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 September 30, 1999

                                       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:      (831) 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

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

            Class                              Outstanding at September 30, 1999
  -----------------------                      ---------------------------------
  Common Stock, par value                                6,084,379 Shares
       $.001 per share

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



<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 and nine months ended September 30, 1999.

     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, 1998.

     The results  reflected  for the three and nine months ended  September  30,
1999 are not necessarily indicative of the results for the entire fiscal year.






















                                       2
<PAGE>


                    ELLEGANT 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 disclosure provided in
       the   annual   consolidated   financial   statements.   These   unaudited
       consolidated condensed financial statements should be read in conjunction
       with  the  consolidated   financial   statements  and  footnotes  thereto
       contained in the Annual Report on Form 10-KSB for the year ended December
       31, 1998 of Elegant  Illusion,  Inc. (the  "Company"),  as filed with the
       Securities and Exchange  Commission.  The December 31, 1998  consolidated
       condensed 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 and nine
       months ended  September  30, 1999 are not  necessarily  indicative of the
       results to be expected for the full fiscal year.


2.     RESTATEMENT OF THREE AND NINE MONTHS ENDED
       SEPTEMBER 30, 1998


       Subsequent  to the year ended  December  31, 1998 the Company  determined
       that an  error  related  to the  elimination  of  intercompany  inventory
       profits  affecting  operating  results in previous  quarter of 1998.  See
       unaudited Note 7 To the Company's Audited Financial  Statements  included
       in the Company's Annual Report on Form 10-KSB for the year ended December
       31, 1998. As a result, the financial  statements herein for the three and
       nine months period ended September 30, 1998 have been restated to correct
       these errors.











                                       3

<PAGE>
                     ELEGANT ILLUSIONS, INC. AND SUBSIDARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS


                                                    September 30,   December 31,
                                                        1999            1998
                                                    (Unaudited)    (Derived from
                                                                       Audited
                                                                      Financial
                                                                     Statements)
                                                     -----------      ----------
                                     ASSETS

CURRENT ASSETS
     Cash and cash equivalents                       $1,126,525      $1,560,403
     Accounts receivable                                424,353         415,141
     Income tax receivable                              100,000         142,800
     Inventory                                        2,865,031       2,635,870
     Prepaid expenses                                   313,591         270,685

             TOTAL CURRENT ASSETS                     4,829,501       5,024,899


PROPERTY AND EQUIPMENT, NET                           1,895,382       1,743,134

OTHER ASSETS                                            104,283          94,188
                                                     ----------      ----------
                                                     $6,829,166      $6,862,221
                                                     ==========      ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable and accrued expenses               86,693        $162,244
     Income taxes payable                                     0               0
                                                         86,693         162,244

DEFERRED INCOME TAXES                                   152,871         152,871
                                                     ----------      ----------

              TOTAL LIABILITIES                         239,564         315,115
                                                     ----------      ----------

STOCKHOLDERS' EQUITY
     Common stock-authorized 30,000,000 shares,
         $.001 par value, issued and outstanding
          6,146,446 shares in 1999 and 1998               6,146           6,146
     Additional paid in capital                       3,914,509       3,914,509
     Retained earnings                                2,752,955       2,710,459
     Less treasury stock at cost (62,067 shares in
          1999 and 1998)                                (84,008)        (84,008)
                                                     ----------      ----------
                                                      6,589,602       6,547,106
                                                     ----------      ----------
                                                     $6,829,166      $6,862,221
                                                     ==========      ==========






      See Accompanying Notes to Consolidated Condensed Financial Statements

                                      4

<PAGE>

                     ELEGANT ILLUSIONS, INC. AND SUBSIDARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998



                                                       1999            1998
                                                   ----------      ----------
REVENUES                                           $7,428,980      $6,718,493

COST OF GOODS SOLD                                 $2,310,201       2,178,986
                                                   ----------      ----------
GROSS PROFITS                                       5,118,779       4,539,507

SELLING, GENERAL AND ADMINISTRATION                 5,051,284       4,373,578
                                                   ----------      ----------
INCOME(LOSS) BEFORE INCOME TAXES                       67,496         165,929

PROVISION FOR INCOME TAXES                             25,000          71,463
                                                   ----------      ----------
NET INCOME(LOSS)                                   $   42,496      $   94,466
                                                   ==========      ==========


