<PAGE>

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 October 26, 1996

                                     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)

Registrant's telephone number,
including area code:                                     (206)  622-5400


      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 CORPORATE ISSUERS:

      Indicate  the  number  of  shares  outstanding of each of the issuer's 
classes of common stock, as of October 26, 1996

                      (Common Stock, 6,126,871 shares) 
                             Page 1 of 12 pages                             

<PAGE>

                       PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                      JAY JACOBS, INC. AND SUBSIDIARIES

                         Consolidated Balance Sheet
                        (Dollar amounts in thousands)
                                 (Unaudited)

                                                  October 26,  January 27,
ASSETS                                               1996         1996   
                                                  ----------   ----------
                                                                          
Current assets:
  Cash and cash equivalents                        $    78       $   705 
  Accounts receivable                                  528           442 
  Inventories                                        7,706         7,323 
  Prepaid expenses                                     244           219 
                                                   -------       ------- 
    Total current assets                             8,556         8,689 
                                                   -------       ------- 

Property and equipment, net                          5,648         5,558 
                                                   -------       ------- 
                                                   $14,204       $14,247 
                                                   -------       ------- 
                                                   -------       ------- 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                 $ 4,431       $ 1,402 
  Accrued payroll                                      237           529 
  Accrued reorganization liability                   2,725         3,188
  Other accrued expenses                             1,168           550 
  Short term bank debt                               2,781             0
                                                   -------       ------- 
    Total current liabilities                       11,342         5,669 
                                                   -------       ------- 


Deferred rental credits                                549           995 
                                                   -------       ------- 

Accrued reorganization liability                       666         4,249
                                                   -------       ------- 

Shareholders' equity:
  Preferred stock:
    Authorized - 5,000,000 shares; Issued and
      outstanding - none                                -             -  
  Common stock:
    Authorized - 20,000,000 shares; Issued and
      outstanding - 6,126,871 and 6,007,283 
      shares                                        12,991        12,920
  Retained earnings                                (11,344)       (9,586)
                                                   -------       ------- 
                                                     1,647         3,334 
                                                   -------       ------- 
                                                   $14,204       $14,247 
                                                   -------       ------- 
                                                   -------       ------- 



                                     -2-
<PAGE>

                         PART I.  FINANCIAL INFORMATION

                      JAY JACOBS, INC. AND SUBSIDIARIES

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


                                     Three months ended  Nine months ended
                                     October    October  October    October
                                      1996       1995     1996       1995
                                      ----       ----     ----       ----

Net sales                             $13,479  $18,357   $43,776   $54,261
                                      -------  -------   -------   -------
Operating costs and expenses:
  Cost of sales, buying and 
    occupancy costs                    10,883   13,599    34,579    41,845
  Selling, general and 
    administrative expenses             4,197    5,327    13,081    15,720
  Interest expense                         60      (74)      228      (232)
                                      -------  -------   -------   -------


  Net operating expenses               15,140   18,852    47,888    57,333
                                      -------  -------   -------   -------

Income (loss) before income taxes      (1,661)    (495)   (4,112)   (3,072)

Federal income tax payment (refund)     2,355         -    2,355         -

Income tax provision (benefit)              -         -        -         - 
                                      -------  -------   -------   -------

Net income (loss)                     $   694     (495)   (1,757)   (3,072)
                                      -------  -------   -------   -------
                                      -------  -------   -------   -------

Earnings (loss) per share             $  0.11    (0.08)   $(0.29)   $(0.51)
                                      -------  -------   -------   -------
                                      -------  -------   -------   -------

Weighted average number of  
  shares outstanding                    6,127    6,007     6,093     6,007
                                      -------  -------   -------   -------



                                     -3-

<PAGE>

                       PART I.  FINANCIAL INFORMATION

                      JAY JACOBS, INC. AND SUBSIDIARIES

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


                                                      Nine months ended  
                                                     October 26  October 28
                                                     ----------------------
                                                       1996        1995   
                                                     --------    --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                             $(1,758)    $(3,072)
Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
    Depreciation and amortization                        968       1,050 
    Non-cash restructuring items                                     313
    Change in deferred rents                            (446)       (255)
    Change in assets and liabilities:
      Accounts receivable                                (86)       (141) 
      Inventories                                       (383)     (3,657)
      Prepaid expenses and other                         (25)       (266)
      Accounts payable                                 3,029       3,033 
      Accrued payroll                                   (292)       (392)
      Other accrued expenses                             618        (211)
      Obligations subject to compromise               (4,046)     (3,489)
                                                     --------    --------
                                                      (2,421)     (7,087) 
                                                     --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in property and equipment                (1,058)       (560) 
                                                     --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:                                   

