================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

         _X_   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

               For the Quarterly Period Ended July 29, 2000
                                              -------------

                                       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: 0-25716



                            FINLAY ENTERPRISES, INC.
            --------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                      13-3492802
-------------------------------                       ---------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)



      529 Fifth Avenue, New York, NY                         10017
------------------------------------------                 ----------
 (Address of principal executive offices)                  (zip code)


                                 (212) 808-2800
             ------------------------------------------------------
              (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 ____

As of September 8, 2000, there were 10,427,353 shares of common stock, par value
$.01 per share, of the Registrant outstanding.


<PAGE>


                             FINLAY ENTERPRISES, INC

                                    FORM 10-Q

                      QUARTERLY PERIOD ENDED JULY 29, 2000

                                      INDEX

<TABLE>
                                                                                                         PAGE(S)
                                                                                                         -------
PART I - FINANCIAL INFORMATION

<S>      <C>               <C>
         Item 1.           Consolidated Financial Statements (Unaudited)

                           Consolidated Statements of Operations for the thirteen weeks and
                           twenty-six weeks ended July 31, 1999 and July 29, 2000..............................1

                           Consolidated Balance Sheets as of January 29, 2000 and July 29, 2000................3

                           Consolidated Statements of Changes in Stockholders' Equity for the year
                           ended January 29, 2000 and twenty-six weeks ended July 29, 2000.....................4

                           Consolidated Statements of Cash Flows for the thirteen weeks and
                           twenty-six weeks ended July 31, 1999 and July 29, 2000..............................5

                           Notes to Consolidated Financial Statements..........................................7

         Item 2.           Management's Discussion and Analysis of
                           Financial Condition and Results of Operations......................................13

         Item 3.           Quantitative and Qualitative Disclosures about Market Risk.........................19


PART II - OTHER INFORMATION

         Item 4.           Submission of Matters to a Vote of Security Holders................................20

         Item 6.           Exhibits and Reports on Form 8-K...................................................20

SIGNATURES....................................................................................................22
</TABLE>


<PAGE>

PART I - FINANCIAL INFORMATION
  Item 1. Consolidated Financial Statements

                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      THIRTEEN WEEKS ENDED
                                                                               ------------------------------------
                                                                                  JULY 31,             JULY 29,
                                                                                    1999                 2000
                                                                               ---------------      ---------------

<S>                                                                            <C>                  <C>
Sales....................................................................      $    183,367         $    211,229
Cost of sales............................................................            90,438              105,050
                                                                               ---------------      ---------------
    Gross margin.........................................................            92,929              106,179
Selling, general and administrative expenses.............................            81,770               91,759
Depreciation and amortization............................................             4,276                4,378
                                                                               ---------------      ---------------
    Income (loss) from operations........................................             6,883               10,042
Interest expense, net....................................................             7,427                7,825
                                                                               ---------------      ---------------
    Income (loss) before income taxes....................................              (544)               2,217
Provision (benefit) for income taxes.....................................                99                1,145
                                                                               ---------------      ---------------
    Net income (loss)....................................................      $       (643)        $      1,072
                                                                               ===============      ===============

Net income (loss) per share applicable to common shares:

       Basic net income (loss) per share.................................      $      (0.06)        $       0.10
                                                                               ===============      ===============
       Diluted net income (loss) per share...............................      $      (0.06)        $       0.10
                                                                               ===============      ===============
Weighted average shares and share equivalents outstanding................        10,412,762           10,507,957
                                                                               ===============      ===============
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       1
<PAGE>

                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     TWENTY-SIX WEEKS ENDED
                                                                               ------------------------------------

                                                                                  JULY 31,             JULY 29,
                                                                                    1999                 2000
                                                                               ---------------      ---------------

<S>                                                                            <C>                  <C>
Sales....................................................................      $    351,746         $    389,843
Cost of sales............................................................           172,357              192,386
                                                                               ---------------      ---------------
    Gross margin.........................................................           179,389              197,457
Selling, general and administrative expenses.............................           161,674              174,495
Depreciation and amortization............................................             8,476                8,582
                                                                               ---------------      ---------------
    Income (loss) from operations........................................             9,239               14,380
Interest expense, net....................................................            14,433               14,722
                                                                               ---------------      ---------------
    Income (loss) before income taxes ...................................            (5,194)                (342)
Provision (benefit) for income taxes.....................................            (1,463)                 358
                                                                               ---------------      ---------------
    Net income (loss)....................................................      $     (3,731)        $       (700)
                                                                               ===============      ===============
Net income (loss) per share applicable to common shares:
       Basic net income (loss) per share.................................      $      (0.36)        $      (0.07)
                                                                               ===============      ===============
       Diluted net income (loss) per share...............................      $      (0.36)        $      (0.07)
                                                                               ===============      ===============
Weighted average shares and share equivalents outstanding................        10,409,750           10,421,638
                                                                               ===============      ===============
</TABLE>






              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       2

<PAGE>


                            FINLAY ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                        (UNAUDITED)
                                                                                     JANUARY 29,         JULY 29,
                                                                                         2000              2000
                                                                                     -------------     --------------
<S>                                                                                  <C>               <C>
                                      ASSETS
Current assets
  Cash and cash equivalents....................................................      $    35,107       $     4,853
  Accounts receivable - department stores......................................           22,574            37,349
  Other receivables............................................................           31,075            34,801
  Merchandise inventories......................................................          279,336           309,679
  Prepaid expenses and other...................................................            2,083             4,262
                                                                                     -------------     --------------
     Total current assets......................................................          370,175           390,944
                                                                                     -------------     --------------
Fixed assets

  Equipment, fixtures and leasehold improvements...............................          110,017           118,134
  Less - accumulated depreciation and amortization.............................           40,439            43,984
                                                                                     -------------     --------------
     Fixed assets, net.........................................................           69,578            74,150
                                                                                     -------------     --------------
Deferred charges and other assets..............................................           20,484            20,389
Goodwill.......................................................................           96,805            96,676
                                                                                     -------------     --------------
     Total assets..............................................................      $   557,042       $   582,159
                                                                                     =============     ==============

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Notes payable................................................................      $     -           $    87,558
  Accounts payable - trade.....................................................          149,799            91,198
  Accrued liabilities:
     Accrued salaries and benefits.............................................           23,094            19,724
     Accrued miscellaneous taxes...............................................            6,296             2,369
     Accrued interest..........................................................            5,321             5,826
     Other.....................................................................           19,729            21,783
  Income taxes payable.........................................................            6,668             7,501
  Deferred income taxes........................................................            1,681             1,559
                                                                                     -------------     --------------
     Total current liabilities.................................................          212,588           237,518
Long-term debt.................................................................          225,000           225,000
Other non-current liabilities..................................................           10,654            11,419
                                                                                     -------------     --------------
     Total liabilities.........................................................          448,242           473,937
                                                                                     -------------     --------------
Stockholders' equity

