SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2)) [X ] Definitive Proxy Statement [ ] Definitive Additional
Materials
[ ] Solicitation Material Pursuant to Rule 14a-11(c) or rule 14a-12
ELEGANT ILLUSIONS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)
(1) 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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DEFINITIVE COPY
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ELEGANT ILLUSIONS, INC.
542 Lighthouse Ave.
Suite 5
Pacific Grove, CA 93950
Telephone (831) 649-1814
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1999
An Annual Meeting of Stockholders of Elegant Illusions, Inc., a Delaware
corporation (the "Company"), will be held at the Company's offices, 542
Lighthouse Ave., Suite 5, Pacific Grove, CA 93950, on May 25, 1999 at 9:30 a.m.,
California time, for the following purposes:
(1) To elect five directors to hold office until the next Annual
Meeting of Stockholders or until their successors have been duly qualified
and elected;
(2) To consider and act upon a proposal to approve the appointment of
Jeffrey S. Gilbert, CPA as the independent auditor of the Company to audit
the accounts of the Company for the fiscal year ending December 31, 1999;
and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of the Company's common stock, par value $0.001 per share (the
"Common Stock") of record on April 1, 1999 are entitled to notice of, and to
vote at, the meeting or any adjournment thereof. At April 1, 1999, the record
date for determination of stockholders entitled to vote at the meeting or any
adjournments thereof, 6,084,379 shares of Common Stock were issued and
outstanding.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. PROXIES FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED
AS REQUESTED BY THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE
INVOLVED IN FURTHER COMMUNICATION.
By Order of the Board of Directors,
Pacific Grove, California
April 29, 1999
Tamara Gear
Secretary
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DEFINITIVE COPY
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ELEGANT ILLUSIONS, INC.
542 Lighthouse Ave.
Suite 5
Pacific Grove, CA 93950
Telephone (831) 649-1814
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1999
This Proxy Statement is furnished to holders of the Company's common stock,
par value $0.001 per share (the "Common Stock"), in connection with the
solicitation of proxies by the Board of Directors of Elegant Illusions, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held at the Company's offices, 542 Lighthouse
Ave., Suite 5, Pacific Grove, CA 93950, on May 25, 1999 at 9:30 a.m., California
time, and at any and all postponements or adjournments thereof (the "Annual
Meeting") for the purposes of:
(1) Electing five directors to hold office until the next Annual
Meeting of Stockholders or until their successors have been duly qualified
and elected;
(2) Considering and acting upon a proposal to approve the appointment
of Jeffrey S. Gilbert, CPA as the independent auditor of the Company to
audit the accounts of the Company for the fiscal year ending December 31,
1999; and
(3) Transacting such other business as may properly come before the
meeting or any adjournments thereof.
The approximate date on which this Proxy Statement and accompanying proxy are
first being sent or given to stockholders is April 29, 1999.
Shares of Common Stock represented by each proxy, if properly executed and
returned to the Company prior to the Annual Meeting, will be voted as directed,
but if not otherwise specified, will be voted for the election of the five
nominees for director and to approve the appointment of Jeffrey S. Gilbert, CPA
as independent auditor, all as recommended by the Board of Directors.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting (except for proxies which have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been effectively voted
on the same or any other matter at a previous meeting.
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The Board of Directors knows of no other business to be presented at the
Annual Meeting. If any other business is properly presented, the person named in
the enclosed proxy has authority to vote on such matters in accordance with such
person's discretion. A stockholder executing the proxy may revoke it at any time
before it is voted by giving written notice to the Secretary of the Company.
The solicitation of proxies in the enclosed form is made on behalf of the
Company's Board of Directors. The entire cost of soliciting these proxies,
including the costs of preparing, printing and mailing this Proxy Statement and
accompanying materials to stockholders, will be borne by the Company. In
addition to use of the mails, proxies may be solicited personally or by
telephone or otherwise by officers, directors and employees of the Company, who
will receive no additional compensation for such activities. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such brokerage houses, custodians, nominees and fiduciaries.
Such parties will be reimbursed for their reasonable expenses incurred in
forwarding the proxy materials.
VOTE REQUIRED FOR APPROVAL;
SHARES ENTITLED TO VOTE; RECORD DATE
The presence at the Annual Meeting, whether in person or by proxy, of the
holders of at least a majority of the outstanding shares of Voting Stock
entitled to vote thereat constitutes a quorum for the transaction of business.
