Wheeling, dealing Vegas company in bankruptcy

Kevin Ferguson and David Strow

Tuesday, Aug. 21, 2001 | 11:11 a.m.

Mirage Computers Inc., once a high-flying member of Southern Nevada's technology industry, has filed for bankruptcy in Las Vegas federal court.

The 10-year-old Las Vegas based computer retailer, also known as Mega Micro Technologies Group, filed for Chapter 7 bankruptcy, which will result in the company's liquidation. It listed assets of just $211,000 against debts of $1.9 million.

It is not known how many jobs will be lost with the liquidation. As of April, the company said it had 16 employees in Las Vegas, describing its business as "providing services for the storage, management, protection and sharing of electronic information."

Just two years ago, the company operated five retail stores around the Las Vegas Valley. Now, none are listed in telephone directories. Earlier this year, Mirage Computers operated a retail store in the Arrowhead Commerce Center at 6280 Pecos Road just north of Sunset Road, but Arrowhead property manager Faye Murphy said the company vacated the building prior to her joining EJM Development, the property management company, in April.

She declined to say if Mirage Computers was forced out or whether it owed money to EJM.

Neither Mirage Computers Chief Executive Robert Stander nor the company's bankruptcy lawyer, Michael Kulwin, could be reached for comment.

The company's creditors are scheduled to meet with Las Vegas bankruptcy judge Robert C. Jones in a hearing Sept. 14.

Court documents say Mirage Computers owes $355,900 in taxes to the Internal Revenue Service. Other creditors listed include Greenleaf Distribution, PC Wholesale and Sprint Publishing.

It didn't appear Mirage Computers would come to this fate several years ago. From 1994 to 1998, the company's revenues grew from $300,000 to $5 million. The company provided a variety of computer-related products and services, such as computer networking consulting, Y2K consulting, computer equipment and Internet access.

But its difficulties began shortly after company officials took Mirage public in July 1999.

Rather than an initial public offering of stock, Mirage went public in an unorthodox method -- a reverse merger with Torrey Pines Productions Inc. Torrey Pines was a "shell company," a company that had no assets or revenues but did have publicly traded shares. Merging with it made Mirage a public company.

Mirage tried growth through acquisition, but this strategy proved disastrous.

The company first acquired Mega Micro Inc., a San Diego computer equipment and hardware supplier, in January 2000. It didn't say how much it paid for Mega Micro, but said the company would produce a big jump in revenues.

How much of a jump wasn't clear -- a January 2000 statement put the company's annual revenues alternatively at $16 million and "in excess of $18 million." After the merger, Mirage changed its name to Mega Micro Technology Group.

Within days of the Mega Micro announcement, Mirage said it had acquired Skylink Network Inc., a Las Vegas Internet service provider. Again, the acquisition price was not disclosed. Later, however, the company disclosed there had been a "disparity in the financial information" provided by Skylink's former owner.

The Mega Micro purchase, however, proved crippling for the company. The Las Vegas company reported revenues of $13.63 million in 2000 -- an increase of 184 percent -- but also reported a net loss of $1.97 million, an increase of 61 percent over the previous year. Mega Micro blamed the loss on a "significant" downturn in retail sales of computer hardware, caused by an "onslaught of technology hardware in the market."

By the end of 2000, it was clear Mega Micro was in trouble. The company had just $82,500 in cash, $993,000 in assets and $1.84 million in current liabilities. Because of this financial condition, the company said in its 2000 annual report, "there is substantial concern about our ability to continue as a going concern." If the company wasn't successful in raising cash, it wouldn't survive the next year, the report said.

A second blow came in February 2001, when the company reported that its auditing firm, Braverman & Co., allegedly wasn't properly licensed, and therefore wasn't qualified to audit the company's public reports.

Mega Micro told investors its 1999 report should no longer be used, and presented its 2000 annual report unaudited to the Securities and Exchange Commission.

Mega Micro took one last, drastic step to try to save itself in April, when it sold off the San Diego computer operations it had acquired just one year before. Mega Micro netted $200,000 in cash in the liquidation.

With the sale, the company announced the resignation of three top officials -- Thomas Embrogno, its president and chief operating officer, David Steffey, its chief financial officer, and Bruce Voss, a director of the company.

But that was the last investors would hear from the company. It would not file another financial report or press release after April 9.

Mega Micro stock still trades, though it is all but worthless now. It traded at about $2 per share last September, but today trades at one-half cent per share.