  Common Stock, par value $.01 per share; authorized 25,000,000 shares;
     issued and outstanding 10,416,353 and 10,427,353 shares, respectively.....              104               104
  Additional paid-in capital ..................................................           77,194            77,316
  Retained earnings (deficit)..................................................           31,502            30,802
                                                                                     -------------     --------------
     Total stockholders' equity................................................          108,800           108,222
                                                                                     -------------     --------------
     Total liabilities and stockholders' equity................................      $   557,042       $   582,159
                                                                                     =============     ==============
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       3

<PAGE>

                            FINLAY ENTERPRISES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                          COMMON STOCK                                  FOREIGN
                                       -------------------    ADDITIONAL   RETAINED     CURRENCY        TOTAL
                                        NUMBER                 PAID-IN     EARNINGS   TRANSLATION    STOCKHOLDERS'
                                       OF SHARES   AMOUNT      CAPITAL     (DEFICIT)   ADJUSTMENT      EQUITY
                                       ----------  ------    ----------   ---------   -----------   ------------
<S>                                    <C>         <C>       <C>          <C>          <C>           <C>
Balance, January 30, 1999........      10,403,353  $  104    $   77,057   $  27,439    $  (4,789)    $  99,811
  Net income (loss)..............           -          -           -          4,063          -           4,063
  Foreign currency translation
     adjustment..................           -          -           -           -           4,789         4,789
  Exercise of stock options......          13,000      -            137        -             -             137
                                       ----------  ------    ----------   ---------   -----------   ------------
Balance, January 29, 2000 .......      10,416,353     104        77,194      31,502          -         108,800
  Net income (loss)..............           -          -           -           (700)         -            (700)
  Exercise of stock options......          11,000      -            122        -             -             122
                                       ----------  ------    ----------   ---------   -----------   ------------
Balance, July 29, 2000
  (unaudited)....................      10,427,353  $  104    $   77,316   $  30,802    $     -       $ 108,222
                                       ==========  ======    ==========   =========   ===========   ============
</TABLE>






              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       4

<PAGE>


                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            THIRTEEN WEEKS ENDED
                                                                                        ------------------------------
                                                                                         JULY 31,          JULY 29,
                                                                                           1999              2000
                                                                                        ------------     -------------
<S>                                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)..............................................................       $     (643)      $     1,072
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization..................................................            4,575             4,682
  Other, net.....................................................................              401               229
  Changes in operating assets and liabilities:
     (Increase) decrease in accounts and other receivables.......................           (4,523)            1,563
     Decrease in merchandise inventories.........................................           10,469            10,519
     Increase in prepaid expenses and other......................................             (212)              (36)
     Decrease in accounts payable and accrued liabilities........................          (36,072)          (18,619)
                                                                                        ------------     -------------
        NET CASH USED IN OPERATING ACTIVITIES....................................          (26,005)             (590)
                                                                                        ------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements....................           (4,038)           (3,908)
  Deferred charges and other.....................................................           (2,932)             (521)
  Proceeds from sale of outlet assets............................................                -               752
                                                                                        ------------     -------------
        NET CASH USED IN INVESTING ACTIVITIES....................................           (6,970)           (3,677)
                                                                                        ------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility........................................          169,030           159,813
  Principal payments on revolving credit facility................................         (135,378)         (158,864)
  Stock options exercised .......................................................               64                77
                                                                                        ------------     -------------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES..............................           33,716             1,026
                                                                                        ------------     -------------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................               48               133
                                                                                        ------------     -------------
        INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........................              789            (3,108)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................................            3,851             7,961
                                                                                        ------------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.........................................       $    4,640       $     4,853
                                                                                        ============     =============
Supplemental disclosure of cash flow information:
  Interest paid..................................................................       $   11,910       $    12,380
  Income taxes paid (received)...................................................            2,742                83
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       5

<PAGE>


                            FINLAY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           TWENTY-SIX WEEKS ENDED
                                                                                        ------------------------------
                                                                                         JULY 31,          JULY 29,
                                                                                           1999              2000
                                                                                        ------------     -------------
<S>                                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)..............................................................       $   (3,731)      $      (700)
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization..................................................            9,080             9,192
  Other, net.....................................................................              957             1,056
  Changes in operating assets and liabilities, net of effect from purchase of
       J.B. Rudolph assets (Note 6):
     Increase in accounts and other receivables..................................          (23,824)          (25,287)
     (Increase) decrease in merchandise inventories..............................              507           (14,060)
     Increase in prepaid expenses and other......................................           (1,322)           (2,190)
     Decrease in accounts payable and accrued liabilities........................          (94,196)          (63,626)
                                                                                        ------------     -------------
        NET CASH USED IN OPERATING ACTIVITIES....................................         (112,529)          (95,615)
                                                                                        ------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements....................           (7,915)           (7,741)
  Deferred charges and other.....................................................           (5,213)           (1,075)
  Proceeds from sale of Sonab assets.............................................                -             6,792
  Proceeds from sale of outlet assets............................................                -               752
  Payment for purchase of J.B. Rudolph assets....................................                -           (20,605)
                                                                                        ------------     -------------
        NET CASH USED IN INVESTING ACTIVITIES....................................          (13,128)          (21,877)
                                                                                        ------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility........................................          355,006           362,732
  Principal payments on revolving credit facility................................         (242,069)         (275,174)
  Stock options exercised........................................................              121               122
                                                                                        ------------     -------------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES..............................          113,058            87,680
                                                                                        ------------     -------------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................              (89)             (442)
                                                                                        ------------     -------------
        DECREASE IN CASH AND CASH EQUIVALENTS....................................          (12,688)          (30,254)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................................           17,328            35,107
                                                                                        ------------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.........................................       $    4,640       $     4,853
                                                                                        ============     =============
Supplemental disclosure of cash flow information:
  Interest paid..................................................................       $   13,584       $    13,607
  Income taxes paid (received)...................................................             (527)            2,746
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       6

<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements of Finlay
Enterprises,  Inc.  (the  "Company" or the  "Registrant"),  and its wholly owned
subsidiary,  Finlay Fine Jewelry  Corporation and its wholly owned  subsidiaries
("Finlay  Jewelry"),  have been prepared in accordance  with generally  accepted
accounting principles for interim financial information.  References to "Finlay"
mean collectively, the Company and Finlay Jewelry. In the opinion of management,
the  accompanying   unaudited  consolidated  financial  statements  contain  all
adjustments necessary to present fairly the financial position of the Company as
of July 29, 2000,  and the results of operations and cash flows for the thirteen
weeks and  twenty-six  weeks ended July 31, 1999 and July 29,  2000.  Due to the
seasonal nature of the business,  results for interim periods are not indicative
of annual results.  The unaudited  consolidated  financial  statements have been
prepared on a basis consistent with that of the audited  consolidated  financial
statements as of January 29, 2000  referred to below.  Certain  information  and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission (the "Commission").

