SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 10-Q


[ X ]    QUARTERLY  REPORT  PURSUANT  TO  SECTION 13 OR 15(d)  OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

[   ]    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: 0-18064

                                YES CLOTHING CO.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                   CALIFORNIA
         (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)

                                   95-3768671
                      (I.R.S. EMPLOYER IDENTIFICATION NO.)

        4695 MACARTHUR COURT, SUITE 530, NEWPORT BEACH, CALIFORNIA 92660
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

       Registrant's telephone number, including area code: (714) 833-5381

Indicate by check mark whether the registrant [1] has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 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

 Number of shares of Common Stock outstanding as of February 20, 1998: 7,036,492

                                                            [YES\10Q:123197.10Q]

<PAGE>

                                YES CLOTHING CO.

                                      INDEX

                                                                        PAGE NO.

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements
         Balance Sheets....................................................3
         Statements of Operations..........................................4
         Statements of Cash Flows..........................................5
         Notes to Financial Statements.....................................6

Item 2.  Management's Discussion and Analysis of  Financial Condition
          and Results of Operations .......................................7

Item 3.  Quantitative and Qualitative Disclosures About Market Risk .......8

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.................................................8

Item 2.  Changes in Securities.............................................8

Item 3.  Defaults Upon Senior Securities...................................8

Item 4:  Submission of Matters to a Vote of Security Holders...............9

Item 5. Other Information..................................................9

Item 6:  Exhibits and Reports on Form 8-K..................................9

         Signatures........................................................9

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PART I.           FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                YES CLOTHING CO.
                                 BALANCE SHEETS

                                                                        December 31, 1998
                                                                           (Unaudited)            March 31, 1997
                                                                     ----------------------  ------------------------
<S>                                                                  <C>                     <C>

ASSETS
Current Assets:
  Cash                                                               $                2,584  $                 79,703
  Due from factor, net                                                                    0                    49,451
  Accounts receivable, non-factored-net                                              62,687                     1,585
  Other receivables and deposits                                                     69,096                   130,675
  Inventories                                                                             0                   643,931
  Prepaid expenses                                                                        0                    34,021
                                                                     ----------------------- ------------------------
         Total current assets                                        $              134,367  $                939,366
Equipment, net                                                                      108,175                   446,540
Other Assets                                                                         68,699                    73,584
                                                                     ----------------------- ------------------------
         TOTAL ASSETS                                                $              311,241  $              1,459,490
                                                                     ======================= ========================
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:
  Accounts payable                                                   $              957,361  $                954,478
  Accrued expenses and other current liabilities                                    433,972                   344,832
  Due to factor                                                                     419,674                         0
  Income Taxes payable                                                              971,000                    65,000
  Note payable                                                                    1,189,361                 1,175,000
  Contract payables                                                                  41,187                    83,964
                                                                     ----------------------- ------------------------
         Total current liabilities                                                4,012,555                 2,623,274
Long-term liabilities:
  Contract payables                                                                   2,960                    25,724
                                                                     ----------------------- ------------------------
     Total long-term liabilities                                                      2,960                    25,724
                                                                     ----------------------- ------------------------
         Total liabilities                                                        4,015,515                 2,648,998
Shareholder's Equity:
  Preferred stock, no par; 2,000,000 shares
   authorized; no shares issued and outstanding
  Common stock, no par; 20,000,000 shares
   authorized; 7,036,492 issued and outstanding                                  11,308,336                11,308,336
  Retained deficit                                                              (15,012,610)              (12,497,844)
                                                                     ----------------------- -------------------------
     Total shareholder's equity                                                  (3,704,274)               (1,189,508)
TOTAL LIABILITIES AND SHAREHOLDERS'  EQUITY                          $              311,241  $              1,459,490
                                                                     ======================= =========================
</TABLE>

                        See Notes to Financial Statements

                                                            [YES\10Q:123197.10Q]

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<TABLE>
<CAPTION>

                                YES CLOTHING CO.
                             STATEMENT OF OPERATIONS
                                   (Unaudited)

                                                         NINE MONTHS ENDED                    THREE MONTHS ENDED
                                                            December 31                           December 31
                                             ---------------------------------------- ---------------------------------
                                                     1997                1996               1997              1996
                                             -------------------- ------------------- ----------------- ---------------
<S>                                          <C>                  <C>                 <C>               <C>

