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


                       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 November 3, 2001

                                       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 December 14, 2001, there were 10,097,223 shares of common stock, par value
$.01 per share, of the Registrant outstanding.


<PAGE>


                            FINLAY ENTERPRISES, INC.

                                    FORM 10-Q

                     QUARTERLY PERIOD ENDED NOVEMBER 3, 2001

                                      INDEX


<TABLE>
<CAPTION>
                                                                                           PAGE(S)
                                                                                           -------

<S>            <C>                                                                           <C>
PART I - FINANCIAL INFORMATION

      Item 1.  Consolidated Financial Statements (Unaudited)

               Consolidated Statements of Operations for the thirteen weeks and
               thirty-nine weeks ended October 28, 2000 and November 3, 2001..................1

               Consolidated Balance Sheets as of February 3, 2001 and
               November 3, 2001...............................................................3

               Consolidated Statements of Changes in Stockholders' Equity for the year
               ended February 3, 2001 and thirty-nine weeks ended November 3, 2001............4

               Consolidated Statements of Cash Flows for the thirteen weeks and
               thirty-nine weeks ended October 28, 2000 and November 3, 2001..................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 6.  Exhibits and Reports on Form 8-K..............................................20

SIGNATURES...................................................................................21
</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
                                                                      -----------------------------

                                                                       October 28,      November 3,
                                                                          2000             2001
                                                                      ------------     ------------

<S>                                                                   <C>              <C>
Sales .............................................................   $    189,728     $    175,292
Cost of sales .....................................................         93,233           87,680
                                                                      ------------     ------------
    Gross margin ..................................................         96,495           87,612
Selling, general and administrative expenses ......................         86,616           80,918
Depreciation and amortization .....................................          4,448            5,070
                                                                      ------------     ------------
    Income (loss) from operations .................................          5,431            1,624
Interest expense, net .............................................          8,140            6,861
                                                                      ------------     ------------
    Income (loss) before income taxes .............................         (2,709)          (5,237)
Provision (benefit) for income taxes ..............................           (850)          (1,959)
                                                                      ------------     ------------
    Net income (loss) .............................................   $     (1,859)    $     (3,278)
                                                                      ============     ============

Net income (loss) per share applicable to common shares:
       Basic net income (loss) per share ..........................   $      (0.18)    $      (0.32)
                                                                      ============     ============
       Diluted net income (loss) per share ........................   $      (0.18)    $      (0.32)
                                                                      ============     ============
Weighted average shares and share equivalents outstanding .........     10,427,511       10,191,591
                                                                      ============     ============
</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>
                                                                             Thirty-Nine Weeks Ended
                                                                         ------------------------------

                                                                          October 28,       November 3,
                                                                              2000             2001
                                                                         ------------      ------------

<S>                                                                      <C>               <C>
Sales .............................................................      $    579,571      $    564,708
Cost of sales .....................................................           285,619           281,041
                                                                         ------------      ------------
    Gross margin ..................................................           293,952           283,667
Selling, general and administrative expenses ......................           261,111           257,440
Depreciation and amortization .....................................            13,030            14,953
                                                                         ------------      ------------
    Income (loss) from operations .................................            19,811            11,274
Interest expense, net .............................................            22,862            20,630
                                                                         ------------      ------------
    Income (loss) before income taxes .............................            (3,051)           (9,356)
Provision (benefit) for income taxes ..............................              (492)           (3,298)
                                                                         ------------      ------------
    Net income (loss) .............................................      $     (2,559)     $     (6,058)
                                                                         ============      ============

Net income (loss) per share applicable to common shares:
       Basic net income (loss) per share ..........................      $      (0.25)     $      (0.59)
                                                                         ============      ============
       Diluted net income (loss) per share ........................      $      (0.25)     $      (0.59)
                                                                         ============      ============
Weighted average shares and share equivalents outstanding .........        10,423,595        10,253,407
                                                                         ============      ============
</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)
                                                                                   February 3,    November 3,
                                                                                      2001           2001
                                                                                   -----------    -----------
<S>                                                                                 <C>            <C>
                                      ASSETS
Current assets
  Cash and cash equivalents ....................................................    $  31,662      $   2,321
  Accounts receivable - department stores ......................................       23,677         36,746
  Other receivables ............................................................       30,856         35,636
  Merchandise inventories ......................................................      326,511        334,355
  Prepaid expenses and other ...................................................        2,880          3,913
                                                                                    ---------      ---------
     Total current assets ......................................................      415,586        412,971
                                                                                    ---------      ---------
Fixed assets
  Equipment, fixtures and leasehold improvements ...............................      117,871        124,622
  Less - accumulated depreciation and amortization .............................       44,028         52,466
                                                                                    ---------      ---------
     Fixed assets, net .........................................................       73,843         72,156
                                                                                    ---------      ---------
Deferred charges and other assets ..............................................       22,161         22,551
Goodwill .......................................................................       94,799         91,984
                                                                                    ---------      ---------
     Total assets ..............................................................    $ 606,389      $ 599,662
                                                                                    =========      =========

