UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q
(Mark One)
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the quarterly period ended May 2, 1998

OR

                 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from ....... to ..........

                         Commission file number 0-15934


                                JAY JACOBS, INC.
             (Exact name of registrant as specified in its charter)


                Washington                            91-0698077
     (State or other jurisdiction of                (IRS Employer
      incorporation or organization)             Identification Number)


                  1530 Fifth Avenue, Seattle, Washington 98101 (Address of
               principal executive offices) (Zip code)

                                 (206) 622-5400
              (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 [ ]

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

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                Common Stock: 544,323 shares, as of May 2, 1998.
<PAGE>
<TABLE>
<CAPTION>
                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements

                         JAY JACOBS, INC. AND SUBSIDIARY

                                  Balance Sheet
                                 (In thousands)
                                   (Unaudited)

                                                                      May 2,         Jan. 31,
                                                                       1998            1998
<S>                                                                <C>             <C>     
Assets

Current assets:
  Cash and cash equivalents                                        $  1,406        $  1,567
  Accounts receivable                                                   536             336
  Inventories                                                        12,151           9,532
  Prepaid expenses                                                      524             562
                                                                   --------        --------
Total current assets                                                 14,617          11,997
                                                                   --------        --------

Property and equipment, net                                           4,419           4,409
                                                                   --------        --------

Total Assets                                                       $ 19,036        $ 16,406
                                                                   --------        --------

Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                                                 $  3,197        $  2,074
  Accrued payroll                                                       334             162
  Accrued reorganization expenses                                       397             400
  Other accrued expenses                                              1,080             988
  Line of credit                                                      7,563           5,687
  Subordinated debt                                                   2,000               0
  Accrued interest subordinated debt                                     47               0
                                                                   --------        --------
Total current liabilities                                            14,618           9,311
                                                                   --------        --------

Deferred rental credits                                                 171             171

Federal income tax refund reserve                                     1,980           1,980
                                                                   --------        --------
Total liabilities                                                    16,769          11,462
                                                                   --------        --------

Series A preferred stock -- 46,000 shares issued and
outstanding - mandatorily redeemable                                  3,854           3,874

Shareholders' equity:

   Series B preferred stock  - 25,000 shares issued
   and outstanding                                                    2,072           2,072
   Common stock 544,323 shares issued and
   outstanding                                                       16,104          13,257
   Unrecognized stock compensation expense                           (2,126)              0
   Retained deficit                                                 (17,637)        (14,259)
                                                                   --------        --------
Total shareholders' equity                                           (1,587)           1,070
                                                                   --------        --------

Total liabilities and shareholders' equity                           19,036          16,406
                                                                   --------        --------
</TABLE>

                                     Page 2
<PAGE>
<TABLE>
<CAPTION>
                         JAY JACOBS, INC. AND SUBSIDIARY

                      Consolidated Statement of Operations
                    (In thousands, except per share amounts)
                                   (Unaudited)


                                                                                Three Months Ended
                                                                           May 2, 1998      May 3, 1997
          <S>                                                                   <C>              <C>   
          Net Sales                                                          $  12,691        $  13,466
                                                                             ---------        ---------
          Operating costs and expenses:
          Cost of sales, buying and occupancy costs                             10,447           11,052
          Selling, general and administrative expenses                           4,157            3,884
          Interest expense                                                         234              127
          Option compensation expense                                              671                0
                                                                             ---------        ---------

                                                                                15,509           15,063
                                                                             ---------        ---------

          Loss before extraordinary item                                        (2,818)          (1,597)

          Extraordinary charge
               Debt extinguishment                                                 522                0
                                                                             ---------        ---------

          Net loss                                                           $  (3,340)         $(1,597)
                                                                             ---------        ---------

          Basic earnings per share:
               Loss before extraordinary item                                $   (5.56)          $(3.91)
               Extraordinary charge                                              (0.96)                0
                                                                             ---------        ---------
               Net loss                                                      $   (6.52)          $(3.91)
                                                                             ---------        ---------

          Weighted average number of shares outstanding                        544,000          408,000