WEIGHTED AVERAGE SHARES OUTSTANDING                 6,084,379       5,893,000
                                                   ==========      ==========

BASIC AND DILUTED INCOME(LOSS) PER SHARE                $0.01           $0.02
                                                   ==========      ==========










      See Accompanying Notes to Consolidated Condensed Financial Statements

                                    5

<PAGE>

                     ELEGANT ILLUSIONS, INC. AND SUBSIDARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998



                                                     1999            1998
                                                  ----------      ----------
REVENUES                                          $2,523,924      $2,320,587

COST OF GOODS SOLD                                   750,511         733,721
                                                  ----------      ----------
GROSS PROFITS                                      1,773,413       1,586,866

SELLING, GENERAL AND ADMINISTRATION                1,725,341       1,249,731
                                                  ----------      ----------
INCOME BEFORE INCOME TAXES                            48,072         337,135

PROVISION FOR INCOME TAXES                            17,000         127,965
                                                  ----------      ----------
NET INCOME                                        $   31,072      $  209,170
                                                  ==========      ==========


WEIGHTED AVERAGE SHARES OUTSTANDING                6,084,379       6,016,000
                                                  ==========      ==========

BASIC AND DILUTED INCOME PER SHARE                     $0.01          ($0.03)
                                                  ==========      ==========




      See Accompanying Notes to Consolidated Condensed Financial Statements

                                      6


<PAGE>

<TABLE>


<CAPTION>


                     ELEGANT ILLUSIONS, INC. AND SUBSIDARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998



                                                                     1999            1998
                                                                   --------         -------
<S>                                                                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income(loss)                                               $ 42,496        $  94,466
    Adjustments to reconcile net income
        to net cash provided by (used in)
       operating activities:
                Depreciation and amortization                       306,493          293,314
                 Issuance of stock for services                                      205,000
                Changes in operating assets and liabilities:
                     (Increase) Decrease in:
                       Accounts receivable                           (9,212)         (92,573)
                       Inventory                                   (229,161)        (583,365)
                       Prepaid expenses                             (42,906)        (149,487)
                     Increase (Decrease in):
                       Accounts payable and accrued expenses        (75,551)           3,352
                       Income taxes payable                          42,800          116,680
                                                                   --------        ---------
NET CASH PROVIDED BY OPERATIONS                                      34,958         (112,613)
                                                                   --------        ---------
CASH FLOW FROM INVESTING ACTIVITIES
    Purchase of property and equipment                             (458,741)        (720,679)
    Other assets                                                    (10,095)          (7,255)
                                                                   ---------       ---------
NET CASH USED IN INVESTING ACTIVITIES                              (468,836)        (727,934)
                                                                   ---------       ---------
CASH FLOW FROM FINANCING ACTIVITIES
    Sale of common stock                                                             720,000
    Purchase of treasury stock                                                       (37,952)
                                                                   ---------       ---------
NET CASH USED IN FINANCING ACTIVITIES                                     0          682,048
                                                                   ---------       ---------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS                (433,878)        (158,499)

CASH AND CASH EQUIVALENT BALANCE,
     Beginning of period                                           1,560,403       1,321,448
                                                                   ---------       ---------
CASH AND CASH EQUIVALENT BALANCE,
     End of period                                                $1,126,525      $1,162,949
                                                                   =========       =========


</TABLE>





      See Accompanying Notes to Consolidated Condensed Financial Statements

                                      7
<PAGE>


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

Cautionary Statement on Forward-Looking Statements

         Except for the historical  information contained herein, certain of the
matters discussed in this report are "forward-looking statements," as defined in
Section 21E of the Securities  Exchange Act of 1934, which involve certain risks
and  uncertainties,  which could cause actual results to differ  materially from
those discussed herein including, but not limited to, risks relating to changing
economic conditions, our shift in expansion plans and competitive pressures.

         We caution readers that any such  forward-looking  statements are based
on our  current  expectations  and  beliefs  but are not  guarantees  of  future
performance.  Actual  results could differ  materially  from those  expressed or
implied in the forward-looking statements.

Results of Operations 1

         Sales for the quarter ended  September 30, 1999  increased  $203,337 or
8.8% when compared to the quarter ended  September 30,1998.

