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, 2001

                                       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 March 31, 2001
------------------------------------               -----------------------------
  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 months ended March 31, 2001.

         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, 2000.

         The results reflected for the three months ended March 31, 2001 are not
necessarily indicative of the results for the entire fiscal year.



<PAGE>

                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                            December 31,    March 31,
                                                                                2000          2001
                                                                                ----          ----
                                                                           (Derived from   (Unaudited)
                                                                              Audited
                                                                             Financial
                                                                            Statements)


                                          ASSETS
CURRENT ASSETS
<S>                                                                            <C>           <C>
          Cash and cash equivalents                                            $1,899,722    $1,930,822
          Accounts receivable                                                     227,245       233,039
          Income tax receivable                                                     5,380        21,380
          Inventory                                                             2,867,755     2,753,453
          Prepaid expenses                                                        279,232       267,280
                                                                                  -------       -------

                  TOTAL CURRENT ASSETS                                          5,279,334     5,205,974
                                                                                ---------     ---------

PROPERTY AND EQUIPMENT, NET                                                     2,196,339     2,180,619
                                                                                ---------     ---------

OTHER ASSETS
          Deposits                                                                 68,264        69,475
          Patents and trademarks, net                                               1,291         1,101
          Excess cost over net assets acquired, net                                14,141        13,129
                                                                                   ------        ------
                                                                                   83,696        83,704
                                                                               $7,559,369    $7,470,297

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
          Current portion of long tern debt                                       $10,118       $10,347
          Accounts payable and accrued expenses                                  $202,418       162,877
          Income taxes payable                                                          0             0
                                                                                        -             -
                        TOTAL CURRENT LIABILITIES                                 212,536       173,224
                                                                                  -------       -------

LONG TERM LIABILITIES

          Mortgage Payable                                                        463,430       460,045
          Deferred Income taxes                                                   205,871       205,871
                                                                                  -------       -------
                                                                                  669,301       665,916

                    TOTAL LIABILITIES                                             881,837       839,140
                                                                                  -------       -------

STOCKHOLDERS' EQUITY
          Common stock-authorized 30,000,000 shares,
              $.001 par value, issued and outstanding
               6,146,446 shares in 2000 and 2001                                    6,147         6,147
          Additional paid in capital                                            3,914,509     3,914,509
          Retained earnings                                                     2,840,884     2,794,509
          Less treasury stock at cost
               (62,067 shares in 1999 and 1998)                                  (84,008)      (84,008)
                                                                                 --------      --------
                                                                                6,677,532     6,631,157
                                                                               $7,559,369    $7,470,297
</TABLE>

      See Accompanying Notes to Consolidated Condensed Financial Statements
                                       -2-
<PAGE>


ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001

<TABLE>
<CAPTION>


                                                                                2000          2001
                                                                                ----          ----
                                                                            (Unaudited)    (Unaudited)

<S>                                                                            <C>           <C>
REVENUES                                                                       $2,604,585    $2,207,445

COST OF GOODS SOLD                                                                691,923       690,442
                                                                           -------------- --------------
GROSS PROFITS                                                                   1,912,662     1,517,003

EXPENSES
              SELLING, GENERAL AND ADMINISTRATION                               1,732,115     1,451,900
              DEPRECIATION AND AMORTIZATION                                       126,849       113,250
              INTEREST EXPENSE                                                      6,981        14,228
                                                                           -------------- --------------
                                                                                1,865,945     1,579,378
                                                                           -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES                                                  46,717      (62,375)

PROVISION FOR INCOME TAXES                                                         18,000      (16,000)
                                                                           -------------- --------------
NET INCOME (LOSS) BEFORE ACCOUNTING CHANGE                                        $28,717      (46,375)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                                                                          96,045             0
                                                                           -------------- --------------
NET INCOME (LOSS)                                                               ($67,328)     ($46,375)
                                                                                 ========      ========


WEIGHTED AVERAGE SHARES OUTSTANDING                                             6,146,446     6,146,446
                                                                                =========     =========

BASIC AND DILUTED INCOME PER SHARE
                 BEFORE ACCOUNTING CHANGE                                          $0.00         ($0.01)
                 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
                 PRINCIPLE                                                         (0.02)          0.00
                                                                                  -------        -------
                 AFTER ACCOUNTING CHANGE                                          ($0.01)        ($0.01)
                                                                                  =======        =======