(See Note 2 - Earnings (loss) per share - for per share calculations)
</TABLE>

                                     Page 3
<PAGE>
<TABLE>
<CAPTION>
                         JAY JACOBS, INC. AND SUBSIDIARY

                      Consolidated Statement of Cash Flows
                                 (In thousands)
                                   (Unaudited)

                                                                               Three Months Ended
                                                                          May 2, 1998      May 3, 1997
            <S>                                                             <C>                 <C>    
            Cash flows from operating activities:
            Net loss                                                        $  (3,340)          (1,597)
            Adjustments to reconcile net loss to net cash
               used in operating activities:
            Depreciation and amortization                                         281              286
            Option compensation expense                                           671                0
            Change in deferred rental credits                                       0               24

            Change in assets and liabilities:
               Accounts receivable                                               (200)            (455)
               Inventories                                                     (2,619)          (1,446)
               Prepaid expenses                                                    38              (48)
               Accounts payable                                                 1,123            1,216
               Accrued payroll                                                    172              206
               Accrued interest                                                    47                0
               Other accrued expenses                                              92              484
               Accrued reorganization expenses                                     (3)             (95)
               Federal income tax refund reserve                                    0              (25)
            Net cash used for operations                                       (3,738)          (1,450)

            Cash flows from (to) investing activities:
               Net increase in property and equipment                            (251)             (22)
            Net cash to investing activities                                     (251)             (22)

            Cash flows from (to) financing activities:
               Net borrowing from line of credit                                1,876            1,263
               Proceeds from options exercised                                     10                0
               Proceeds from subordinated debt                                  2,000                0
               Preferred stock dividend                                           (58)               0
            Net cash from financing activities                                  3,828            1,263

            Net decrease in cash and cash equivalents                            (161)            (209)
            Cash and cash equivalents - beginning of period                     1,567              249
            Cash and cash equivalents - end of period                           1,406               40
</TABLE>

                                     Page 4
<PAGE>
                         JAY JACOBS, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements


Note 1. Financial Presentation

The attached condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
As a result, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
disclosures made are adequate to make the information not misleading and that
the information furnished reflects all material adjustments which are, in the
opinion of management, necessary to present fairly its results for the interim
periods reported and that all such adjustments are of a normal recurring nature.
The consolidated financial statements should be read in conjunction with the
financial statements and related notes included in the Company's Form 10-K/A
filed with the Securities and Exchange Commission on May 14, 1998. Certain prior
year amounts have been reclassified to conform to current year's presentation.

Results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year.

The Company's fiscal year ends on the Saturday closest to January 31st of each
year. The current fiscal year ends on January 30, 1999. Each fiscal quarter
contains 13 weeks.

Note 2. Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of
common shares outstanding during the period as adjusted to take into account the
effect of outstanding options to purchase common stock unless the effect of
including such options is anti-dilutive. The weighted average number of common
shares and equivalents outstanding were 544,000 and 408,000 for the quarters
ended May 2, 1998 and May 3, 1997, respectively. All common shares and
equivalents have been adjusted for the reverse stock split noted below.

On March 24, 1998, the shareholders of the Company approved a 1-for-15 reverse
stock split and the Company's new stock option plan. Both items were approved by
the majority of the holders of both classes of the Company's stock. The reverse
stock split was effective on April 3, 1998. As such, all share and per share
amounts presented in the financial statements and related notes thereto have
been retroactively restated to reflect this stock split.

The following represents the reconciliation of numerators and denominators used
to calculate the basic and diluted earnings per share for all periods presented:

<TABLE>
<CAPTION>
                                                             Quarter ended            Quarter ended
                                                              May 2, 1998               May 3, 1997
<S>                                                              <C>                       <C>      
Loss before extraordinary item                                   $ (2,818)                 $ (1,597)
Less:  Accretion of Series A Preferred
   Stock to redemption value                                          (38)                        0
Less: Series A Preferred Stock dividends                             (129)                        0
Less: Series B Preferred Stock dividends                              (40)                        0
                                                                 --------                  --------

Loss available to common shareholders                              (3,025)                   (1,597)

Extraordinary charge
   Debt extinguishment                                               (522)                        0
                                                                 --------                  --------