Net borrowing from line of credit                      2,781           0
Proceeds from options exercised                           71           0
Proceeds from sales of fixed assets                        0           0

Net change in cash and cash equivalents                 (627)     (7,647) 
Cash and cash equivalents - beginning of period          705       8,745  
                                                     --------    --------
Cash and cash equivalents - end of period            $    78     $ 1,098  
                                                     --------    --------
                                                     --------    --------


                                     -4-

<PAGE>

                      JAY JACOBS, INC. AND SUBSIDIARIES

            Notes to Unaudited Consolidated Financial Statements

Note 1. Financial Presentation:

        The  attached  unaudited 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 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 
filed  with  the  Securities  and  Exchange Commission on April 26, 1996, as 
amended by Form 10-K/A on April 29, 1996 and May 28, 1996.

Note 2. Earnings (Loss) Per Share

        Earnings (loss) per share is based on the weighted average number of 
shares  outstanding  during the quarter 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  effect of the outstanding 
options  is  computed  using the treasury stock method. The weighted average 
number  of  shares  and equivalents outstanding were 6,126,871 and 6,007,283 
for  the  quarter ended October 26, 1996 and October 28, 1995, respectively. 
The  weighted  average  number  of  shares  and equivalents outstanding were 
6,093,186  and  6,007,283  for  the  nine  months ended October 26, 1996 and 
October 28, 1995, respectively.

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

        GENERAL

        All  references  herein to fiscal 1996, 1995 and 1994  relate to the 
twelve  months  ended  January 27, 1996, the eleven months ended January 28, 
1995  and  the  twelve  months  ended February 26, 1994. References to third 
quarter  1997 and 1996 relate to the three months ended October 26, 1996 and 
October  28,  1995,  respectively.  References  to  the  first  three fiscal 
quarters  of  fiscal  years  1997  and  1996 relate to the nine months ended 
October  26,  1996  and October 28, 1995, respectively. The Company made the 
decision,  during  fiscal 1995, to change its fiscal year to end on the last 
Saturday  in  January,  as  opposed  to  the last Saturday in February. This 
change  was  made  to  align  the  Company's fiscal calendar to the seasonal 
patterns  that  it  experiences,  as well as to enhance comparability of its 
fiscal  quarter  and  year  end results with similar retail companies in its 
industry segment.


                                     -5-

<PAGE>

SEASONALITY

        The  Company's  business  is  seasonal.  During fiscal year 1994 and 
earlier  fiscal  years,  fall and "back to school" shopping by the Company's 
customers,  generally  have  resulted  in  the  largest  sales in the second 
quarter  ending in late August. Sales also historically have been greater in 
the  holiday  season,  but  earnings  in  the  fourth quarter were adversely 
affected  by  markdowns  of  unsold  holiday merchandise and generally lower 
sales in January and February.  

        The  Company  changed  its  fiscal year ending date as of the end of 
fiscal  1995  and  as  a  result the seasonal pattern mentioned in the prior 
paragraph  has  changed.  The Company's fourth quarter, ending late January, 
has  generated  the largest sales and earnings followed by its third quarter 
ending in late October.           

RESULTS OF OPERATIONS

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

                                           Percentage of net sales
                                           -----------------------
                                 Three months ended       Nine months ended
                                  October    October        October October
                                   1996       1995           1996     1995
                                  ------     ------         ------   ------

Net sales                         100.0%     100.0%         100.0%   100.0%
Cost of sales, buying and 
 occupancy costs                   80.7       74.1           79.0     77.1
Selling, general and 
  administrative expenses          31.1       29.0           29.9     29.0
Interest expense                    0.5       (0.4)           0.5     (0.4)
  Net operating expenses          112.3%     102.7%         109.4%   105.7%