For purposes of the quorum and the discussion below regarding the votes
necessary to take stockholder action, Stockholders of record who are present at
the meeting in person or by proxy and who abstain, including brokers holding
customers' shares of record who cause abstentions to be recorded at the meeting,
are considered Stockholders who are present and entitled to vote and they count
toward the quorum.
Brokers holding shares of record for customers generally are not entitled
to vote on certain matters unless they receive voting instructions from their
customers. As used herein, "uninstructed shares" means shares held by a broker
who has not received instructions from its customers on such matters and the
broker has so notified the Company on a proxy form in accordance with industry
practice or has otherwise advised the Company that it lacks voting authority. As
used herein, "broker non-votes," means the votes that could have been cast on
the matter in question by brokers with respect to uninstructed shares if the
brokers had received their customers' instructions.
Election of Directors. Directors are elected by a plurality vote and the
five nominees who receive the most votes will be elected. In the election of
Directors, votes may be cast in favor of or withheld with respect to each
nominee. Abstentions and broker non-votes will not be taken into account in
determining the outcome of the election.
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Approval of Auditor. To be approved, this matter must receive the
affirmative vote of the majority of the shares present or by proxy at the Annual
Meeting and entitled to vote. Uninstructed shares are entitled to vote on this
matter. Therefore, abstentions and broker non-votes have the effect of negative
votes.
On April 1, 1999 (the "Record Date"), there were outstanding 6,084,379
shares of Common Stock.. Only holders of record of Common Stock at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. Each share of Common Stock is entitled to one vote for each
director to be elected and upon all other matters to be brought to a vote by the
Stockholders at the forthcoming Annual Meeting. As of April 1, 1999, the
Company's directors and executive officers, and their affiliates, had a
beneficial interest in an aggregate of 4,326,131 shares of Common Stock,
representing approximately 71.1% of the Common Stock outstanding on the Record
Date and entitled to vote on all proposals to be presented at the Annual
Meeting.
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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 April 1, 1999 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:
<TABLE>
<CAPTION>
Name and Address Amount of Record
of Beneficial and Beneficial Percent of
Owner Ownership Class
- ---------------- ---------------- ----------
<S> <C> <C>
James C. Cardinal ........................... 2,126,673 35.0%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Gavin M. Gear ............................... 1,091,146(1) 17.9%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Tamara Gear ................................. 1,108,312(1) 18.2%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Janet Heinze ................................ 0 0%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
Keith Brandon ............................... 0 0%
542 Lighthouse Ave., Suite 5
Pacific Grove, CA 93950
All Officers and
Directors as a Group
(5 Persons) ............................... 4,326,131 71.1%
- --------------------
</TABLE>
(1) Gavin and Tamara Gear are husband and wife. Although each is deemed to be
the beneficial owner of the shares held by the other, 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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ELECTION OF DIRECTORS
General
Unless otherwise instructed, the proxy holders intend to vote the proxies
received by them FOR the five nominees below.
James C. Cardinal
Gavin Gear
Tamara Gear
Janet Heinze
Keith Brandon
All nominees listed above are currently members of the Board of Directors
and were previously elected directors by the stockholders.
Each nominee has consented to being named in this Proxy Statement and to
serve it elected. If any nominee becomes unavailable for any reason or if a
vacancy should occur before the election, the shares represented by the proxies
will be voted for such person, if any, as may be designated by the Board of
Directors. However, management of the Company has no reason to believe that any
nominee will be unavailable or that any vacancy of the Board of Directors will
occur. The five nominees will serve until the next Annual Meeting of
Stockholders and until their successors are elected.
Directors and Nominees for election to the Board of Directors
Set forth below is a description of the backgrounds of each of the
directors and nominees of the Company.
JAMES CARDINAL, age 52, has been the Company's Chief Executive Officer
since May 1994 and a director of the Company since May 1993. He was President of
the Company from May 1993 to May 1994. He has been a director of Subsidiary
since 1992 and a business consultant for Subsidiary since 1989. He was a
director of Bay from June 1992 until it s merger in to the Subsidiary. Prior
thereto, he was self-employed as a business consultant and capital organizer to
start-up companies.