Total loss available to common shareholders                      $ (3,547)                 $ (1,597)
                                                                 --------                  --------

Weighted average shares (basic and diluted)                           544                       408
                                                                 --------                  --------

Basic and diluted earnings per share:

   Loss before extraordinary item                                $  (5.56)                 $  (3.91)
   Extraordinary gain                                               (0.96)                        0
                                                                 --------                  --------
   Net loss                                                      $  (6.52)                 $  (3.91)
                                                                 --------                  --------
</TABLE>

The discounts on the increasing rate Series A and Series B preferred stock are
equivalent to a prepayment of dividends by the Company, and accordingly are
being amortized using the effective interest method over the period until
January 1, 2003, when the dividend rates increase to 20%. For purposes of
calculating earnings per share, the current period amortization of these
discounts has been added to the stated dividends for the period.

                                     Page 5
<PAGE>
Note 3.  Option Plan

During March 1998, the shareholders approved a new non-qualified stock option
plan for the benefit of senior management and associates. The plan reserved
1,094,467 shares for issuance at the discretion of the compensation committee of
the board of directors. The options under the new plan generally vest over five
years and expire ten years from the date of grant. In addition, the shares
outstanding under the Company's previous plans were rolled over into the new
plan and all options were priced at an exercise price of $1.95 per share.

Generally Accepted Accounting Principles require that compensation expense be
recorded for the difference between the exercise price and the fair value of the
shares, as defined, on the date of grant. This non-cash compensation expense is
charged to operations 20% (the initial vesting percentage) as of the date of
plan approval with the balance charged to operations ratably using a straight
line method, subject to the vesting provisions of the plan. During the first
quarter of fiscal 1999, option related compensation expense of $671,000 was
charged to operations.

Note 4.  Subordinated Debt

On March 11, 1998 the Company closed on a financing transaction with two members
of its investor group, Cahill, Warnock & Company, L.L.C., and T. Rowe Price
Recovery Fund II, L.P. The financing transaction provided for subordinated debt
in the amount of $2,000,000. The subordinated debt agreement provides for
interest at the rate of 14% per annum payable June 30, 1998 and December 31,
1998, and warrants to purchase 2% of the Company, on a fully diluted basis. The
subordinated debt matures on December 31, 1998.

Note 5.  Federal Income Tax Refund Reserve

During fiscal 1997, the Company filed a refund claim with the Internal Revenue
Service (the "IRS") resulting from the carry back of certain expenses of its
bankruptcy proceeding. The tentative refund of approximately $2,355,000, which
is net of fees and expenses, was received in October 1996. The tentative refund
is subject to audit by the IRS, which is currently in process. Should the IRS
ultimately determine that the carry back of some or all of the expenses was
inappropriate, the Company may be called upon to repay a portion of the
tentative refund, with interest. A reserve of $1,980,000 was established in the
Company's financial statements related to the tentative refund.

                                     Page 6
<PAGE>
Note 6.  Subsequent Events

On June 2, 1998 the Company entered into a new credit facility with FINOVA
Capital Corporation ("FINOVA") for a credit facility in the amount of
$15,000,000. The new credit facility provides for borrowing and letters of
credit based on a formula the aggregate of which cannot exceed the lesser of
100% of the net appraised value of eligible inventory, as defined, and
outstanding letters of credit, or $15,000,000. Letters of credit are limited to
a maximum of $5,000,000. A first lien is granted to FINOVA on all the Company's
assets. The Company must maintain a scheduled minimum earnings before interest,
taxes, depreciation and amortization and a senior debt coverage ratio, and may
not declare or pay dividends or other distributions on account of any equity
interest in the Company, until payment or satisfaction in full of liabilities
under the FINOVA line of credit and termination of the financing agreement.
Excluded under certain circumstances are dividends to be paid on Series A and
Series B preferred stock. Interest is charged at FINOVA's prime rate plus .5%.
The Company is charged normal audit fees, letter of credit fee of 1% per annum
on the aggregate undrawn face amount of letters of credit outstanding, and a
commitment fee of $150,000. As a condition of closing this facility, the Company
repaid the previous General Eelectric Capital Corporation ("GECC") facility and
incurred a $338,000 termination fee. This cost, together with remaining
unamortized financing costs related to the closing of the GECC facility of
$184,000, are reflected as an extraordinary charge for debt extinguishment
during the first quarter of fiscal 1999.