</TABLE>




      See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -3-

<PAGE>


ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 2001
<TABLE>
<CAPTION>

                                                                                2000          2001
                                                                                ----          ----
                                                                            (Unaudited)    (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                               <C>         <C>
          Net income (loss)                                                       $28,717     ($46,375)
          Adjustments to reconcile net income
              to net cash provided by (used in)
             operating activities:
                      Depreciation and amortization                               126,849       113,251
                       Issuance of stock for                                            0
          services
                      Changes in operating assets and liabilities:
                        (Increase) Decrease in:
                          Accounts receivable                                      51,886       (5,794)
                          Inventory                                                60,968       114,302
                          Prepaid expenses                                          5,628        11,952
                        Income tax receivable                                      18,000      (16,000)
                        Increase (Decrease in):
                          Accounts payable and accrued expenses                  (48,287)      (39,540)
                          Income taxes payable                                          0             0
                                                                            ------------- -------------
NET CASH PROVIDED BY OPERATIONS                                                   243,761       131,796
                                                                            ------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES
          Purchase of property and equipment                                    (574,533)      (97,531)
          Other assets                                                          (457,974)           (8)
                                                                            ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES                                         (1,032,507)      (97,540)
                                                                            ------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
          Mortgage Payable                                                        480,000       (3,156)
                                                                            ------------- -------------
NET CASH USED IN FINANCING ACTIVITIES                                             480,000       (3,156)
                                                                            ------------- -------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS                             (308,746)        31,100

CASH AND CASH EQUIVALENT BALANCE,
          Beginning of period                                                   1,760,254     1,899,722
                                                                            ------------- -------------
CASH AND CASH EQUIVALENT BALANCE,
          End of period                                                        $1,451,508    $1,930,822
                                                                                =========     =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
          Interest Paid                                                            $6,981       $14,228
          Income taxes paid                                                            $0            $0


</TABLE>


      See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -4-

<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 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, 2000 of Elegant Illusion,  Inc. (the "Company"),  as
         filed with the Securities and Exchange Commission. ___ The December 31,
         2000  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 months
         ended March 31, 2001 are not  necessarily  indicative of the results to
         be expected for the full fiscal year.


2.       ACCOUNTING CHANGE

         The Company during the quarter ending  September 30, 2000 adopted a new
         accounting  method  whereas  layaway  sales would only be recognized as
         sales upon delivery of the  merchandise to the customer.  The impact of
         this accounting change was a cumulative charge to net income of $96,045
         effective  at the  beginning  of the  period.  The pro forma  effect of
         retroactive  application of this  accounting  change to prior operating
         periods is immaterial.







                                       -5-


<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

         Sales for the quarter ended March 31, 2001 decreased  $397,140 or 15.2%
when compared to the quarter ended March 31, 2000.

         We believe that the decrease in sales was due primarily to:

o        Closing  of three  locations,  (Mall of  America,  Royal  Dane Mall and
         Seaport  Jewelers)  that were open for the full three  months of fiscal
         2000 and were closed for the full three months of fiscal 2001
o        closing of two  locations,  (Tulare and Hawaii) that were open for part
         of three  months  of fiscal  2000 and were  closed  for the full  three
         months of fiscal 2001


offset by the opening of  the Vail Gallery.

         As of March 31, 2000, we operated 27 retail locations and as of March
31, 2001, we operated 26 retail locations.


         Costs of goods sold as a percentage of revenues increased from 26.6% in
the quarter  ended March 31, 2000 to 31.3% in the quarter  ended March 31, 2001.
We believe that this  increase was due to our  implementation  of the  following
sales programs:

1.       We  discounted  merchandise  at three mall  locations  where a national
         jewelry chain was running an "80% off going out of business sale."

                                      -6-
<PAGE>

2.       We have been  conducting a closeout sale on certain  inventory items at
         our  Steinbecks  location with the intent of  remodeling  and reopening
         this location with higher ticket jewelry and original art.

3.       We have  been  conducting  closeout  sales  at our  Grapevine  and Utah
         stores; two locations that we plan to close.

4.       We have been conducting a sale to reduce inventory at our Santa Barbara
         location. We are relocating this store.

         During  the  quarter  ended  March  31,  2001,  selling,   general  and
administrative  expenses decreased when compared to the first quarter of 2000 by
$280,215,  or approximately 16.2%. We believe that this decrease in expenses was
the  result  of the  closing  of five  locations  offset by the  opening  of two
locations.  As a  percentage  of  sales,  selling,  general  and  administrative
expenses decreased from approximately  66.5% during the first quarter of 2000 to
approximately 65.8% during the first quarter of 2001.

