 2,437
=========
See accompanying accountants' review report and notes to financial statements.
F-6
MIRAGE COLLECTION
(A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ACTIVITY:
The partnership is engaged in the retail clothing business for sale to the
general public with two locations in Southern California.
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.
CASH EQUIVALENTS:
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments with
original maturities of three months or less which are not securing any
partnership obligations.
INVENTORY:
Inventory, consisting principally of finished goods, is valued at the lower
of cost (first-in, first-out) or market.
(2) LOAN RECEIVABLE:
The loan receivable is a bridge loan to a product development company and is
unsecured and bears interest at 10% per annum. 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 loan payable referred to in note 6.
(3) PROPERTY AND EQUIPMENT:
A summary is as follows:
Leasehold improvements............................................ $43,853
Machinery and equipment........................................... 6,381
Furniture and office equipment.................................... 6,368
-------
56,602
Less accumulated depreciation and amortization.................... 14,081
-------
$42,521
=======
F-7
MIRAGE COLLECTION
(A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED MARCH 31, 1997
(4) ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
A summary is as follows:
Sales tax.......................................................... $ 9,756
Month end bills.................................................... 6,761
Accrued interest................................................... 6,688
-------
$23,205
=======
(5) NOTES PAYABLE:
Notes payable to various individuals and entities with interest
from 8% to 10%, unsecured..................................... $ 86,369
Less current portion........................................... (55,111)
--------
$ 31,258
========
Interest on these obligations amounted to $5,202 for the nine months ended
March 31, 1997 and is included in accrued interest.
(6) LOAN PAYABLE:
The loan payable is secured by the bridge loan receivable from the product
development company (referred to in note 2) and bears interest at 10% per
annum.
(7) COMMITMENTS:
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 March 31, 1997:
Year ending June 30, 1997........................................ $ 38,633
1998........................................................... 51,510
1999........................................................... 51,510
2000........................................................... 38,710
2001........................................................... 12,018
--------
$192,381
========
Rent expense amounted to $32,573 for the nine months ended March 31, 1997.
F-8
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Mirage Collection (A Partnership)
Artesia, California
The supplemental information for the nine months ended March 31, 1997,
contained on pages 9 and 10, is presented only for supplementary analysis
purposes and is the representation of the partners and management of Mirage
Collection (A Partnership). Such information has been subjected to the inquiry
and analytical procedures applied in the review of the basic financial
statements, and we are not aware of any material modifications that should be
made to the supplemental information in order for it to be in conformity with
generally accepted accounting principles.
/s/ Stonefield Josephson, Inc.
ACCOUNTANCY CORPORATION
Santa Monica, California
May 28, 1997
F-9
MIRAGE COLLECTION
(A PARTNERSHIP)
SCHEDULE OF NET SALES AND COST OF SALES
NINE MONTHS ENDED MARCH 31, 1997
SALES........................................................... $161,125
Returns, allowances and discounts............................. 2,981
--------
$158,144
========
COST OF SALES:
Beginning inventory........................................... $ 62,615
Purchases..................................................... 114,597
Other costs................................................... 1,459
--------
178,671
Ending inventory................................................ 62,358
--------
$116,313
========
See accompanying accountants' review report on supplemental information.
F-10
MIRAGE COLLECTION
(A PARTNERSHIP)
SCHEDULE OF OPERATING EXPENSES
NINE MONTHS ENDED MARCH 31, 1997
AMOUNT PERCENT
-------- -------
Salaries....................................................... $ 1,520 1.0%
Payroll taxes.................................................. 181 .1
Accounting..................................................... 3,325 2.1
Advertising.................................................... 3,276 2.1
Alarm.......................................................... 26
Alterations.................................................... 851 .5
Bank service charge............................................ 1,527 1.0
Computer services.............................................. 69
Credit card expenses........................................... 1,102 .7
Deprecation.................................................... 7,254 4.6
Discounts--merchant............................................ 832 .5
Equipment rental............................................... 342 .2
Freight........................................................ 4,118 2.6
Insurance...................................................... 2,079 1.3
Interest....................................................... 5,202 3.3
Office supplies and expense.................................... 4,448 2.8
Outside labor.................................................. 46,466 29.4
Postage........................................................ 446 .3
Printing....................................................... 548 .3
Rent........................................................... 32,573 20.6
Repairs and maintenance........................................ 18
Security....................................................... 560 .4
Show expense................................................... 1,425 .9
Tax and license................................................ 125 .1
Telephone...................................................... 8,330 5.3
Travel and entertainment....................................... 8,474 5.4
Utilities...................................................... 2,380 1.5
-------- ----
$137,497 87.0%
======== ====
See accompanying accountants' review report on supplemental information.
