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 June 30, 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 June 30, 1997
         -----                            ----------------------------

  Common Stock, par value                      17,434,338 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 six months ended June 30, 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 and six months ended June 30, 1997 are
not necessarily indicative of the results for the entire fiscal year.

<PAGE>


                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (UNAUDITED)

                                                June 30,     December 31,
                                                  1997           1996
                                              ------------   ------------

                                     ASSETS

CURRENT ASSETS
  Cash and cash equivalents                   $ 1,511,236    $ 1,886,297
  Accounts receivable                             263,661        190,270
  Prepaid income taxes                             79,075
  Inventory                                     2,115,000      1,990,174
  Prepaid expenses                                 78,568         45,643
                                              ------------   ------------
    TOTAL CURRENT ASSETS                        4,047,540      4,112,384

PROPERTY AND EQUIPMENT, NET                     1,056,807        884,707

OTHER ASSETS                                       83,269         85,853
                                              ------------   ------------
                                              $ 5,187,616    $ 5,082,944
                                              ============   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses       $    90,596    $    92,827
  Income taxes payable                                            71,915
                                              ------------   ------------
    TOTAL CURRENT LIABILITIES                      90,596        164,742

NOTE PAYABLE                                                      20,000

DEFERRED INCOME TAXES                              95,871         95,871
                                              ------------   ------------
    TOTAL LIABILITIES                             186,467        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                             2,005,494      1,806,676
                                              ------------   ------------
    TOTAL STOCKHOLDERS' EQUITY                  5,001,149      4,802,331
                                              ------------   ------------
                                              $ 5,187,616    $ 5,082,944
                                              ============   ============


    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 JUNE 30, 1997 AND 1996 (UNAUDITED)

                                                  1997           1996
                                              ------------   ------------

REVENUES                                      $ 1,956,957    $ 1,816,390

COST OF GOODS SOLD                                569,498        546,939
                                              ------------   ------------

GROSS PROFIT                                    1,387,459      1,269,451

EXPENSES
  Selling, general and administrative           1,120,960        966,710
  Depreciation and amortization                    74,442         56,170
                                              ------------   ------------

     TOTAL EXPENSES                             1,195,402      1,022,880
                                              ------------   ------------

INCOME BEFORE INCOME TAXES                        192,057        246,571

PROVISION FOR INCOME TAXES                         77,100         98,200
                                              ------------   ------------

NET INCOME                                    $   114,957    $   148,371
                                              ============   ============

WEIGHTED AVERAGE SHARES OUTSTANDING            17,434,000     17,401,000
                                              ============   ============

NET INCOME PER COMMON SHARE                   $       .01    $       .01
                                              ============   ============



     See accompanying Notes to Consolidated Condensed Financial Statements.

                                        3

<PAGE>





                   ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
         FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)

                                                  1997           1996
                                              ------------   ------------

REVENUES                                      $ 3,864,356    $ 3,196,004

COST OF GOODS SOLD                              1,149,228        976,226
                                              ------------   ------------

GROSS PROFIT                                    2,715,128      2,219,778

EXPENSES
  Selling, general and administrative           2,246,146      1,782,629
  Depreciation and amortization                   137,164        111,000
                                              ------------   ------------

    TOTAL EXPENSES                              2,383,310      1,893,629
                                              ------------   ------------

INCOME BEFORE INCOME TAXES                        331,818        326,149

PROVISION FOR INCOME TAXES                        133,000        130,000
                                              ------------   ------------

NET INCOME                                    $   198,818    $   196,149
                                              ============   ============

WEIGHTED AVERAGE SHARES OUTSTANDING            17,434,000     17,065,000
                                              ============   ============

NET INCOME PER COMMON SHARE                   $       .01    $       .01
                                              ============   ============


     See accompanying Notes to Consolidated Condensed Financial Statements.

