<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

(Mark One)

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

     For the quarterly period ended DECEMBER 31, 1996

                                       OR

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

Commission file number 0-28760

                      Pacific Coast Apparel Company, Inc.
                      -----------------------------------
             (Exact name of registrant as specified in its charter)

           California                                      95-4536683
           ----------                                      ----------
(State or other Jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

         11828 Teale St.
         Culver City, CA                                      90230
         ---------------                                      -----
(Address of principal office)                              (Zip Code)

Registrant's telephone number,
including area code                                      (310) 636-8432
                                                         --------------
                                 Inapplicable
                                 ------------
(Former name, former address and former fiscal year, if changed since last
report)

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 December 31, 1996              2,980,000

Transitional Small Business Disclosure Format    Yes [_]   No [X]
 
<PAGE>
 
FORWARD LOOKING INFORMATION

     In addition to historical information, this Annual Report contains forward-
looking statements, such as those pertaining to the Company's future sales and
revenues, return on investment, profitability, and cash requirements.  Forward-
looking statements involve numerous risks and uncertainties.  The following
factors, among others, could cause actual results and future events to differ
materially from those set forth or contemplated in the forward-looking
statements:  economic conditions, competitive products and pricing, new product
development, the Company's lack of operating history and the prolonged absence
of ACA JOE products from the market place, the need for additional capital,
changes in fashion trends, dependence on key customers and personnel, and
consumer response to the Company's products and advertising.  Readers are
cautioned not to place undue reliance on forward-looking statements, which
reflect management's analysis only as of the date hereof.  The Company assumes
no obligation to update forward-looking statements.  See also the Company's
annual report on Form 10-KSB and other reports to be filed from time to time
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934.

                                       2
<PAGE>

PART I    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
                            CONDENSED BALANCE SHEET


<TABLE>
<CAPTION>
 
 
                                                 December 31,   September 30,
                                                     1996           1996
                                                 ------------   -------------
                 ASSETS
<S>                                              <C>            <C>
CURRENT ASSETS
  Cash                                             $   20,498      $  109,977
  Short-term investments                            3,022,004       3,699,551
  Due from factor                                      26,194               -
  Inventories                                         539,083         257,083
  Prepaid expenses and other current assets           109,877          30,000
                                                   ----------      ----------
 
        Total Current Assets                        3,717,656       4,096,611
 
PROPERTY AND EQUIPMENT, at cost, net of
  accumulated depreciation                            109,421           8,514
 
OTHER ASSETS                                           13,782          13,782
                                                   ----------      ----------
 
                                                   $3,840,859      $4,118,907
                                                   ==========      ==========
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
  Due to factor                                     $        -    $     5,000
  Accounts payable                                     239,443         44,240
  Other current liabilities                            112,310        114,909
  Loans payable, officer/stockholder                     6,899          6,899
                                                   -----------    -----------
 
        Total Current Liabilities                      358,652        171,048
 
LONG-TERM DEBT                                           2,049          2,049
 
STOCKHOLDERS' EQUITY
  Preferred stock
     Authorized, 600,000 shares
     No shares outstanding                                   -              -
  Common stock, no par value
     Authorized, 10,000,000 shares
     Issued and outstanding 2,980,000
        and 3,070,000 shares                         5,806,868      5,920,118
  Additional paid-in capital                           162,500        162,500
  Deficit                                           (2,489,210)    (2,136,808)
                                                   -----------    -----------
 
        Total Stockholders' Equity                   3,480,158      3,945,810
                                                   -----------    -----------
 
                                                   $ 3,840,859    $ 4,118,907
                                                   ===========    ===========
</TABLE>
                     See notes to condensed financial statements

                                       3
<PAGE>
 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
                       CONDENSED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                        December 31,
                                                 -----------------------
                                                    1996         1995
                                                 ---------    ----------
  <S>                                            <C>          <C>
  NET SALES                                      $  66,022    $        -
 
