<PAGE>   1
                                  UNITED STATES
                       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     SEPTEMBER 30, 1997
                                       ------------------

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period from ___________________ to ___________________

    Commission file number 33-80570
                           --------

                             APPAREL VENTURES, INC.
             -----------------------------------------------------
             (Exact Name of Registrant as specified in its charter)


           DELAWARE                                  95 - 4475766
           --------                        -----------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)



  204 WEST ROSECRANS, GARDENA, CALIFORNIA                90248
  ----------------------------------------               -----
  (Address of principal executive offices)             (Zip Code)



                                (310) 538 - 4980
 ------------------------------------------------------------------------------
              (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   X          No
    -----          -----


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

        AT NOVEMBER 12, 1997, 1,000 SHARES OF $.01 PAR VALUE COMMON STOCK OF THE
REGISTRANT WERE OUTSTANDING.


<PAGE>   2


                             APPAREL VENTURES, INC.

                                      INDEX


<TABLE>
<CAPTION>

                                                                                         PAGE
                                                                                         ----
<S>                                                                                       <C>
PART  I.  FINANCIAL  INFORMATION

ITEM 1.   FINANCIAL STATEMENTS:

          Consolidated Balance Sheet as of September 30, 1997 (Unaudited)
            and June 30, 1997.                                                             3

          Consolidated Statement of Operations for the  Three Months ended
            September 30, 1997 and 1996 (Unaudited).                                       4

          Consolidated Statement of Cash Flows for the Three Months ended
            September 30, 1997 and 1996 (Unaudited).                                       5

          Notes to Consolidated Financial Statements (Unaudited).                          6


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
          OPERATIONS AND FINANCIAL CONDITION.                                              9


PART  II. OTHER INFORMATION

ITEM  6.  EXHIBITS AND REPORTS ON FORM 8 - K                                               11



SIGNATURE                                                                                  11



EXHIBIT INDEX                                                                              12
</TABLE>

<PAGE>   3


PART  I  -  FINANCIAL INFORMATION
ITEM  1  -  FINANCIAL STATEMENTS


                             APPAREL VENTURES, INC.
                           CONSOLIDATED BALANCE SHEET

                                   A S S E T S
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,      JUNE 30,
                                                                  1997            1997
                                                              ------------    ------------
                                                               (UNAUDITED)
<S>                                                           <C>             <C>         
CURRENT ASSETS
  Cash                                                        $    630,000    $    476,000
  Due from factor                                                4,214,000      12,969,000
  Accounts receivable, net of allowance for doubtful
    accounts and discounts of $440,000 and $468,000              1,605,000       2,540,000
  Inventories                                                   14,708,000       8,372,000
  Deferred charges                                               2,643,000       2,643,000
  Deferred income taxes                                          2,599,000       1,123,000
  Prepaid expenses                                                 740,000         511,000
                                                              ------------    ------------
       Total current assets                                     27,139,000      28,634,000
                                                              ------------    ------------
PROPERTY AND EQUIPMENT, at cost, net of
  accumulated depreciation and amortization of
  $3,857,000 and $3,657,000                                      4,692,000       4,675,000

OTHER ASSETS
  Goodwill and organizational costs, net of accumulated
    amortization of $1,103,000 and $1,019,000                   12,412,000      12,482,000
  Deferred loan costs, net of accumulated amortization
    of $1,771,000 and $1,641,000                                 1,461,000       1,591,000
  Deferred income taxes                                          2,517,000       2,517,000
  Other                                                            504,000         502,000
                                                              ------------    ------------
                                                              $ 48,725,000    $ 50,401,000
                                                              ============    ============

                         LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
  Line of credit                                              $  3,512,000    $    841,000
  Accounts payable                                               3,682,000       3,299,000
  Accrued interest payable                                       1,356,000       2,466,000
  Accrued expenses                                               2,524,000       2,856,000
  Current portion of notes payable                                  77,000         108,000
                                                              ------------    ------------
        Total current liabilities                               11,151,000       9,570,000
                                                              ------------    ------------
SENIOR NOTES PAYABLE                                            35,582,000      35,555,000

