<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC  20549

                                  FORM 10-QSB


(Mark One)

(x)  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarter ended June 30, 1997.

( )  Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the period from _________________ to ______________.

Commission file number:  0-11744

                       Publishers Equipment Corporation
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)


      Texas                          75-1653425
------------------------    ------------------------------------
(State of incorporation)    (I.R.S. Employer Identification No.)


16660 Dallas Parkway, Suite 1100, Dallas, Texas                         75248
-----------------------------------------------                       ----------
(Address of principal executive offices)                              (zip code)

Registrant's telephone number, including area code:  972-931-2312


Check whether the issuer (1) 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 outstanding of the issuer's common stock as of August 7, 1997,
5,205,719 shares of common stock, no par value.

Page 1 of 12 sequentially numbered pages.
<PAGE>
 
                        PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements


                         Index to Financial Statements
                         -----------------------------


                                                                           Page
                                                                          ------
Publishers Equipment Corporation Consolidated
 Balance Sheet                                                               3


Publishers Equipment Corporation Consolidated
 Statements of Operations                                                    4


Publishers Equipment Corporation Consolidated
 Statements of Cash Flows                                                    5


Publishers Equipment Corporation Notes to
 Consolidated Financial Statements                                           6


In the opinion of management, the financial statements contained herein include
all adjustments, which adjustments are of a normal recurring nature, necessary
for a fair presentation of the Company's consolidated financial position and
results of operations and cash flows.  Results of operations for the period
ended June 30, 1997, are not necessarily indicative of results of operations for
the entire year.



Page 2 of 12 sequentially numbered pages.
<PAGE>
 

                        PUBLISHERS EQUIPMENT CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                 (In Thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                       June 30,
                                                                         1997
                                                                       --------
<S>                                                                   <C>   
                                     ASSETS
                                     ------
     Cash and cash equivalents ....................................    $     75
     Accounts receivable ..........................................       1,753
     Inventories ..................................................       7,139
     Other current assets .........................................         116
                                                                       --------
         Total current assets .....................................       9,083

     Property, plant and equipment, net ...........................       1,186
                                                                       --------

     TOTAL ASSETS .................................................    $ 10,269
                                                                       ========

                     LIABILITIES AND SHAREHOLDERS' EQUITY
                     ------------------------------------
     Accounts payable and accrued liabilities .....................    $  1,747
     Accrued warranty expense .....................................          92
     Customer deposits ............................................         137
     Convertible subordinated note ................................       1,000
     Short term debt ..............................................       3,487
                                                                       --------
         Total current liabilities ................................       6,463

     Other liabilities ............................................         162

     Shareholders' equity:
         Preferred stock ..........................................         300
         Common stock .............................................      19,015
         Treasury stock ...........................................        (168)
         Retained deficit .........................................     (15,503)
                                                                       --------
            Total shareholders' equity ............................       3,644
                                                                       --------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................    $ 10,269
                                                                       ========
</TABLE>

               See accompanying notes



     Page 3 of 12 sequentially numbered pages.
<PAGE>
 

                        PUBLISHERS EQUIPMENT CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                (In Thousands Except Share and Per Share Amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
  
                                                           Three Months Ended              Six Months Ended
                                                                 June 30,                      June 30,
                                                           1997           1996           1997           1996
                                                        -------------------------     ------------------------- 

<S>                                                     <C>           <C>             <C>             <C>

Revenues .............................................  $    3,541    $    2,404       $    5,997    $    7,590
                                                                                                      
Cost of revenues .....................................       2,554         1,744            4,271         6,050
                                                        ----------    ----------       ----------    ----------
                                                                                                      
Gross profit .........................................         987           660            1,726         1,540
                                                                                                      
Selling, general and administrative expense ..........         840           591            1,394         1,294
                                                        ----------    ----------       ----------    ----------
Operating income .....................................         147            69              332           246
                                                                                                      
Interest expense .....................................         (88)          (69)            (165)         (148)
Interest income ......................................         -               2                2             5
Other income (expense), net ..........................          (4)          -                (13)            2
                                                        ----------    ----------       ----------    ----------
                                                                                                      