  COST OF GOODS SOLD                                27,000             -
                                                 ---------    ----------
 
  GROSS PROFIT                                      39,022             -
 
  OPERATING EXPENSES
     Design and production                          33,559        23,379
     Selling                                        46,293             -
     Shipping                                        2,601             -
     General and administrative                    296,972       123,832
     Interest expense (income)                      11,199        (1,882)
                                                 ---------    ----------
                                                   390,624       145,329
                                                 ---------    ---------- 
  LOSS BEFORE INCOME TAXES                        (351,602)     (145,329)
 
  PROVISION FOR INCOME TAXES                          (800)         (800)
                                                 ---------    ----------
 
  NET LOSS                                       $(352,402)   $ (146,129)
                                                 =========    ==========

  NET LOSS PER SHARE                                  (.12)         (.10)

  WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                          3,044,000     1,400,000

</TABLE>
                See notes to condensed financial statements

                                       4
<PAGE>
 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
                  CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY

                         YEAR ENDED SEPTEMBER 30, 1996
                  AND THE THREE MONTHS ENDED DECEMBER 31, 1996



<TABLE>
<CAPTION>
                                                                                                                
                                                                       Convertible                                       Total
                                         Common Stock                Preferred Stock        Additional                Stockholders' 

                                ----------------------------   ---------------------------    Paid-in                    Equity
                                   Shares          Amount          Shares         Amount      Capital      Deficit     (Deficiency)
                                -------------   ------------   --------------   ----------   ---------   ------------   ------------

<S>                             <C>             <C>            <C>              <C>          <C>         <C>            <C>
Balance, October 1, 1995           1,400,000     $   20,610          170,000    $ 425,000     $      -   $  (258,235)   $   187,375
 
Issuance of stock for
 services                             23,000         57,500                -            -            -             -         57,500
 
Sale of stock                          2,000             20           60,000      150,000            -             -        150,020
 
Value of warrants issued in
 connection
with a loan                                -              -                -            -      162,500             -        162,500
 
Exercise of warrants                  65,000            650                -            -            -             -            650
 
Conversion of preferred
 stock to
common stock                         230,000        575,000         (230,000)    (575,000)           -             -              -
 
Issuance of stock in public
 offering                          1,350,000      5,266,338                -            -                          -      5,266,338
 
Dividends on preferred stock               -              -                -            -            -       (51,645)       (51,645)

 
Net loss for the year ended
September 30, 1996                         -              -                -            -            -    (1,826,928)    (1,826,928)

                                   ---------     ----------    -------------    ---------    ---------   -----------    -----------
 
Balance, September 30, 1996        3,070,000      5,920,118                -            -      162,500    (2,136,808)     3,945,810
 
Purchase of common stock             (90,000)      (113,250)               -            -            -             -       (113,250)

 
Net loss for the three
 months ended
 December 31, 1996                                                         -            -            -      (352,402)      (352,402)

                                   ---------     ----------    -------------    ---------    ---------   -----------    -----------
 
Balance, December 31, 1996         2,980,000     $5,806,868                -    $       -     $162,500   $(2,489,210)   $ 3,480,158
                                   =========     ==========    =============    =========    =========   ===========    ===========
</TABLE>

                  See notes to condensed financial statements

                                       5
<PAGE>
 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
                       CONDENSED STATEMENT OF CASH FLOWS

                          INCREASE (DECREASE) IN CASH

<TABLE>
<CAPTION>
 
                                                   Three Months Ended
                                                      December 31,
                                                 ----------------------
                                                    1996         1995
                                                 ---------    ----------
<S>                                             <C>           <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                        $(352,402)    $(146,129)
                                                 ---------     ---------
 Adjustments to reconcile net loss to
   cash used by operating activities:
   Depreciation                                      6,000         2,000
   Amortization of deferred income                       -       (10,000)
   Changes in assets and liabilities
     Increase in due from factor                   (31,194)            -
     Increase in inventories                      (282,000)      (33,033)
     Increase in prepaid expenses
       and other current assets                    (79,877)            -
     Increase (decrease) in accounts
        payable                                    195,203       (40,072)
     Decrease in other current
       liabilities                                  (2,599)            -
                                                 ---------     ---------
 
