SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-QSB/A-1

             [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 1998

                                       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, 1998
-----------------------                           -----------------------------
Common Stock, par value                                  17,155,038 Shares
   $.001 per share

     Transitional Small Business Format (check one); Yes _____ No __X__



<PAGE>


                          PART I. FINANCIAL INFORMATION

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 annual 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,  the Company's  expansion  plans and
competitive pressures.

     The Company cautions readers that any such  forward-looking  statements are
based on management's 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

     Sales for the quarter ended March 31, 1998 increased $258,179 or 13.5% when
compared to the quarter ended March 31, 1997.

     Management  believes  that the increase in sales was due to the addition of
four locations (Gilroy, Kenosha, Tulare and St. Thomas) in 1997.

     As of March 31, 1997,  the Company  operated 20 retail  locations and as of
March 31, 1998, the Company operated 24 retail  locations.  Although the Company
added four stores in 1997,  it closed its  Pavilions  store in January  1997 and
consolidated Steinbeck Lady into Steinbeck Jewelers.

     The Costs of goods as a  percentage  of revenues  decreased  slightly  from
30.1% in fiscal  1996 to 28.7% in fiscal  1997.  Management  believes  that this
decrease was due to the Company's ongoing efforts to reduce costs.

     During  the  quarter   ended   March  31,   1998,   selling,   general  and
administrative  expenses increased when compared to the first quarter of 1997 by
$209,339  (approximately 18.6%). As a percentage of sales, selling,  general and
administrative  expenses  increased  from  approximately  59.0% during the first
quarter  of 1997 to  approximately  61.6%  during  the  first  quarter  of 1998.
Management  believes  that this  increase was the result of a number of factors.
One factor was the cost of operating the four new stores opened in 1997. Another
factor was labor costs.  In this regard sales staff  wages,  as a percentage  of
sales, increased from 11.2% during the first quarter of 1997 to 12.4% during the
first  quarter  of 1998 and  management  salaries,  as a  percentage  of  sales,
increased  from 7.0%  during the first  quarter of 1997 to 8.4% during the first
quarter of 1998.  Management  raised  labor  costs to  stabilize  the  Company's
workforce in light of the strong  economic  conditions in the United States over
the past  year.  Management  believes  that  increased  salaries  will lead to a
decrease  in job  turnover  and added  revenues  during the  remainder  of 1998.
Increased  labor costs also  reflects an  increase in staff in  anticipation  of
meeting the  additional  administrative  burdens of  operating  the stores to be
opened  pursuant to the Company's  expansion  plans.  The Company also increased
media  advertising in the first quarter of 1998 as compared to the first quarter



<PAGE>


of 1997. As a percentage of sales, media advertising  increased from 1.8% during
the first  quarter  of 1997 to 2.3%  during  the  first  quarter  of 1998.  This
increase in media advertising is part of the Company's long-term plan to promote
name recognition.

     Revenues same store locations.

     As of March 31, 1997,  the Company  operated 20 locations  (which  includes
Steinbeck  Lady)  that were also in  operation  at March  31,  1998:  two in New
Orleans,  four 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 Portland,  one in Branson,  one in  Minneapolis,  one in Laughlin,  two in St
Croix and one in Oahu. The Company's  Pavilions  store in Sacramento,  which was
operating on March 31, 1996,  closed in January  1997.  Revenues  from the above
mentioned  20  locations  for  the  quarter  ended  March  31,  1998,  decreased
approximately  10% from the same period in 1997.  Management  believes that this
decrease in same store revenues was due primarily to an exceptionally good first
quarter in 1997.  Same store  sales for the first  quarter  ended March 31, 1997
exceeded same store sales for the first quarter of 1996 by approximately 19%. In
this regard,  during March 1997,  the  Company's  Bourbon  Street  Gallery had a
single  $100,000  transaction.  Excluding  this  transaction,  same store  sales
decreased  by 4.7% during the first  quarter of 1998 when  compared to the first
quarter of 1997.

     In 1996,  the Company  adjusted  some of its  software in light of the year
2000 problem.  Management  does not believe that the year 2000 problem will have
any material adverse affect on the Company's operations or revenues.


Liquidity and Capital Resources

   
     As of  March  31,  1998,  the  Company  had  $1,336,163  in cash  and  cash
equivalents  and  its  current  assets  exceeded  its  current   liabilities  by
$4,208,254.
    

     In  October  1997,  subsequent  to the  opening  of a new store in  Gilroy,
California,  the Company  announced  plans for a 50 store expansion over a three
year period.  Pursuant to the Company's expansion plan, the Company opened three
stores  (Tulare,  California,  Kenosha,  Wisconsin and St. Thomas,  U.S.  Virgin
Islands)  during the remainder of 1997. The Company plans to open  approximately
25 of the stores over the next 19 months and anticipates  opening  approximately
six of these new stores in 1998. At this time,  management believes,  but cannot
assure, that six of these stores will be located at Birch Run, Michigan (opening
May 27, 1998); Michigan City, Indiana (opening June 2, 1998);  Universal Studios
in  Orlando,  Florida  (anticipated  to open in October  1998);  Ontario  Mills,
California; Grapevine Mills, Texas; and Maui, Hawaii . The Company also plans to
move its Kenosha store from one location to a new location within the same mall.

     The cost of opening  new  stores  ranges  from  approximately  $120,000  to
$140,000,  depending  upon a number of  factors.  Based  upon  past  experience,
management  anticipates that it will need  approximately $ 3,500,000 to open the
planned 25 stores over the next 19 months.  Factored into the anticipated amount
of funds needed to complete the planned expansion, are funds required to further
increase  the  Company's  management  and  administrative  staff to  handle  the
increased  operations  that  will  result  from  the  planned  expansion.  It is
anticipated  that the  opening  of  additional  new stores  will be funded  from
current cash reserves and revenues and, to the extent required, from bank and/or
equity  financing.  No  assurance  can be given that the Company will be able to



<PAGE>


secure additional bank and/or equity financing,  if required.  Completion of the
Company's  planned  store  expansion is dependant  on the  Company's  ability to
obtain adequate financing on acceptable terms. In addition,  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 an advance line of credit up to  $2,000,000  from  Comerica
Bank to open new stores and the Company's  Subsidiary  has a $350,000  revolving
line of credit from Comerica Bank for working capital  purposes.  These lines of
credit are collateralized by the Company's assets and the Company is required to
maintain certain  financial  ratios and covenants.  As of March 31, 1998 and the
date hereof, no funds had been advanced on the these lines of credit.



<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: July 2, 1998                  /s/ James Cardinal
                                         ---------------------------------------
                                         James Cardinal, Chief Executive Officer



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