                                        4

<PAGE>


  
                    ELEGANT ILLUSIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
         FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)

                                                  1997           1996
                                              ------------   ------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                  $   198,818    $   196,149
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                 137,164        111,000
    Changes in operating assets and
     liabilities:
     (Increase) Decrease in:
       Accounts receivable                        (73,391)        (1,247)
       Inventory                                 (124,826)      (322,920)
       Prepaid expenses                           (32,925)       (53,292)
     Increase (Decrease in):
       Accounts payable and accrued expenses       (2,231)       (28,707)
       Income taxes payable                      (150,990)
                                              ------------   ------------
         NET CASH PROVIDED BY (USED IN)
          OPERATING ACTIVITIES                    (48,381)       (99,017)
                                              ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment             (307,100)      (179,975)
  Deposits and other assets                           420         10,143
                                              ------------   ------------
         NET CASH USED BY INVESTING
          ACTIVITIES                             (306,680)      (169,832)
                                              ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Repayment of borrowing from bank
   credit line                                                  (750,000)
  Repayment of note payable                       (20,000)       (60,000)
  Sale of common stock                                           950,000
                                              ------------   ------------

         NET CASH PROVIDED BY FINANCING
          ACTIVITIES                              (20,000)       140,000
                                              ------------   ------------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                    (375,061)      (128,849)

CASH AND CASH EQUIVALENTS BALANCE,
  Beginning of period                           1,886,297      1,699,110
                                              ------------   ------------
  End of period                               $ 1,511,236    $ 1,570,261
                                              ============   ============



     See accompanying Notes to Consolidated Condensed Financial Statements.

                                        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 and six months ended June 30, 1997 are
not  necessarily  indicative  of the results to be expected  for the full fiscal
year.

    Reclassifications  - Certain 1996 balances have been reclassified to conform
with 1997 presentation.
















                                        6

<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 quarterly 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 three  months  ended  June 30,  1997  increased  $140,567  or
approximately 7.7% when compared to the three months ended June 30, 1996.

     Management believes that the increase in sales was due to the fact that two
locations  (San  Francisco  and Monterey,  California),  which opened during the
three months ended June 30, 1996,  operated for the full quarter  ended June 30,
1997.

     As of June 30, 1996,  the Company  operated 20 retail  locations  and as of
June 30, 1997, the Company operated 22 retail locations.

     The Costs of goods as a  percentage  of revenues  decreased  slightly  from
approximately  30% during the three months ended June 30, 1996 to 29% during the
three months ended June 30, 1997.

     During  the  three  months  ended  June  30,  1997,  selling,  general  and
administrative  expenses  increased when compared to the three months ended June
30, 1996 by $154,250 (approximately 16%). Management believes that this increase
was  primarily  the result of (1)  operating  the new San Francisco and Monterey
locations for a full quarter; (2) operating the Laughlin,  Nevada location which
opened  subsequent to the quarter  ended June 30, 1996;  (3) hiring and training
additional   personnel  in  the  accounting  and   distribution   department  in
anticipation  of  future  expansion;  and  (4)  opening  and  operating  the new
locations in Kenosha,  Wisconsin  and Gilroy,  California.  In this regard,  the
Company incurred higher than normal expenses in opening the Kenosha store due to
the size of the store and,  because the Kenosha store was opened at the very end
of the June 30, 1997 quarter,  there were minimal revenues from this location to
offset the opening  expenses.  As a percentage  of sales,  selling,  general and
administrative expenses increased from approximately 53% during the three months
ended June 30, 1996 to approximately  57% during the three months ended June 30,
1997.

                                      - 7 -


<PAGE>




Revenues same store locations.


     As of June 30, 1996, the Company operated 20 locations: two in New Orleans,
four in Monterey, two 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,  two in St Croix and one in Oahu.  Revenues
from these  locations for the three months ended June 30, 1997,  which  includes
revenues  from the  Pavilions  Sacramento  store that  closed in  January  1997,
decreased approximately 4% from the same period in 1996. Excluding the Pavilions
Sacramento  store from same store  operations,  same  store  revenues  decreased
approximately  2% during  the three  months  ended  June 30,  1997 from the same
period in 1996. Management believes that this decrease in same store revenues is
consistent with the general down turn in retail sales for the quarter.


Liquidity and Capital Resources

     As of  June  30,  1997,  the  Company  had  $1,511,236  in  cash  and  cash
equivalents  and  its  current  assets  exceeded  its  current   liabilities  by
$3,956,944.

     During the quarter  ended June 30,  1997,  the Company  opened two new copy
jewelry stores; one in Gilroy, California and one in Kenosha,  Wisconsin. During
the third and fourth  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 New Orleans and Tulare, California.

     Management believes that it will cost approximately  $300,000 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 June 30,
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



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:  August 11, 1997                  /s/James Cardinal
                                         ...........................
                                         James Cardinal, Chief Executive Officer




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























                                     - 10 -