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Notes payable ................................................................    $    --        $ 101,803
  Accounts payable - trade .....................................................      162,242         78,625
  Accrued liabilities:
     Accrued salaries and benefits .............................................       20,806         20,384
     Accrued miscellaneous taxes ...............................................        4,118          5,246
     Accrued interest ..........................................................        5,270            690
     Other .....................................................................       18,203         18,237
  Income taxes payable .........................................................       21,576          7,284
  Deferred income taxes ........................................................        3,097          3,343
                                                                                    ---------      ---------
     Total current liabilities .................................................      235,312        235,612
Long-term debt .................................................................      225,000        225,000
Other non-current liabilities ..................................................       11,737         12,855
                                                                                    ---------      ---------
     Total liabilities .........................................................      472,049        473,467
                                                                                    ---------      ---------
Stockholders' equity
  Common Stock, par value $.01 per share; authorized 25,000,000 shares;
     issued and outstanding 10,336,986 and 10,097,223 shares, respectively .....          104            105
  Additional paid-in capital ...................................................       77,332         78,728
  Retained earnings ............................................................       58,023         51,965
  Unamortized restricted stock compensation ....................................         --             (990)
  Accumulated other comprehensive income .......................................         --              380
  Less treasury stock, at cost .................................................       (1,119)        (3,993)
                                                                                    ---------      ---------
     Total stockholders' equity ................................................      134,340        126,195
                                                                                    ---------      ---------
     Total liabilities and stockholders' equity ................................    $ 606,389      $ 599,662
                                                                                    =========      =========
</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                            Unamortized    Accumulated
                                      ------------------  Additional  Retained    Restricted       Other                  Total
                                        Number             Paid-in    Earnings      Stock      Comprehensive Treasury  Stockholders'
                                      of shares   Amount   Capital    (Deficit)  Compensation     Income       Stock      Equity
                                      ---------   ------  ----------  ---------  ------------  ------------- --------  -------------
<S>                                  <C>           <C>     <C>        <C>             <C>          <C>        <C>        <C>
Balance, January 29, 2000 .......... 10,416,353    $104    $77,194    $ 31,502        $--          $--        $  --      $ 108,800
  Net income (loss) ................       --       --        --        26,521         --           --           --         26,521
  Exercise of stock options ........     12,633     --         138        --           --           --           --            138
  Purchase of treasury stock .......    (92,000)    --        --          --           --           --         (1,119)      (1,119)
                                     ----------    ----    -------     -------        -----        ----       -------    ---------
Balance, February 3, 2001 .......... 10,336,986     104     77,332      58,023         --           --         (1,119)     134,340
  Net income (loss) ................       --       --        --        (6,058)        --           --           --         (6,058)
  Fair value of gold forward
     contracts at February 4, 2001..       --       --        --          --           --            24          --             24
  Change in fair value of gold
     forward contracts .............       --       --        --          --           --           356          --            356
  Exercise of stock options ........     16,967     --         178        --           --           --           --            178
  Issuance of restricted stock .....    100,000       1      1,218        --           (990)        --           --            229
  Purchase of treasury stock .......   (356,730)    --        --          --           --           --         (2,874)      (2,874)
                                      ---------    ----    -------    --------        -----        ----       -------    ---------
Balance, November 3, 2001
       (unaudited) ................. 10,097,223    $105    $78,728    $ 51,965        $(990)       $380       $(3,993)   $ 126,195
                                     ==========    ====    =======    ========        =====        ====       =======    =========
</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
                                                                          -------------------------
                                                                          October 28,   November 3,
                                                                             2000          2001
                                                                          -----------   -----------
<S>                                                                        <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) .....................................................  $  (1,859)    $  (3,278)
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization .........................................      4,448         5,070
  Amortization of deferred financing costs ..............................        306           309
  Amortization of restricted stock compensation .........................       --              76
  Other, net ............................................................        298           808
  Changes in operating assets and liabilities:
     Increase in accounts and other receivables .........................    (19,656)       (6,676)
     Increase in merchandise inventories ................................    (40,736)      (17,247)
     Decrease in prepaid expenses and other .............................        949           195
     Increase in accounts payable and accrued liabilities ...............     23,420         1,212
                                                                           ---------     ---------
        NET CASH USED IN OPERATING ACTIVITIES ...........................    (32,830)      (19,531)
                                                                           ---------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements ...........     (3,955)       (3,471)
  Deferred charges and other, net .......................................       (655)         (525)
                                                                           ---------     ---------
        NET CASH USED IN INVESTING ACTIVITIES ...........................     (4,610)       (3,996)
                                                                           ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility ...............................    173,520       155,073
  Principal payments on revolving credit facility .......................   (136,602)     (129,837)
  Purchase of treasury stock ............................................       --          (2,009)
  Stock options exercised ...............................................         23          --
                                                                           ---------     ---------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES .....................     36,941        23,227
                                                                           ---------     ---------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH .........................       (278)         --
                                                                           ---------     ---------
        DECREASE IN CASH AND CASH EQUIVALENTS ...........................       (777)         (300)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..........................      4,853         2,621
                                                                           ---------     ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................  $   4,076     $   2,321
                                                                           =========     =========