F-11
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
F-12
MIRAGE COLLECTION, A PARTNERSHIP
BALANCE SHEET
JUNE 30, 1996
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
========
See accompanying notes and independent auditors' report.
F-13
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF OPERATIONS
FOR YEAR ENDED JUNE 30, 1996
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)
========
See accompanying notes and independent auditors' report
F-14
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
FOR YEAR ENDED JUNE 30, 1996
BEGINNING PARTNERS' EQUITY............................................ $ 5,950
Capital Contributions............................................... 65,611
Net Loss............................................................ (62,295)
--------
ENDING PARTNERS' EQUITY............................................... $ 9,266
========
See accompanying notes and independent auditors' report
F-15
MIRAGE COLLECTION, A PARTNERSHIP
STATEMENT OF CASH FLOWS
JUNE 30, 1996
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
=========
See accompanying notes and independent auditors' report
F-16
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:
1996-97.......................................................... $ 38,400
1997-98.......................................................... 38,400
1998-99.......................................................... 38,400
1999-00.......................................................... 38,400
2000............................................................. 6,400
--------
$160,000
========
Rent expense for the year ended June 30, 1996 totaled $28,800.
F-17
MIRAGE COLLECTION, A PARTNERSHIP
SCHEDULE OF REVENUE
FOR YEAR ENDED JUNE 30, 1996
REVENUE:
Sales Revenue....................................................... $204,482
Less: Sales Returns................................................. (5,252)
--------
TOTAL REVENUE......................................................... $199,230
========
F-18
MIRAGE COLLECTION, A PARTNERSHIP
SCHEDULE OF GENERAL & ADMINISTRATIVE EXPENSES
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
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
=======
F-19
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
PAGE
----
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 4
Dilution.................................................................. 8
Comparative Data.......................................................... 9
Use of Proceeds........................................................... 10
Dividend Policy........................................................... 10
Capitalization............................................................ 11
Selected Financial Data................................................... 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 13
Business of the Company................................................... 15
Management................................................................ 20
Employment and Related Agreements......................................... 21
Certain Transactions...................................................... 23
Principal Shareholders.................................................... 24
Description of Securities................................................. 25
Shares Eligible for Future Sale........................................... 26
Underwriting.............................................................. 27
Legal Matters............................................................. 27
Experts................................................................... 28
Additional Information.................................................... 28
Index to Financial Statements............................................. F-1
-----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
342,857 UNITS, EACH UNIT CONSISTING
OF ONE SHARE OF COMMON STOCK AND
ONE WARRANT TO PURCHASE ONE SHARE
OF COMMON STOCK FOR $4.50
$5.25 PER UNIT
MIRAGE HOLDINGS, INC.
-----------------
PROSPECTUS
-----------------
VEERA CAPITAL, INC.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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
SEC Registration Fee.................................................. $ 1,845
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......................................................... 975
--------
Total............................................................... $121,000
========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On April 10, 1997, the Company commenced a private placement (the "Private
Placement") of 500,000 shares of the Company's common stock at a purchase
price of $0.50 (the "Private Placement Stock") and 500,000 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.
II-1
ITEM 27. EXHIBITS
EXHIBIT
-------
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*
24.1 Consent of Horwitz & Beam (included in their opinion set forth in
Exhibit 5 hereto)
24.2 Consent of Hoffski & Pisano, P.C.
25 Power of Attorney (see signature page)
28 Specimen of Common Stock Certificate of Mirage Holdings, Inc.
- --------
* To be filed by Amendment
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-2
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 June 5, 1997.
MIRAGE HOLDINGS, INC.
/s/ Najeeb U. Ghauri
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Najeeb U. Ghauri President, Secretary, June 5, 1997
____________________________________ Director
Najeeb U. Ghauri
/s/ Gill Champion Vice President, Chief June 5, 1997
____________________________________ Financial Officer, Director
Gill Champion
/s/ Irfan Mustafa Director June 5, 1997
____________________________________
Irfan Mustafa
II-3