Income before taxes ..................................          55             2              156           105
                                                                                                      
Provision for income taxes (Note 1) ..................         -             -                -             -
                                                        ----------    ----------       ----------    ----------
                                                                                                      
Net income ...........................................  $       55    $        2       $      156    $      105
                                                        ==========    ==========       ==========    ==========
                                                                                                      
Net income per common share (Note 2) .................  $     0.01    $      -         $     0.03    $     0.02
                                                        ==========    ==========       ==========    ==========
                                                                                                      
Weighted average common shares .......................   5,205,719     5,191,185        5,205,719     5,191,185


</TABLE>

  See accompanying notes.



Page 4 of 12 sequentially pages
<PAGE>
 

                        PUBLISHERS EQUIPMENT CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>


                                                               Six Months Ended
                                                                   June 30,
                                                               1997       1996
                                                             -------------------
<S>                                                          <C>         <C>    

Cash flows from operating activities:
   Net income from operations ............................   $   156    $   105
Adjustments to reconcile net income to
     net cash provided by (used in) operating activities:
           Depreciation and amortization .................       124        113
           Provision for losses on doubtful accounts .....         9         15

Change in assets and liabilities:
           Increase in accounts receivable ...............      (880)      (140)
           Decrease in inventories .......................       494        684
           Decrease in other current assets ..............        13         87
           Decrease in accounts payable and
                 accrued liabilities .....................      (270)      (599)
Increase (decrease) in accrued warranty expense ..........       (39)       372
           Increase (decrease) in customer deposits ......      (495)        24
                                                             -------    -------
   Net cash provided by (used in) operations .............      (888)       661

Cash flows from investing activities:
           Additions to property, plant and equipment ....       -         (146)
                                                             -------    -------
   Net cash used in investing activities .................       -         (146)

Cash flow from financing activities:
      Total borrowings ...................................     3,015      4,349
      Total repayments ...................................    (2,200)    (4,807)
                                                             -------    -------
   Net cash provided by (used in) financing activities ...       815       (458)

Net increase (decrease) in cash and cash equivalents .....       (73)        57

Cash and cash equivalents at beginning of period .........       148         91
                                                             -------    -------

Cash and cash equivalents at end of period ...............   $    75    $   148
                                                             =======    =======
</TABLE>

             See accompanying notes.



Page 5 of 12 sequentially numbered pages.
<PAGE>
 
PUBLISHERS EQUIPMENT CORPORATION

                  Notes to Consolidated Financial Statements
                  ------------------------------------------
                                  (unaudited)


1.   The income tax provision for the six month period ended June 30, 1997, of
     $54,000 has been offset entirely by a corresponding tax benefit related to
     the reversal of previously unrecognized temporary differences, primarily
     net operating loss carryforwards.

2.   In February 1997, the Financial Accounting Standards Board issued Statement
     No. 128, Earnings Per Share (SFAS No. 128), which establishes new standards
     for computing and presenting earnings per share.  The provisions of SFAS
     No. 128 are effective for earnings per share calculations for periods after
     December 15, 1997.  At that time, the Company will be required to change
     the method currently used to compute earnings per share and to restate all
     prior periods.  The following table presents pro forma earnings per share
     amounts computed using SFAS No. 128:

<TABLE> 
<CAPTION> 
                                                   Pro Forma Earnings Per Share

                                              Three Months                Six Months
                                              Ended June 30,            Ended June 30,
                                              --------------            --------------
                                            1997          1996        1997          1996
                                            ----          ----        ----          ----
<S>                                        <C>           <C>         <C> 
       Earnings per common share           $ 0.01        $   --      $ 0.03        $ 0.02
                                           ======        ======      ======        ======
       Earnings per common share -
        assuming dilution                  $ 0.01        $   --      $ 0.03        $ 0.02
                                           ======        ======      ======        ======
</TABLE> 


Page 6 of 12 sequentially numbered pages.
<PAGE>
 
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND 
                             RESULTS OF OPERATIONS

The Company serves the printing industry worldwide with new and remanufactured
single-width, web-fed offset printing equipment through its wholly owned
subsidiary King Press Corporation.  Its products meet the needs of printers and
publishers, and range from cost effective presses for newspaper production to
heatset equipment that meet the high quality requirements of commercial
printers.  The Company's customer base includes a broad range of small
newspapers, commercial and semi-commercial printers.

