<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               _________________
                                        
                                  FORM 10-Q/A
                                        
(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended March 31, 1998

                                       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 0-23669


                              SHOE PAVILION, INC.
             (Exact name of Registrant as Specified in its Charter)

                 Delaware                                      94-3289691
(State or Other Jurisdiction of Incorporation            (IRS Employer
             or Organization)                             Identification Number)
                                        
             3200-F Regatta Boulevard, Richmond, California  94804
             (Address of principal executive offices)  (Zip Code)

                                 (510) 970-9775
              (Registrant's telephone number, including area code)

        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 [ ].  No [X].

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

        Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

   Common Stock outstanding as of March 31, 1998          6,800,000 shares

                                       1
<PAGE>
 
                                     PART I

                             FINANCIAL INFORMATION

Item 1.  Financial Statements.

        The following financial statements and related financial information are
filed as part of this report:

                              Shoe Pavilion, Inc.
                     Condensed Consolidated Balance Sheets
                                  (Unaudited)
<TABLE> 
<CAPTION> 
($000, except per share data)                                                   March 31     December 31   March 31
                                                                                    1998            1997       1997
                                                                               ----------    -----------   --------
                                                                               (Restated)
                                                                                 (Note 3)
<S>                                                                            <C>           <C>           <C> 
                ASSETS
Current assets
     Cash                                                                        $   218         $   395    $   398
     Inventories                                                                  22,208          19,795     13,878
     Prepaid expenses and other                                                      414              73        156
                                                                               ----------    -----------   --------
            Total current assets                                                  22,840          20,263     14,432
Property and equipment, net                                                        2,016           2,075      1,399
Other assets                                                                         639             308         42
                                                                               ----------    -----------   --------
            Total assets                                                         $25,495         $22,646    $15,873
                                                                               ==========    ===========   ========

               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Accounts payable                                                            $ 6,755         $ 5,921    $ 3,902
     Accrued expenses                                                                936             843        994
     Line of credit                                                                1,987           7,387      5,503
     Current portion of long-term obligations                                         16              68         87
                                                                               ----------    -----------   --------
            Total current liabilities                                              9,694          14,219     10,486
Deferred rent                                                                        913             896        414
Long-term obligations, less current portion                                          230             203        161
Stockholders' equity
      Common stock- $.001 par value: 15,000,000 shares authorized;
      issued; 6,800,000, 4,500,000, 4,500,000                                          7               4          4
      Preferred stock- $.001 par value; 1,000,000 shares authorized;
      no shares issued or outstanding                                                  -               -          -
      Additional paid-in capital                                                  13,968             812        563
      Retained earnings                                                              683           6,512      4,245
                                                                               ----------    -----------   --------
            Total stockholders' equity                                            14,658           7,328      4,812
                                                                               ----------    -----------   --------
            Total liabilities and stockholders' equity                           $25,495         $22,646    $15,873
                                                                               ==========    ===========   ========
</TABLE> 

                                       2
<PAGE>
 
                              Shoe Pavilion, Inc.
                  Condensed Consolidated Statements of Income
                                  (Unaudited)

<TABLE> 
<CAPTION> 
(In thousands, except per share and operating data)

                                                                   Three Months Ended
                                                                        March 31
                                                                 ---------------------
                                                                    1998         1997
                                                                 ----------   --------
                                                                 (Restated)
                                                                   (Note 3)
<S>                                                              <C>          <C> 
Net sales                                                          $11,451      $8,155
Cost of sales and related occupancy expenses                         7,641       5,475
                                                                 ----------   --------
         Gross profit                                                3,810       2,680
Selling, general and administrative expenses                         3,008       2,034
                                                                 ----------   --------
         Income from operations                                        802         646
Interest and other, net                                                117         113
                                                                 ----------   --------
Income before taxes                                                    685         533
Income tax provision (benefit)                                        (337)         37
                                                                 ----------   --------
NET INCOME                                                         $ 1,022     $   496
                                                                 ==========   ========

Earnings per share
Basic                                                                $0.19       $0.11
Diluted                                                              $0.19       $0.11

Weighted average shares outstanding
Basic                                                                5,420       4,500
Diluted                                                              5,433       4,500

PRO FORMA
  Historical income before taxes on income                            $685        $533
  Pro forma provision for income taxes                                 258         201
                                                                 ----------   --------
  Pro forma net income                                                $427        $332
                                                                 ==========   ========

Pro forma earnings per share
Basic                                                                $0.07
Diluted                                                              $0.07

Pro forma weighted average shares outstanding
Basic                                                                6,183
Diluted                                                              6,196

Stores Open at end of period                                            56          47
</TABLE> 

See notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                              Shoe Pavilion, Inc.
                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE> 
<CAPTION> 
(In thousands)