Income (loss) before income
 taxes                            (12.3)%     (2.7)%         (9.4)%   (5.7)%
                                  ------     ------         ------   ------
Federal Income Tax Refund         17.4          0            5.4        0
Net income (loss)                  5.1 %     (2.7)%         (4.0)%   (5.7)%
                                  ------     ------         ------   ------
                                  ------     ------         ------   ------


QUARTER ENDED OCTOBER 26,1996 COMPARED TO QUARTER ENDED OCTOBER 28, 1995

        Net  sales decreased by $4.9 million, or 26.6%, in the quarter ended 
October  26, 1996 as compared to the same period in 1995.  This decrease was 
primarily  due  to  store closures.  Comparable store sales decreased by 16% 
during  the  quarter as a result of inventory levels that were approximately 
33%  below same store levels of a year earlier. During the third quarter the 
Company  closed  two  stores.  The Company operated 130 stores at the end of 
the  third  quarter  of  fiscal  year 1997. The Company operated twenty-five 
fewer  stores  at  the  beginning  of the third quarter of fiscal 1997 (132) 
than  it  did at the beginning of the third quarter of 1996 (157), a decline 
of 16%. 


                                     -6-

<PAGE>

        Cost  of sales, buying and occupancy costs increased as a percentage 
of  sales by 6.6%. Cost of sales related to merchandise sold was the same as 
last  year. The increase in this category was a result of a 5.6% increase in 
occupancy  cost  as  a  percentage  of  sales as a result of the significant 
decline  in  comparable  store  sales  which,  in  turn,   resulted in fewer 
dollars  over  which   to  leverage  fixed rental and other occupancy costs. 
Depreciation  increased  by  1.0%  of  sales  as  a result of the decline in 
comparable store sales.

        Selling,   general   and  administrative  expenses  increased  as  a 
percentage  of  sales by 2.1%, primarily as a result of the comparable store 
sales  decline  which resulted in less sales to leverage cost expenses over, 
partially offset by expense reductions during the quarter.

        Interest expense as a percent of sales was 0.4% in the third quarter 
of  fiscal  1997 compared to interest income of (0.4%) of sales in the third 
quarter  of  fiscal  1996.  This  was  a  result  of the decline in cash and 
increase in short term borrowing during the quarter. 

        The  Company incurred a gain of $694,000 during the third quarter of  
1997,  or  $0.11  per  share  compared  to  a  loss of $495,000 in the third 
quarter  of 1996 or $0.08 per share. The gain is due to a federal income tax 
refund  of  $2.4  million  received  in  October  1996,  the  result  of net 
operating loss carrybacks. 

NINE  MONTHS  ENDED  OCTOBER  26, 1996 COMPARED TO NINE MONTHS ENDED OCTOBER 
28, 1995                              
  
      Net  sales  decreased $10.5 million, or 19.0% in the nine months ended 
October  26,  1996 as compared to the same period in 1995. This decrease was 
primarily  due  to  store  closures.  The  Company operated 16% fewer stores 
during  the  period  than  it did one year earlier. In addition to the store 
closures,  the  Company  attributes  a  portion of the sales decline to a 7% 
decrease  in  comparable  store  sales. Comparable store sales declined as a 
result  of  the  decline  in  comparable  store  sales  of  16% in the third 
quarter,  which  was  a  result  of  the  33%  decline  in inventory.  Sales 
declined  as  a  result  of  a generally soft demand for apparel merchandise 
during  the  first  quarter  of 1997, particularly during the month of April 
when comparable store sales declined 11%.
        
        Cost  of sales, buying and occupancy costs increased as a percentage 
of  net  sales  by 1.9%. Cost of sales, as a percentage to sales, related to 
merchandise  sold  was  the same as last year. The increase in this category 
was  a result of a 1.6% increase in occupancy cost as a percentage of sales, 
as  a  result  of  the  decline  in comparable store sales which resulted in 
fewer  dollars  over  which  to  leverage  fixed  rental and other occupancy 
costs.  Depreciation  increased  0.3% of sales as a result of the decline in 
comparable store sales.


                                     -7-

<PAGE>

         Selling,   general  and  administrative  expenses  increased  as  a 
percentage  of  net  sales by 0.9%, primarily as a result  of the decline in 
comparable  store  sales  during the first quarter of fiscal 1997, partially 
offset  by expense reductions during the second and third quarters of fiscal 
1997.