Net Sales                                    $          1,777,673 $         1,611,000 $         108,964 $       581,000
Cost of Sales                                           1,798,202           1,001,000           (9,785)         520,000
                                             -------------------- ------------------- ----------------- ---------------
Gross Profit                                             (20,529)             610,000           118,749          61,000
Operating expenses:
  Selling, general &  administrative                    1,275,561           1,597,000           250,907         927,000
                                             -------------------- ------------------- ----------------- ---------------
Loss from operations                                  (1,411,090)           (987,000)         (132,158)        (866,000)
Gain on Sale of Assets                                   (66,553)              54,000         (144,038)                0
Interest income  (expense) -- net                        (66,123)           (102,000)           (6,656)         (28,000)
                                             -------------------- ------------------- ----------------- ----------------
Loss before income tax                                (1,543,766)         (1,035,000)         (282,852)        (894,000)
Provision for income taxes                                971,000                   0                 0                0
                                             -------------------- ------------------- ----------------- ----------------
Net loss                                              (2,514,766)         (1,035,000)         (282,852)        (894,000)
                                             ==================== =================== ================= ================
Loss per share                               $             (0.36) $            (0.15) $          (0.04) $         (0.13)
                                             ==================== =================== ================= ================
Average number of  shares outstanding                   7,036,000           7,036,000         7,036,000        7,036,000

</TABLE>

                       See notes to financial statements.

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<TABLE>
<CAPTION>

                                YES CLOTHING CO.
                            STATEMENTS OF CASH FLOWS
                  Nine Months Ended December 31, 1997 and 1996
                                   (Unaudited)
                           Increase (Decrease) in Cash

                                                                                 Nine Months Ended
                                                                                   December  31,
                                                                             ------------------------
                                                                                       1997                       1996
                                                                                    (Unaudited)                (Unaudited)
                                                                             ------------------------  --------------------------
<S>                                                                          <C>                       <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                          $             (2,514,766) $              (1,306,000)

  Adjustments  to reconcile  net income  (loss) to net cash  provided  (used) by
   operating activities:
   Depreciation and amortization                                                              115,000                    212,000
   Doubtful accounts                                                                          323,766                  (134,000)
   Loss (gain) on sale of assets                                                               66,553
 Increases (decreases) in changes in assets and liabilities:
   Accounts receivable, non-factored                                                         (384,868)                    (4,000)
   Due from (to) factor                                                                       469,125                    562,000
   Inventory                                                                                  643,931                  1,021,000
   Other receivables                                                                           61,579                   (110,000)
   Prepaid expenses and other assets                                                           38,906                     11,000
   Accounts payable                                                                             2,883                   (383,000)
   Accrued expenses                                                                            89,140                     20,000
   Taxes payable                                                                              906,000
   Contracts payable                                                                          (65,541)
                                                                                              --------

Net cash (used) by operating activities                                                      (248,292)                 (111,000)
                                                                                             ---------                 ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                                                                 -                    257,000
 Proceeds from sale of assets                                                                 156,812                          -
                                                                                              --------                         -

Net cash provided by investing activities                                                     156,812                    257,000
                                                                                              --------                   -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowing from bank                                                                               -                  1,174,000
  Proceeds from notes payable                                                                  14,361                     60,000
  Borrowing (repayment) from (to) related party                                                     -                   (119,000)
  Advance from factor - net                                                                         -                 (3,397,000)
  Contributions of capital                                                                          -                  2,735,000
                                                                                                    --                 ---------

Net cash provided by financing activities                                                      14,361                    333,000
                                                                                               -------                   -------

Net (decrease) increase in cash                                                               (77,119)                   479,000
                                                                                              --------                   -------

Cash and cash equivalents, beginning of period                                                 79,703                    103,000
                                                                                               -------                   -------

Cash and cash equivalents, end of period                                     $                  2,584  $                 582,000
                                                                             ========================= =========================
</TABLE>

                        See Notes to Financial Statements

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                                YES CLOTHING CO.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1.           BASIS OF PRESENTATION