NOTES  PAYABLE, net of current portion                           2,465,000       2,483,000

STOCKHOLDER'S EQUITY (DEFICIT)
  Common stock $.01 par value, 10,000 shares authorized,
     1,000 shares issued and outstanding                             1,000           1,000
  Additional paid - in capital                                  10,938,000      11,038,000
  Cumulative translation adjustment                               (192,000)       (156,000)
  Accumulated deficit                                          (11,220,000)     (8,090,000)
                                                              ------------    ------------
                                                                  (473,000)      2,793,000
                                                              ------------    ------------

                                                              $ 48,725,000    $ 50,401,000
                                                              ============    ============
</TABLE>



                 See notes to consolidated financial statements.


                                                                               3

<PAGE>   4



                             APPAREL VENTURES, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  1997           1996
                                                              ------------   ------------
<S>                                                           <C>            <C>         
NET SALES                                                     $ 2,710,000    $ 3,356,000

COST OF SALES                                                   1,728,000      2,687,000
                                                              -----------    -----------

    Gross profit                                                  982,000        669,000

OPERATING EXPENSES
  Design                                                          731,000        649,000
  Selling                                                       1,142,000      1,006,000
  Shipping                                                        303,000        288,000
  General and administrative                                    2,065,000      2,132,000
                                                              -----------    -----------
                                                                4,241,000      4,075,000
                                                              -----------    -----------
    Loss from operations                                       (3,259,000)    (3,406,000)
                                                              -----------    -----------

OTHER (EXPENSE) INCOME
  Interest expense, including amortization of deferred
    loan costs of $130,000 and $130,000                        (1,374,000)    (1,353,000)
  Interest income                                                   5,000          5,000
  Royalty income                                                   43,000         43,000
  Miscellaneous                                                   (17,000)      (199,000)
                                                              -----------    -----------
                                                               (1,343,000)    (1,504,000)
                                                              -----------    -----------

LOSS BEFORE INCOME TAXES                                       (4,602,000)    (4,910,000)

INCOME TAX BENEFIT                                              1,472,000      1,550,000
                                                              -----------    -----------

NET LOSS                                                      ($3,130,000)   ($3,360,000)
                                                              ===========    ===========
</TABLE>









                 See notes to consolidated financial statements.


                                                                               4

<PAGE>   5



                             APPAREL VENTURES, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                  1997            1996
                                                              ------------    ------------
 <S>                                                           <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                     ($3,130,000)    ($3,360,000)
  Depreciation and amortization                                    418,000         470,000
  Other                                                            (53,000)         (5,000)
  Changes in assets and liabilities
   Due from factor                                               8,755,000      12,024,000
   Accounts receivable, net                                        935,000       1,442,000
   Inventories                                                  (6,336,000)     (4,757,000)
   Deferred income tax benefits                                 (1,476,000)     (1,550,000)
   Prepaid expenses and other assets                              (231,000)       (122,000)
   Accounts payable                                                383,000       2,689,000
   Accrued interest, expenses and taxes                         (1,442,000)     (1,277,000)
                                                               -----------    ------------
  Net cash provided (used) by operating activities              (2,177,000)      5,554,000
                                                               -----------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment                                          (218,000)       (113,000)
                                                                -----------    ------------
  Net cash used by investing activities                           (218,000)       (113,000)
                                                                -----------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Borrowing under (repayment of) line of credit                 2,671,000      (4,144,000)
   Repayment of notes payable                                      (22,000)        (37,000)
   Advances to Parent Company                                     (100,000)              -
                                                                -----------    ------------
     Net cash provided (used) by financing activities            2,549,000      (4,181,000)
                                                                -----------    ------------


NET INCREASE IN CASH                                               154,000       1,260,000

CASH, BEGINNING OF PERIOD                                          476,000         244,000
                                                                -----------    ------------
CASH, END OF PERIOD                                             $  630,000      $1,504,000
                                                                ===========    ============
</TABLE>







                 See notes to consolidated financial statements.