        Interest  expense  as a percent of sales was 0.5% for the first nine 
months  of  fiscal  1997  compared to interest income of (0.4%) in the first 
nine  months  of  fiscal  1996. This was a result of the decline in cash and 
increase in short term borrowing during the first nine months.

        The  Company  incurred a loss of $1.76 million during the first nine 
months  ended  October  26, 1996 compared to a $3.07 million during the nine 
months  ended  October 28, 1995. The loss can be primarily attributed to the 
decline  in store count and decline in comparable store sales, offset by the 
income tax recovery noted above.

LIQUIDITY AND CAPITAL RESOURCES
THE LASALLE FACILITY

        On  November  29,  1995,  the  Bankruptcy Court approved a financing 
agreement  on  a  revolving  credit  basis  between  the Company and LaSalle 
National  Bank  ("LaSalle"). The LaSalle Facility provides for borrowing and 
letters  of  credit,  the  aggregate of which cannot exceed the lower of $10 
million  or  a  computed  borrowing  base  based  on  50%  of  inventory and 
outstanding  letters  of  credit. Letters of credit are limited to a maximum 
of  $5  million.  A first and only lien is granted to LaSalle on all Company 
assets  (excluding  capitalized  leases  and excluding permitted liens up to 
$400,000).  The Company must maintain a scheduled minimum tangible net worth 
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  LaSalle  Facility  and termination of the financing 
agreement.  Interest  is  charged  at  LaSalle's  announced  prime rate. The 
Company  is  charged an annual fee of 1% of the aggregate loan limit, normal 
audit  fees,  and a letter of credit fee of 1.25% per annum on the aggregate 
undrawn  face  amount  of letters of credit outstanding. The agreement has a 
three-year term and was signed on December 4, 1995.

        As  of  the  end  of  the  third  quarter  of  1997  the Company had 
$2,781,000  of  direct  borrowing  and  $37,000  of  outstanding  letters of 
credit.

        GENERAL

        The  Company's  principal  needs  for  liquidity  are to finance the 
purchase   of merchandise inventories, fund its operations and make payments 
under its Plan of Reorganization.


                                     -8-

<PAGE>

        Net  cash used for operations for the first three quarters of fiscal 
years  1997  and  1996  was  $2.4 and $7.1 million, respectively. The use of 
cash  during  the  third  quarter  of 1997 resulted primarily from operating 
losses.

        Payments  under  the  Plan of Reorganization of $2,289,000 were made 
for  Allowed  Claims  in  late  January 1996, subsequent to fiscal year end. 
Additional   payments  were  made  during  the nine months ended October 26, 
1996   for   Allowed   Priority   Tax  Claims,  disputed  claims  that  were 
subsequently   settled   and   other  costs  associated  with  the  Plan  of 
Reorganization in the aggregate amount of $1,757,000.

        Property  and  equipment  expenditures were $1,058,000 (primarily in 
the   first   fiscal   quarter  of  1997)  and  $560,000  respectively.  The 
expenditures  during  the  first  quarter  of fiscal 1997 were the result of 
opening   15   stores  and  converting  5  stores  to  new  formats.  Future 
expenditures  on  property  and  equipment  were  curtailed during the third 
quarter until additional working capital is available. 

         The  Company had a working capital deficit of $2,786,000 on October 
26,  1996  compared  to a working capital of $7,773,000 on October 28, 1995. 
The   working  capital declined $10,559,000 primarily due to losses incurred 
during   the   first   nine   months,   payments  made  under  the  Plan  of 
Reorganization  or  to  be  made  in  January  1997  (of which $2,725,000 is 
classified  as  a  current  liability)  and acquisition of fixed assets. The 
working  capital  deficit declined since the end of the first half of fiscal 
1997  as  a result of the receipt of a federal income tax refund. During the 
third  quarter,  the Company applied for and received a refund of $2,355,000 
(net  of  fees)  for a carryback of net operating losses for its fiscal year 
1996.  The  carryback  is subject to review by the Internal Revenue Service. 
The  Company  anticipates  that  a  portion  of  the  losses incurred in the 
current  fiscal  year  will  be  available for carryback to prior years. The 
amount,  however,  will  not be determined until subsequent to the Company's 
fiscal year end.

