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, 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 March 31, 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 months ended March 31, 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 months ended March 31, 1999 are not
necessarily indicative of the results for the entire fiscal year.



<PAGE>

ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                           March 31,      December 31,
                                                             1999            1998
                                                          (unaudited)    (Derived from
                                                                            Audited
                                                                           Financial
                                                                          Statements)

                           ASSETS

CURRENT ASSETS
<S>                                                      <C>            <C>        
         Cash and cash equivalents ...................   $ 1,349,822    $ 1,560,403
         Accounts receivable .........................       463,780        415,141
         Income tax receivable .......................       161,800        142,800
         Inventory ...................................     2,612,762      2,635,870
         Prepaid expenses ............................       279,913        270,685
                                                         -----------    -----------

                  TOTAL CURRENT ASSETS ...............     4,868,077      5,024,899

PROPERTY AND EQUIPMENT, NET ..........................     1,851,222      1,743,134

OTHER ASSETS .........................................        88,888         94,188
                                                         -----------    -----------
                                                         $ 6,808,187    $ 6,862,221
                                                         ===========    ===========
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
         Accounts payable and accrued expenses .......       141,651    $   162,244
         Income taxes payable ........................             0              0
                                                         -----------    -----------
                                                             141,651        162,244

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

         TOTAL LIABILITIES ...........................       294,522        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 ...........................     2,677,018      2,710,459
         Less treasury stock at cost (62,067 shares in
         1999 and 1998) ..............................       (84,008)       (84,008)
                                                         -----------    -----------
                                                           6,513,665      6,547,106
                                                         $ 6,808,187    $ 6,862,221
                                                         ===========    ===========
</TABLE>








     See Accompanying Notes to Consolidated Condensed Financial Statements


                                       -1-
<PAGE>


ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998

                                               1999           1998
                                           -----------    -----------
REVENUES ...............................    $2,254,863     $2,165,578

COST OF GOODS SOLD .....................       644,930        655,555

GROSS PROFITS ..........................     1,609,933      1,510,023

SELLING, GENERAL AND ADMINISTRATION ....     1,662,374      1,535,863

INCOME(LOSS) BEFORE INCOME TAXES .......       (52,441)       (25,840)

PROVISION FOR INCOME TAXES .............       (19,000)       (10,906)

NET INCOME(LOSS) .......................   ($   33,441)   ($   14,934)


WEIGHTED AVERAGE SHARES OUTSTANDING ....     6,084,379      5,757,333


BASIC AND DILUTED INCOME(LOSS) PER SHARE   ($     0.01)         (0.00)

























     See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -2-
<PAGE>

ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                         1999          1998
                                                                         ----          ----

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                <C>            <C>         
         Net income(loss) ......................................   ($   33,441)   ($   14,934)
         Adjustment to reconcile net Income
          to net cash provided by (used in)
          operating activities:
                  Depreciation and amortization ................        97,690
                                                                                       85,755
                  Changes in operating assets and liabilities:
                              (Increase) Decrease in:
                           Accounts Receivable .................       (48,639)       (55,288)
                           Inventory ...........................        23,108
                                                                                      172,088
                           Prepaid expenses ....................        (9,228)       (38,797)
                              Increase (Decrease in):
                           Accounts payable and accrued expenses       (20,593)        (5,360)
                           Income taxes payable ................       (19,000)       (16,958)

NET CASH PROVIDED BY OPERATIONS ................................       (10,103)       126,506

CASH FLOW FROM INVESTING ACTIVITIES
         Purchase of property and equipment ....................      (205,780)       (54,318)
         Other assets ..........................................         5,302        (19,521)

NET CASH USED IN INVESTING ACTIVITIES ..........................      (200,477)       (73,839)

CASH FLOW FROM FINANCING ACTIVITIES
         Sales of common stock
         Purchase of treasury stock ............................             -        (37,952)

NET CASH USED IN FINANCING ACTIVITIES ..........................             0        (37,952)

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS ............      (210,581)        14,715

CASH AND CASH EQUIVALENT BALANCE,
         Beginning of period ...................................     1,560,403      1,321,448

CASH AND CASH EQUIVALENT BALANCE,
         End of period .........................................   $ 1,349,822    $ 1,336,163

</TABLE>
















     See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -3-
<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 months ended March 31,
     1999 are not  necessarily  indicative of the results to be expected for the
     full fiscal year.

2.   RESTATEMENT OF QUARTER ENDED MARCH 31, 1998

     Subsequent  to the year ended  1998 the  Company  determined  that an error
     related to the  elimination  of  intercompany  inventory  profits  affected
     operating results in previous quarters of 1998. See unaudited Note 7 to the
     Company's   Consolidated  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 quarter ended
     March 31, 1998 have been restated to correct these errors.

<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 March 31, 1999  increased  $89,285 or 4.1%
when compared to the quarter ended March 31, 1998.

         We believe  that the increase in sales was due to the addition of seven
locations (Birch Run, Michigan City, Grapevine,  Ontario,  Maui, Miromar and St.
Thomas) in 1998 and one location (St.  Thomas) in 1999,  offset by a decrease in
same store sales of  approximately  10.5%  compared to the first quarter of 1998
and the closing of our Portland, Oregon location in January 1999.

         As of March 31, 1998,  we operated 23 retail  locations and as of March
31,  1999,  we operated 30 retail  locations.  Although we added seven stores in
1998  and one  store in the  first  quarter  of 1999,  we  closed  our  Ontario,
California  store on May 1, 1999 and, as noted  above,  we closed our  Portland,
Oregon store in January 1999.

