SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[X ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5((d)(2))
[ ] Definitive Information Statement
ELEGANT ILLUSIONS, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies: ______
2) Aggregate number of securities to which transaction applies: _________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ___________
4) Proposed maximum aggregate value of transaction: _____________________
5) Total fee paid: ___________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _______________
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(4) Date Filed: _______________
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PRELIMINARY COPY
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ELEGANT ILLUSIONS, INC.
542 Lighthouse Ave.
Suite 5
Pacific Grove, CA 93950
NOTICE OF ACTION BY WRITTEN CONSENT
To the Stockholders of Elegant Illusions, Inc.:
Notice is hereby given that James Cardinal, Gavin Gear and Tamara Gear,
as the collective holders of approximately 75% of the issued and outstanding
Common Stock, par value $0.001 per share (the "Common Stock"), of Elegant
Illusions, Inc., a Delaware corporation (the "Company"), have approved and
adopted, by written consent in lieu of a meeting of stockholders, a proposal
(the "Charter Amendment") to amend the Company's Certificate of Incorporation to
reverse split the outstanding shares of the Company's Common Stock on a
one-for-six basis, so that every six issued and outstanding shares of Common
Stock, before the split, shall represent one share of Common Stock after the
split, effective December 26, 1997. As a result of the split, the Company's
17,434,338 shares of Common Stock currently outstanding shall become
approximately 2,905,723 shares of Common Stock. All fractional shares resulting
from the split will be rounded up to the next whole share.
The Board of Directors of the Company has approved the Charter
Amendment. The record date for the determination of stockholders of the Company
entitled to receive this Notice of Action by Written Consent and the
accompanying Information Statement and the determination of the number of shares
of Common Stock necessary to approve the Charter Amendment has been fixed as of
the close of business on November 14, 1997.
NO STOCKHOLDERS' MEETING WILL BE HELD TO VOTE ON OR DISCUSS THE
PROPOSAL. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
By Order of the Board of Directors
By: /s/Tamara Gear
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Tamara Gear, Secretary
December 5, 1997
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PRELIMINARY COPY
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ELEGANT ILLUSIONS, INC.
542 Lighthouse Ave.
Suite 5
Pacific Grove, CA 93950
INFORMATION STATEMENT
AMENDMENT TO
CERTIFICATE OF INCORPORATION
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
Approximate Date of Mailing of this Information Statement: December 5, 1997.
INTRODUCTION
This Information Statement is being furnished by the Board of Directors
of Elegant Illusions, Inc., a Delaware corporation (the "Company"), in
connection with the proposed adoption of a Certificate of Amendment (the
"Charter Amendment") to the Company's Certificate of Incorporation (the
"Certificate of Incorporation"), by the written consent of the holders of a
majority of the Company's outstanding Common Stock, par value $0.001 per share
(the "Common Stock").
James Cardinal, Gavin Gear and Tamara Gear (collectively referred to
herein as the "Stockholders"), collectively hold approximately 75% of the issued
and outstanding Common Stock. By written consent, the Stockholders have approved
and adopted the Charter Amendment to amend the Certificate of Incorporation to
reverse split the outstanding shares of the Company's Common Stock on a
one-for-six basis, so that every six issued and outstanding shares of Common
Stock, before the split, shall represent one share of Common Stock after the
split, effective December 26, 1997. As a result of the split, the Company's
17,434,338 shares of Common Stock currently outstanding shall become
approximately 2,905,723 shares of Common Stock. All fractional shares resulting
from the split will be rounded up to the next whole share.
The Board of Directors has unanimously approved the Charter Amendment.
Approval of the Charter Amendment requires the vote of stockholders who own a
majority of the Company's Common Stock. There are no other classes of Company
stock. The Company has received written consents to the Charter Amendment from
the Stockholders, who collectively hold approximately 75% of the Company's
outstanding Common Stock, which consents are dated November 13, 1997 with an
effective date for the reverse split of December 26, 1997.
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Only stockholders of record of the Company's 17,434,338 shares of Common
Stock outstanding at the close of business on November 14, 1997 (the "Record
Date") are entitled to receive this Information Statement and Notice of Action
by Written Consent.
The Company has asked brokers and other custodians and fiduciaries to
forward this Information Statement to the beneficial owners of the Common Stock
held of record by such persons and will reimburse such persons for out-of-pocket
expenses incurred in forwarding such materials.