                                                                    Three Months Ended
                                                                         March 31
                                                                   ---------------------
                                                                       1998      1997
                                                                   ----------  ---------
                                                                   (Restated)
                                                                    (Note 3)
<S>                                                                <C>         <C> 
Operating activities
Net income                                                           $  1,022  $   496
Adjustments to reconcile net income to net cash
  used by operating activities
  Depreciation                                                            175      124
  Deferred taxes                                                         (485)       -
  Cash provided (used) by changes in:
     Inventories                                                       (2,413)    (392)
     Prepaid expenses and other current assets                           (341)     (90)
     Accounts payable                                                     834   (1,792)
     Accrued expenses                                                      93      221
     Other assets                                                         154      (25)
     Deferred rent                                                        17       (24)
                                                                   ----------  ---------
        Net cash provided (used) by operating activities                 (944)  (1,482)
 
Investing activities
   Purchase of property and equipment, net                               (116)    (149)

Financing activities
   Net proceeds from initial public offering                           14,108        0
   (Payment) Proceeds (to) from line of credit                         (5,400)   2,103
   Principal payments on long-term obligations                            (25)     (18)
   Principal payments on capital leases                                     0       (8)
   Distributions paid to stockholder                                   (7,800)    (250)
                                                                   ----------  ---------
        Net cash provided by financing activities                         883    1,827
                                                                   ----------  ---------
NET (DECREASE) INCREASE IN CASH                                          (177)     196
CASH, BEGINNING OF PERIOD                                                 395      202
                                                                   ----------  ---------
CASH, END OF PERIOD                                                  $    218  $   398
                                                                   ==========  =========

Interest paid                                                        $    118  $    98
Income taxes paid                                                          33       65
</TABLE> 

See notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                         Notes to Financial Statements


1.  Basis of Presentation

General - The accompanying unaudited condensed consolidated financial statements
have been prepared form the records of the Company without audit, and in the
opinion of management, include all adjustments necessary to present fairly the
financial position at March 31, 1998 and 1997 and the interim results of
operations and cash flows for the three months then ended.   The balance sheet
as of December 31, 1997, presented herein, has been derived from the audited
financial statements of the Company for the year then ended.

Accounting policies followed by the Company are described in Note 2 to the
audited consolidated financial statements for the year ended December 31, 1997,
included in the Company's prospectus dated February 23, 1998.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for purposes of the condensed consolidated interim
financial statements.  The condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements,
including the notes thereto, for the year ended December 31, 1997.

The results of operations for the three-month periods presented herein are not
necessarily indicative of the results to be expected for the full year.

Public Offering - On February 27, 1998 the Company sold 2,300,000 shares of its
common stock for net proceeds of  $14,107,651.  In connection with the offering,
the Company terminated its status as an S corporation and recorded deferred
taxes of $485,000.

New Accounting Pronouncement - The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income during the
quarter ended March 31, 1998.  SFAS 130 requires that an enterprise report, by
major components and as a single total, the change in its net assets during the
period from nonowner sources.  As the Company has no nonowner sources,
comprehensive income and net income are the same.

2.  Pro Forma Information

The objective of the pro forma information is to show what the significant
effects on the historical information might have been had the Company not been
treated as an S Corporation for tax purposes prior to the February 23, 1998, the
effective date of the Company's initial public offering.

Income Taxes - The pro forma information presented on the condensed consolidated
statements of income reflects a provision for income taxes at an effective rate
of 38.0% for the quarter ended March 31, 1998 and 1997.

Pro Forma Net Income Per Share - Pro forma basic net income per share is based
on the weighted average number of shares of common stock outstanding during the
period plus the estimated number of shares offered by the Company (1,271,650
shares) which were necessary to fund the $7,800,000 distribution paid to the
Company's stockholder upon termination of the Company's status as an S
Corporation.  Pro forma diluted net income per share is calculated using the
number of shares used in the basic calculation plus the dilutive effect of stock
options outstanding during the period.

3. Restatement

Subsequent to the issuance of the Company's condensed consolidated financial
statements for the quarter ended March 31, 1998, the Company determined that the
effect of recording the $485,000 deferred tax asset resulting from the
termination of the Company's status as an S corporation should have been
recorded as a deduction to tax 

                                       5
<PAGE>
 
expense rather than directly to additional paid-in capital. As a result,
additional paid-in capital, retained earnings, income taxes and net income have
been restated from amounts previously reported as follows:

<TABLE> 
        (In thousands)                             As Previously        As
                                                     Reported        Restated
                                                   -------------   -----------
<S>                                                <C>             <C> 
        At March 31, 1998:
          Additional paid-in capital                  $14,453       $13,968
          Retained Earnings                               198           683

        For the quarter ended March 31, 1998:
          Income tax provision (benefit)                  148          (337)
          Net income                                     $537        $1,022
</TABLE> 

                                       6
<PAGE>
 
                                  SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 17th day of March 1999.


                              SHOE PAVILION, INC., as Registrant

                              By /s/ Dmitry Beinus
                              -----------------------------------------
                              Dmitry Beinus
                              Chairman and Chief Executive Officer

                              By /s/ Gary A. Schwartz
                              -----------------------------------------
                              Gary A. Schwartz
                              Vice President and Chief Financial Officer

                                       7
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                              INDEX TO EXHIBITS

Exhibit Number      Description
--------------      -----------

27.1                Financial Data Schedule