                             Results of Operations
                             ---------------------
                                        
Three Months Ended June 30, 1997
--------------------------------

REVENUES.  Revenues of $3,541,000 for the second quarter of 1997 compares to
$2,404,000 for the second quarter of 1996, an increase of approximately 47
percent that reflects increases in both domestic and foreign revenues in the
current quarter.

Revenues derived from sales to domestic customers increased approximately 46
percent in the second quarter of 1997 compared to the second quarter of 1996 as
domestic printing equipment markets continue to recover from a severe
recessionary period of 1990 to 1994.

Advertising revenues represent the major source of income for the industry's
domestic customer base.  During 1990, major domestic business segments began a
curtailment of advertising expenditures in response to unfavorable economic
conditions, and this reduction was not reversed until early 1994.  In the first
half of 1997, trade publications have reported a significant strengthening of
domestic advertising expenditures.  As advertising expenditures declined, so did
print demand and the requirement for printing equipment.  In 1994, advertising
expenditures and print demand began a turnaround and newsprint requirements grew
to quickly absorb available papermill capacity, which had been reduced during
the period of low newsprint demand.  Newsprint cost, which is the single largest
component of a newspapers production expense, increased almost twofold between
early 1994 and year end 1995.  This increase in newsprint cost had an adverse
affect on printing equipment order activity in 1994 and constrained its growth
in 1995, even as print demand was increasing.  During 1996 papermill capacity
increased and newsprint cost declined substantially, but the cost of newsprint
entering 1997 remained above the early 1994 level.

Increased newsprint cost and uncertainties concerning the strength of the
turnaround in advertising expenditures produced irregular order activity in
domestic equipment printing markets in 1995 and 1996 that is continuing in 1997.
Until these markets are more fully recovered, including the absorption of over
capacity in the commercial printing segment, it will be difficult for the
Company to achieve a sustained high level of domestic revenues from quarter to
quarter. The Company's backlog entering the third quarter of 1997 will adversely
affect profitability for that quarter, but the prospects for the fourth quarter
of 1997 are significantly better with the booking in July of a large order for
Saudi Arabia (See Financial Position and Liquidity).

Page 7 of 12 sequentially numbered pages.
<PAGE>
 
The Company believes that the full recovery of domestic printing equipment
markets will require stable newsprint cost and interest rates underlying
continued growth in print demand. The increase in advertising expenditures and
reductions in newsprint cost, if sustained, will do much to improve domestic
printing equipment market conditions.

Revenues derived from sales to foreign customers increased approximately 48
percent in the second quarter of 1997 compared to the second quarter of 1996,
accounting for approximately 62 percent of total revenues in both periods.
Revenues in the current quarter include, most significantly, an equipment order
delivered to a customer in the Slovak Republic.  In recent years the Company has
focused increased attention on the expansion of its international sales
capabilities.  This focus, which resulted in a realignment and strengthening of
the Company's international dealer network, was driven by a belief that the most
rapidly emerging markets for printing equipment lie overseas, principally in the
Middle East, the Pacific Rim and Former East Bloc countries.  In July 1997, the
Company completed contractual arrangements for a large press order scheduled for
delivery to a customer in Saudi Arabia in the fourth quarter of this year.  Both
the order for the Slovak Republic and the order for Saudi Arabia will join other
installations of the Company's equipment in these important market areas, which
includes a large order delivered to a customer in the United Arab Emirates in
the fourth quarter of 1996.  Installation of this equipment in the United Arab
Emirates was completed in the second quarter of 1997.