Supplemental disclosure of cash flow information:
  Interest paid .........................................................  $   2,708     $  11,279
  Income taxes paid .....................................................      1,725           251
</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>
                                                                                      Thirty-Nine Weeks Ended
                                                                                    ----------------------------
                                                                                    October 28,     November 3,
                                                                                       2000            2001
                                                                                    -----------     -----------
<S>                                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss) ..............................................................   $  (2,559)     $  (6,058)
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization ..................................................      13,030         14,953
  Amortization of deferred financing costs .......................................         916            927
  Amortization of restricted stock compensation ..................................        --              229
  Other, net .....................................................................       1,354          2,212
  Changes in operating assets and liabilities, net of effect from purchase of
     J.B. Rudolph assets (Note 6):
     Increase in accounts and other receivables ..................................     (44,943)       (17,124)
     Increase in merchandise inventories .........................................     (54,796)        (7,844)
     Increase in prepaid expenses and other ......................................      (1,241)        (1,041)
     Decrease in accounts payable and accrued liabilities ........................     (40,206)      (101,382)
                                                                                     ---------      ---------
        NET CASH USED IN OPERATING ACTIVITIES ....................................    (128,445)      (115,128)
                                                                                     ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements ....................     (11,696)        (9,694)
  Deferred charges and other .....................................................      (1,730)        (3,626)
  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 ....................................     (26,487)       (13,320)
                                                                                     ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility ........................................     536,252        525,842
  Principal payments on revolving credit facility ................................    (411,776)      (424,039)
  Purchase of treasury stock .....................................................        --           (2,874)
  Stock options exercised ........................................................         145            178
                                                                                     ---------      ---------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES ..............................     124,621         99,107
                                                                                     ---------      ---------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................................        (720)          --
                                                                                     ---------      ---------
        DECREASE IN CASH AND CASH EQUIVALENTS ....................................     (31,031)       (29,341)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...................................      35,107         31,662
                                                                                     ---------      ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD .........................................   $   4,076      $   2,321
                                                                                     =========      =========

Supplemental disclosure of cash flow information:
  Interest paid ..................................................................   $  16,315      $  24,283
  Income taxes paid ..............................................................       4,471         12,146
</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  November  3,  2001,  and the  results of  operations  and cash flows for the
thirteen  weeks and  thirty-nine  weeks ended  October 28, 2000 and  November 3,
2001. 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 February  3, 2001  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 February 3, 2001
("Form 10-K") previously filed with the Commission.

     The  Company's  fiscal  year ends on the  Saturday  closest to January  31.
References  to 1998,  1999,  2000 and 2001  relate to the  fiscal  years  ending
January 30,  1999,  January  29,  2000,  February 3, 2001 and  February 2, 2002,
respectively.  Each of the fiscal years includes 52 weeks,  except 2000 includes
53 weeks.