         Costs of goods as a  percentage  of revenues  decreased  slightly  from
30.3% in the quarter  ended  March 31, 1998 to 28.6% in the quarter  ended March
31, 1999. We believe that this decrease was due to our ongoing efforts to reduce
costs.

         During  the  quarter  ended  March  31,  1999,  selling,   general  and
administrative  expenses increased when compared to the first quarter of 1998 by
$126,511  (approximately 8.2%). As a percentage of sales,  selling,  general and
administrative  expenses  increased  from  approximately  70.9% during the first
quarter  of 1998 to  approximately  73.7%  during  the  first  quarter  of 1999.
Excluding  depreciation,  during the  quarter  ended  March 31,  1999,  selling,
general and administrative expenses increased when compared to the first quarter
of 1998 by $37,123  (approximately  2.6%).  As a percentage  of sales,  selling,
general and  administrative  expenses,  excluding  depreciation,  increased from
approximately  67.0%  during the first  quarter of 1998 to  approximately  69.4%
during the first  quarter of 1999.  We believe  that the  increase  in  selling,
general and administrative expenses was the result of the cost of setting up and
operating the seven new stores opened in 1998 subsequent to the end of the first
quarter of 1998 and  setting up and  operating  one new store  opened in January
1999,  offset by  expenses  saved as a result  of the  closing  of the  Portland
location.  Expenses  incurred  in setting up and  commencing  operations  at new
locations are non-recurring  and are fully expensed when incurred.  Labor costs,
in this tight labor  market,  rose as a  percentage  of sales from 20.8% for the
period ending March 31, 1998 to 23.6% for the same period in 1999.  




--------------------------  
1 The  financial  information  for the  quarter  ended  March 31,  1998 has been
restated.  See Note 2 to our unaudited financial statements contained in Part I;
Section 1 of this Form 10-QSB.

<PAGE>

Revenues same store locations.

         As of March  31,  1998,  we  operated  23  locations  that were also in
operation at March 31,  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 Kenosha, one in Tulare, two in St Croix, one in
St Thomas and one in Oahu.  Revenues from these  locations for the quarter ended
March 31, 1999, decreased approximately 10.5% from the same period in 1998.

         We believe that the overall  decrease in same store revenues during the
first  quarter of 1999 was due, in part,  to extended  periods of bad weather at
certain of our locations  which  disrupted  foot traffic flow. A good portion of
our sales come from walk-in traffic.

         We  believe,  but cannot  assure,  based on  results  for April and the
beginning of May 1999,  that same store sales will  stabilize  during the second
quarter of 1999.  In this  regard,  same store sales for the month of April 1999
compared to April 1998 were up approximately 3%.

Net Loss

         During  the  quarter  ended  March  31,  1999,  although  we  increased
revenues,  we incurred a net loss of $33,441. We believe that the primary reason
for this loss was the significant decrease in same store sales, mitigated by our
reduction of same store expenses.

         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.

         During the quarter  ended March 31, 1999, we  effectively  have reduced
selling, general and administrative expenses, exclusive of depreciation,  at our
locations that have been  operating for at least one full year by  approximately
9.8% compared to the first quarter of 1998.

         We also are evaluating our locations and are in the process of shedding
those locations that are not and, in our opinion will not,  generate  sufficient
profits.  In this regard,  we have closed our Ontario location and plan to close
our Kenosha location.


<PAGE>

Inventory Turnover Ratios

         During the first  quarter of 1999,  we  maintained  an  inventory  that
provided a turnover ratio of 0.98. We do not believe that our current  inventory
turnover is indicative  of impaired or  slow-moving  inventory.  We note that we
opened seven locations during 1998 and one in the first quarter of 1999 and have
not had the opportunity of a full year's sales.

         We  believe  that  our  current  inventory  turnover  ratio  of 0.98 is
appropriate  for our plan of operation,  including  opening new locations out of
inventory on hand and  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 1998 was 1.03.

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.


Liquidity and Capital Resources

         As of March 31, 1999, we had  $1,349,822 in cash and cash  equivalents,
down  $210,581  from  December 31,  1998,  and our current  assets  exceeded our
current liabilities by $4,726,472, down $136,183 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 one in  January  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 are  limiting  our  expansion  plans at this  time.  We  opened  one
additional  store at the Royal  Dane Mall in St  Thomas,  USVI  during the first
quarter of 1999 and plan to open two additional  locations  during the remainder
of 1999.



<PAGE>

         We anticipate that one of these stores,  Universal  Studios in Orlando,
Florida will open on May 27, 1999.

         The cost of opening  new stores  generally  ranges  from  approximately
$120,000 to $140,000, depending upon a number of factors. We anticipate that the
opening of  additional  new stores will be funded from  current  cash  reserves,
revenues and/or equity financing.

         We also are in the process of setting up an e-commerce site to sell our
products over the internet. We anticipate, but cannot assure, that the site will
be operational in August 1999. 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.

         We had a commitment for a line of credit up to $2,000,000 from Comerica
Bank  to  open  new  stores  and  our  subsidiary,   Elegant   Illusions,   Inc.
(California),  had a  commitment  for a $350,000  revolving  line of credit from
Comerica Bank for working capital purposes.  However,  we have elected not to go
forward with these lines of credit.

         No  assurance  can be given  that the  Company  will be able to  secure
additional  financing  over and above its current  resources,  if  required.  In
addition,  no  assurance  can be given as to the actual  number or  location  of
stores that the Company will open in the future.


<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.




<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 14, 1999                    /s/ James Cardinal
                                       ---------------------------------------
                                       James Cardinal, Chief Executive Officer



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