The holders of Common Stock have no dissenters' rights or preemptive
rights in connection with the Charter Amendment or the resulting reverse stock
split.
THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION HAS BEEN APPROVED BY
STOCKHOLDERS WHO HOLD SUFFICIENT VOTING SECURITIES TO APPROVE THE ACTION. THIS
INFORMATION STATEMENT IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION. WE
ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY TO THE
COMPANY.
The date of this Information Statement is December 5, 1997.
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Stockholders and the Board of Directors of the Company have approved
the Charter Amendment to facilitate the listing of the Company's Common Stock on
the American Stock Exchange (Athe AAMEX@). The Charter Amendment will effect a
reverse split the outstanding shares of the Company's Common Stock on a
one-for-six basis, so that every six issued and outstanding shares of Common
Stock, before the split, shall represent one share of Common Stock after the
split. As a result of the split, the Company's 17,434,338 shares of Common Stock
currently outstanding shall become approximately 2,905,723 shares of Common
Stock. All fractional shares resulting from the split will be rounded up to the
next whole share. The Board of Directors retains the right to: (i) reduce the
ratio of the reverse split to as low as one-for-three if, in the Board's
judgment, such an adjustment still would lead to a market price of at least
$3.00 per share; or (ii) not proceed with any reverse split if, in the Board's
judgment, the Company's Common Stock will not be accepted for listing on the
AMEX.
The Charter Amendment will become effective upon (i) December 26, 1997:
or (ii) the filing of the Charter Amendment with the Secretary of State of the
State of Delaware, which ever occurs later. See the form of Certificate of
Amendment appended hereto as APPENDIX "A."
REASONS FOR CHARTER AMENDMENT; PROPOSED TRANSACTIONS
The Stockholders and the Board of Directors of the Company have approved
the Charter Amendment to facilitate the listing of the Company's Common Stock on
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the AMEX. Currently, the Company's Common Stock is traded on the NASDAQ SmallCap
Market. Management believes that switching from the NASDAQ SmallCap market to
the AMEX will increase the Company's visibility in the investment community and
enhance shareholder value because of the market quality of the AMEX's auction
market, the high degree of services available from and the visibility programs
provided by the AMEX. To meet the AMEX listing requirements, the Common Stock
must have a market price of at least $3.00 per share. During the quarter ended
September 30, 1997, the bid price for the Common Stock remained below $1.00. The
bid price has been as low as $.56 per share. Management believes but cannot
assure that, by reverse splitting the outstanding shares of Common Stock on a
six-for-one basis, the bid price for the Common Stock will exceed $3.00 per
share. The Board of Directors retains the right to: (i) reduce the ratio of the
reverse split to as low as one-for-three if, in the Board's judgment, such an
adjustment still would lead to a market price of at least $3.00 per share; or
(ii) not proceed with any reverse split if, in the Board's judgment, the
Company's Common Stock will not be accepted for listing on the AMEX.
Current stockholders of the Company have no dissenters' rights or
preemptive rights in connection with the reverse split of the outstanding Common
Stock.
CERTAIN EFFECTS OF THE CHARTER AMENDMENT
AND THE PROPOSED REVERSE SPLIT
Stockholders will not realize any dilution in their percentage of
ownership of the Company or their voting rights as a result of the Charter
Amendment and reverse split. The reverse split may, however, affect the market
value of the Common Stock. No assurance can be given that the market value of
the Common Stock will increase in inverse proportion to the ratio of the reverse
split.
As a result of the reverse split, 27,094,277 shares will be authorized
but unissued. The Board of Directors has total discretion in the issuance of any
shares of Common Stock which may be issued in the future. The Board of Directors
could issue shares of Common Stock to discourage attempts by others to obtain
control of the Company through merger, tender offer, proxy contest or otherwise
by making such attempts more difficult to achieve or more costly. All issuances
of additional shares will dilute current stockholders' percentage of ownership
of the Company and voting rights.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON STOCK AND OTHER STOCKHOLDER MATTERS
The principal U.S. market in which the Company's Common Stock ($.001 par
value, all of which are one class) is traded is in the over-the-counter market
(NASDAQ SmallCap Symbol: "EILL"). The Company's Common Stock was listed for
trading on the NASDAQ Smallcap Market on August 16, 1996. Prior thereto, it
traded in the over-the-counter market (Bulletin Board Symbol: "EILL").