                                                                               5

<PAGE>   6


                             APPAREL VENTURES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1997 AND 1996
                                   (Unaudited)


 NOTE 1  -  BASIS OF PRESENTATION

        The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments (consisting of normal
recurring adjustments) which are necessary for a fair presentation of the
changes in financial position, results of operations and cash flows for the
interim periods reported.

        The results of operations for the three months ended September 30, 1997
are not necessarily indicative of the results to be expected for the full year.

        The accompanying financial statements should be read with reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained herein and the Notes to consolidated financial statements,
as set forth in the Company's Form 10-K filing for the fiscal year ended June
30, 1997.

COMPANY BACKGROUND AND NATURE OF BUSINESS - Apparel Ventures, Inc. (the
"Company") is a wholly owned subsidiary of AVI Holdings, Inc. The Company was
incorporated in Delaware on May 23, 1994 and is headquartered in Gardena,
California and designs, manufactures and markets branded women's swimwear. The
Company offers seven proprietary lines catering to the Junior and Missy
categories distributed through major department stores and specialty retail
stores nationwide and, through its subsidiary, throughout Europe.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its 79% owned Portuguese subsidiary, Apparel
Ventures Europa - Textil, LDA, and wholly owned Mexican subsidiary, AVI de
Mexico, S.A. de C.V. Significant intercompany accounts and transactions are
eliminated in consolidation.

REVENUE RECOGNITION - Revenue is recognized when shipment of product occurs. An
estimate for returns and allowances is recorded against gross sales amounts to
arrive at net sales.

TRANSLATION OF FOREIGN CURRENCIES - Cumulative translation adjustments, which
arise from consolidating Portuguese operations, are included in stockholder's
equity.

ADVERTISING COSTS  -    Advertising costs are expensed in the period incurred.


NOTE 2  -  INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>

                                         September 30,         June 30,
                                                  1997             1997
                                         --------------      -----------
<S>                                         <C>              <C>       
         Piece goods and trim               $6,484,000       $3,977,000
         Work-in-process                     2,354,000          769,000
         Finished goods                      5,870,000        3,626,000
                                         -------------       ----------

                                           $14,708,000       $8,372,000
                                         =============       ==========
</TABLE>




                                                                               6

<PAGE>   7
NOTE 3 - LINE OF CREDIT

        The Company has a line of credit with a bank (the "Credit Facility")
which provides for advances and commercial letters of credit of up to $32.0
million through May 23, 1999. The Credit Facility has a sublimit of $3.0 million
for commercial letters of credit. Borrowings are limited to a predetermined
percentage of eligible factored accounts receivable and eligible finished goods
inventory, plus a seasonal overadvance of $2.5 million during September
increasing to $4.5 million from October 1 to March 15, of each year, the amount
of which is tied to bookings. Interest on base borrowings is charged at the
bank's prime rate plus 1/2%; however borrowings may be fixed, at management's
discretion for periods of 30 to 180 days on which interest is charged at LIBOR
plus 2.75 %. Interest on seasonal overadvances is charged at the bank's prime
rate plus 1 1/2%; however borrowings may be fixed, at management's discretion,
for periods of 30 to 180 days on which interest is charged at LIBOR plus 3.75%.
The Credit Facility is collateralized by receivables, finished goods inventories
and general intangibles.

        The credit agreement includes a $2,450,000 term loan due May 23, 1999.
Interest on the term loan is payable monthly at the bank's prime rate or LIBOR
plus 2.5%. The term loan is collateralized by receivables, finished goods
inventories, and general intangibles of the Company as well as certain personal
assets pledged by the Company's President.

        The Credit Facility contains covenants requiring the maintenance of
minimum tangible net worth, fixed charge coverage ratios and other matters. The
Company was in compliance with these covenants for the quarter ended September
30, 1997.