In April 1998 a letter of intent was signed with SPS Payment Systems ("SPS") to
provide the Company with a private label credit card. SPS will provide third
party services for developing, managing and marketing the Company's private
label credit card program. SPS will purchase credit sales on a non-recourse
basis. The Company is responsible for marketing the program in conjunction with
SPS and for a service fee based on a percentage of credit sales. The private
label credit program was launched in May 1998.


                  Item 2. Management's Discussion and Analysis
                of Financial Condition and Results of Operations

Forward Looking Statements

The information in this Report may contain "forward looking statements" within
the meaning of Section 27 A of the Securities Act of 1933, as amended, and
Section 21 E of the Securities Act of 1934, as amended. Such forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties related to the Company's operations. These risks and uncertainties
include, but are not limited to, matters discussed in Item 5 B 1 "Risk Factors"
from the Company's Report on Form 8-K, filed December 15, 1997.

General

All references herein to fiscal 1999 and fiscal 1998 relate to the twelve months
ending January 30, 1999 and the twelve months ended January 31, 1998,
respectively. References to the first quarter of fiscal 1999 and fiscal 1998
relate to the three months ended May 2, 1998 and May 3, 1997, respectively.

Overview and Recent Developments

Jay Jacobs, Inc. ("Jay Jacobs" or the "Company") was incorporated in 1941 and
operates a chain of mall-based specialty apparel stores offering contemporary
men's and women's clothing and accessories at reasonable prices. At the date of
this report the Company operates 105 stores in 19 states. The greatest
concentration of stores is in the Pacific Northwest and Alaska.

                                     Page 7
<PAGE>
In March 1998 the Company closed on a financing transaction with two members of
its investor group, Cahill, Warnock & Company, L.L.C., and T. Rowe Price
Recovery Fund II, L.P. The financing transaction provided for subordinated debt
in the amount of $2,000,000 (See Note 4 - Subordinated Debt).

On May 1, 1998, the Company signed a commitment letter with a new commercial
lender, which would increase its credit facility from $10,000,000 to
$15,000,000. The facility provides for the ability to finance eligible inventory
and to facilitate the issuance of letters of credit. The new facility was closed
on June 2, 1998, subsequent to the end of the first quarter of fiscal 1999 (See
Note 6 - Subsequent Events). The Company had $7,563,000 of short term notes
outstanding at the end of the first quarter of fiscal 1999, representing
advances under its facility with its former commercial lender. As a condition of
closing the new facility, the Company repaid the GECC facility and incurred
$338,000 in termination fees. This cost, together with remaining unamortized
financing costs related to the closing of the GECC facility of $184,000, was
expensed during the first quarter of fiscal 1999.

The Company expects to utilize the additional capacity provided by the new
credit facility along with the new subordinated debt provided by its investor
group to fund its business plan for fiscal 1999, which includes opening at least
25 new stores during fiscal 1999.

During the first quarter of fiscal 1999, the shareholders approved a 1-for-15
reverse stock split and the Company's 1998 Stock Incentive Plan (the "Plan").
The reverse stock split was effective on April 3, 1998. In order to more closely
align the interests of management and employees to those of the shareholders,
the board of directors approved the issuance of 932,000 non-qualified stock
options on March 24, 1998 to employees at an exercise price of $1.95 per share.
Twenty percent of the non-qualified stock options vested immediately and the
balance vest over a five-year period. The Company will incur option related
compensation expense amounting to the difference between the exercise price and
the market price on the date of grant. During the first quarter of fiscal 1999
the Company recorded option of its common stock related compensation expense of
$671,000 (See Note 3 - Option Plan). The Company will record a charge of
$112,000 in each of the next 19 quarters, which represents the straight line
amortization of option related compensation expense over the vesting period of
the stock options. The charges during the first quarter of fiscal 1999, as well
as future quarters, represent non-cash expense.