     The Company  recorded a tax provision  based on an estimated  annual income
tax rate. In addition,  the Company has recognized an intraperiod tax benefit as
it has projected  that there will be a profit in the fourth  quarter and for the
fiscal year.

     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.  As the
Company  had a net loss for the  thirteen  weeks  and  thirty-nine  weeks  ended
October 28, 2000 and November 3, 2001,  the dilutive  stock options  outstanding
are not  considered in the  calculation  of dilutive net income (loss) per share
due to their  anti-dilutive  effect. As a result, the weighted average number of
shares  outstanding  used for both the basic and dilutive net income  (loss) per
share calculations was the same.

     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 2000,  there were no such  adjustments  and,  therefore,
comprehensive  income (loss) was the same as the Company's net income (loss). In
2001, the only non-owner change in equity related to the change in fair value of
the  Company's  outstanding  gold forward  contracts  (Refer to Note 3). For the
thirteen weeks and



                                       7
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION (continued)

thirty-nine  weeks  ended  November  3, 2001,  the  comprehensive  loss was $3.0
million and $5.7 million, respectively.

     The Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and
Other Intangible Assets" in July 2001, which addresses the financial  accounting
and reporting  standards for the  acquisition of intangible  assets outside of a
business  combination and for goodwill and other intangible assets subsequent to
their acquisition.  This accounting standard requires that goodwill no longer be
amortized over its estimated  useful life but tested for impairment on an annual
basis.  The completion of a transitional  impairment test is required within six
months of adoption. Upon adoption of this statement, the impairment,  if any, is
treated as a cumulative effect of a change in accounting principle.  SFAS No.142
is effective for fiscal years  beginning after December 15, 2001. The Company is
currently evaluating the impact of adopting SFAS No. 142.

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 42% of Finlay's  sales due to the  seasonality  of the retail jewelry
industry.  Approximately  47% of Finlay's sales in 2000 were from  operations in
The May  Department  Stores Company  ("May") and 22% in departments  operated in
store groups owned by Federated Department Stores ("Federated").

NOTE 3 - MERCHANDISE INVENTORIES

     Merchandise inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                                        (unaudited)
                                                                        February 3,     November 3,
                                                                           2001            2001
                                                                        -----------     -----------
                                                                              (in thousands)
<S>                                                                       <C>             <C>
     Jewelry goods - rings, watches and other fine jewelry
         (specific identification basis) ...........................      $332,693        $342,520
     Less:  Excess of specific identification cost over LIFO
         inventory value ...........................................         6,182           8,165
                                                                          --------        --------
                                                                          $326,511        $334,355
                                                                          ========        ========
</TABLE>



                                       8
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - MERCHANDISE INVENTORIES (continued)

     The LIFO method had the effect of  increasing  the loss before income taxes
for the thirteen  weeks ended  October 28, 2000 and November 3, 2001 by $405,000
and  $989,000,  respectively.  The effect of  applying  the LIFO  method for the
thirty-nine  weeks ended  October 28, 2000 and  November 3, 2001 was to increase
the loss before income taxes by $1,092,000 and $1,983,000,  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  $381,724,000  and  $394,101,000  at  February  3,  2001  and
November 3, 2001, 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 an  amended  and  restated  gold  consignment
agreement  (the "Gold  Consignment  Agreement"),  which  expires on December 31,
2001.  Finlay  Jewelry is currently in the process of amending and extending the
Gold  Consignment  Agreement.  The Gold  Consignment  Agreement  enables  Finlay
Jewelry to receive  merchandise by providing gold, or otherwise  making payment,
to certain  vendors who supply Finlay Jewelry 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)
130,000  fine troy  ounces or (ii)  $37.0  million  worth of gold,  subject to a
formula as prescribed by the Gold  Consignment  Agreement.  At November 3, 2001,
amounts  outstanding  under the Gold Consignment  Agreement totaled 129,497 fine
troy ounces,  valued at  approximately  $36.1 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.

     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.  At  February 3, 2001 and  November  3, 2001,  the
Company had several open positions in futures contracts for gold totaling 46,300
and  40,000  fine troy  ounces,  valued  at $12.6  million  and  $10.6  million,
respectively, which expire during 2001.