     Total Adjustments                            (194,467)      (81,105)
                                                 ---------     ---------
 
     Net Cash Used by Operating
       Activities                                 (546,869)     (227,234)
 
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment               (106,907)            -
 Decrease in short-term investments                677,547             -
                                                 ---------     ---------
 
    Net Cash Provided by Investing
      Activities                                   570,640             -
 
CASH FLOWS FROM FINANCING ACTIVITIES
 Decrease in loans receivable,
  officer/stockholder                                    -        14,027
 Reacquisition of common stock                    (113,250)            -
 Proceeds from issuance of preferred stock               -       100,000
                                                 ---------     ---------
 
    Net Cash (Used) Provided
      by Financing Activities                     (113,250)      114,027
                                                 ---------     ---------
 
NET DECREASE IN CASH                               (89,479)     (113,207)
 
CASH, beginning                                    109,977       233,407
                                                 ---------     ---------
 
CASH, ending                                     $  20,498     $ 120,200
                                                 =========     =========
</TABLE>
              See notes to condensed financial statements

                                       6
<PAGE>
 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
          CONDENSED STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                             December 31,
                                                         -------------------
                                                           1996        1995
                                                         -------     -------
<S>                                                      <C>        <C> 
  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
     Cash paid during the period for:
       Interest                                          $11,199     $     -
       Income taxes                                          800           -
</TABLE>

              See notes to condensed financial statements

                                       7
<PAGE>
 
                PACIFIC COAST APPAREL COMPANY, INC. dba ACA JOE
                    NOTES TO CONDENSED FINANCIAL STATEMENTS

                               DECEMBER 31, 1996



   1 - ACCOUNTING POLICIES

       Although the interim condensed financial statements of the Company are
       unaudited, it is the opinion of the Company's management that all normal
       recurring adjustments necessary for a fair statement of the results have
       been reflected therein.  Operating revenues and net earnings for any
       interim period are not necessarily indicative of results that may be
       expected for the entire year.

       These statements should be read in conjunction with the financial
       statements and related notes which are incorporated by reference in the
       Company's Annual Report on Form 10-KSB for the year ended September 30,
       1996.


   2 - REACQUISITION OF COMPANY STOCK

       During the three months ended December 31, 1996, the Company reacquired
       90,000 shares of its common stock for $113,250.

                                       8
<PAGE>


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


INTRODUCTION

     The Company was formed in April 1995 for the purpose of designing, sourcing
and marketing the ACA JOE brand of men's casual sportswear.  The Company sources
and designs the ACA JOE products through the use of sub-contractors and
independent agents, which allows the Company to avoid the fixed overhead cost of
maintaining its own production facilities.  The business strategy of the Company
is primarily focused on reintroducing the ACA JOE products in the United States
through national and regional advertising, marketing and customer service
programs designed to promote the ACA JOE name and products.  Specifically, the
Company is focusing its efforts on:  (1) expanding its distribution in the
department store and retail men's specialty store categories; (2) developing
targeted licensees in the accessories categories; (3) further developing its
Quick Response Program for the basic apparel collection for better customers;
and (4) developing alternative marketing techniques.  The Company is using the
net proceeds of its August 1996 initial public offering (approximately
$5,267,000) to implement its business strategy.
 
