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, 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 June 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 six months ended June 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 six months ended June 30, 1999
are not necessarily indicative of the results for the entire fiscal year.








<PAGE>

                     ELEGANT ILLUSIONS, INC. AND SUBSIDARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS


                                                      June 30,    December 31,
                                                        1999         1998
                                                    (Unaudited)  (Derived from
                                                                   Audited
                                                                  Financial
                                                                  Statements)

                                     ASSETS

CURRENT ASSETS
         Cash and cash equivalents                  $1,452,874    $1,560,403
         Accounts receivable                           387,514       415,141
         Income tax receivable                         114,961       142,800
         Inventory                                   2,671,782     2,635,870
         Prepaid expenses                              245,609       270,685
                                                    ----------    ----------
                 TOTAL CURRENT ASSETS                4,872,739     5,024,899


PROPERTY AND EQUIPMENT, NET                          1,865,132     1,743,134

OTHER ASSETS                                            88,489        94,188
                                                    ----------    ----------
                                                    $6,826,360    $6,862,221
                                                    ==========    ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
         Accounts payable and accrued expenses         114,959      $162,244
         Income taxes payable                                0             0
                                                       114,959       162,244

DEFERRED INCOME TAXES                                  152,871       152,871
                                                    ----------    ----------
                   TOTAL LIABILITIES                   267,830       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                           2,721,882
         Less treasury stock at cost (62,067
              shares in 1999 and 1998)                 (84,008)      (84,008)
                                                    ----------    ----------
                                                     6,558,529     6,547,106
                                                    ----------    ----------
                                                    $6,826,360    $6,862,221
                                                    ==========    ==========


         See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -1-
<PAGE>

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



                                                        1999          1998
                                                     ----------    ----------
REVENUES                                             $4,905,056    $4,397,906

COST OF GOODS SOLD                                    1,559,690     1,329,681
                                                     ----------    ----------
GROSS PROFITS                                         3,345,366     3,068,225

SELLING, GENERAL AND ADMINISTRATION                   3,325,943     3,239,432
                                                     ----------    ----------
INCOME(LOSS) BEFORE INCOME TAXES                         19,423      (171,207)

PROVISION FOR INCOME TAXES                                8,000       (56,502)
                                                     ----------    ----------
NET INCOME(LOSS)                                        $11,423     ($114,705)
                                                     ==========    ==========


WEIGHTED AVERAGE SHARES OUTSTANDING                   6,084,379     5,831,000
                                                     ==========    ==========

BASIC AND DILUTED INCOME(LOSS) PER SHARE                  $0.00        ($0.02)
                                                     ==========    ==========






      See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -2-

<PAGE>

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



                                                        1999          1998
                                                     ----------    ----------
REVENUES                                             $2,650,194    $2,232,328

COST OF GOODS SOLD                                      914,761       674,126
                                                     ----------    ----------
GROSS PROFITS                                         1,735,433     1,558,202

SELLING, GENERAL AND ADMINISTRATION                   1,661,020     1,703,568
                                                     ----------    ----------
INCOME BEFORE INCOME TAXES                               74,413      (145,366)

PROVISION FOR INCOME TAXES                               27,000       (45,596)
                                                     ----------    ----------
NET INCOME                                              $47,413      ($99,770)
                                                     ==========    ==========


WEIGHTED AVERAGE SHARES OUTSTANDING                   6,084,379     5,904,667
                                                     ==========    ==========

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



      See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -3-

<PAGE>

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

<TABLE>
<CAPTION>
                                                                          1999           1998
                                                                       ----------     ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                    <C>            <C>
         Net income(loss)                                                 $11,423      ($114,705)
         Adjustments to reconcile net income
             to net cash provided by (used in)
            operating activities:
                     Depreciation and amortization                        199,469        179,035
                      Issuance of stock for services                            -        205,000
                     Changes in operating assets and liabilities:
                  (Increase) Decrease in:
                    Accounts receivable                                    27,627        (48,740)
                    Inventory                                             (35,912)      (139,007)
                    Prepaid expenses                                       25,076        (63,308)
                  Increase (Decrease in):
                    Accounts payable and accrued expenses                 (47,285)       (53,247)
                    Income taxes payable                                  $27,840       (162,428)
                                                                       ----------     ----------
NET CASH PROVIDED BY OPERATIONS                                           208,238       (197,400)
                                                                       ----------     ----------
CASH FLOW FROM INVESTING ACTIVITIES
         Purchase of property and equipment                              (321,467)      (275,575)
         Other assets                                                       5,699         (5,878)
                                                                       ----------     ----------
NET CASH USED IN INVESTING ACTIVITIES                                    (315,768)      (281,453)
                                                                       ----------     ----------
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                      (107,530)       203,195