     On February 4, 2001,  the Company  adopted  SFAS  No.133,  "Accounting  for
Derivative Instruments and Hedging Activities". This Statement requires that all
derivative  instruments  be recorded in the balance  sheet as either an asset or
liability  measured at its fair value.  The Company has  designated the existing
derivative  instruments,  consisting  of gold  forward  contracts,  as cash flow
hedges. For derivative instruments designated as cash flow hedges, the effective
portion of the change in the fair value of the  derivative  is recorded in other
comprehensive  income,  a separate  component of  stockholders'  equity,  and is
reclassified into earnings when the offsetting effects of the hedged transaction
affects  earnings.  Upon adoption,  the fair value of the gold forward contracts
resulted in the  recognition  of an asset of $40,800.  At November 3, 2001,  the
fair value of the gold forward contracts resulted in the recognition of an asset
of $638,300.  The amount recorded in other comprehensive income of $380,000, net
of tax, is expected to be



                                       9
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - MERCHANDISE INVENTORIES (continued)

reclassified into earnings during 2001.

     The Company has documented all  relationships  between hedging  instruments
and hedged items,  as well as its risk  management  objectives  and strategy for
undertaking various hedge transactions.  The Company also assesses,  both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in cash flows
of hedged items. The Company believes that the designated  hedges will be highly
effective and that the related hedge  accounting will not have a material impact
on the Company's results of operations.

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  several  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.

     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        Thirty-Nine Weeks Ended
                                   --------------------------    --------------------------
                                   October 28,    November 3,    October 28,    November 3,
                                      2000           2001           2000           2001
                                   -----------    -----------    -----------    -----------
                                                        (in thousands)
<S>                                  <C>           <C>             <C>             <C>
     Minimum fees ..............     $ 2,985       $ 1,885         $ 9,008         $ 5,960
     Contingent fees ...........      28,412        26,879          86,542          86,982
                                     -------       -------         -------         -------
       Total ...................     $31,397       $28,764         $95,550         $92,942
                                     =======       =======         =======         =======
</TABLE>



                                       10
<PAGE>



                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 former European leased jewelry department  subsidiary,
sold the majority of its assets for approximately  $9.9 million.  To date, Sonab
has received  $8.8  million and the balance  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.

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 of approximately  $16.3 million and fixed assets of approximately $4.0
million.  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,  which is
being amortized over a period of ten years.

NOTE 7 - STOCK REPURCHASE PROGRAM AND RESTRICTED STOCK

     On December 1, 2000, the Company  announced that its Board of Directors had
approved a stock repurchase  program to acquire up to $20 million of outstanding
Common Stock.  The Company may, at the  discretion of  management,  purchase its
Common  Stock,  from time to time,  through  September  30, 2002 under the stock
repurchase  program.  The extent  and timing of  repurchases  will  depend  upon
general  business  and  market  conditions,  stock  prices,  availability  under
Finlay's  revolving credit facility and its cash position and requirements going
forward.  The repurchase program may be modified,  extended or terminated by the
Board of Directors at any time.  During  fiscal  2000,  the Company  repurchased
92,000 shares at a cost of  approximately  $1,119,000.  During fiscal 2001,  the
Company repurchased an additional 356,730 shares for approximately $2,874,000.

     On February 4, 2001, an executive officer of the Company was issued 100,000
shares of Common Stock, subject to restrictions  ("Restricted Stock"),  pursuant
to a restricted stock agreement. The restricted stock becomes fully vested after
four years of continuous  employment  with the Company and is accounted for as a
component of stockholders'  equity.  Compensation  expense of approximately $1.2
million is being amortized over four years.  Amortization for the thirteen weeks
and the  thirty-nine  weeks ended November 3, 2001 totaled $76,000 and $229,000,
respectively.



                                       11
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - DEPARTMENT CLOSINGS

     On February  8, 2001,  Federated  announced  its plans to close its Stern's
division of which Finlay  operated 23  departments.  During  March 2001,  Finlay
closed two departments and closed the remaining 21 departments during the second
quarter. Finlay recorded a charge of approximately $900,000 for the write-off of
fixed assets and employee severance.

     During 2001,  Federated  acquired the Liberty House department store chain.
Finlay  operated in all twelve of the Liberty House  department  stores  through
mid-November 2001. The Liberty House store group represented approximately 1% of
Finlay's locations. Finlay intends to record a charge, during the fourth quarter
of 2001,  of  approximately  $150,000  for the  write-off  of fixed  assets  and
employee severance.