     During the development stage of the Company, the Company's primary
activities have included product development and design, organizing the sales
force, marketing, arranging for production sources, and the opening of a retail
outlet store.  The costs of products sold includes design, selling, shipping,
and general and administrative expenses.  To date, the Company has not
capitalized development costs associated with the development of the ACA JOE
products and has instead expensed all payroll and related costs for such
development.  Design expenses consist of payments to sub-contractors for design
and development of new product lines.  Selling expenses consist primarily of
salaries, commissions and administrative costs associated with the Company's
payroll and marketing personnel.  General and administrative expenses include
the costs of consultants and other administrative functions of the Company.  In
December 1996, the Company purchased a total of 90,000 shares of its common
stock in the open market at an average price of $1.258 per share (a total of
$113,250), in block transactions as defined in SEC Rule 10b-18.

RESULTS OF OPERATIONS

Quarter Ended December 31, 1996

     The Company's total expenses for the quarter ended December 31, 1996 were
$390,624.  The increase over the prior year primarily reflects an increase in
selling, design and general and administrative expenses incident to the
commencement of operations, specifically the selling and shipping of its ACA JOE
products and preparation for the company's first major production introduction.
During the quarter ended December 31, 1996, net sales of $66,000 were
recognized, and cost of goods sold was $27,000.  While operating expenses were
disproportionally large in relation to sales, management believes that if sales
increase, design and general and administrative expenses will decline
substantially as a percentage of sales.  There can be no assurance, however,
that the Company will operate profitably in the future.

Quarter Ended December 31, 1995

     The Company began conducting business in August of 1995.  While the Company
received purchase orders during fiscal 1995, the Company's first shipment of
product took place in fiscal year 1996.  Consequently, the Company received no
revenues during the fourth quarter of 1995.  Design expenses were incurred
primarily to design the Company's initial line of ACA JOE products.  The general
and administrative expenses relate primarily to accounting, legal and consulting
fees associated with the start-up expenditures of the Company.

LIQUIDITY AND CAPITAL RESOURCES

     In September 1996, the Company realized net proceeds of approximately
$5,267,000 from an initial public offering of common stock and warrants to
purchase common stock.  A portion of these proceeds was used to repay all of the
indebtedness then outstanding.

                                       9
<PAGE>
 
     The Company experienced losses from operations of $258,235 for the period
from April 28, 1995 (inception) to September 30, 1995 and $1,826,928 for the
year ended September 30, 1996.  The cumulative loss through December 31, 1996 is
$2,437,565, excluding the preferred stock dividend of $51,645.  Sales of the
Company's initial, Spring 1997 product line did not meet expectations.  To
remedy this, the Company retained a new designer to create its Fall 1997 line,
and retained an advertising firm to develop and implement a marketing program at
an estimated cost of up to $1,000,000.  If sales of the Fall 1997 line, which
will be introduced beginning in February 1997, do not meet expectations, the
Company would likely require additional capital.  In the event of unanticipated
developments or to satisfy future funding requirements, the Company may seek to
fund its operations through public or private offerings of securities, with
collaborative or other arrangements with corporate partners or from other
sources.  Additional financing may not be available when needed or on terms
acceptable to the Company.  If adequate financing is not available, the Company
may be required to delay, scale back or eliminate certain of its development
programs, to relinquish rights to certain of its products, or to license to
third parties the right to commercialize products the Company would otherwise
seek to develop itself.

     In November 1996, following a decline in the market price of the Company's
common stock, the Board authorized the Company's purchase of up to 150,000
shares of its common stock.  To date, 90,000 shares have been purchased.
Management believes these purchases at current price levels are in the interests
of the Company and its shareholders, and will not affect the Company's ability
to fund its business plan for the remainder of the current fiscal year.

PART II   OTHER INFORMATION



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

               27.  Financial Data Schedule

          (b)  Reports on Form 8-K.

                None.

                                      10
<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.


                             Pacific Coast Apparel Company, Inc.
 
                             By /s/ Terrence L. McGovern
                               --------------------------------
                                    Terrence L. McGovern
                                Chief Executive Officer and
                                  Chief Financial Officer 
February 13, 1997

                                      11