<PAGE>
                                       
                    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 JUNE 30, 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                               95-3768671
(STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

                                       
       1380 WEST WASHINGTON BOULEVARD, LOS ANGELES, CALIFORNIA 90007
           (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

Registrant's telephone number, including area code:   (213) 765-7800 



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 August 11, 1996:   7,036,492 

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                               YES CLOTHING CO.
                                           
                                    INDEX
                                           
                                           
                                                                        PAGE NO.
          
PART I.     FINANCIAL INFORMATION

            Balance Sheets                                                  3

            Statements of Operations                                        4

            Statements of Cash Flows                                        5

            Notes to Financial Statements                                   6

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


PART II.    OTHER INFORMATION

            Item 4:   Submission of Matters to a Vote of Security Holders   8
         
            Item 6:   Exhibits and Reports on Form 8-K                      8

            Signatures                                                      9 

                                       2


<PAGE>
                      PART I.  FINANCIAL INFORMATION
                                       
                              YES CLOTHING CO.
                               BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   June 30        March 31
                                                                     1997          1997
                                                                 (unaudited)
<S>                                                             <C>            <C>
ASSETS
Current Assets:
    Cash                                                              $7,000        $80,000
    Due from factor                                                       --         49,000
    Accounts receivable, non-factored-net                             73,000          1,000
    Due from officers                                                  4,000          4,000
    Other receivables and deposits                                     8,000          7,000
    Inventories                                                      122,000        644,000
    Prepaid expenses                                                  31,000         34,000
                                                                ------------   ------------
                                                                       
        Total current assets                                         245,000        819,000

Property and equipment, at cost, net of
  accumulated depreciation and amortization                          418,000        447,000
Due from officers, net of current portion                            126,000        120,000
Other assets                                                          74,000         73,000
                                                                ------------   ------------

 TOTAL ASSETS                                                       $863,000     $1,459,000
                                                                ------------   ------------
                                                                ------------   ------------

LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current Liabilities:
    Accounts payable                                              $1,112,000       $954,000
    Accrued expenses and other current liabilities                   369,000        345,000
    Due to factor                                                    283,000             --
    Note payable                                                   1,189,000      1,175,000
    Due to related party                                                  --         65,000
    Contracts payable                                                 62,000         84,000
                                                                ------------   ------------

        Total current liabilities                                  3,015,000      2,623,000
                                                                ------------   ------------

Long-term liabilities:
    Contracts payable, net of current portion                         27,000         26,000
                                                                ------------   ------------

        Total long-term liabilities                                   27,000         26,000
                                                                ------------   ------------

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;
      7,036,000 issued and outstanding                            11,308,000     11,308,000
      Accumulated deficit                                        (13,487,000)   (12,498,000)
                                                                ------------   ------------
                                                                                           
        Total shareholder's equity/(deficit)                      (2,179,000)    (1,190,000)
                                                                ------------   ------------
                                                                                           
TOTAL LIABILITIES/SHAREHOLDER'S EQUITY/(DEFICIT)                    $863,000     $1,459,000
                                                                ------------   ------------
                                                                ------------   ------------
</TABLE>
                        See Notes to Financial Statements

                                     3
<PAGE>
                             YES CLOTHING CO.
                         STATEMENT OF OPERATIONS
                               (Unaudited)

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED
                                                     June 30        
                                             -----------------------
                                                 1997        1996    
                                                 ----        ----
<S>                                          <C>          <C>
Net Sales                                    $1,401,000   $1,030,000
Cost of  Sales                                1,636,000      481,000
                                             ----------   ----------

Gross Profit / (Loss)                          (235,000)     549,000

Operating expenses:
  Selling, general &  
  administrative                                709,000      669,000
                                             ----------   ----------

Loss from operations                           (944,000)    (120,000)

Gain on sale of assets                               --       54,000
Interest income(expense) -- net                 (45,000)     (75,000)
                                             ----------   ----------

Loss before income tax                         (989,000)    (141,000)

Provision for income taxes                           --           --

Net loss                                       (989,000)    (141,000)
                                             ----------   ----------
                                             ----------   ----------

Loss per share                                   $(0.14)      $(0.02)
                                             ----------   ----------
                                             ----------   ----------

Average number of shares outstanding          7,036,000    7,036,000
                                             ----------   ----------
                                             ----------   ----------
</TABLE>