NOTE 4 - SENIOR NOTES PAYABLE

        On May 23, 1994, the Company issued $40 million principal amount of
Series A Senior Notes. The Senior Notes are due December 30, 2000 and bear
interest of 12 1/4%, payable July 1 and January 1 each year. The Senior Notes
were issued at a discount of $800,000, which is being amortized over the term of
the Senior Notes to yield a constant interest rate of 12.7%. As of September 30,
1997 there is $36.0 million principal amount of bonds outstanding net of
$418,000 in unamortized discount.

        The Company may redeem the Senior Notes, subject to a premium for
redemption, after December 31, 1998. The Senior Notes contain certain
restrictions requiring the Company to offer to redeem the Senior Notes including
a premium for redemption, in the event of a change in control of the Company.

        The indenture governing the Senior Notes contains customary covenants
regarding maintaining specified ratios of earnings to fixed charges,
restrictions on transactions with officers and affiliates, and other matters.
For the year ended June 30, 1997 the Company failed to meet the fixed charge
coverage ratio covenant required by the indenture. The bondholders waived the
violation and their right to require redemption of 10% of the bonds.

        The fair value of the senior notes payable is determined based on the
estimated current rates available to the Company for debt of similar maturities
and terms. The estimated fair value of senior notes payable as of September 30,
1997 is their carrying value.


NOTE 5 - COMMITMENT - PARENT COMPANY CAPITAL STRUCTURE

        In connection with the acquisition of the Company, AVI Holdings, Inc. 
(the "Parent") issued $10 million of Subordinated Senior Notes, $3.8 million of
Subordinated Junior Notes, $300,000 of common stock, $1.7 million of Class A
Preferred Stock, $1.7 million of Class B Preferred Stock and $1.0 million of
Class C Preferred Stock. A Subordinated Junior Note in the amount of $650,000
was immediately repaid in full for $350,000. Since the Company is a wholly -
owned subsidiary of the Parent and is the sole operating unit of the
consolidated entity, the Company is the sole source of any cash to be paid by
the parent on such securities in the form of interest, dividends or principal
repayments. The cash required by the Parent to make these payments will be
provided by dividends or cash advances by the Company. While the Parent
company's debt service requirements will be funded by the Company, the debt of
the Parent is not reflected in the balance sheet of the Company since the
Company has not guaranteed, pledged assets as security for, or have plans,
intentions, or a requirement to directly assume or repay the Parent company's
organizational obligations.


                                                                               7
<PAGE>   8







        On December 5, 1995, in order for the Company to obtain waivers of
certain defaults from the Senior Note holders, the Parent authorized the
issuance of 6,450 shares of Class D Preferred Stock and issued to certain
subscribers 4,000 shares of Class D Preferred Stock for cash consideration of
$4.0 million. Such proceeds were then contributed by the Parent to the Company.

        The $10.0 million Senior Subordinated Notes issued by the Parent bear
interest at 12% and require semi-annual interest payments on April 30 and
October 31 each year. The notes are due on April 30, 2004. The remaining $3.15
million Junior Subordinated Notes bear interest at 10.78% and require
semi-annual interest payments on the 150th day following the second and fourth
quarter of each fiscal year. The notes are due in equal annual installments on
June 30, 2002, 2003 and 2004. In the aggregate, annual debt service requirements
for each of the next 5 years is $1,540,000.

        The Indenture for the Company's Senior Notes prohibits the Company from
making distributions to the Parent for the payment of interest on the Senior
Subordinated Notes unless the Company satisfies a fixed charge coverage ratio
requirement. The Company has not satisfied this requirement and has not made any
advances to the Parent for the payment of interest. However, the Parent has
satisfied this payment obligation by issuing promissory notes (bearing interest
at the default rate) in the amounts of the interest due. In the quarter ended
September 30, 1997, the Company made an advance to the Parent in the amount of
$100,000 for the payment of certain fees which was permitted by the Indenture
for the Senior Notes.

        All classes of preferred stock of the Parent are 6% cumulative shares.
The dividends shall be paid, at the option of the Board of Directors, in the
form of cash or preferred stock, payable November 1 of each year. The payment of
cash dividends shall be restricted if such payment would result, directly or
indirectly, in a default under any obligation of the Company. The preferred
shares may be redeemed at any time for $1,000 per share plus accrued but unpaid
dividends. All shares not previously redeemed shall be redeemed by payment of
cash of $1,000 per share plus all accrued and unpaid dividends on September 30,
2004.