CASH AND CASH EQUIVALENT BALANCE,
         Beginning of period                                            1,560,403      1,321,448
                                                                       ----------     ----------
CASH AND CASH EQUIVALENT BALANCE,
         End of period                                                 $1,452,873     $1,524,643
                                                                       ==========     ==========
</TABLE>


         See Accompanying Notes to Consolidated Condensed Financial Statements

                                       -4-


<PAGE>

                   ELLEGANT ILLUSIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.  COMMENTS

The accompanying  unaudited  consolidated  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. Th SB for 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 six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.

2.   RESTATEMENT OF THREE AND SIX MONTH PERIOD ENDED JUNE 30, 1998

Subsequent to the year ended 1998 the Company  determined  that an error related
to the elimination of inter-company 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 three and six month  periods ended June 30, 1998 have
been restated to correct these errors.


                                      -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 1

         Sales for the quarter ended June 30, 1999  increased  $417,866 or 18.7%
when compared to the quarter ended June 30, 1998.

         We believe  that the increase in sales was due to the addition of seven
locations (Birch Run, Michigan City, Grapevine,  Ontario,  Lahini-Maui,  Seaport
and Miromar) in 1998 and two  locations  (Royal Dane in St. Thomas and Universal
Studios in Orlando) in 1999 and  occurred in spite of closing two  locations  in
1999 as noted below.

         As of June 30, 1998,  we operated 25 retail  locations  and, as of June
30,  1999,  we operated 30 retail  locations.  Although we added seven stores in
1998 and two stores in the first half of 1999,  we closed our  Portland,  Oregon
and  Ontario,  California  stores  on  January  3,  1999  and  April  28,  1999,
respectively.  In our last  quarterly  report we noted that we were  considering
closing our  Kenosha,  Wisconsin  store.  The Kenosha  store closed on August 3,
1999.

         Costs of goods as a percentage of revenues  increased from 30.2% in the
quarter  ended June 30, 1998 to 34.5% in the  quarter  ended June 30,  1999.  We
believe that this increase was due to a shift in the type of products  purchased
by our  customers to higher  priced  products that have a lower gross margin and
increases in sales of our discounted merchandise.

         During  the  quarter  ended  June  30,  1999,   selling,   general  and
administrative expenses decreased when compared to the second quarter of 1998 by
$42,548  (approximately  2.5%). As a percentage of sales,  selling,  general and
administrative  expenses  decreased from  approximately  76.3% during the second
quarter of 1998 to  approximately  62.7% during the second  quarter of 1999.  We
believe that the decrease in selling,  general and  administrative  expenses was
the result of our closing of the Portland and Ontario locations, our eliminating
certain media advertising and the 2% increase in same store sales.

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

                                       -6-

<PAGE>

Revenues same store locations.

         As of June 30,  1998,  we  operated  24  locations  that  were  also in
operation  at June 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 Kenosha, one in Tulare, two in St Croix, one in
St Thomas,  one in Oahu, one in Birch Run and one in Michigan City. Our Portland
location was in  operation  at June 30,  1998,  but was closed prior to June 30,
1999. Accordingly, same store revenues excludes our Portland location.


         Revenues from same store locations for the quarter ended June 30, 1999,
increased approximately 2% from the same period in 1998.

         Net Income

         During the  quarter  ended June 30,  1999,  we  realized  net income of
$47,413 compared to a net loss of ($99,770) for the second 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 on August 3, 1999.

         Inventory Turnover Ratios

         During the second  quarter of 1999,  we  maintained  an inventory  that
provided  a  turnover  ratio of  1.18:1.  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 two in the first half of 1999 and
have not had the opportunity of a full year's sales.

         We  believe  that our  current  inventory  turnover  ratio of 1.18:1 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 second quarter of
1998 was 1.02:1.

                                       -7-

<PAGE>

         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 June 30, 1999, we had  $1,452,874  in cash and cash  equivalents,
down  $107,529  from  December 31,  1998,  and our current  assets  exceeded our
current liabilities by $4,757,780, down $104,875 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.

         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 early  September 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.


                                       -8-
<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.

                                       -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 13, 1999                 s/James Cardinal
                                       ---------------------------------------
                                       James Cardinal, Chief Executive Officer


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
















                                      -10-