                        See Notes to Financial Statements 

                                       4
<PAGE>
                                 YES CLOTHING CO.
                             STATEMENTS OF CASH FLOWS
                     Three Months Ended June 30, 1997 and 1996
                                   (Unaudited)
                           Increase/(Decrease)  in Cash
                                           
<TABLE>
<CAPTION>

                                                                   1997           1996
                                                                   ----           ---- 
<S>                                                              <C>            <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                        $(989,000)     $(141,000)

Reconciliation of net loss to net cash flows from operating 
activities:
  Depreciation and amortization                                      28,000       (52,000)
  Increase (decrease) in credits due customers
     and allowance for doubtful accounts                             15,000       (36,000)
  Increase (decrease) in cash due to changes in assets
     and liabilities:
        Due from factor                                             117,000        538,000
        Accounts receivable, nonfactored                            (43,000)      (247,000)
        Other receivables and deposits                               (7,000)       (65,000)
        Inventories                                                 522,000        530,000 
        Prepaid expenses                                              3,000        (11,000)
        Other assets                                                  1,000         (5,000)
        Accounts payable                                            158,000       (741,000)
        Accrued expenses                                             24,000        (12,000)
                                                                  ---------      ---------  
                                          
  Net cash used in operating activities                            (171,000)      (242,000)
                                                                  ---------      ---------  
                                                    
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                    --        320,000
                                                                  ---------      ---------  
                                                    
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on contracts payable                                     (21,000)       (15,000)
  Borrowing (repayment) from/to related party                       (65,000)      (119,000) 
  Advances from factor -- net                                       170,000     (3,240,000)
  Borrowing from bank                                                14,000        475,000
  Contributions of capital                                               --      2,735,000
                                                                  ---------      ---------  
  Net cash provided (used) by financing activities                   98,000       (164,000)
                                                                  ---------      ---------  

NET INCREASE (DECREASE) IN CASH                                      73,000        (86,000)
                                                              
CASH AND CASH EQUIVALENTS, Beginning of period                       80,000        103,000
                                                                  ---------      ---------  
                                                              
CASH AND CASH EQUIVALENTS, End of period                             $7,000        $17,000
                                                                  ---------      ---------  
                                                                  ---------      ---------  
                                                              
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period:
       For interest                                                 $45,000        $75,000
                                                                  ---------      ---------  
</TABLE>
                          See Notes to Financial Statements 

                                       5
<PAGE>

                                   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, contain all adjustments, consisting of only 
normal recurring accruals, necessary to present fairly the financial position 
at June 30, 1997, and the results of operations and changes in cash flows for 
the three (3) months ended June 30, 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 three (3) months ended June 30, 1997 are 
not necessarily indicative of the results of operations to be expected for 
the fiscal year ending March 31, 1998.

NOTE 2 -- DUE FROM/TO FACTOR  
     The amount due to factor is net of estimated customer returns, allowances
and discounts as follows:
                                             June 30, 1997   March 31, 1997

Unmatured receivables (with and without 
  recourse)                                      $693,000         $810,000
Advances                                         (618,000)        (448,000)
Open credits                                     (358,000)        (313,000)
                                               ----------         --------

                                               $ (283,000)         $49,000
                                               ----------         --------
                                               ----------         -------- 

NOTE 3 -- INVENTORIES
     Inventories consisted of the following:
                                            June 30, 1997        March 31, 1997

Raw materials                                     $50,000              $176,000
Work-in-process                                    24,000               277,000
Finished goods                                     48,000               191,000
                                                   ------               -------

                                                 $122,000              $644,000
                                                 --------              --------
                                                 --------              --------

NOTE 4 -- INTEREST INCOME (EXPENSE) - NET:
     Net interest income consisted of the following:
                                     Income       Expense        Net      
                                     ------       -------        ---     

Three months ended June 30, 1997        $  0       $(45,000)     $(45,000)
Three months ended June 30, 1996        $  0       $(75,000)     $(75,000)

                                       6
                                                  


<PAGE>
                                       
         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, and 
for young men. 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

     The Company terminated its license agreements with AUDIENCE and CS 
SPORTSWEAR, INC., on April 14, 1997, and July 31, 1997, respectively. The 
Company continued to sell existing AUDIENCE  inventory through May 1997.

     The following table sets forth, for the periods indicated, the 
percentage of net sales represented by certain items in the Company's 
Statements of Operations.
    