     These consolidated  financial statements should be read in conjunction with
the audited consolidated  financial statements and notes thereto included in the
Company's  annual report on Form 10-K for the fiscal year ended January 29, 2000
("Form 10-K") previously filed with the Commission.

     Finlay's fiscal year ends on the Saturday closest to January 31. References
to 1997, 1998, 1999 and 2000 relate to the fiscal years ending January 31, 1998,
January 30, 1999, January 29, 2000 and February 3, 2001,  respectively.  Each of
the fiscal years includes 52 weeks, except 2000 includes 53 weeks.

     Net income (loss) per share has been computed in accordance  with Statement
of Financial  Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic
and  diluted  net income  (loss) per share were  calculated  using the  weighted
average  number of shares  outstanding  during  each  period,  with  options  to
purchase Common Stock included in diluted net income (loss) per share, using the
treasury  stock  method,  to the extent that such  options  were  dilutive.  The
following is an analysis of the differences between basic and diluted net income
(loss) per share:

<TABLE>
<CAPTION>
                                         THIRTEEN WEEKS ENDED                                  TWENTY-SIX WEEKS ENDED
                            -------------------------------------------------   ---------------------------------------------------
                                 JULY 31, 1999            JULY 29, 2000             JULY 31, 1999              JULY 29, 2000
                            ------------------------ ------------------------   ------------------------ --------------------------
<S>                          <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Weighted average shares
  outstanding...........     10,412,762   $  (0.06)    10,423,571   $   0.10     10,409,750   $  (0.36)    10,421,638   $  (0.07)
Dilutive stock options..          -           -            84,386        -            -           -             -            -
                            ------------ ----------- ------------- ----------   ------------ ----------- ------------- ------------
Weighted average shares
  and share equivalents.     10,412,762   $  (0.06)    10,507,957   $   0.10     10,409,750   $  (0.36)    10,421,638   $  (0.07)
                            ============ =========== ============= ==========   ============ =========== ============= ============
</TABLE>

     In 1998,  the  Company  adopted  SFAS  No.  130,  "Reporting  Comprehensive
Income". This Statement requires disclosure of comprehensive income,  defined as
the total of net income and all other  nonowner  changes in equity,  which under
generally  accepted  accounting   principles,   are  recorded  directly  to  the
stockholders'  equity section of the consolidated  balance sheet and, therefore,
bypass net income.  In 1999,  the only nonowner  change in equity related to the
foreign currency translation  adjustment.  For the thirteen weeks and twenty-six
weeks ended July 31,  1999,  the  comprehensive  loss was $0.3  million and $6.3
million,  respectively.  In 2000, there were no such adjustments and, therefore,
comprehensive income (loss) was the same as the Company's net income (loss).


                                       7
<PAGE>

                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - DESCRIPTION OF BUSINESS

     The Company conducts business through its wholly owned  subsidiary,  Finlay
Jewelry.  Finlay is a retailer of fine jewelry  products and primarily  operates
leased fine jewelry  departments  in  department  stores  throughout  the United
States.  Over the past three fiscal years,  the fourth quarter  accounted for an
average of 43% of Finlay's  domestic sales due to the  seasonality of the retail
jewelry industry. Approximately 46% of Finlay's domestic sales in 1999 were from
operations in The May Department  Stores Company  ("May") and 22% in departments
operated in store groups owned by Federated Department Stores.

NOTE 3 - MERCHANDISE INVENTORIES

     Merchandise inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                                                    (UNAUDITED)
                                                                            JANUARY 29,              JULY 29,
                                                                               2000                    2000
                                                                          ----------------       ------------------
                                                                                       (IN THOUSANDS)
   <S>                                                                     <C>                      <C>
   Jewelry goods - rings, watches and other fine jewelry
       (specific identification basis)...............................      $    283,717             $    314,746
   Less:  Excess of specific identification cost over LIFO
       inventory value...............................................             4,381                    5,067
                                                                          ----------------       ------------------
                                                                           $    279,336             $    309,679
                                                                          ================       ==================
</TABLE>

     The LIFO method had the effect of  increasing  the loss before income taxes
for the thirteen  weeks ended July 31, 1999 by $98,000 and decreasing the income
before income taxes for the thirteen weeks ended July 29, 2000 by $599,000.  The
effect of applying the LIFO method for the twenty-six  weeks ended July 31, 1999
and July 29, 2000 was to increase  the loss before  income taxes by $191,000 and
$687,000, respectively.  Finlay determines its LIFO inventory value by utilizing
selected  producer price indices published for jewelry and watches by the Bureau
of Labor Statistics.

     Approximately  $329,850,000  and  $360,910,000 at January 29, 2000 and July
29, 2000, respectively, of merchandise received on consignment has been excluded
from  Merchandise  inventories and Accounts  payable-trade  in the  accompanying
Consolidated Balance Sheets.

     Finlay  Jewelry  is  party  to a  gold  consignment  agreement  (the  "Gold
Consignment   Agreement"),   which  expires  on  December  31,  2001.  The  Gold
Consignment Agreement enables Finlay Jewelry to receive merchandise by providing
gold, or otherwise  making  payment,  to certain  vendors who supply Finlay with
merchandise on consignment.  While the merchandise  involved remains  consigned,
title to the gold content of the  merchandise  transfers from the vendors to the
gold  consignor.  Finlay  Jewelry can obtain,  pursuant to the Gold  Consignment
Agreement,  up to the lesser of (i) 105,000 fine troy ounces or (ii) $32,000,000
worth of gold,  subject  to a  formula  as  prescribed  by the Gold  Consignment
Agreement.  At July 29, 2000,  amounts  outstanding  under the Gold  Consignment
Agreement  totaled  102,339  fine troy  ounces,  valued at  approximately  $28.3
million. For financial statement purposes, the consigned gold is not included in
Merchandise  inventories  on the  Company's  Consolidated  Balance  Sheets  and,
therefore, no related liability has been recorded.


                                       8

<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - MERCHANDISE INVENTORIES (continued)

     The cost to Finlay of gold merchandise sold on consignment in some cases is
not fixed until the sale is reported to the vendor or to the gold  consignor  in
the case of merchandise sold pursuant to the Gold Consignment Agreement.  Finlay
at times enters into futures contracts,  such as options or forwards, based upon
the  anticipated  sales of gold product,  to hedge against the risk arising from
those payment arrangements. Changes in the market value of futures contracts are
accounted for as an addition to or reduction from the inventory cost. At January
29,  2000,  the Company had two open  positions  in futures  contracts  for gold
totaling 25,000 fine troy ounces,  valued at $7.3 million,  which expired during
the first  quarter of 2000.  At July 29,  2000,  the Company  had  several  open
positions in futures contracts for gold totaling 49,000 fine troy ounces, valued
at $13.6 million, which expire during the fall of 2000.