GAVIN GEAR, age 47, has been the Company's President since May 1994 and a
director of the Company since May 1993. He was Vice President of the Company
from May 1993 to May 1994. He was a founder and has been the President, Chief
Financial Officer and a director of the Subsidiary since 1989. Mr. Gear was
President, Chief Financial Officer and a director of Copy Jewels, Inc. ("CJI")
from 1989 until its merger in to Elegant Illusions, Inc, a California
corporation (the "Subsidiary") and President and a director of Bay from 1988
until its merger in to the Subsidiary. Since 1979, he also has been the
President, Chief Financial Officer and a director of Cannery Row Enterprises,
Inc. ("CRE"). CRE was acquired by the Company in July 1994.
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TAMARA GEAR, age 41, has been the Secretary-Treasurer and a director of the
Company since May 1993. She was a founder and has been the Secretary-Treasurer
and a director of the Subsidiary since 1989. She was the Secretary-Treasurer and
a director of CJI (from 1989) and of Bay (from 1988) until their merger in to
the Subsidiary. Since 1985, she also has been an officer and director of CRE.
From 1984 to 1985, Ms. Gear was a gemologist for Sun Studies in Carmel. From
1980 to 1984, she was the retail manager for Cannery Row Enterprises.
JANET HEINZE, age 51, has taught elementary school at the Park School in
Hayward, California since September of 1997. Ms. Heinze taught at the American
School in Guadalajara, Mexico from September 1991 to August 1996. Ms. Heinze
graduated from the University of California, Berkeley (UCB) in 1969 with a
degree in Sociology, received her teaching credentials at UCB in 1970 and her
Masters degree from Framingham State University, Framingham, Massachusetts in
1996.
KEITH BRANDON age 65, has been a director of the Company since February
1998. Since 1976, Mr. Brandon has owned and operated KRB Bookkeeping, a tax
consulting firm.
The Board of Directors recommends a vote FOR the election of the nominees
for director named above.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Board of Director Meetings
During the fiscal year ended December 31, 1998, the Board of Directors
acted three times by written consent. It did not hold any face-to-face meetings.
All directors executed the written consents. The Board of Directors does not
have any standing Nominating or Compensation Committees.
Audit Committee
Effective February 23, 1998, the Board of Directors has established a
standing Audit Committee. The Audit Committee recommends the independent public
accountants that the Company considers to perform the annual audit, reviews
financial statements, and reviews the observations of independent public
accountants concerning their annual audit. The Audit Committee consists of Gavin
Gear, Janet Heinze and Keith Brandon. During the fiscal year ended December 31,
1998, the Audit Committee acted by written on one occasion. It did not hold any
face-to-face meetings. All members of this Committee executed the written
consent.
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EXECUTIVE OFFICERS
The following table sets forth the executive officers of the Company.
Name Age Position(s) Held
-------------- --- -----------------------
James Cardinal 52 Chief Executive Officer
Gavin Gear 47 President
Tamara Gear 40 Secretary-Treasurer
For a brief description of the business backgrounds of each of the
executive officers see "Nominees for Directors."
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation of the Chief
Executive Officer of the Company for the fiscal years ended December 31, 1998,
1997 and 1996. No Executive Officer received total annual salary and bonus in
excess of $100,000. Total compensation paid to all three executive officers as a
group during 1998 was $255,510.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
---------------------------------- --------------------- ------------------
Other Restrict- All Other
Annual ed Stock LTIP Compen-
Name and Principal Bonus Compen- Award Options Payouts sation
Position Year Salary ($) sation($) ($) SARs ($) ($)
- -------------------- ------ ------- ------- --------- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Cardinal 1998 91,250 0 0 0 0 0 0
CEO ......... 1997 73,750 0 0 0 0 0 0
1996 59,394 0 0 0 0 0 0
</TABLE>
In January 1999, the Board of Directors at the recommendation of the Audit
Committee of the Board of Directors, increased the annual salaries of the
Company's three executive officers, effective January 1, 1999, as follows:
Name Salary Increase New Annual Salary
- -------------- --------------- -----------------
James Cardinal $ 30,000 $115,000
Gavin Gear ... $ 15,000 $ 90,000
Tamara Gear .. $ 15,000 $ 90,000
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The Audit Committee recommended these salary increases of these three
principal officers of the Company because:
- they have devoted their time and efforts in growing the Company=s
business and increasing revenues year after year; and
- they have consistently taken annual salaries from the Company well
below salaries of executive officers in comparable public companies.