Revenues Same Store Locations.
-----------------------------

         As of March  31,  2000,  we  operated  24  locations  that were also in
operation at March 31,  2001:  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 Laughlin,  one in
Gilroy,  two in St Croix, one in St Thomas,  one in Birch Run, one in Grapevine,
one in Maui, one in Michigan  City, one in Orlando and one in Miromar.  Revenues
from  these   locations  for  the  quarter  ended  March  31,  2000,   decreased
approximately 9.91% from the same period in 2000.

         We believe that the overall  decrease in same store revenues during the
first  quarter  of 2001 was due in part to the  current  state  of the  national
economy,  in part to decreased  revenues at the two New Orleans locations and in
part to a  national  jewelry  chain,  with  stores  in  three  malls in which we
operate, having an 80% Off, going out of business sale.

         Inventory Turnover Ratios

         During the first  quarter of 2001,  we  maintained  an  inventory  that
provided a turnover ratio of 0.98.

         We  believe  that  our  current  inventory  turnover  ratio  of 0.98 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 first quarter of
2000 was 1.08.




                                      -7-
<PAGE>



Liquidity and Capital Resources

         As of March 31, 2001, we had $ 1,930,822 in cash and cash  equivalents,
up $31,100 from December 31, 2000, and our current  assets  exceeded our current
liabilities by $5,032,749, down $34,049 from December 31, 2000.

         In 2001, we plan on closing the Grapevine  Mills and Utah locations and
focusing our new store openings on high traffic, tourist and mall locations.

         In this  regard,  we have  signed a lease for a location  in  Sarasota,
Florida and plan to open an Elegant  Illusions store there in July 2001. We will
relocate the Grapevine Mills assets to the Sarasota store. The Sarasota location
is owned by our three executive officers,  James Cardinal, Gavin Gear and Tamara
Gear. We are leasing the store from them on terms that we believe are comparable
to those we could have obtained from an unaffiliated landlord.

         Further,  we are  negotiating  to  relocate  one of our  San  Francisco
locations  within the same center and we are  negotiating a lease for a new site
for our Santa Barbara store.

         In 2000,  we  negotiated a new lease for our  Steinbeck  Jewelers  Fine
Jewelry  and Gift  store.  We have been  conducting  a closeout  sale on certain
inventory  items with the intent of remodeling  and reopening this location with
higher ticket  jewelry and original art. The remodeling is planned for the month
of June 2001 with the new concept opening by July 4, 2001.

         We are no longer in the market to purchase an office  building to house
our corporate and executive offices nor are we seeking to purchase  locations as
we believe the downturn in the economy will cause lower prices for real-estate.

         We plan to license our Elegant Illusions trade name to permit others to
open signature stores  featuring  Elegant  Illusions brand copy jewelry.  We are
structuring  these  transactions  in a manner  that we believe  will not require
registration under current franchising laws.

         We also plan to license the right to sell our Elegant  Illusions  brand
copy  jewelry  to  existing  retail  jewelry  stores or  jewelry/gift  galleries
operating under their own trade name.  These stores would devote a department or
area to Elegant Illusions brand copy jewelry.

         Our primary  anticipated  capital  expenditures during the remainder of
fiscal 2001 include:

o        opening the Sarasota store;
o        relocating one of the San Francisco stores and the Santa Barbara store;
o        closing the Grapevine Mills and Utah locations;
o        remodeling Steinbeck Jewelers;
o        possibly  increasing  inventory  to  accommodate   supplying  potential
         licensees; and
o        possibly,  opening one to three  more  fine art  and/or  copy  jewelry
         stores.


                                      -8-
<PAGE>

         We believe  that we have  sufficient  capital  reserves  for all of the
foregoing activities.

         In   September    1999,   we    established    an    e-commerce    site
(www.elegantillusions.com)  to sell its products over the internet.  However, to
date internet sales have not made a material  contribution to revenues.  In June
2000, we entered into an internet alliance with Vcommerce Corporation to provide
for the sale of certain of our jewelry  over the  internet.  We had  anticipated
that our  products  would  be  available  on the  internet  as a result  of this
alliance in late August or September 2000. Our products became available through
Vcommerce  commencing in November 2000; however,  revenues from this source have
not been material to date.



                                      -9-
<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.






                                      -10-
<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 11, 2001
                                    /s/ James Cardinal
                                    ---------------------------
                                    James Cardinal, Chief Executive Officer



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




                                      -11-