     In June 1998,  SFAS No. 133,  "Accounting  for Derivative  Instruments  and
Hedging  Activities"  was issued.  This  Statement  requires that all derivative
instruments  be recorded in the  balance  sheet as either an asset or  liability
measured at its fair value and that changes in the derivative  instrument's fair
value be recognized  currently in earnings or in comprehensive  income. SFAS No.
133 is effective for fiscal years  beginning after June 15, 2000. The Company is
currently evaluating the impact of adopting SFAS No. 133.

NOTE 4 - LEASE AGREEMENTS

     Finlay conducts  substantially all of its operations as leased  departments
in department  stores.  All of these leases, as well as rentals for office space
and equipment,  are accounted for as operating  leases. A substantial  number of
such  operating  leases expire on various dates  through  2008.  All  references
herein to leased  departments refer to departments  operated pursuant to license
agreements or other arrangements with host department stores.

     Substantially  all of the department store leases provide that the title to
certain fixed assets of Finlay  transfers upon  termination  of the leases,  and
that Finlay will receive the  undepreciated  value of such fixed assets from the
host store in the event such transfers occur, although the depreciation schedule
provided  for in the lease may  differ  from that used for  financial  reporting
purposes.  The values of such fixed assets are recorded at the  inception of the
lease  arrangement and are reflected in the  accompanying  Consolidated  Balance
Sheets.

     In many cases,  Finlay is subject to limitations under its lease agreements
with host department stores which prohibit Finlay from operating departments for
other store groups within a certain geographical radius of the host store.



                                       9


<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - LEASE AGREEMENTS (continued)

     The store leases  provide for the payment of fees based on sales,  plus, in
some instances,  installment payments for fixed assets. Lease expense,  included
in Selling, general and administrative expenses, is as follows:

<TABLE>
<CAPTION>
                                         THIRTEEN WEEKS ENDED                 TWENTY-SIX WEEKS ENDED
                                   ---------------------------------     ---------------------------------
                                      JULY 31,          JULY 29,           JULY 31,           JULY 29,
                                        1999              2000               1999               2000
                                   ---------------    --------------     --------------    ---------------
                                                               (IN THOUSANDS)
    <S>                            <C>                <C>                <C>               <C>
     Minimum fees..............    $      4,475       $      3,259       $      8,638      $      6,023
     Contingent fees...........          25,576             31,667             49,009            58,130
                                   ---------------    --------------     --------------    ---------------
       Total...................    $     30,051       $     34,926       $     57,647      $     64,153
                                   ===============    ==============     ==============    ===============
</TABLE>

NOTE 5 - SALE AND CLOSURE OF SONAB

     On January 3, 2000,  Societe  Nouvelle  d'Achat de  Bijouterie - S.O.N.A.B.
("Sonab"), the Company's European leased jewelry department subsidiary, sold the
majority of its assets for approximately  $9.9 million.  As of January 29, 2000,
Sonab  had  received  $1.2  million  of the sale  proceeds.  Sonab  received  an
additional $6.8 million in February 2000 upon the completion of the post-closing
audit,  and the  balance of $1.9  million  remains  subject  to  certain  escrow
arrangements among the parties.  After the sale, the buyer operated more than 80
locations  previously  included  in Sonab's  130-location  base in  France.  The
remaining  departments were closed. The Company recorded a pre-tax charge in the
fourth quarter of 1999 of $28.6  million,  or $1.62 per share on a diluted basis
after-tax,  for the  write-down of assets for  disposition  and related  closure
expenses.

NOTE 6 - JAY B. RUDOLPH, INC. ACQUISITION

     On April 3, 2000, Finlay completed the acquisition of certain assets of Jay
B. Rudolph,  Inc. ("J.B.  Rudolph") for $20.6 million,  consisting  primarily of
inventory  and fixed  assets.  By  acquiring  J.B.  Rudolph  (the "J.B.  Rudolph
Acquisition"),  Finlay  added 57  departments  and  also  added  new host  store
relationships with Bloomingdale's,  Dayton's, and Hudson's.  Finlay financed the
J.B.  Rudolph  Acquisition  with  borrowings  under  Finlay's  revolving  credit
agreement  with  General  Electric  Capital  Corporation  and the other  lenders
thereto (the "Revolving Credit Agreement").

     The  J.B.  Rudolph  Acquisition  was  accounted  for  as a  purchase,  and,
accordingly,  the operating results of the former J.B. Rudolph  departments have
been included in the Company's  consolidated financial statements since the date
of  acquisition.  The Company has recorded  goodwill of $1.7 million  based on a
preliminary purchase price allocation. Goodwill is being amortized over a period
of ten years.


                                       10
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - DOMESTIC OPERATIONS UNAUDITED PROFORMA FINANCIAL INFORMATION

     The following tables present proforma domestic  statement of operations for
the thirteen weeks and twenty-six  weeks ended July 31, 1999, which reflects the
Company's domestic  operations only and excludes the operating results of Sonab.
Refer  to  Note 5 for  additional  information  regarding  the  disposition  and
close-down of Sonab. In addition, the Company's actual results of operations for
the  thirteen  weeks and  twenty-six  weeks  ended  July 29,  2000 are shown for
comparative purposes.

IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                                          THIRTEEN WEEKS ENDED
                                                  ------------------------------------------------------------------------
                                                            JULY 31, 1999                          JULY 29, 2000
                                                              PROFORMA                                 ACTUAL
                                                  ----------------------------------      --------------------------------
<S>                                                  <C>                     <C>            <C>                   <C>
Sales........................................        $     176,316           100.0%         $     211,229         100.0%
Cost of sales................................               86,621            49.1                105,050          49.7
                                                    ---------------        ---------       ---------------        -------
  Gross margin...............................               89,695            50.9                106,179          50.3
Selling, general and administrative
  expenses...................................               77,783            44.1                 91,759          43.4
Depreciation and amortization................                4,109             2.4                  4,378           2.1
                                                    ---------------        ---------       ---------------        -------
   Income (loss) from operations.............                7,803             4.4                 10,042           4.8
Interest expense, net........................                6,921             3.9                  7,825           3.7
                                                    ---------------        ---------       ---------------        -------
   Income (loss) before income taxes.........                  882             0.5                  2,217           1.1
Provision (benefit) for income taxes.........                  659             0.4                  1,145           0.6
                                                    ---------------        ---------       ---------------        -------
   Net income (loss).........................        $         223             0.1%         $       1,072           0.5%
                                                    ===============        =========       ===============        =======
Net income (loss) per share
 applicable to common shares:
   Basic net income (loss) per share.........        $        0.02                          $        0.10
                                                    ===============                        ===============
   Diluted net income (loss) per share.......        $        0.02                          $        0.10
                                                    ===============                        ===============
Weighted average shares and share equivalents
  outstanding................................           10,518,959                             10,507,957
                                                    ===============                        ===============
</TABLE>