NOTE 7 - FINANCIAL INSTRUMENTS

        Statements of Financial Accounting Standard No. 107 "Disclosures About
Fair Value of Financial Instruments" (SFAS 107) requires the disclosure of the
fair market value of financial instruments for which it is practicable to
estimate fair value. The Company's financial instruments include cash,
receivables, accounts payable, line of credit, notes payable, and senior notes
payable. The Company considers the carrying amounts of all financial
instruments except for senior notes payable to approximate their fair value.






                                                                               8

<PAGE>   9


PART I - FINANCIAL INFORMATION

                             APPAREL VENTURES, INC.

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


        The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.

RESULTS OF OPERATIONS

        The following table sets forth information with respect to the
percentage relationship of net sales of certain items of the consolidated
statement of operations of the Company for the three months ended September 30,
1997 and 1996.

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED SEPTEMBER 30,
                                     -------------------------------------------------
                                            1997         %            1996        %
                                     -----------   --------    -----------      ------
<S>                                  <C>             <C>       <C>              <C>   
NET SALES                            $ 2,710,000     100.0%    $ 3,356,000      100.0%

COST OF SALES                          1,728,000      63.8%      2,687,000       80.1%
                                     -----------               -----------      

        Gross profit                     982,000      36.2%        669,000       19.9%

OPERATING EXPENSES
  Design                                 731,000                   649,000
  Selling                              1,142,000                 1,006,000
  Shipping                               303,000                   288,000
  General and administrative           2,065,000                 2,132,000
                                     -----------               -----------
                                       4,241,000     156.5%      4,075,000      121.4%
                                     -----------               -----------

        Loss from operations          (3,259,000)   -120.3%     (3,406,000)    -101.5%

OTHER (EXPENSE) INCOME
  Interest expense                    (1,374,000)               (1,353,000)
  Interest income                          5,000                     5,000
  Royalty income                          43,000                    43,000
  Miscellaneous                          (17,000)                 (199,000)
                                     -----------               -----------
                                      (1,343,000)    -49.6%     (1,504,000)     -44.8%
                                     -----------               -----------

LOSS BEFORE INCOME TAXES              (4,602,000)   -169.8%     (4,910,000)    -146.3%

INCOME TAX BENEFIT                     1,472,000      54.3%      1,550,000       46.2%
                                     -----------               -----------
NET LOSS                             ($3,130,000)   -115.5%    ($3,360,000)    -100.1%
                                     ===========               ===========      
</TABLE>



NET SALES

        Net sales for the first three months of fiscal 1998 decreased by $0.6
million as compared to the same period of fiscal 1997. This decrease was
primarily due to the decrease in sales of 103,000 units totaling $1.3 million of
prior season merchandise, an increase in returns and allowances of $0.2
million, offset by an increase in current season sales of $0.9 million. The
increase in returns and allowances was primarily due to cash discounts on
increased current season merchandise sales. The increase in current season
merchandise net sales was primarily in the La Blanca Group, as sales of current
season branded merchandise was up $1.3 million, offset by decrease in current
season private label merchandise sales of $0.4 million.


                                                                               9

<PAGE>   10





GROSS PROFIT

        Gross profit increased from $0.7 million or 20% of net sales to $1.0
million or 36% of net sales. The $0.3 million increase in gross profit occurred
despite a $0.6 million decrease in net sales, as noted above. Gross profit
continues to improve due to better inventory management and controls, which
results in lower prior season merchandise sales which generally are sold at
cost.