                                       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       Thirty-Nine Weeks Ended
                                                --------------------------   -------------------------
                                                October 28,    November 3,   October 28,   November 3,
                                                   2000           2001          2000          2001
                                                -----------    -----------   -----------   -----------
<S>                                                <C>           <C>           <C>           <C>
Sales .......................................      100.0%        100.0%        100.0%        100.0%
Cost of sales ...............................       49.1          50.0          49.3          49.8
                                                   -----         -----         -----         -----
    Gross margin ............................       50.9          50.0          50.7          50.2
Selling, general and administrative
     expenses ...............................       45.5          46.2          45.1          45.6
Depreciation and amortization ...............        2.3           2.9           2.2           2.6
                                                   -----         -----         -----         -----
    Income (loss) from operations ...........        2.9           0.9           3.4           2.0
Interest expense, net .......................        4.3           3.9           3.9           3.7
                                                   -----         -----         -----         -----
    Income (loss) before income taxes .......       (1.4)         (3.0)         (0.5)         (1.7)
Provision (benefit) for income taxes ........       (0.4)         (1.1)         (0.1)         (0.6)
                                                   -----         -----         -----         -----
    Net income (loss) .......................       (1.0)%        (1.9)%        (0.4)%        (1.1)%
                                                   =====         =====         =====         =====
</TABLE>


Thirteen  Weeks  Ended   November 3, 2001  Compared  with Thirteen  Weeks  Ended
     October 28, 2000

     Sales.  Sales for the thirteen weeks ended November 3, 2001 decreased $14.4
million,  or 7.6%,  over the comparable  period in 2000.  Comparable  department
sales (departments open for the same months during comparable periods) decreased
5.5%.  Management  attributes this decrease in sales primarily due to the closed
Stern's stores which  contributed  approximately  $5.0 million in the comparable
period  in  2000,  a  general  softening  in  the  retail  environment  and  the
extraordinary events of September 11, 2001. Sales decreased by $4.0 million as a
result of the net effect of new store openings and closings.

     With the  continuing  weak retail  environment,  the Company  continued  to
experience soft sales trends in the month of November 2001.

     During  the  thirteen  weeks  ended  November  3,  2001,  Finlay  opened 18
departments  and closed five  departments.  The openings  and closings  were all
within existing store groups.

     Gross margin. Gross margin for the period decreased by $8.9 million in 2001
compared to 2000 and as a percentage of sales,  gross margin  decreased by 0.9%,
primarily  due  to  (i)  management's   continued  efforts  to  increase  market
penetration and market share through its pricing  strategy,  (ii) the high level
of  clearance  merchandise  sold off during the  closing  of the  Liberty  House
departments  and  (iii) an  increase  in the  LIFO  provision  of  approximately
$600,000.



                                       13
<PAGE>


     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses ("SG&A") decreased $5.7 million, or 6.6%, due primarily
to payroll  expense and lease fees associated with the decrease in the Company's
sales. As a percentage of sales,  SG&A increased 0.5% due to the negative impact
of payroll and other  expenses as a  percentage  of sales due to the lower sales
volume.

     Depreciation and amortization.  Depreciation and amortization  increased by
$0.6 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.  The increase in fixed assets was due
to the addition of new departments and the renovation of existing departments.

     Interest expense, net. Interest expense decreased by $1.3 million primarily
due to a lower weighted average interest rate (7.5% for the 2001 period compared
to 8.6% for the comparable period in 2000) and a decrease in average  borrowings
($322.4  million  for the  period in 2001  compared  to $347.1  million  for the
comparable period in 2000).

     Provision (benefit) for income taxes. The income tax provision for the 2001
and 2000 periods reflects an effective tax rate of 40.5%.

     Net income  (loss).  The net loss of $3.3  million  for the 2001 period was
$1.4 million  higher as compared to the net loss in the prior period as a result
of the factors discussed above.

Thirty-Nine Weeks Ended November 3, 2001 Compared with  Thirty-Nine  Weeks Ended
     October 28, 2000

     Sales.  Sales for the  thirty-nine  weeks ended  November 3, 2001 decreased
$14.9  million,  or  2.6%,  over  the  comparable  period  in  2000.  Comparable
department  sales decreased 3.0%.  Management  attributes this decrease in sales
primarily due to a general softening in the retail environment and, to a greater
degree,  the jewelry  sector.  Sales from the  operation of net new  departments
contributed  $2.5  million,  relating  to the net effect and timing of new store
openings and closings.

