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)
(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
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 June 1, 2000
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 June 1, 2000 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, 2000; 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 17, 2000 are entitled to notice of, and
to vote at, the meeting or any adjournment thereof. At April 17, 2000, 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, excluding 62,067 treasury shares.
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
May 1, 2000
Tamara Gear
Secretary
<PAGE>
DEFINITIVE COPY
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 June 1, 2000
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 June 1, 2000 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, 2000; 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 May 1, 2000.
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.
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.
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<PAGE>
On April 17, 2000 (the "Record Date"), there were outstanding 6,084,379
shares of Common Stock which excludes 62,067 treasury shares. 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 17, 2000, 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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<PAGE>
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 17, 2000 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 Class
- ---------------- ----------------- ----------
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%
(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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<PAGE>
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 53, 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 the Company's
wholly-owned California Subsidiary, Elegant Illusions, Inc.(the "Subsidiary")
since 1992 and a business consultant for Subsidiary since 1989. He was a
director of Bay Area Grand Illusions, Inc. ("Bay") from June 1992 until its
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 48, 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 into 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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<PAGE>
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 52, currently is the Principal at the American School
in Guadalajara, Mexico. Prior thereto, she taught elementary school at the Park
School in Hayward, California since September 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 66, 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, 1999, the Board of Directors
acted five 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
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, 1999, the Audit Committee
acted by written consent on two occasions. It did not hold any face-to-face
meetings. All members of this Committee executed the written consents.
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EXECUTIVE OFFICERS
The following table sets forth the executive officers of the Company.
Name Age Position(s) Held
---- --- ----------------
James Cardinal 53 Chief Executive Officer
Gavin Gear 48 President
Tamara Gear 41 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,
1999, 1998 and 1997. No other 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 1999 was $335,418.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------------------
Annual Compensation Awards Payouts
---------------------------------- --------------------- ----------------------
Other Restrict- All Other
Annual ed Stock LTIP Compensa
Name and Principal Bonus Compen- Award Options Payouts -tion
Position Year Salary ($) sation($) ($) SARs ($) ($)
- ------------------ ------ ------- ------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Cardinal 1999 $146,418 0 0 0 0 0 0
CEO 1998 91,250 0 0 0 0 0 0
1997 73,750 0 0 0 0 0 0
</TABLE>
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, 2000, as follows:
Name New Annual Salary
-------------- -----------------
James Cardinal $ 225,000
Gavin Gear $ 112,500
Tamara Gear $ 112,500.
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The Audit Committee recommended these salary increases of these three
principal officers of the Company because:
o they have devoted their time and efforts in growing the Company's
business and increasing revenues year after year; and
o prior to last year, they consistently took 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, 1999, 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, 1999.
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, 2000. 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, 1999 were audited by Jeffrey S. Gilbert, CPA.
Jeffrey S. Gilbert CPA is not expected to be present at the meeting.
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, 2000.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended December 31, 1999 and 1998, 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 29, 2000. 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 14, 2001.
GENERAL
The Annual Report to Stockholders (which includes the Company's Annual
Report on Form 10-KSB) for the fiscal year ended December 31, 1999 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
May 1, 2000
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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 17, 2000 at the annual meeting of
stockholders to be held at the Company's offices, 542 Lighthouse Ave., Suite 5,
Pacific Grove, CA 93950, on June 1, 2000 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 [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) 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, 2000.
[ ] 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: , 2000
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Signature, if held jointly
Please sign exactly as name appears below. 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.