         During  the  first  three  quarters  the Company's accounts payable 
increased  by  $3,030,000. This is a result of an increased accounts payable 
base  due vendors at the end of October 1996, compared to the end of January 
1996;  an  increase  in  payment terms negotiated with some of the Company's 
vendors;  and payables that were not made within normal terms as a result of 
the Company's working capital deficit.


                                     -9-

<PAGE>

         The second payment to the unsecured creditors is payable in January 
1997.  The  amount  of  the  payment was dependent upon the election made by 
each  unsecured  creditor  on  July  15,  1996. The claim value of creditors 
electing  to take the note option under the Company's Plan of Reorganization 
was  $390,000.  As  a  result  of  this  election,  $2,485,000 is payable in 
January  1997  for  the  second  and  final  cash  payment.  The  long  term 
installment  note  payable  over  four  years  bearing  interest of 9.5% and 
maturity  in  January  2001  is  $164,000 (which represents 42% of the claim 
value).  The  Company  has  begun  discussions with the unsecured creditors' 
committee  of its unsecured creditors regarding appropriate alternatives for 
the  payment  due  in  January  1997.  There  can  be no assurance that such 
discussions  will result in negotiations or terms acceptable to the Company, 
if at all.

         During  the  fiscal year ended February 1, 1997 the Company will be 
obligated to pay approximately $240,000 to Allowed Priority Tax Claims.

         At  October  26,  1996  the  Company  had  $78,000 in cash and cash 
equivalents.  The Company  had approximately $990,000 of potential liquidity 
under  terms  of  its  LaSalle Facility based on its borrowing base formula. 
The  amount  of  capital  resources  combined with cash flow from operations 
reflect  a  significantly declined position from year end. Subsequent to the 
end  of  the  first  quarter  1997,  the  Company experienced a reduction in 
inventory  flow,  as a result of reduced capital available under the LaSalle 
Facility.  As  a  result  of  the decline in sales, primarily related to the 
first  quarter, the Company's liquidity continues to be under pressure. This 
is  hampering  the  Company's  ability to fund ongoing operations. Plans for 
expansion   have  been  put  on  hold.  The  Company  is  currently  seeking 
additional sources of capital to strengthen its working capital position. 

         On  a  going  forward basis, the Company's liquidity and ability to 
make  all remaining Plan payments is dependent on cash flow from operations, 
successful  negotiations  with  creditors and management's ability to secure 
additional   financing.  There  can  be  no  assurance  that  commercial  or 
corporate  finance  will  be available, or if available, on terms acceptable 
to  the Company. If sufficient working capital cannot be secured in a timely 
fashion  or  results  of  operations  do not improve, the Company may not be 
able to pay its obligations in a timely manner.


                                    -10-

<PAGE>

                         PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

        
Item 2.  CHANGES IN RIGHTS OF SECURITY HOLDERS

     None

Item 3.  DEFAULTS UPON SENIOR SECURITIES

     None

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None

Item 5.  OTHER INFORMATION

         By  letter  dated  May  31,  1996,  Nasdaq  officially notified the 
Company  of  its  determination  to  de-list  the Company's shares of common 
stock  from  the  Nasdaq National Market effective June 10, 1996. This was a 
result  of  the Company's failure to meet certain requirements for continued 
listing  on  the  Nasdaq National Market relating to net tangible assets. On 
June  7,  1996,  the  Company  filed  notice  requesting  an appeal, pending 
temporarily  the  de-listing process until a formal hearing. The Company was 
notified  on  June  27,  1996 that its appeal for continued inclusion on the 
Nasdaq  National Market was denied. The Company's stock was subsequently de-
listed on June 28, 1996. 

         The  Nasdaq  Board  of  Governors  reviewed the decision to de-list 
the  Company  in October 1996 and upheld its earlier decision. The Company's 
shares  currently trade on the OTC Bulletin Board or Pink Sheets, subject to 
the  interest  of  market makers. There can be no assurance that a public or 
liquid trading market for the Company's shares will be available.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K                              
     (a)  Exhibits

          None.      

     (b)  Reports on Form 8-K

       


                                    -11-

<PAGE>

                                 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.


December 10, 1996  /s/ William L. Lawrence, Jr.                    
                  -------------------------------------------------------------
                 William L. Lawrence, Jr.,Senior Vice President and        
                         Chief Financial Officer and Treasurer
                         (Principal Financial and Accounting Officer)
                    

                                    -12-