     During the  thirty-nine  weeks  ended  November 3, 2001,  Finlay  opened 30
departments and closed 52 departments. The openings and closings were all within
existing store groups. The closings included all 23 Stern's departments.

     Gross  margin.  Gross  margin for the period  decreased  by $10.3  million,
primarily as a result of the sales  decrease.  As a percentage  of sales,  gross
margin  decreased  by 0.5% due to  management's  continued  efforts to  increase
market  penetration  and  market  share  through  its  pricing  strategy  and an
increased LIFO provision of approximately $900,000.

     Selling,  general and administrative expenses. SG&A decreased $3.7 million,
or 1.4%. SG&A as a percentage of sales increased by 0.5%.

     Depreciation and amortization.  Depreciation and amortization  increased by
$1.9 million,  reflecting an increase in capital  expenditures  and  capitalized
software  costs  for the most  recent  twelve  months,  including  fixed  assets
acquired in connection with the J.B. Rudolph  Acquisition in April 2000,  offset
by the effect of certain  assets  becoming  fully  depreciated.  The increase in
fixed assets was due to the addition of new  departments  and the  renovation of
existing departments.



                                       14
<PAGE>


     Interest expense, net. Interest expense decreased by $2.2 million primarily
due to a lower weighted average interest rate (7.8% for the 2001 period compared
to 8.6% for the comparable period in 2000) and a decrease in average  borrowings
($311.5  million  for the  period in 2001  compared  to $324.1  million  for the
comparable period in 2000).

     Provision (benefit) for income taxes. The income tax provision for the 2001
and 2000 periods reflects an effective tax rate of 40.5%.

     Net income  (loss).  The net loss of $6.1  million  for the 2001 period was
$3.5  million  higher  than the net loss in the prior  period as a result of the
factors discussed above.

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 thirty-nine
weeks ended October 28, 2000 and November 3, 2001, capital  expenditures totaled
$11.7  million  (exclusive  of the fixed  assets  acquired  in the J.B.  Rudolph
Acquisition)  and $9.7 million,  respectively.  For 2000,  capital  expenditures
totaled $14.1 million (also exclusive of the J.B.  Rudolph  Acquisition) and for
2001  are  estimated  to  be  approximately  $12.0  million.   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  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 $177.4 million at November 3, 2001, a
decrease of $2.9 million from February 3, 2001. The decrease resulted  primarily
from  the  impact  of the  interim  net  loss,  exclusive  of  depreciation  and
amortization,  capital  expenditures,  additions  to  deferred  charges  and the
purchase of treasury stock.  Based on the 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,  which  includes a $50.0 million  acquisition  facility.  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 November 3, 2001 were $101.8 million, compared
to a zero  balance at February 3, 2001 and $124.5  million at October 28,  2000.
The average amounts  outstanding under the Revolving Credit Agreement were $99.1
million and $86.5 million for the thirty-nine weeks ended October



                                       15
<PAGE>


28, 2000 and November 3, 2001, respectively.  The maximum amount outstanding for
the thirty-nine weeks ended November 3, 2001 was $114.7 million,  at which point
the unused excess  availability  was $106.1  million,  excluding the acquisition
facility.

     On December 1, 2000, the Company  announced that its Board of Directors had
approved a stock repurchase  program to acquire up to $20 million of outstanding
Common Stock.  The Company may, at the  discretion of  management,  purchase its
Common  Stock,  from time to time,  through  September  30, 2002 under the stock
repurchase  program.  The extent  and timing of  repurchases  will  depend  upon
general  business  and  market  conditions,  stock  prices,  availability  under
Finlay's  revolving credit facility and its cash position and requirements going
forward.

     On April 3, 2000 Finlay completed the acquisition of certain assets of J.B.
Rudolph for $20.6 million,  consisting  primarily of inventory and fixed assets.
During 2000, the J.B. Rudolph Acquisition required additional working capital to
increase the inventory  levels in anticipation  of the year-end  holiday season.
Inventory  purchases for the former J.B. Rudolph  departments are being 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.

     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 2000,  Finlay  had an average
balance of  consignment  merchandise of $372.9  million from  approximately  300
vendors as  compared  to an average  balance  of $321.7  million in 1999.  As of
November  3, 2001,  $394.1  million of  consignment  merchandise  was on hand as
compared to $421.3 million at October 28, 2000.