                                       11
<PAGE>


NOTE 7 - DOMESTIC OPERATIONS UNAUDITED PROFORMA FINANCIAL
         INFORMATION (continued)

IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                         TWENTY-SIX WEEKS ENDED
                                                   -----------------------------------------------------------------
                                                            JULY 31, 1999                       JULY 29, 2000
                                                              PROFORMA                              ACTUAL
                                                   ----------------------------         ----------------------------

<S>                                                <C>                   <C>            <C>                   <C>
Sales........................................      $    338,967          100.0%         $     389,843         100.0%
Cost of sales................................           165,518           48.8                192,386          49.3
                                                   -------------       ----------       --------------      ---------
  Gross margin...............................           173,449           51.2                197,457          50.7
Selling, general and administrative
  expenses ..................................           153,927           45.4                174,495          44.8
Depreciation and amortization................             8,133            2.4                  8,582           2.2
                                                   -------------       ----------       --------------      ---------
   Income (loss) from operations.............            11,389            3.4                 14,380           3.7
Interest expense, net........................            13,289            3.9                 14,722           3.8
                                                   -------------       ----------       --------------      ---------
   Income (loss) before income taxes.........            (1,900)          (0.5)                  (342)         (0.1)
Provision (benefit) for income taxes.........              (168)           -                      358           0.1
                                                   -------------       ----------       --------------      ---------
   Net income (loss).........................      $     (1,732)          (0.5)%        $        (700)         (0.2)%
                                                   =============       ==========       ==============      =========
Net income (loss) per share
 applicable to common shares:................
   Basic net income (loss) per share.........      $      (0.17)                        $       (0.07)
                                                   =============                        ==============
   Diluted net income (loss) per share.......      $      (0.17)                        $       (0.07)
                                                   =============                        ==============
Weighted average shares and share equivalents
  outstanding................................        10,409,750                            10,421,638
                                                   =============                        ==============
</TABLE>


                                       12

<PAGE>


PART I - FINANCIAL INFORMATION
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The following table sets forth  operating  results as a percentage of sales
for the periods indicated:

STATEMENTS OF OPERATIONS DATA
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THIRTEEN WEEKS ENDED             TWENTY-SIX WEEKS ENDED
                                                                 ----------------------------     -----------------------------
                                                                  JULY 31,         JULY 29,        JULY 31,          JULY 29,
                                                                    1999             2000            1999              2000
                                                                 -----------      -----------     -----------       -----------
<S>                                                                <C>              <C>             <C>               <C>
Sales......................................................        100.0%           100.0%          100.0%            100.0%
Cost of sales..............................................         49.3             49.7            49.0              49.3
                                                                 -----------      -----------     -----------       -----------
    Gross margin...........................................         50.7             50.3            51.0              50.7
Selling, general and administrative expenses...............         44.6             43.4            46.0              44.8
Depreciation and amortization..............................          2.3              2.1             2.4               2.2
                                                                 -----------      -----------     -----------       -----------
    Income (loss) from operations..........................          3.8              4.8             2.6               3.7
Interest expense, net......................................          4.1              3.7             4.1               3.8
                                                                 -----------      -----------     -----------       -----------
    Income (loss) before income taxes......................         (0.3)             1.1            (1.5)             (0.1)
Provision (benefit) for income taxes.......................          0.1              0.6            (0.4)              0.1
                                                                 -----------      -----------     -----------       -----------
    Net income (loss)......................................         (0.4)%            0.5%           (1.1)%            (0.2)%
                                                                 ===========      ===========     ===========       ===========
</TABLE>

THIRTEEN  WEEKS ENDED JULY 29, 2000 COMPARED WITH THIRTEEN  WEEKS ENDED JULY 31,
1999

     SALES.  Sales for the thirteen  weeks ended July 29, 2000  increased  $27.9
million,  or 15.2%,  over the  comparable  period in 1999. On a domestic  basis,
sales  increased  $34.9  million,  or 19.8%,  over the 1999  period.  Comparable
department  sales  (departments  open  for the  same  months  during  comparable
periods) increased 7.8%.  Management  attributes this increase in the comparable
department  sales to the following  initiatives:  (i) emphasizing its "Key Item"
and "Best Value" merchandising programs,  which provide a targeted assortment of
items at competitive  prices;  (ii) increasing focus on holiday and event-driven
promotions as well as host store marketing  programs;  and (iii) positioning the
Company's departments as a "destination  location" for fine jewelry.  Sales from
the  operation  of net new  departments  contributed  $13.6  million,  primarily
relating to the J.B. Rudolph Acquisition offset by the sale and closure of Sonab
at the end of 1999.

     During  the  thirteen  weeks  ended  July  29,  2000,   Finlay  opened  two
departments  and closed seven  departments.  The openings and closings  were all
within existing store groups.  The closings included six of the Company's outlet
stores, which were sold in May 2000.

     GROSS  MARGIN.  Gross  margin for the period  increased  by $13.3  million,
primarily as a result of the sales  increase.  As a percentage  of sales,  gross
margin  decreased by 0.4%. On a domestic basis,  gross margin as a percentage of
sales decreased by 0.6% primarily  attributable to (i)  management's  efforts to
increase market penetration and market share through its pricing strategy,  (ii)
intensified  promotional  activity by the host  stores,  including  an increased
usage of in-store  coupons and (iii) an increase in the LIFO  provision  of $0.5
million.



                                       13

<PAGE>

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative   expenses  ("SG&A")  increased  $10.0  million,  or  12.2%,  due
primarily to payroll  expense and lease fees associated with the increase in the
Company's  sales.  SG&A as a percentage  of sales  decreased  by 1.2%,  and on a
domestic  basis by 0.7%,  as a result of the  leveraging of these  expenses.  In
addition,  expenses  related  to the  Company's  year 2000  remediation  project
totaled  approximately  $1.2 million for the thirteen weeks ended July 31, 1999.
There were no such expenses recorded in the current year's quarter.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  increased by
$0.1 million,  reflecting an increase in capital  expenditures  and  capitalized
software  costs for the most  recent  twelve  months,  offset  by the  effect of
certain  assets  becoming  fully  depreciated  as  well as the  disposition  and
write-off  of Sonab's  fixed  assets.  On a  domestic  basis,  depreciation  and
amortization  increased by $0.3 million. The increase in fixed assets was due to
the addition of new departments,  the renovation of existing departments and the
inclusion  of the cost of fixed  assets  acquired  in  connection  with the J.B.
Rudolph Acquisition.

     INTEREST EXPENSE, NET. Interest expense increased by $0.4 million primarily
due to a higher  weighted  average  interest  rate  (8.5%  for the  2000  period
compared  to 8.0% for the  comparable  period  in  1999)  offset  slightly  by a
decrease in average  borrowings  ($336.6 million for the period in 2000 compared
to $339.0 million for the comparable period in 1999).