The  accompanying  financial  statements  are  unaudited  but, in the opinion of
management  of the Company,  they contain all  adjustments,  consisting  of only
normal recurring accruals, necessary to present fairly the financial position at
December 31, 1997,  and the results of operations  and changes in cash flows for
the nine months  ended  December  31,  1997 and 1996.  Certain  information  and
footnote  disclosures  normally included in financial  statements that have been
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange  Commission,  although  management  of the  Company  believes  that the
disclosures  contained in these  financial  statements  are adequate to make the
information presented therein not misleading. For further information,  refer to
the financial  statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal  year ended  March 31, 1997 as filed with the
Securities  and  Exchange  Commission.  The results of  operations  for the nine
months ended December 31, 1997 are not necessarily  indicative of the results of
operations to be expected for the fiscal year ending March 31, 1998.

NOTE 2.           DUE TO/FROM FACTOR

The amount due to/from factor is net of estimated  customer returns,  allowances
and discounts as follows:

                                  December 31, 1997       March 31, 1997
                                  -----------------       ----------------
Unmatured receivables             $      82,000           $    810,000
Advances                               (382,000)              (448,000)
Open credits                            (59,000)              (313,000)
                                  -----------------       ----------------
                                  $    (359,000)          $     49,000
                                  =================       ================

NOTE 3.           INVENTORIES

Inventories consisted of the following:

                                  December 31, 1997        March 31, 1997

Raw materials                     $        000             $     176,000
Work-in-process                            000                   277,000
Finished goods                             000                   191,000
                                  -----------------        ---------------
                                  $        000             $     644,000
                                  =================        ===============

NOTE 4.            INTEREST INCOME (EXPENSE) - NET

Net interest income consisted of the following:

                                        Income    Expense        Net
                                        ------    --------    ----------
Nine months ended December 31, 1997     $0        $ 60,000    $ (60,000)
Nine months ended December 31, 1996     $0        $102,000    $(102,000)

Three months ended December 31, 1997    $0        $ 15,000    $ (15,000)
Three months ended December 31, 1996    $0        $ 28,000    $ (28,000)

                                                            [YES\10Q:123197.10Q]

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<PAGE>

ITEM 2:           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

YES Clothing Co. (the "Company")  designs,  contracts for the manufacture of and
markets  diversified  lines of apparel for women in junior sizes.  The Company's
garments are manufactured  predominantly  in the United States,  and are sold to
retail  department  stores and  specialty  chains and  stores  throughout  North
America.

RESULTS OF OPERATIONS

RECENT  DEVELOPMENTS.  In July 1997,  due to a lack of trade  credit and working
capital,  the Company  temporarily  suspended it's operations pending receipt of
additional  capital or third party credit (see Capital Resources and Liquidity).
On December  17,  1997,  the Company  filed for  protection  from its  creditors
pursuant to Chapter 11 of the United States Bankruptcy Code. The Company expects
to be dismissed from its bankruptcy proceedings in the next 30 days.

NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO NINE MONTHS ENDED DECEMBER
31, 1996

Net sales for the nine  months  ended  December  31,  1997  were  $1,777,673  as
compared to $1,611,000 for the same period in 1996. This represented an increase
of  10.35% in net  sales  for the  period.  The  increase  was  mainly  due to a
reduction  in the  Company's  reserve  for  future  chargebacks  and the sale of
assets.

Gross profit as a percentage of net sales  decreased to (1)% for the nine months
ended  December 31, 1997 from 37.9% for the nine months ended December 31, 1996.
The decrease was due to the suspension of the Company's  operations and the sale
of inventory and assets at below cost.

Operating expenses  consisting of selling,  general and administrative  expenses
decreased by $321,439 or 20.13% to $1,275,561 for the nine months ended December
31, 1997 from  $1,597,000  in the same period in 1996.  The decrease in S, G & A
was primarily due to reductions in payroll, insurance,  depreciation,  legal and
professional expenses and sales-related expenses.

Interest expense  decreased from $102,000 for the nine months ended December 31,
1996 to  $66,123  for  the  comparable  period  in 1996  due to a  reduction  in
borrowings from the factor (SEE LIQUIDITY AND CAPITAL RESOURCES).

THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER
31, 1996

Net sales for the three months ended December 31, 1997 were $108,964 as compared
to $581,000 for the same period in 1996. This represented a decrease of $472,036
or 81.25% in net sales for the period primarily due to the reasons stated in the
discussion of the nine-month period.