The Company is planning to increase the net store count during the year,
reversing a three-year trend where the store count has declined significantly,
as a result of the closure of unprofitable stores. Management plans to open 25
new stores in fiscal 1999. The increase in store count should result in
increased sales and operating income. The capital requirements will also
increase as a result of the new store openings and are estimated at $1,500,000
for fiscal 1999.

As a result of the fundamental changes instituted by management, including the
new financing and increased credit facility put in place during the first
quarter of fiscal 1999, management believes that the Company is well positioned
to be a successful competitor in its market. While management believes that it
will continue to be required to manage cash carefully, it believes that the
recent financings will enable it to fully implement its business plan, open new
stores, and improve operating efficiency in the future.

As a result of the financing described above, the Company expects that the
increase in interest expense reflected in the results for the first quarter of
fiscal 1999 will continue in future quarters. In addition, dividend obligations
on the preferred stock, as well as the convertibility of the Series B preferred
stock, will affect earnings per share of common stock in future periods.

                                     Page 8
<PAGE>
Seasonality

Historically, the Company's operations have been seasonal, with highest-sales
and net income occurring in the fourth fiscal quarter, reflecting increased
demand during the year-end holiday selling season and, to a lesser extent, the
third quarter, reflecting increased demand during the Fall selling season. The
Company has generally recognized net losses during its first and second fiscal
quarters.

Results of Operations

The following table sets forth, for the periods indicated, certain consolidated
financial data as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                   Percentage of net sales
                                                                      Three Months Ended
                                                                 May 2, 1998     May 3, 1997

        <S>                                                           <C>             <C>   
        Net sales                                                     100.0%          100.0%

        Cost of sales, buying and occupancy costs                      82.3%           82.1%
        Selling, general and administrative expenses                   32.8%           28.8%
        Interest expense                                                1.8%            1.0%
        Option compensation expense                                     5.3%               0
        Loss before extraordinary items                               (22.2%)         (11.9%)
        Extraordinary charge
           Debt extinguishment                                          4.1%               0
        Net loss                                                      (26.3%)         (11.9%)
</TABLE>


Quarter ended May 2, 1998 compared to quarter ended May 3, 1997.

Net sales decreased by $775,000 (or 6 %), in the quarter ended May 2, 1998 as
compared to the same period a year earlier. This decrease was primarily a result
of operating 15 less stores at the beginning of the first quarter of fiscal 1999
than at the beginning of the same quarter last year, and accounted for a sales
decline of approximately $1,642,000. This decline was partially offset by a
comparable store sales increase of 5%. Comparable store sales increased
primarily as a result of the increasing acceptance by its customers of the new
merchandise concept implemented in the Fall of 1995. During the first quarter of
fiscal 1999 the Company opened two stores, closed eight stores and relocated
thirteen stores for a total of 102 stores in operation at the end of the
quarter.

Cost of sales, buying and occupancy costs increased by .2% as a percentage of
sales. This increase was primarily due to decreased leverage on fixed occupancy
and buying costs as a result of operating 15 fewer stores during the quarter.
Cost of sales related to merchandise was unchanged compared to the same quarter
last year.

Selling, general and administrative expenses increased by 4.0% as a percentage
of sales, primarily as a result of decreased leverage on fixed expenses as a
result of the planned decrease in store count. In addition, the increase in the
percentage of sales can be attributed to an increase in marketing expense during
the later portion of the quarter and increased payroll costs relating to
increased staffing of key positions in the buying and selling areas of the
business required in support of planned expansion of the business. The Company
has instituted a direct mail campaign for existing stores and tested direct mail
for new and relocated stores that are designed to increase awareness by its
target market. The Company believes that the additional expenses related to
marketing will provide benefits in future quarters.

                                     Page 9
<PAGE>
The Company recorded option related compensation expense of $671,000 or 5.3% of
sales related to the issuance of 932,000 non-qualified stock options on March
24,1998. Generally Accepted Accounting Principles require that compensation
expense be recorded for the difference between the exercise price and the fair
value of the shares, as defined, on the date of grant. This non-cash
compensation expense is charged to operations 20% (the initial vesting
percentage) as of the date of plan approval with the balance charged to
operations ratably using a straight line method, subject to the vesting
provisions of the plan. During the first quarter of fiscal 1999, option related
compensation expense of $671,000 was charged to operations (See Note 3 - Option
Plan).