     PROVISION (BENEFIT) FOR INCOME TAXES. The income tax provision for the 2000
and 1999 periods reflects an effective tax rate of 40.5%.

     NET INCOME  (LOSS).  The net income of $1.1 million for the 2000 period was
$1.7  million  higher  than the net loss in the prior  period as a result of the
factors discussed above. On a domestic basis, the net income for the 2000 period
was $0.8 million  higher than the net income in the prior period,  which totaled
$0.2 million.

TWENTY-SIX  WEEKS ENDED JULY 29, 2000 COMPARED WITH TWENTY-SIX  WEEKS ENDED JULY
31, 1999

     SALES.  Sales for the twenty-six  weeks ended July 29, 2000 increased $38.1
million,  or 10.8%,  over the  comparable  period in 1999. On a domestic  basis,
sales  increased  $50.9  million,  or 15.0%,  over the 1999  period.  Comparable
department  sales  increased  6.3%.  Management  attributes this increase in the
comparable  department  sales  primarily  to the "Key  Item"  and  "Best  Value"
merchandising  programs and to the marketing  initiatives discussed above. Sales
from the operation of net new departments  contributed $15.9 million,  primarily
relating  to the  J.B.  Rudolph  Acquisition  and the net  effect  of new  store
openings  and  closings  offset by the sale and  closure  of Sonab at the end of
1999.

     During  the  twenty-six  weeks  ended  July  29,  2000,  Finlay  opened  68
departments and closed 14 departments. The openings included 57 departments as a
result  of  the  J.B.   Rudolph   Acquisition,   including  23   departments  in
Bloomingdale's, 13 departments in Dayton's and 21 departments in Hudson's, seven
departments as a result of May's acquisition of ZCMI and four departments within
existing  store  groups.  The closings  were all within  existing  store groups,
including six of the Company's outlet stores which were sold in May 2000.

     GROSS  MARGIN.  Gross  margin for the period  increased  by $18.1  million,
primarily as a result of the sales  increase.  As a percentage  of sales,  gross
margin  decreased by 0.3%. On a domestic basis,  gross margin as a percentage of
sales decreased by 0.5% primarily  attributable to (i)  management's  efforts to
increase market penetration and market share through its pricing strategy,  (ii)
intensified  promotional


                                       14

<PAGE>

activity by the host stores,  including an increased  usage of in-store  coupons
and (iii) an increase in the LIFO provision of $0.5 million.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $12.8 million,
or 7.9%,  due primarily to payroll  expense and lease fees  associated  with the
increase in the  Company's  sales.  SG&A as a percentage  of sales  decreased by
1.2%,  and on a domestic  basis by 0.6%, as a result of the  leveraging of these
expenses.  In addition,  expenses related to the Company's year 2000 remediation
project totaled  approximately  $1.7 million for the twenty-six weeks ended July
31, 1999. There were no such expenses recorded in the current year.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  increased by
$0.1 million,  reflecting an increase in capital  expenditures  and  capitalized
software  costs for the most  recent  twelve  months,  offset  by the  effect of
certain  assets  becoming  fully  depreciated  as  well as the  disposition  and
write-off  of Sonab's  fixed  assets.  On a  domestic  basis,  depreciation  and
amortization  increased by $0.4 million. The increase in fixed assets was due to
the addition of new departments,  the renovation of existing departments and the
inclusion  of the cost of fixed  assets  acquired  in  connection  with the J.B.
Rudolph Acquisition.

     INTEREST EXPENSE, NET. Interest expense increased by $0.3 million primarily
due to a higher  weighted  average  interest  rate  (8.5%  for the  2000  period
compared  to 8.1% for the  comparable  period in 1999)  offset by a decrease  in
average  borrowings  ($312.6  million for the period in 2000  compared to $322.0
million for the comparable period in 1999).

     PROVISION (BENEFIT) FOR INCOME TAXES. The income tax provision for the 2000
and 1999 periods reflects an effective tax rate of 40.5%.

     NET INCOME  (LOSS).  The net loss of $0.7  million  for the 2000 period was
$3.0  million  lower  than the net loss in the  prior  period as a result of the
factors  discussed  above. On a domestic basis, the net loss for the 2000 period
was $1.0 million lower than the net loss in the prior period, which totaled $1.7
million.

LIQUIDITY AND CAPITAL RESOURCES

     Finlay's  primary capital  requirements are for funding working capital for
new departments and for working capital growth of existing departments and, to a
lesser extent,  capital  expenditures  for opening new  departments,  renovating
existing departments and information technology investments.  For the twenty-six
weeks ended July 31, 1999 and July 29, 2000, capital  expenditures  totaled $7.9
million and $7.7 million  (exclusive  of the fixed  assets  acquired in the J.B.
Rudolph Acquisition), respectively. For 1999, capital expenditures totaled $15.0
million and for 2000 are estimated to be approximately $15.0 million,  exclusive
of the fixed assets acquired in the J.B. Rudolph  Acquisition.  Although capital
expenditures are limited by the terms of the Revolving Credit Agreement, to date
this  limitation  has not  precluded  the Company  from  satisfying  its capital
expenditure requirements.

     Finlay's  operations  substantially  preclude  customer  receivables and in
recent years, on average, approximately 50% of Finlay's domestic merchandise has
been carried on consignment.  Accordingly,  management  believes that relatively
modest  levels of working  capital  are  required  in  comparison  to many other
retailers.  The Company's working capital balance was $153.4 million at July 29,
2000, a decrease of $4.2 million  from January 29, 2000.  The decrease  resulted
primarily from the impact of the interim net loss, exclusive of depreciation and
amortization, and capital expenditures. Based on the



                                       15
<PAGE>

seasonal nature of Finlay's business, working capital requirements and therefore
borrowings  under the Revolving  Credit Agreement can be expected to increase on
an interim basis during the first three  quarters of any given fiscal year.  See
"--Seasonality".

     The seasonality of Finlay's business causes working capital requirements to
reach their  highest  level in the months of October,  November  and December in
anticipation of the year-end  holiday season.  Accordingly,  Finlay  experiences
seasonal cash needs as inventory  levels peak.  The Revolving  Credit  Agreement
provides Finlay with a line of credit of up to $275.0 million to finance working
capital needs.  Amounts  outstanding  under the Revolving  Credit Agreement bear
interest at a rate equal to, at Finlay's option,  (i) the Index Rate (as defined
in the Revolving  Credit  Agreement)  plus a margin ranging from zero to 1.0% or
(ii)  adjusted  LIBOR  plus a margin  ranging  from  1.0% to 2.0%,  in each case
depending on the financial performance of the Company.