GROSS PROFIT.  Gross profit for the second quarter of 1997 of $987,000, or 27.9
percent of revenues, compares to $660,000, or 27.5 percent of revenues, for the
second quarter of 1996.  The improvement in gross profit expressed as a percent
of revenues in the second quarter of 1997 is attributable to a more favorable
business mix in the current quarter.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.  Selling, general and
administrative expense of $840,000, or 23.7 percent of revenues, for the second
quarter of 1997 compares to $591,000, or 24.6 percent of revenues, for the
second quarter of 1996.  The increase in selling, general and administrative
expense in the current quarter is attributable primarily to increased foreign
sales commissions.  Expressed as a percent of revenues, selling, general and
administrative expense for the second quarter of 1997 compares favorably to the
second quarter of 1996 as a result of increased revenues in the current period.

OTHER INCOME (EXPENSE).  Interest expense of $88,000 for the second quarter of
1997 compares to $69,000 for the second quarter of 1996, and is attributable
primarily to borrowings under the King Press Corporation revolving line of
credit.  In the second quarter of 1996, the Company had interest income of
$2,000 attributable  to short term money markets investments.  In the second
quarter of 1997, the Company had net other expense totaling $4,000.

NET INCOME.  Net income of $55,000, or 1.6 percent of revenues, for the second
quarter of 1997 compares to $2,000, or 0.1 percent of revenues, for the second
quarter of 1996.




Page 8 of 12 sequentially numbered pages.
<PAGE>
 
Six Months Ended June 30, 1997
------------------------------

REVENUES.  Revenues of $5,997,000 for the first six months of 1997, compares to
$7,590,000 for the first six months of 1996, a decrease of approximately 21
percent that reflects decreases in both domestic and foreign revenues in the
current period.

Revenues derived from sales to domestic customers decreased approximately 25
percent in the first six months of 1997, compared to the year earlier period
that included a large order for Gannett Company, a leading U.S. newspaper group.
The equipment delivered to Gannett Company provides versatile printing
capability for color circulars, inserts and other short press-run products.  In
recent years, the production mix of most major domestic newspapers has included
an increasing content of such targeted market products which can be produced
more efficiently on single-width press equipment such as manufactured by the
Company.  The Company believes that this application of its printing equipment
offers an important new business opportunity and is actively pursuing sales to
other domestic newspaper groups for this purpose.

Revenues derived from sales to foreign customers decreased approximately 17
percent in the first six months of 1997, accounting for approximately 48 percent
of total revenues, compared to the year earlier period when foreign sales
accounted for approximately 45 percent of total revenues.  Foreign markets for
printing equipment continue to be more active than domestic markets, but foreign
orders are often subject to delays in contract award resulting from a variety of
factors that include economic uncertainties affecting print demand and financing
availability, and the selection of equipment supplier under very competitive
conditions.    The Company attributes the decline in foreign revenues in the
current period primarily to delays in the finalization of several foreign orders
currently being pursued.

GROSS PROFIT.  Gross profit for the first six months of 1997 of $1,726,000, or
28.8 percent of revenues, compares to $1,540,000, or 20.3 percent of revenues
for the first six months of 1996.  The improvement in gross profit expressed as
a percent of revenues in the current period reflects the strategic pricing of
equipment delivered to Gannett Company in the first quarter of 1996 (See

REVENUES. Six Months Ended June 30, 1997).  The contract with Gannett Company
was priced at a reduced gross profit level for a new application of the
Company's equipment.  The Company expects that the gross profit margin to be
earned on future sales of its equipment for this production purpose will be
closer to its historical experience.  Competitive pricing pressures remain
intense in both domestic and foreign printing markets and will affect the
Company's profit margins on all equipment sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE.  Selling, general and
administrative expense of $1,394,000, or 23.2 percent of revenues, for the first
six months of 1997 compares to $1,294,000, or 17.0 percent of revenues, for the
first six months of 1996.  The increase in selling, general and administrative
expense in the current period results primarily form increased foreign sales
commission, and to a smaller extent reflects increases in research and
development expenditures directed primarily at adapting the Company's products
to meet the printing requirements of certain foreign markets.