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The following tables set forth the range of high and low bid prices for
the Company's Common Stock on a quarterly basis for the past two fiscal years
and the first three quarters of fiscal 1997 as reported by the National
Quotation Bureau (which reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions).
As of November 17, 1997, the closing bid for the Company's Common Stock was
$0.59 per share.
COMMON STOCK
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Bid Prices
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High Low
---- ---
Fiscal Year 1997
First Quarter ending March 31, 1997 2.875 1.25
Second Quarter ending June 30, 1997 1.6875 0.6875
Third Quarter ending September 30, 1997 1.1875 0.6525
Fiscal Year 1996
First Quarter ending March 31, 1996 3 2
Second Quarter ending June 30, 1996 3.125 3
July 1, 1996 - August 15, 1996 3.125 2.75
August 16, 1996 - September 30, 1996 3.1875 3
Fourth Quarter ending December 31, 1996 3.25 1.625
Fiscal Year 1995
First Quarter ending March 31, 1995 2 1
Second Quarter ending June 30, 1995 2 3/4
Third Quarter ending September 30, 1995 2 1
Fourth Quarter ending December 31, 1995 2 1
There were approximately 77 holders of record of the Company's Common
Stock as of November 14, 1997, the record date, inclusive of those brokerage
firms and/or clearing houses holding the Company's securities for their
clientele (with each such brokerage house and/or clearing house being considered
as one holder).
The Company has not paid or declared any dividends upon its Common Stock
since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of Common Stock as of the date of this Information
Statement by: (i) each of the Company's directors and executive officers; (ii)
each person who is known by the Company to be the beneficial owner of five
percent or more of the outstanding shares of Common Stock; and (iii) all of the
Company's directors and executive officers as a group:
Name and Address Amount of Record
of Beneficial and Beneficial Percent of
Owner Ownership(1) Class
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James C. Cardinal 6,380,000 36.6%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Gavin M. Gear 3,343,430 (2) 19.2%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Tamara Gear 3,319,930 (2) 19.0%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
All Officers and
Directors as a Group
(3 Persons) 13,043,360 74.8%
(1) Prior to anticipated reverse split.
(2) Gavin and Tamara Gear are husband and wife. The shares listed for Gavin
Gear do not include the shares owned by Tamara Gear and the shares listed for
Tamara Gear do not include the shares owned by Gavin Gear.
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APPENDIX "A"
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ELEGANT ILLUSIONS, INC.
Under Section 242 of the
Corporation Law of the State of Delaware
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James Cardinal and Tamara Gear, respectively, the Chief Executive
Officer and the Secretary of ELEGANT ILLUSIONS, INC. (the "Company"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DO HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by written
consent filed with the minutes of the Board, adopted the following resolution
proposing and declaring advisable the following amendment to the Certificate of
Incorporation of said corporation:
"1. The Certificate of Incorporation is hereby amended to effect a
reverse split of the Company's outstanding Common Stock in the ratio of one
share for every six shares outstanding. The Company currently has authorized
30,000,000 shares of Common Stock with a par value of $.001 per share, of which
17,434,338 shares of Common Stock are issued and outstanding, and 12,565,662
shares are unissued. Under the new structure, the Company will have 30,000,000
shares of Common Stock, par value $.001, authorized, of which approximately
2,905,723 shares will be issued and outstanding and 27,094,277 shares will be
unissued. All fractional shares resulting from the reverse split will be rounded
up to the next whole share. The number of authorized shares shall not change.
The reverse split shall take effect (i) at 12:01 a.m. Eastern Standard Time on
December 26, 1997: or (ii) the filing of the Charter Amendment with the
Secretary of State of the State of Delaware, which ever occurs later."
SECOND: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of section 242 of the General Corporation Law of the
State of Delaware by obtaining the written consent of the holders of the
majority of the stock of the Company entitled to vote at a meeting of
stockholders pursuant to section 228 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, we, the undersigned, have executed and
subscribed this certificate this ___ day of December, 1997.
/s/ James Cardinal /s/ Tamara Gear
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James Cardinal, Chief Executive Officer Tamara Gear, Secretary
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