Gross profit as a percentage of net sales increased to 102% for the three months
ended December 31, 1997 from 10.5% for the three months ended December 31, 1996.
The increase was  primarily due to the reasons  stated in the  discussion of the
nine-month period.

Operating  expenses comprised of selling,  general and  administrative  expenses
("S, G & A")  decreased  by  $676,093  to $250,907  for the three  months  ended
December 31, 1997 from  $927,000 in the same period in 1996  principally  due to
the reasons stated above in the discussion of the nine-month period.

Interest  expenses   decreased  by  $21,344  from  $28,000  to  $6,656  for  the
three-month  period ended  December 31, 1997 due to  decreased  working  capital
requirements and borrowing from the Company's factor. (SEE LIQUIDITY AND CAPITAL
RESOURCES).

                                                            [YES\10Q:123197.10Q]

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<PAGE>

CAPITAL RESOURCES AND LIQUIDITY

On June 4, 1996,  control of the Company changed when  approximately  50% of the
Company's outstanding stock was acquired by Guy Anthome.

The Company entered into a new factoring  agreement with Republic  Factors and a
letter of credit  facility  with  Republic  National Bank of New York on May 15,
1995 (the financing  bank)  effective  through March 1998.  Both the old and new
agreements are non-recourse  (i.e., the factor purchases the Company's  accounts
receivable  that it has  preapproved,  without  recourse,  except in cases where
there are merchandise disputes in the normal course of business).

Under the new factoring  agreement,  the Company sells  substantially all of its
trade accounts receivable,  without recourse, and may request advances up to 80%
on the net sales  factored at any time before their maturity date. The factor is
responsible for the accounting and collection of all accounts receivable sold to
it  by  the  Company  and  receives  a  commission  of  0.9%  of  purchased  net
receivables.

The  agreements  are  collateralized  by accounts  receivable  and assets of the
Company.  The Company or the factor may  terminate  the credit  agreement on the
anniversary date of the agreement with at least 60 days prior written notice.

As of December  31,  1997,  the Company  had a net  working  capital  deficit of
$3,878,188,  as compared to a deficit of $1,237,000 as of December 31, 1996. The
Company's current ratio as of December 31, 1997 was 0.03, as compared to 0.56 as
of December 31, 1996.  The  decreases in working  capital and current  ratio are
primarily due to continued operating losses.

Inventories  at  December  31, 1997 were nil as compared to $644,000 at December
31, 1996, a decrease of $644,000.  The decrease was due to the suspension of the
Company's operations.

In June 1996,  the Company  entered into an agreement  with  Imperial Bank which
provided the Company with a $1,200,000  credit  facility at an interest  rate of
9.75%  secured by a letter of credit  provided by an  unaffiliated  third party.
This  credit  facility  was paid in June  1997 and  extinguished  following  the
negotiation of the referenced letter of credit. The Company and the unaffiliated
third party are currently negotiating the terms of a replacement obligation.

The Company filed for and received,  on November 20, 1996, a federal  income tax
refund of $971,000.  The Company was recently  notified by the Internal  Revenue
Service that the Company's net operating  loss  carryback  claim for fiscal 1996
has been denied.  The Company  will appeal the  decision,  and has,  pending the
outcome of the appeal, fully
reserved the refund amount.

In July 1997, the Company exhausted its available working capital,  credit lines
with its  Factor  and  trade  credit.  The  Company  temporarily  suspended  its
operations  pending  receipt of an  infusion  of equity  capital or third  party
credit.
The Company continues it's efforts to secure financing.

The Company  has  suspended  its  operations,  continued  to cut its payroll and
reduce  its  operating  costs.  The  Company  anticipates  that it  will  not be
profitable for the fiscal year ending March 31, 1998.

ITEM 3:           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         N/A

                                                            [YES\10Q:123197.10Q]

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                           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

         None.

Item 6:  Exhibits and Reports on Form 8-K

         None.

                                                            [YES\10Q:123197.10Q]

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<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        YES CLOTHING CO.

                                        BY:  /s/  Guy Anthome
                                             ----------------------------------
                                                  GUY ANTHOME
                                                  Chairman of the Board and
                                                  Chief Executive Officer

Dated:   March 3, 1998

                                                            [YES\10Q:123197.10Q]

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