         We believe  that the  increase in sales was due to the  addition of two
locations in 1998,  Seaport  Jewelers  opened  October 1998,  and Miromar opened
November 1998, and the addition of two locations in 1999, Royal Dane Mall opened
January 1999 and Universal Studios Citiwalk opened June 1999.

         As of September  30, 1998, we operated 28 retail  locations  and, as of
September  30, 1999,  we operated 29 retail  locations.  Although we added seven
stores in 1998 and two stores in the first half of 1999, we closed our Portland,
Oregon, Ontario,  California,  and Kenosha, Wisconsin stores on January 3, 1999,
April 28, 1999, and August 3, 1999, respectively.

         Costs of goods as a percentage of revenues  decreased from 31.6% in the
quarter ended  September  30, 1998 to 29.7% in the quarter  ended  September 30,
1999.  We  believe  that this  decrease  was due,  in part,  to normal  seasonal
fluctuations and in part to improved purchasing of inventory.

         During the quarter  ended  September  30,  1999,  selling,  general and
administrative  expenses increased when compared to the third quarter of 1998 by
$475,610  (approximately 38.1%). As a percentage of sales, selling,  general and
administrative  expenses  increased  from  approximately  53.9% during the third
quarter of 1998 to  approximately  68.4%  during the third  quarter of 1999.  We
believe that the  significant  increase in selling,  general and  administrative
expenses was the result of the following factors:

----------------------------------

1.   The financial information for the quarter ended September 30, 1998 has been
     restated.  See Note 2 to our unaudited  financial  statements  contained in
     Part I; Section 1 of this Form 10-QSB.



                                       8
<PAGE>

-    The cost of operating the Birch Run,  Michigan  City,  Grapevine  Mills and
     Lahina (Maui)  locations for the full nine months of 1999.  These locations
     were  opened  in May  1998,  June  1998,  July  1998  and  September  1998,
     respectively,  and,  accordingly,  did not operate for the full nine months
     ended September 30, 1998.

-    The cost of operating  Seaport Jewelers and Miromar  locations for the full
     nine  months of 1999.  These  locations  were opened in October  1998,  and
     November 1998, respectively.

-    The cost of  operating  Royal  Dane  Mall and  Universal  Studios  Citiwalk
     locations which opened January 1999 and June 1999, respectively.

-    Significantly  Lower  than  anticipated  revenues  for the  new  locations,
     Seaport  Jewelers and Royal Dane Mall.  Management  believes  that revenues
     were down as the result of lower than  expected  bookings  on the  visiting
     cruise ships during the summer season; however the Cruise Ship industry has
     announced an additional  100 visits to the port of St Thomas for the coming
     Cruise Ship season that began November 1, 1999.

-    Lower than expected revenues at the Universal Citiwalk  location.  However,
     management   notes  that   revenues  for  this   location  were  closer  to
     expectations for the month of October 1999

-    One time costs associated with the opening of Royal Dane Mall and Universal
     Citiwalk locations.

-    Increased  payroll costs incurred due to the very competitive labor market.
     Payroll costs as a percentage of revenues  increased  from 22.42% to 24.08%
     an increase of 1.66 percentage points.

         Revenues same store locations.

         As of September  30, 1998,  we operated 24 locations  that were also in
operation at September 30, 1999: two in New Orleans,  three in Monterey,  one in
Sacramento, one in San Diego, one in Santa Barbara, two in San Francisco, one in
Palm Springs, one in Salt Lake City, one in Branson, one in Minneapolis,  one in
Laughlin,  one in Gilroy,  one in Tulare, two in St Croix, one in St Thomas, one
in Oahu,  one in Birch Run,  one in  Grapevine  and one in  Michigan  City.  Our
Portland and Kenosha locations were in operation at September 30, 1998, but were
closed prior to September 30, 1999. Accordingly, same store revenues exclude our
Portland and Kenosha locations. Further, Lahina (Maui) was open for one month of
the quarter ending September 30, 1998 so its revenues are excluded.

         Revenues from same store  locations for the quarter ended September 30,
1999,  increased  approximately  6.68% from the same period in 1998.  Management
believes that this increase was due to the  Company's  diversification  into new
products and the results of its ongoing one-on-one  training of its managers and
sales staff.