OPERATING EXPENSES

        Operating expenses increased by $0.2 million or 4.1% due primarily to a
$0.1 million increase in design wages, as a result of the additional licensed
lines and the reorganization of the Sassafras Group design department, increased
sample expense of $0.1 million and $0.1 million increase in commission expense
due to the increased sales of current season merchandise. These increases were
offset by a reduction of $0.1 million in the bonus accrual. Operating expenses
were 156% of net sales in the current fiscal quarter as compared to 121% of net
sales in the same period of fiscal 1997. This increase in operating expenses as
a percent of net sales, was due to the decrease in prior season merchandise net
sales, while operating expenses remained relatively constant.

OTHER EXPENSES

        Other expenses decreased $0.2 million or 11% due primarily to a decrease
in litigation costs incurred in fiscal 1997 that did not reoccur in fiscal 1998.

INCOME TAX BENEFIT AND NET LOSS

        Net loss before income tax benefit was $(4.6) million for the first
quarter of fiscal 1998 compared to $(4.9) million for the same quarter in fiscal
1997. The decrease in net loss reflects the (i) improved gross profit margin of
$0.3 million, (ii) reduced other expenses of $0.2 million, offset by increased
operating expenses of $0.2 million.

        The income tax benefit is estimated at a 32% effective tax rate,
consistent with the first fiscal quarter ended in 1997. The Company expects to
utilize portion of the net operating loss carryforwards during fiscal 1998 as it
realizes taxable income.

LIQUIDITY AND CAPITAL RESOURCES

        The Company's working capital requirements are seasonal, with peak needs
arising near the end of the third quarter and the beginning of the fourth
quarter of the fiscal year, primarily as a result of building inventories in the
first and second quarters of the fiscal year to supply third and fourth quarter
demand and the financing of accounts receivable in the fourth quarter of the
fiscal year.

        AVI has formed an operating company in Mexico. To support this Mexican
operation AVI will invest approximately $1.0 million in factory building through
a five year lease and approximately $1.0 million in equipment through fiscal
1998.

        The Company does not have any mandatory long-term debt principal
payment requirements until May 1999. Based upon current levels of operations and
anticipated growth, the Company expects that sufficient cash flow will be
generated from operations so that, with the other financing alternatives
available to it, the Company will be able to meet all of its debt service
requirements as well as its capital expenditure requirements for the foreseeable
future.

        At September 30, 1997, the net collateral availability under the line of
credit was approximately $5,000,000.

BACKLOG

        Backlog represents booked unshipped customer orders which, although
terminable without penalty, are believed by the Company to be firm. Because of
the seasonality of the Company's business, the Company's backlog varies over the
course of the year. Backlog usually peaks in December and January. At September
30, 1997 the Company's backlog for current season merchandise was approximately
$19.4 million, compared to $12.1 million for the same period in fiscal 1997. See
also "Seasonality" below.

                                                                              10

<PAGE>   11


SEASONALITY

        The Company's business is highly seasonal. In fiscal 1997, approximately
78% of the Company's gross sales were generated in the second half of its fiscal
year. The Company expects this pattern to continue in its current and subsequent
fiscal years. This seasonality and the relatively long times required to design
and manufacture new products have led to the development of this standard
selling cycle. The Company operates with a deficit in cash flow from operations
(seasonal working capital requirements) for the first nine months of each
fiscal year.



PART II.    OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

     (a)    EXHIBITS

                The Exhibits listed in the Index to Exhibits are filed as part
of this Quarterly Report on Form 10-Q.







                                    SIGNATURE

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.





                                            APPAREL VENTURES,  INC.





November 12, 1997                           /s/  WILLIAM F. SINGLETARY
------------------------------------        -----------------------------------
                  Date                      WILLIAM F. SINGLETARY
                                            Chief Financial Officer
                                            (Duly authorized officer and
                                            principal financial and
                                            accounting officer)







                                                                              11

<PAGE>   12





                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

                                                                         Sequential
Exhibit No.                  Description of Exhibit                       Page  No.
-------------   ------------------------------------------------         ----------
<S>             <C>                                                      <C>
   10.1         Amendment No. 7 to Loan and Security Agreement
                dated  November 7, 1996 by and between Apparel
                Ventures, Inc. and Fleet Capital Corporation.                 13

     27         Financial data schedule.                                      17
</TABLE>

























                                                                              12