     In each year, Finlay is required to reduce the outstanding revolving credit
balance and letter of credit  balance  under the Revolving  Credit  Agreement to
$50.0  million  or less  and  $20.0  million  or  less,  respectively,  for a 30
consecutive day period (the "Balance Reduction  Requirement").  Borrowings under
the Revolving Credit Agreement at July 29, 2000 were $87.6 million,  compared to
a zero  balance at January 29,  2000 and $112.9  million at July 31,  1999.  The
average  amounts  outstanding  under the Revolving  Credit  Agreement were $97.0
million and $87.6 million for the twenty-six  weeks ended July 31, 1999 and July
29, 2000, respectively.  The maximum amount outstanding for the twenty-six weeks
ended July 29, 2000 was $131.8 million.

     The J.B. Rudolph Acquisition did not require significant additional working
capital with respect to the  operation  of the former J.B.  Rudolph  departments
because Finlay purchased the inventory of those J.B. Rudolph  departments  which
it acquired.  On a going-forward basis,  inventory purchases for the former J.B.
Rudolph departments will be financed in part by trade payables combined with the
utilization  of  consignment   inventory.   Finlay  financed  the  J.B.  Rudolph
Acquisition with borrowings under its Revolving Credit Agreement.

     On January 3, 2000, Sonab sold the majority of its assets for approximately
$9.9  million.  As of January 29, 2000,  Sonab had received  $1.2 million of the
sale proceeds.  Sonab received an additional  $6.8 million in February 2000 upon
the  completion  of the  post-closing  audit,  and the  balance of $1.9  million
remains  subject to certain  escrow  arrangements  among the parties.  After the
sale, the buyer operated more than 80 locations  previously  included in Sonab's
130-location base in France. The remaining  departments were closed. The Company
recorded a pre-tax  charge in the fourth  quarter of 1999 of $28.6  million,  or
$1.62 per share on a diluted basis  after-tax,  for the write-down of assets for
disposition  and related closure  expenses.  The cash portion of this charge was
approximately $7.8 million.

     Finlay's  long-term needs for external financing will depend on its rate of
growth,  the level of  internally  generated  funds and the  ability to continue
obtaining  substantial amounts of merchandise on advantageous  terms,  including
consignment  arrangements  with its  vendors.  For 1999,  Finlay  had an average
balance of  consignment  merchandise of $329.9  million from  approximately  300
vendors as compared to an average  balance of $283.8 million in 1998. As of July
29, 2000,  $360.9 million of consignment  merchandise was on hand as compared to
$308.4 million at July 31, 1999.

     A substantial  amount of Finlay's operating cash flow has been used or will
be  required  to pay  interest,  directly  or  indirectly,  with  respect to the
Company's 9% Senior Debentures due May 1, 2008 (the "Senior Debentures"), Finlay
Jewelry's 8 3/8 Senior  Notes due May 1, 2008 (the  "Senior  Notes") and amounts
due under the  Revolving  Credit  Agreement,  including  the  payments  required
pursuant to the


                                       16

<PAGE>

Balance  Reduction  Requirement.  As of  July  29,  2000,  Finlay's  outstanding
borrowings were $312.6 million, which included a $75.0 million balance under the
Senior Debentures,  a $150.0 million balance under the Senior Notes and an $87.6
million balance under the Revolving Credit Agreement.

     Finlay Jewelry is party to the Gold Consignment Agreement, which expires on
December 31, 2001.  The Gold  Consignment  Agreement  enables  Finlay Jewelry to
receive  merchandise by providing gold, or otherwise making payment,  to certain
vendors.  Finlay Jewelry can obtain, pursuant to the Gold Consignment Agreement,
up to the lesser of (i) 105,000 fine troy ounces or (ii) $32.0  million worth of
gold, subject to a formula as prescribed by the Gold Consignment  Agreement.  At
July 29, 2000, amounts outstanding under the Gold Consignment  Agreement totaled
102,339 fine troy ounces,  valued at  approximately  $28.3 million.  The average
amount  outstanding  under the Gold  Consignment  Agreement was $23.5 million in
1999.

     The year  2000  issue  did not pose  significant  operational  problems  to
Finlay.  Finlay used a combination of internal and external resources to execute
its year 2000  project  plan.  The costs  related to Finlay's  year 2000 efforts
totaled approximately $4.0 million, of which approximately $1.9 million and $2.1
million was spent in 1998 and 1999,  respectively.  Finlay  funded the year 2000
costs through operating cash flows.

     The  Company  is  in  the  process  of  implementing   several  information
technology   initiatives,   including  the  design  and  development  of  a  new
merchandising system and a point-of-sale system in Finlay's  departments.  These
projects  will serve to support  future growth of the Company as well as provide
improved analysis and reporting capabilities and are expected to be completed by
mid-2001.  At July 29, 2000,  a total of  approximately  $10.7  million has been
expended  for  software  and  implementation  costs and is  included in Deferred
charges and other  assets.  Approximately  $4.0 million for hardware and related
equipment was expended in 1999 to upgrade Finlay's  departments and is reflected
in Fixed  assets.  The  Company  anticipates  it will spend an  additional  $6-9
million to complete these systems.

     Section 382 of the Internal  Revenue Code of 1986,  as amended (the "Code")
restricts  utilization  of net operating  loss  carryforwards  ("NOLs") after an
ownership   change   exceeding  50%.  As  a  result   certain   recapitalization
transactions  in 1993,  a change  in  ownership  of the  Company  exceeding  50%
occurred  within the  meaning of Section 382 of the Code.  Similar  restrictions
apply to other  carryforwards.  Consequently,  there is a material limitation on
the  Company's  annual  utilization  of its NOLs and other  carryforwards  which
requires  a  deferral  or  loss  of  the  utilization  of  such  NOLs  or  other
carryforwards.  The Company  had, at October  31, 1999 (the  Company's  tax year
end), a NOL for tax purposes of  approximately  $7.5 million which is subject to
an annual limit of approximately $2.0 million per year.  However,  for financial
reporting purposes, no NOL exists as of January 29, 2000.

     From time to time, Finlay enters into futures contracts, such as options or
forwards,  based upon the  anticipated  sales of gold  product in order to hedge
against the risk  arising from its payment  arrangements.  Changes in the market
value of futures contracts are accounted for as an addition to or reduction from
the inventory  cost.  For the year ended  January 29, 2000,  the gain or loss on
open futures  contracts  was not  material.  At July 29,  2000,  the Company had
several open positions in futures  contracts for gold totaling  49,000 fine troy
ounces, valued at $13.6 million, which expire during the fall of 2000. There can
be no assurance that these hedging techniques will be successful or that hedging
transactions  will not adversely  affect the Company's  results of operations or
financial position.