                                       9
<PAGE>


         Net Income

         During the quarter  ended  September  30, 1999,  we realized net income
of $31,072  compared to net income of $209,170 for the third quarter of 1998.

         As we discussed in our Annual  Report on Form 10-KSB for the year ended
December 31, 1998,  we have shifted our focus from  expanding  the number of our
stores to increasing sales at existing locations and reducing costs.

         We have cut costs in corporate operations,  cut back staff hours in our
retail  stores and  increased  employees'  wages to compete in the fierce  labor
market in the retail industry.

         We also evaluated the  profitability of our locations and, as a result,
we closed our Portland and Ontario  locations  during the first half of 1999 and
we closed our Kenosha location in August 1999.

Inventory Turnover Ratios

         During the third  quarter of 1999,  we  maintained  an  inventory  that
provided  a  turnover  ratio of  1.12:1.  We do not  believe  that  our  current
inventory turnover is indicative of impaired or slow-moving inventory.

         We  believe  that our  current  inventory  turnover  ratio of 1.12:1 is
appropriate  for our plan of operation,  including  maintaining  our strategy of
replacing inventory sold at our retail locations within a 2-3 day time frame. We
review items on hand, on a regular basis,  to determine slow moving items,  then
discount the price of those items so they are sold at prices that still generate
a positive gross margin.  The inventory  turnover ratio for the third quarter of
1998 was 1:0.97. We believe that this improved  inventory  turnover ratio is due
to the fact that during the third  quarter of 1999 we had more stores open for a
full 12 month  period and fewer new stores  that were open only a portion of the
period than during the third quarter of 1998.


         Year 2000 Compliance

         Many currently installed computer systems and software products use two
digits  rather  than  four to  define  the  applicable  year.  In  other  words,
date-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This could  result in system  failures  or  miscalculations
causing disruptions of operations.

         We do not believe  that the year 2000  problem  will have any  material
adverse  affects on the our  operations  or revenues.  In 1994,  we adjusted our
Point of Sale and Inventory  Control software in light of the year 2000 problem.
The foregoing software now utilizes a database  management system which provides
date management tools. Mathematical date calculations were changed to store date
information in an eight  character  field  (YYYYMMDD).  In 1996, the credit card
authorization modules were adjusted to avoid potential issues from the year 2000
problem.  Although years continue to be expressed in two digits,  any two digits
prior to 96 will be read as expiring in the 2000s rather than the 1900s. We have
confirmed  with our credit  card  processors  that their  systems  are year 2000
compliant.





                                       10
<PAGE>

Liquidity and Capital Resources

         As  of  September  30,  1999,  we  had  $1,126,525  in  cash  and  cash
equivalents,  down  $433,878  from  December  31, 1998,  and our current  assets
exceeded our current liabilities by $4,742,808,  down $119,847 from December 31,
1998.

         In 1997, we announced a 50 store expansion.  In this regard,  we opened
four locations in 1997, seven in 1998 and two in 1999.  However,  management has
elected to shift its focus from  opening new  locations to  bolstering  revenues
from existing stores and expanding into e-commerce.  As a result, we do not plan
to open any additional stores during the remainder of 1999.

         In   September    1999,   we    established    an    e-commerce    site
(www.elegantillusions.com)  to sell our products over the  internet.  We believe
that internet  sales may be a more cost effective and faster method of expanding
sales  beyond the  current  geographic  boundaries  of our  existing  stores.  A
significant  amount of our business comes from tourists who visit certain of our
stores but do not have an Elegant Illusions store near their home. We anticipate
that these tourists and others who will learn about our  e-commerce  site at our
existing locations will shop on our e-commerce site.







                                       11

<PAGE>


                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

                           None.


Item 2.  Changes in Securities and Use of Proceeds

                           None.


Item 3.  Defaults Upon Senior Securities

                           None.


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

                           None.

Item 5.  Other Information

                           None.


Item 6.  Exhibits and Reports on Form 8-K

                           None.



                                       12
<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: November 8, 1999              /s/ James Cardinal
                                         ---------------------------------------

                                         James Cardinal, Chief Executive Officer





                                     /s/ Tamara Gear
                                         ---------------------------------------
                                         Tamara Gear, Treasurer















                                       13