Interest expense as a percent of sales was 1.8% in the first quarter of fiscal
1999 compared to 1.0% of sales in the first quarter of fiscal 1998. This
increase resulted from greater availability and borrowings under the line of
credit (See - Liquidity and Capital Resources) and interest incurred under the
subordinated debt transaction closed in March 1998.

The Company incurred an extraordinary charge related to the extinguishment of
debt of the former GECC facility in the amount of $522,000. The charge includes
termination fees of $338,000 and the write-off of remaining unamortized
financing costs of $184,000 related to the previous GECC line of credit.

The Company had a loss before the extraordinary charge of $2,818,000 for the
first quarter of fiscal 1999 or $5.56 per share compared to a loss of $1,597,000
in the first quarter of fiscal 1998 or $3.91 per share. The decline in sales
related to store closings during the first quarter of 1999, option related
compensation expense and increased costs related to expansion of the business
accounted for the increased loss for the first quarter of fiscal 1999.

The Company incurred a loss of $3,340,000 (or $6.52 per share) after the
extraordinary charge of $522,000 (or $0.96 per share) related to the
extinguishment of debt.

Liquidity and Capital Resources

General

The Company's principal needs for liquidity are to finance the purchase of
merchandise inventories, to fund operations and to fund the Company's expansion
plan.

During the first quarter of fiscal 1999, the Company's primary source of
liquidity was from borrowings under its $10,000,000 secured line of credit with
GECC.

Net cash used for operations for the first three months of fiscal 1999 was
$3,738,000. This use of cash resulted primarily from an increase in inventory
($2,619,000) and from the operating loss during the first three months of fiscal
1998 ($2,388,000, net of non-cash expenses), partially offset by the increase in
accounts payable ($1,123,000). Property and equipment expenditures for the first
three months of fiscal 1998 were $251,000.

The Company had a working capital deficit of $1,000 at May 2, 1998 compared to a
working capital deficit of $4,297,000 at May 3, 1997. The working capital
deficit decreased $4,296,000 primarily due to the investment in the Company of
$5,900,000 (net) which occurred in December 1997.

                                    Page 10

<PAGE>
Subsequent Events

Jay Jacobs replaced the former credit facility with GECC, entered into on August
29, 1997, with a new $15,000,000 facility with FINOVA on June 2, 1998. The new
credit facility provides for borrowing and letters of credit based on a formula
the aggregate of which cannot exceed the lessor of 100% of the net appraised
value of eligible inventory, as defined, and outstanding letters of credit, or
$15,000,000. Letters of credit are limited to a maximum of $5,000,000. A first
lien is granted to FINOVA on all the Company's assets. The Company must maintain
a scheduled minimum earnings before interest, taxes, depreciation and
amortization and a senior debt coverage ratio, and may not declare or pay
dividends or other distributions on account of any equity interest in the
Company, until payment or satisfaction in full of liabilities under the FINOVA
line of credit and termination of the financing agreement. Excluded under
certain circumstances are dividends to be paid on Series A and Series B
preferred stock. Interest is charged at FINOVA's prime rate plus .5%. The
Company is charged, normal audit fees, letter of credit fee of 1% per annum on
the aggregate undrawn face amount of letters of credit outstanding, and a
commitment fee of $150,000.

The Company is currently planning to open at least 25 stores and relocate 10
stores during fiscal 1999. In addition, the Company is researching alternatives
to its existing management information system and expects to incur capital
expenditures to replace existing systems during fiscal 1999. The estimated
capital expense during fiscal 1999 is $1,500,000. These forward-looking
statements will be influenced by the Company's financial position and the number
of advantageous mall store locations that become available.

