SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 1997

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                         Commission File Number: 0-28128

                             ELEGANT ILLUSIONS, INC.
        (Exact name of small business issuer as specified in its charter)


                    DELAWARE                         88-0282654
         (State or other jurisdiction of           (I.R.S. Employer
         incorporation or organization)           Identification No.)


              542 Lighthouse Ave., Suite 5, Pacific Grove, CA 93950
                    (Address of principal executive offices)

Issuer's telephone number, including area code:      (408) 649-1814
                                                     --------------

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                Yes X   No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common equity as of the latest practicable date.

           Class                         Outstanding at March 31, 1997
  Common Stock, par value                     17,434,338 Shares
       $.001 per share

         Transitional Small Business Format (check one);  Yes        No  X

                                       1
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

         The  accompanying  financial  statements  are unaudited for the interim
periods,  but  include  all  adjustments  (consisting  only of normal  recurring
accruals)  which  management  considers  necessary for the fair  presentation of
results for the three months ended March 31, 1997.

         Moreover, these financial statements do not purport to contain complete
disclosure in conformity  with  generally  accepted  accounting  principles  and
should be read in conjunction with the Company's  audited  financial  statements
at, and for the fiscal year ended December 31, 1996.

         The results reflected for the three months ended March 31, 1997 are not
necessarily indicative of the results for the entire fiscal year.

                                       2

<PAGE>

              ELEGANT ILLUSIONS, INC. AND SUBSIDIARIESCONSOLIDATED
                            CONDENSED BALANCE SHEETS

                                                 March 31,       December 31, 
                                                   1997              1996
                                                   ----              ----
                                                (Unaudited)     (Derived from 
                                                                   Audited 
                                                                  Financial
                                                                  Statements)
                                                -----------      -----------
                                     ASSETS
CURRENT ASSETS
        Cash and cash equivalents ............   $2,037,350       $1,886,297
        Accounts receivable ..................      176,259          190,270
        Inventory ............................    1,945,240        1,990,174
        Prepaid expenses .....................       44,434           45,643
                                                 ----------       ----------

                TOTAL CURRENT ASSETS              4,203,283        4,112,384

PROPERTY AND EQUIPMENT, NET ..................      869,355          884,707

OTHER ASSETS .......................                 82,726           85,853
                                                 ----------       ----------

                                                 $5,155,364       $5,082,944
                                                 ==========       ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
        Accounts payable and accrued expenses     $115,401          $92,827
        Income taxes payable ................       57,900           71,915
                                                    ------           ------

                TOTAL CURRENT LIABILITIES ...      173,301          164,742
NOTE PAYABLE ................................         --             20,000
DEFERRED INCOME TAXES .......................       95,871           95,871
                                                    ------           ------

                TOTAL LIABILITIES ...........      269,172          280,613
                                                   -------          -------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
        Common stock - authorized 30,000,000
        shares, $.001 par value,issued and
        outstanding 17,434,338 shares .......       17,434           17,434
        Additional paid-in capital ..........    2,978,221        2,978,221
        Retained earnings ...................    1,890,537        1,806,676
                                                 ---------        ---------

                TOTAL STOCKHOLDERS' EQUITY ..    4,886,192        4,802,331
                                                 ---------        ---------

                                                $5,155,364       $5,082,944
                                                ==========       ==========

                                      3


<PAGE>


                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
         FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)

                                                   1997             1996
                                                 ---------        ---------
REVENUES ...................................... $1,907,399       $1,379,614

COST OF GOODS SOLD .............................   579,730          429,287
                                                 ---------        ---------

GROSS PROFIT ................................... 1,327,669          950,327
EXPENSES
        Selling, general and administrative .... 1,125,186          815,919
        Depreciation and amortization ..........    62,722           54,830
                                                 ---------        ---------

                TOTAL EXPENSES ................. 1,187,908          870,749
                                                 ---------        ---------

INCOME BEFORE INCOME TAXES .....................   139,761           79,578
PROVISION FOR INCOME TAXES .....................    55,900           31,800
                                               -----------       ----------

NET INCOME ....................................$    83,861       $   47,778
                                               ===========       ==========


WEIGHTED AVERAGE SHARES OUTSTANDING ............17,434,000       16,930,000
                                               ===========       ==========


NET INCOME PER COMMON SHARE ...................$       .00      $       .00
                                               ===========      ===========


                                      4

<PAGE>


                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
         FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)

                                                 1997            1996
                                              ----------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES
        Net income ...........................$    83,861    $      47,778
        Adjustments to reconcile  
        net income to net cash  
        provided  by  operating
        activities:  
          Depreciation and amortization            62,722           54,830 
          Changes in operating assets 
          and liabilities:
           (Increase) Decrease in:
             Accounts receivable ................. 14,011           27,578
             Inventory ............................44,934          (78,361)
             Prepaid expenses ..................... 1,209          (10,421)
          Increase (Decrease in):
             Accounts payable and accrued 
              expenses ........................... 22,574           21,650
             Income taxes payable ................(14,015)          31,800
                                                  -------           ------

                NET CASH PROVIDED BY 
                 OPERATING ACTIVITIES ............215,296           94,854
                                                 --------           ------

CASH FLOWS FROM INVESTING ACTIVITIES
        Purchase of property and equipment .......(46,288)         (62,156)
        Deposits .................................  2,045           (5,750)
                                                  -------          ------- 

               NET CASH USED BY 
                INVESTING ACTIVITIES .............(44,243)         (67,906)
                                                  -------          ------- 

CASH FLOWS FROM FINANCING ACTIVITIES
        Proceeds from bank credit line, net ......     --          750,000
        Repayment of borrowing from bank 
          credit line.............................     --         (750,000)
        Repayment of note payable ................(20,000)         (20,000)
        Sale of common stock .....................     --          950,000
                                                  -------          -------
                                                                   