                                         PERCENTAGE OF NET SALES 
                                         ----------------------- 
                                            Three Months Ended
                                                  June 30
                                             1997       1996    
                                             ----       ---- 

     Net sales                               100.0      100.0
     Cost of sales                           116.8       46.7
                                             -----      -----
     Gross profit/(loss) from sales          (16.8)      53.3
     Operating expenses                       50.6       64.9
                                             -----      -----
     Loss from operations                    (67.4)     (11.6)
     Gain on sale of asset                       0        5.2
     Interest expense -- net                  (3.2)      (7.3)
                                             -----      -----
     Loss before income taxes                (70.6)     (13.7)
     Tax provision                               0          0
                                             -----      -----
     Net loss                                (70.6)     (13.7)
                                             -----      -----


THREE (3) MONTHS ENDED JUNE 30, 1997, COMPARED TO THREE (3) MONTHS ENDED JUNE
30, 1996

     NET SALES for the three (3) months ended June 30, 1997 were $1,401,000 
as compared to $1,030,000 for the same period in 1996.  This represents an 
increase of $371,000 or 36% in net sales for the period primarily due to the 
introduction of the AUDIENCE and CS SPORTSWEAR apparel lines.

     GROSS PROFIT AS A PERCENTAGE OF NET SALES decreased to (16.8)% for the 
three (3) months ended June 30, 1997 from 53.3% for the three months ended 
June 30, 1996.  The decrease in gross profit as a percentage of gross sales 
was primarily due to higher development costs and lower than anticipated 
sales price per unit of the AUDIENCE and CS SPORTSWEAR apparel lines.

     OPERATING EXPENSES comprised of selling, general and administrative 
expenses ("S, G & A") increased by $40,000 to $709,000 for the three (3) 
months ended June 30, 1997, from $669,000 in the same period in 1996.  The 
increase in S, G & A was primarily due to increases in payroll and 
sales-related expenses.

                                       7

<PAGE>

     INTEREST EXPENSES decreased by $30,000, from $75,000 to $45,000, for the 
three (3) month period ended June 30, 1997 due a reduction in the average 
outstanding loan balance from the Company's factor.

CAPITAL RESOURCES AND LIQUIDITY

     As of June 30, 1997, the Company had a net working capital deficit of 
$2,771,000, as compared to a deficit of $390,000 as of  June 30, 1996.  The 
Company's current ratio as of June 30, 1997 was 0.08, as compared to 0.77 as 
of June 30, 1996.  The decreases in working capital and current ratio are 
primarily due to continued operating losses.  

     Inventories at June 30, 1997 were $122,000 as compared to $868,000 at 
June 30, 1996, a decrease of $746,000. The decrease in inventory levels was 
primarily due to the Company's difficulty in securing trade credit. The 
Company's open-order backlog as of June 30, 1997 was approximately $400,000, 
compared to a nil open-order backlog as of June 30, 1996.

     In June 1996, the Company entered into an agreement with Imperial Bank 
which supplied the Company with a $1,200,000 credit facility secured by a 
standby letter of credit provided by an unaffiliated third party. The credit 
facility has now been paid off and extinguished following the negotiation of 
the referenced standby letter of credit. The Company and the unaffiliated 
third party are currently negotiating the terms of a replacement obligation.

     The Company has funded its business activities principally from factor 
advances, a federal income tax refund of $971,000 received by the Company on 
November 20, 1996, and the referenced credit facility from Imperial Bank. The 
Company believes that the financial sources available to it will not provide 
sufficient resources to finance the Company's currently anticipated working 
capital needs and capital expenditures. The Company requires additional 
borrowings and/or infusions of capital to avoid a negative impact on the 
Company's continued future operations.

     The Company has continued to cut its payroll and reduce its operating 
costs, and is continuing to actively seek additional sources of investment 
capital.  Notwithstanding the foregoing, the Company anticipates that it may 
not be profitable for the fiscal year ending March 31, 1998. Moreover, absent 
additional capital or third party credit, the Company may need to consider 
such measures as temporarily suspending its business operations pending the 
receipt of additional funding.  

                                       
                          Part II. OTHER INFORMATION     

Item 4 -- Submission of Matters to a Vote of Security Holders:     None 

Item 6 -- Exhibits and Reports on Form 8-K:    None
            
                                       8

<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



                                       BY:  /s/ Jeffery P. Busse 
                                           ----------------------------
                                           JEFFREY P. BUSSE
                                           Chief Financial Officer and
                                           Secretary


Dated:   August 11, 1997

                                       9