At May 2, 1998 the Company had $1,406,000 in cash and cash equivalents. The
Company had drawn $7,563,000 and had approximately $252,000 of potential
availability under its GECC line of credit based on its borrowing base formula.
In the opinion of management, the net proceeds of the Subordinated Debt
transaction along with increased availability under the new credit facility with
FINOVA and anticipated cash flow from operations are adequate to enable the
Company to accomplish its plans for fiscal 1999.

Depending on the ultimate success of its business strategy, the Company may
continue to incur future losses, which could negatively affect working capital,
the extension of credit by the Company's suppliers, the Company's ability to
maintain compliance with its debt covenants, and the ability to raise additional
capital as required in the future.

                                    Page 11
<PAGE>
                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

None

Item 2.  Changes in Securities

On March 11, 1998, the Company issued warrants to purchase 111,880 shares of
Common Stock for $0.15 per share, subject to adjustment in certain events, as a
part of a subordinated debt financing provided by the two principal members of
the Company's investor group. (See Note 4 to Financial Statements) The number of
shares and price per share stated above have been adjusted to reflect the
1-for-15 reverse stock split effective March 24, 1998. (See Note 2 to Financial
Statements.) The warrants are exercisable until they expire on March 10, 2003.
The warrants were issued and sold in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended. Appropriate
representations were obtained from the investors and appropriate legends placed
on the warrant certificates as required for an exemption under Section 4(2).

Item 3.  Defaults upon Senior Securities

None

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

Pursuant to due notice, a Special Meeting of Shareholders of Jay Jacobs, Inc.
was held on March 24, 1998 at the Company's corporate offices. The purpose of
the special meeting was to approve the Company's 1998 Stock Incentive Plan, as
provided to shareholders as Appendix A to the Notice of the meeting; and to
approve an Amendment to the Company's Amended and Restated Articles of
Incorporation in order to effect a 1-for-15 reverse stock split of the common
stock of the Company. Both items were approved by a majority of the
shareholders. The votes were as follows:

<TABLE>
<CAPTION>
          Item                               For         Against      Abstaining      Broker non-votes
<S>                                       <C>            <C>            <C>             <C>      
1998 Stock Incentive Plan                 4,992,186      325,327        34,981          1,617,461
1-for-15 Reverse Stock Split              6,676,768      264,169        29,018              0
</TABLE>


Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

      3.1   Restated Articles of Incorporation (Incorporated by reference to
            Exhibit 3.1 to the Company's Registration Statement on Form S-1,
            Registration No. 33-13112, declared effective May 19, 1987 (the
            "Form S-1"))
      3.2   Articles of Amendment to the Registrant's Restated Articles of
            Incorporation 3.3 Bylaws (Incorporated by reference to Exhibit 3.3
            to the Form S-1)
      4.1   Form of Warrant (Incorporated by reference to Exhibit 6 to the
            Schedule 13D Amendment No. 1 filed on behalf of Cahill, Warnock
            Strategic Partners Fund, Strategic Associates, L.P., Cahill
            Warnock Strategic Partners, L.P., Cahill, Warnock & Co., LLC,
            Edward L. Cahill and David L. Warnock on March 23, 1998 (the
            "Schedule 13D"))
      4.2   Form of Debenture

                                    Page 12
<PAGE>
      4.3   Registration Rights Agreement (Incorporated by reference to
            Exhibit 5 to the Schedule 13D)
      10.1  Subordinated Debenture Agreement (Incorporated by reference to
            Exhibit 4.4 to the Company's Form 8-K filed on December 15, 1997
            (the "Form 8-K"))
      10.2  GECC Loan and Security Agreement (Incorporated by reference to 
            Exhibit 10.2 to the Form 8-K)
      10.3  First amendment to GECC Loan and Security agreement 10.4 Second
            amendment to GECC Loan and Security agreement (Incorporated by
            reference to Exhibit 10.3 to the Form 8-K)
      19.   Reference is made to the Form 10K/A as filed by Registrant on
            May 14, 1998
      27.   Financial Data Schedule

(b)   Reports on Form 8-K

      None


SIGNATURES

Pursuant to 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.

JAY JACOBS, INC.


June 16, 1998
-------

/s/ William L. Lawrence, Jr.
Executive Vice President, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer)

                                    Page 13