              NET CASH PROVIDED BY 
               FINANCING ACTIVITIES ..............(20,000)         930,000
                                                  -------          -------

NET INCREASE IN CASH AND CASH EQUIVALENTS .......  151,053         956,948

CASH AND CASH EQUIVALENTS BALANCE, 
        Beginning of period .....................1,886,297       1,699,110
                                                ----------       ---------

CASH AND CASH EQUIVALENTS BALANCE, 
        End of period .........................$ 2,037,350    $  2,656,058
                                               ===========    ============


SUPPLEMENTAL CASH FLOW DISCLOSURE:
        Interest paid .........................$       291    $      2,575
        Income taxes paid .....................$    69,914    $         --

                                      5
<PAGE>



                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

     1. Comments 

     The accompanying  unaudited  consolidated  condensed financial  statements,
which are for interim  periods,  do not include all disclosures  provided in the
annual consolidated financial statements. These unaudited consolidated condensed
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the year ended December 31, 1996 of Elegant Illusions, Inc. (the
"Company"),  as filed with the Securities and Exchange Commission.  The December
31,  1996  balance  sheet  was  derived  from  audited  consolidated   financial
statements,  but does not include all disclosures required by generally accepted
accounting principles. In the opinion of the Company, the accompanying unaudited
consolidated  condensed financial  statements contain all adjustments (which are
of a normal recurring nature) necessary for a fair presentation of the financial
statements.  The results of operations for the three months ended March 31, 1997
are not necessarily indicative of the results to be expected for the full fiscal
year.

                                      6
                 
<PAGE>


     Item 2.  Management's Discussion And Analysis Of Financial  Condition And
Results Of Operations

Results of Operations

         Sales for the three months ended March 31, 1997  increased  $527,785 or
approximately 38% when compared to the three months ended March 31, 1996.

         Management  believes that the increase in sales was due to the addition
of three  locations  (San  Francisco  and  Monterey,  California,  and Laughlin,
Nevada).

         As of March 31, 1996, the Company  operated 18 retail  locations and as
of March 31,  1997,  the Company  operated 20 retail  locations.  An  additional
location was opened in April 1997.

         The Costs of goods as a percentage of revenues  decreased slightly from
approximately 31% during the three months ended March 31, 1996 to 30% during the
three months ended March 31, 1997.

         During the three  months  ended March 31,  1997,  selling,  general and
administrative  expenses increased when compared to the three months ended March
31, 1996 by $309,267 (approximately 38%). Management believes that this increase
was primarily the result of the cost of opening and operating  three new stores.
However, as a percentage of sales, selling,  general and administrative expenses
remained unchanged between the two periods at approximately 59%.

Revenues same store locations.

     As of March  31,  1996,  the  Company  operated  18  locations:  two in New
Orleans,  three in Monterey,  two in Sacramento,  one in San Diego, one in Santa
Barbara,  one in San Francisco,  one in Palm Springs, one in Salt Lake City, one
in  Portland,  one in Branson,  one in  Minneapolis,  two in St Croix and one in
Oahu.  Revenues from these  locations for the three months ended March 31, 1997,
which  includes  revenues  from the  Pavilions  Sacramento  store that closed in
January  1997,  increased  approximately  15%  from  the  same  period  in 1996.
Excluding the Pavilions Sacramento store from same store operations,  same store
revenues  increased  approximately  19% during the three  months ended March 31,
1997 from the same period in 1996.

Liquidity and Capital Resources

         As of March 31,  1997,  the  Company  had  $2,037,350  in cash and cash
equivalents  and  its  current  assets  exceeded  its  current   liabilities  by
$4,029,982.

                                       7

<PAGE>



         In April 1997,  the Company  opened a new copy jewelry store in Gilroy,
California.  During the second and third  quarters of 1997, the Company plans to
open two additional copy jewelry stores. At this time, management believes,  but
cannot  assure,  that these  stores will be located in Bellport,  New York,  and
Kenosha, Wisconsin.

         Management  believes that it will cost  approximately  $600,000 to open
these two new stores.  Management  believes  that the cost of opening  these new
stores will be paid from current cash reserves.  No assurance can be given as to
the  actual  number or  location  of stores  that the  Company  will open in the
future.

         The  Company  has a  $1,000,000  line of credit  with a bank  effective
December 1996 due on demand. Interest is at annual base rate as announced by the
bank  (initial  base  rate  was  8.25%)  plus  1.75%.  This  line of  credit  is
collateralized by the Company's  accounts  receivable,  inventory and equipment.
The Company also is required to maintain certain financial ratios and covenants.
As of March 31, 1997 and the date hereof, no funds had been advanced on the line
of  credit.  As of the  date  hereof,  the  Company  is in  compliance  with all
financial ratios and covenants.


                                       8

<PAGE>


                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

                  None.


Item 2.           Changes in Securities

                  None.


Item 3.           Defaults Upon Senior Securities

                  None.


Item 4.           Submission of Matters to a vote of Security Holders

                  None.


Item 5.           Other Information

                  In April 1997,  the Company opened a new copy jewelry store in
                  Gilroy, California.


Item 6.           Exhibits and Reports on Form 8-K

                  None.


                                       9


<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registration  has duly  caused  this  report to be  signed on its  behalf by the
undersigned thereunto duly authorized.


                                 ELEGANT ILLUSIONS, INC.



Dated:  May 12, 1997             /s/....................
                                 James Cardinal,
                                 Chief Executive Officer




                                 /s/...................
                                 Tamara Gear, Treasurer
                                      
                                       10