Compensation of Directors
In respect of the year ended December 31, 1998, one of the non-emloyee
directors was paid an annual director's fee of $2,000. None of the other
directors received compensation for their services as directors of the Company.
The Company also reimburses its directors for travel, lodging and related
expenses they may incur attending Board of Directors and committee meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
To the Company's knowledge, based solely on a review of such materials as
are required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended December 31, 1998, except for Gavin Gear who filed a Form 5 late in which
he reported gifts of shares which should have been reported on two Forms 4.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
appointed Jeffrey S. Gilbert, CPA as the independent auditor of the Company for
the fiscal year ending December 31, 1999. Stockholders are being asked to ratify
this appointment. The Company has been informed that Jeffrey S. Gilbert, CPA
does not have any direct financial interest or any material indirect financial
interest in the Company nor has he had any connection during the past three
years with the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
The financial statements for at least the three fiscal years ended prior to
December 31, 1997 were audited by Hollander, Gilbert & Co. Jeffrey S. Gilbert
was the partner in charge of these audits at Hollander, Gilbert & Co.
Jeffrey S. Gilbert CPA is not expected to be present at the meeting.
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<PAGE>
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Jeffrey S. Gilbert, CPA as independent accountant for the Company
for the fiscal year ending December 31, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended December 31, 1998 and 1997, there were no
transactions to which the Company was a party, in which any executive officer,
director, nominee for director, principal stockholder or immediate family member
of any of the foregoing persons had a direct or indirect material interest.
PROPOSAL OF SECURITY HOLDERS
A Shareholder of record may present a proposal for action at the next
Annual Meeting of Shareholders provided that the Company receives such proposal
at its executive office no later than December 24, 1999. Upon receipt of such
proposal, the Company shall set forth the proposal in its Proxy Statement for
that meeting. The proponent may submit a maximum of one (1) proposal of not more
than five hundred (500) words for inclusion in the Company's proxy materials for
a meeting of security holders. At the next Annual Meeting, management proxies
will have discretionary authority to vote on stockholder proposals that are not
submitted for inclusion in the Company's proxy statement unless received by the
Company before March 8, 2000.
GENERAL
The Annual Report to Stockholders (which includes the Company's Annual
Report on Form 10-KSB) for the fiscal year ended December 31, 1998 is enclosed
herewith. The Annual Report does not form any part of the material for the
solicitation of proxies.
OTHER BUSINESS
Management knows of no other matter that will come before the meeting.
However, if other matters do come before the meeting, the proxy holders will
vote in accordance with their best judgment.
By Order of the Board of Directors,
Tamara Gear
Secretary
April 29, 1999
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<PAGE>
APPENDIX A
PROXY
ELEGANT ILLUSIONS, INC.
542 Lighthouse Ave.
Suite 5
Pacific Grove, CA 93950
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints James Cardinal as Proxy, with the power to
appoint his substitute, and hereby authorizes him to represent and to vote, as
designated below, all the shares of Common Stock of Elegant Illusions, Inc. held
of record by the undersigned on April 1, 1999 at the annual meeting of
stockholders to be held at the Company's offices, 542 Lighthouse Ave., Suite 5,
Pacific Grove, CA 93950, on May 25, 1999 at 9:30 a.m., California time, or at
any and all postponements or adjournments thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1 and 2.
The Board of Directors recommends that the stockholders vote FOR each of the
proposals. Please review carefully the Proxy Statement delivered with this
Proxy.
1. Proposal to elect James C. Cardinal, Gavin Gear, Tamara Gear, Janet
Heinze and Keith Brandon as directors until the next Annual Meeting or
until their successors have been duly qualified and elected.
[ ] FOR all nominees listed above
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed above
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(Instruction: to withhold authority to vote for any individual nominee
write that nominee's name in the space provided above)
2. Proposal to approve the appointment of Jeffrey S. Gilbert, CPA as the
independent auditor of the Company to audit the accounts of the Company
for the fiscal year ending December 31, 1999.
FOR AGAINST ABSTAIN
The Proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting.
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Signature
Dated: , 1999
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Signature, if held jointly
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