     A significant  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 Balance Reduction Requirement.  As of November 3, 2001, Finlay's
outstanding  borrowings  were $326.8  million,  which  included a $75.0  million
balance under the Senior  Debentures,  a $150.0 million balance under the Senior
Notes and a $101.8 million balance under the Revolving Credit Agreement.

     Finlay Jewelry is party to the Gold Consignment Agreement, which expires on
December  31, 2001.  Finlay  Jewelry is currently in the process of amending and
extending the Gold Consignment Agreement. 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) 130,000 fine troy ounces or (ii)
$37.0  million  worth of gold,  subject to a formula as  prescribed  by the Gold
Consignment  Agreement.  At November 3, 2001, amounts outstanding under the Gold
Consignment  Agreement totaled 129,497 fine troy ounces, valued at approximately
$36.1  million.  The  average  amount  outstanding  under  the Gold  Consignment
Agreement was $28.0 million in 2000.

     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 for Finlay's departments.  These
projects  will serve to support  future growth of the Company as well as provide
improved analysis and reporting capabilities and more timely sales and inventory
information to facilitate  merchandising  solutions.  These systems will provide
the foundation  for future  productivity  and expense  control  initiatives.  At
November 3, 2001, a total of approximately $18.5 million has been expended for



                                       16
<PAGE>

software and implementation  costs and is included in Deferred charges and other
assets.  The Company  expects  these  systems to be  completed  by late 2001 and
expects  conversion of the full company in the first quarter of fiscal 2002. The
Company anticipates it will spend an additional $3.0 to $5.0 million.

     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  February 3, 2001,  the gain or loss on
open futures  contracts was not material.  At November 3, 2001,  the Company had
several open positions in futures  contracts for gold totaling  40,000 fine troy
ounces,  valued at $10.6  million,  which expire  during  2001.  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 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 $13.0 million and $17.5 million for
the  thirty-nine  week  periods  ended  October 28,  2000 and  November 3, 2001,
respectively.  As a result of the  retail  calendar  closing  date for the third
quarter of 2001, the  semi-annual  interest  payments with respect to the Senior
Debentures and the Senior Notes were paid in the third quarter of 2001,  whereas
the fourth quarter of 2000 included the interest payments.

     On February  8, 2001,  Federated  announced  its plans to close its Stern's
division of which Finlay  operated 23  departments.  During  March 2001,  Finlay
closed two  departments  and the  remaining 21 Stern's  departments  were closed
during the second  quarter of 2001.  Finlay  recorded a charge of  approximately
$900,000 related to the write-off of fixed assets and employee severance. Finlay
expects the closings to reduce sales in 2001 by an estimated $22.0 million.

     During 2001,  Federated  acquired the Liberty House department store chain.
Finlay  operated in all twelve of the Liberty House  department  stores  through
mid-November 2001. The Liberty House store group represented approximately 1% of
Finlay's  locations.  Finlay anticipates that its 2001 fourth quarter sales will
be reduced by  approximately  $6.0  million  as a result of these  closings  and
intends to record a one time  charge of  approximately  $150,000  related to the
write-off of fixed assets and employee  severance  during the fourth  quarter of
2001.



                                       17
<PAGE>


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 42% of Finlay's  sales and 78% of its income  from  operations
for 1998,  1999 and 2000.  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,  performances  or achievements to differ  materially
from those reflected in, or implied by, 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 low or negative growth in the economy or in
the financial markets that will reduce discretionary spending on goods that are,
or are perceived to be "luxuries",  the events of September 11, 2001 and related
events will  negatively  impact the economy or the financial  markets and reduce
discretionary  spending  on  such  goods,  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 compliance with
applicable contractual covenants,  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.  Other such factors include the
ability of the Company to complete the repurchases  contemplated under its stock
repurchase  program,  the adequacy of Finlay's  working  capital to complete the
repurchases,  the  availability and liquidity of the Company's Common Stock, and
overall market conditions for the Company's Common Stock.

     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 or to  reflect  the  occurrence  of  unanticipated  events.  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 $10.6 million at November 3, 2001, which expire
during 2001.



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<PAGE>


PART II - OTHER INFORMATION

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.

       22     Not applicable.

       23     Not applicable.

       24     Not applicable.

       99     Not applicable.

     B.   Reports on Form 8-K

     None.



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<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: December 14, 2001              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)


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