Page 9 of 12 sequentially numbered pages.
<PAGE>
 
OTHER INCOME (EXPENSE).  Interest expense of $165,000 for the first six months
of 1997 compares to $148,000 for the first months of 1996, and is attributable
primarily to borrowings under the King Press Corporation revolving line of
credit.  Interest income of $2,000 for the first six months of 1997, compares to
$5,000 for the first six months of 1996, and is attributable  to short term
money markets investments.  Net other expense of $13,000 for the first six
months of 1997 compares to net other income of $2,000 for the first six months
of 1996.

PROVISION FOR TAX.  The Company utilized available net operating loss
carryforwards to offset federal and state income tax liabilities for the first
six months of 1997 (See Note 1 of Notes to Consolidated Financial Statements).

NET INCOME.  Net income of $156,000 or 2.6 percent of revenues, for the first
six months of 1997, compares to $105,000 or 1.4 percent of revenues, for the
first six months of 1996.


                       Financial Position and Liquidity
                       --------------------------------

The Company's wholly-owned operating subsidiary King Press Corporation is
supported by a secured $3,500,000 line of credit that expires May 31, 1998.  The
loan agreement pertaining to the revolving line of credit includes restrictions
on indebtedness, liens and the disposal of assets, and requires that certain
financial ratios be maintained.  At June 30, 1997, King Press Corporation had
$3,487,000 outstanding under the line of credit and was in compliance with all
provisions of the loan agreement.

The Company believes that the $3,500,000 line of credit will be adequate for its
working capital needs for the next eleven months, but is seeking increased
working capital through a restructuring of the line of credit.  The foreign
content of the Company's revenues has increased in recent years, and is expected
to remain a growing component of the Company's revenues in 1997 and 1998.
Competitive conditions in international markets, and occasionally statutory
constraints, result in financing structures that typically provide a small down
payment, with the balance owing being paid only when the equipment ships.  Such
financing structures require added working capital availability for the
production of an equipment order.

A restructuring of the King Press Corporation line of credit is being sought
that may include a new lender to extend credit secured by the Company's assets
in conjunction with its present lender, or other sources including a working
capital line of credit guaranteed by the Export-Import Bank of the United
States.  There can be no assurance that a restructuring of the line of credit
will occur, or that other sources of adequate working capital will be available.
The Company will take steps required to maintain its liquidity and viability in
the event that the additional working capital desired is not available.

The Company's backlog at June 30, 1997, totaled approximately $1,490,000
compared to approximately $3,792,000 at December 31, 1996, and approximately
$3,339,000 at March 31, 1997.  During July 1997, backlog was increased to over
$4.0 million with the sale of equipment for a customer in Saudi Arabia ( See
REVENUES.  Three Months Ended June 30, 1997).


Page 10 of 12 sequentially numbered pages.
<PAGE>
 
PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.

          The Company and its subsidiaries from time to time become involved in
          various claims and lawsuits incidental to their businesses. In the
          opinion of management of the Company, any ultimate liability arising
          out of currently pending claims and lawsuits will not have a material
          adverse effect on the consolidated financial condition or results of
          operations of the Company.

Item 2. Changes in Securities.

          Not Applicable.

Item 3. Defaults upon Senior Securities.

          Not Applicable.

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

          The Company's Annual Meeting of Shareholders was held on June 20,
          1997. One proposal was acted on at the Meeting:

                             Election of Directors
                             ---------------------

          The result of the vote to elect six directors for a one year term
          was as follows:

             Director           Votes For     Votes Against
          ------------------    ---------     -------------
     
          Simon Bonnier         4,534,599         12,176
          James K. Feeney       4,534,608         12,167
          Robert S. Hamilton    4,531,599         15,176
          Evans Kostas          4,533,255         13,520
          Ole B. Rygh           4,534,608         12,167
          Reinhart Siewert      4,534,608         12,167

Item 5. Other Information.

          Not Applicable.

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

          Not Applicable.



Page 11 of 12 sequentially numbered pages.
<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.


                                        PUBLISHERS EQUIPMENT CORPORATION


August 7, 1997                          By:     /s/Roger R. Baier
                                                --------------------------------
                                                Roger R. Baier
                                                Vice President Finance &
                                                Treasurer
                                                (Principal Financial Officer)



Page 12 of 12 sequentially numbered pages.