     Finlay believes that, based upon current  operations,  anticipated  growth,
and availability under the Revolving Credit Agreement,  Finlay Jewelry will, for
the foreseeable future, be able to meet its debt service and anticipated working
capital  obligations,  and to make  distributions  to the Company  sufficient


                                       17

<PAGE>

to permit the Company to meet its debt  service  obligations  and to pay certain
other  expenses  as they come due.  No  assurances,  however,  can be given that
Finlay Jewelry's  current level of operating results will continue or improve or
that Finlay  Jewelry's  income from operations will continue to be sufficient to
permit  Finlay  Jewelry  and the  Company to meet their debt  service  and other
obligations.   Currently,  Finlay  Jewelry's  principal  financing  arrangements
restrict  annual  distributions  from Finlay  Jewelry to the Company to 0.25% of
Finlay  Jewelry's  net  sales  for the  preceding  fiscal  year and  also  allow
distributions  to the  Company  to enable it to make  interest  payments  on the
Senior  Debentures.  The amounts  required to satisfy  the  aggregate  of Finlay
Jewelry's  interest  expense and required  amortization  payments  totaled $10.2
million for each of the twenty-six week periods ended July 31, 1999 and July 29,
2000.

SEASONALITY

     Finlay's  business is highly  seasonal,  with a significant  portion of its
sales and income from  operations  generated  during the fourth  quarter of each
year, which includes the year-end holiday season.  The fourth quarter  accounted
for an average of 43% of Finlay's  sales and 81% of its income  from  operations
for 1997,  1998 and 1999.  Finlay has  typically  experienced  net losses in the
first three quarters of its fiscal year.  During these periods,  working capital
requirements   have  been  funded  by  borrowings  under  the  Revolving  Credit
Agreement.  Accordingly,  the results for any of the first three quarters of any
given fiscal year, taken individually or in the aggregate, are not indicative of
annual results.

INFLATION

     The effect of  inflation  on Finlay's  results of  operations  has not been
material in the periods discussed.





                                       18
<PAGE>


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Quarterly  Report on Form 10-Q includes  "forward-looking  statements"
within the meaning of Section 27A of the  Securities Act of 1993 and Section 21E
of the  Securities  Exchange Act of 1934 (the  "Exchange  Act").  All statements
other  than   statements  of   historical   information   provided   herein  are
forward-looking  statements and may contain information about financial results,
economic  conditions,  trends  and  known  uncertainties.   The  forward-looking
statements  contained herein are subject to certain risks and uncertainties that
could cause  actual  results to differ  materially  from those  reflected in the
forward-looking statements.  Factors that might cause such a difference include,
but are not limited to,  those  discussed  under  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations", as well as trends in
the general  economy in the United  States,  competition  in the retail  jewelry
business,  the seasonality of the retail jewelry business, the Company's ability
to  increase  comparable  department  sales  and to open  new  departments,  the
Company's   dependence   on  certain  host  store   relationships   due  to  the
concentration  of sales generated by such host stores,  the  availability to the
Company of alternate sources of merchandise supply in the case of an abrupt loss
of any  significant  supplier,  the  Company's  ability  to  continue  to obtain
substantial  amounts of merchandise  on  consignment,  the Company's  ability to
estimate the costs relating to the closure of Sonab, the Company's dependence on
key officers,  the Company's  ability to integrate future  acquisitions into its
existing business, the Company's high degree of leverage and the availability to
the Company of financing and credit on favorable terms and changes in regulatory
requirements which are applicable to the Company's business.

     Readers  are  cautioned  not to rely on these  forward-looking  statements,
which reflect management's analysis,  judgment, belief or expectation only as of
the date hereof.  The Company  undertakes no obligation to publicly revise these
forward-looking  statements to reflect events or circumstances  that arise after
the date hereof. In addition to the disclosure contained herein,  readers should
carefully  review any disclosure of risks and  uncertainties  contained in other
documents the Company  files or has filed from time to time with the  Commission
pursuant to the Exchange Act.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market  risk  through  the  interest  rate on its
borrowings under the Revolving Credit  Agreement,  which has a variable interest
rate.  In seeking to minimize the risks from  interest  rate  fluctuations,  the
Company  manages   exposures   through  its  regular   operating  and  financing
activities.  In addition,  the majority of the  Company's  borrowings  are under
fixed rate  arrangements.  In  addition,  the  Company is exposed to market risk
related to changes in the price of gold, and selectively uses forward  contracts
to manage this risk. The Company enters into forward  contracts for the purchase
of gold to hedge the risk of gold price  fluctuations  for future  sales of gold
consignment  merchandise.  The Company does not enter into forward  contracts or
other financial  instruments for speculation or trading purposes.  The aggregate
amount of forward  contracts  was $13.6  million at July 29, 2000,  which expire
during the fall of 2000.



                                       19

<PAGE>


PART II - OTHER INFORMATION

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

         The Annual Meeting of the  Stockholders of the Company was held on June
22, 2000, pursuant to notice, at which Messrs. David B. Cornstein,  James Martin
Kaplan,  John D. Kerin and Arthur E. Reiner  were  re-elected  directors  of the
Company to serve a three-year  term in the class of directors whose term expires
in 2003.  Such members have been elected to serve until the  expiration of their
respective  terms of office and until  their  successors  are duly  elected  and
qualified. At such meeting, votes were cast as follows:

       Name                           Votes for            Votes Withheld
       ----                           ---------            --------------
David B. Cornstein                    9,353,620                1,000
James Martin Kaplan                   9,354,120                 500
John D. Kerin                         9,354,120                 500
Arthur E. Reiner                      8,658,528               696,092

         Messrs.  Norman S.  Matthews,  Warren C.  Smith,  Jr.,  Rohit M. Desai,
Michael Goldstein and Thomas H. Lee and Ms. Hanne M. Merriman continued to serve
as members of the Board of Directors after the meeting.

         In  addition,  the  proposal  to amend  the  Company's  1997  Long Term
Incentive  Plan to increase by 1,000,000  the number of shares of the  Company's
common stock  available for issuance  thereunder was passed with 4,434,365 votes
in favor, 4,418,340 votes against and 25 votes abstaining.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

     A.    EXHIBITS

        2         Not applicable.

        3         Not applicable.

        4         Not applicable.

       10         Not applicable.

       11         Statement re:  computation of earnings per share (not required
                  because the  relevant  computation  can be clearly  determined
                  from material contained in the financial statements).

       15         Not applicable.

       18         Not applicable.

       19         Not applicable.


                                       20
<PAGE>

       22         Not applicable.

       23         Not applicable.

       24         Not applicable.

       27         Financial Data Schedule.

       99         Not applicable.

       B.   REPORTS ON FORM 8-K

     None.






                                       21
<PAGE>



                                   SIGNATURES

     Pursuant to the  requirement  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.

Date: September 8, 2000              FINLAY ENTERPRISES, INC.

                                     By: /s/ Bruce E. Zurlnick
                                         -------------------------------------
                                         Bruce E. Zurlnick
                                         Senior Vice President, Treasurer
                                         and Chief Financial Officer
                                         (As both a duly authorized officer of
                                         Registrant and as principal financial
                                         officer of Registrant)



                                       22