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

                       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 October 28, 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 December 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 OCTOBER 28, 2000

                                      INDEX



<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION

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

         Consolidated Statements of Operations for the thirteen weeks and
         thirty-nine weeks ended October 30, 1999 and October 28, 2000.......................1

         Consolidated Balance Sheets as of January 29, 2000 and October 28, 2000.............3

         Consolidated Statements of Changes in Stockholders' Equity for the year
         ended January 29, 2000 and thirty-nine weeks ended October 28, 2000.................4

         Consolidated Statements of Cash Flows for the thirteen weeks and
         thirty-nine weeks ended October 30, 1999 and October 28, 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 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 30,          OCTOBER 28,
                                                                                    1999                 2000
                                                                               ---------------      ---------------
<S>                                                                            <C>                  <C>

Sales....................................................................      $    175,280         $    189,728
Cost of sales............................................................            86,631               93,233
                                                                               ---------------      ---------------
    Gross margin.........................................................            88,649               96,495
Selling, general and administrative expenses.............................            81,813               86,616
Depreciation and amortization............................................             4,142                4,448
                                                                               ---------------      ---------------
    Income (loss) from operations........................................             2,694                5,431
Interest expense, net....................................................             7,953                8,140
                                                                               ---------------      ---------------
    Income (loss) before income taxes....................................            (5,259)              (2,709)
Provision (benefit) for income taxes.....................................            (1,814)                (850)
                                                                               ---------------      ---------------
    Net income (loss)....................................................      $     (3,445)        $     (1,859)
                                                                               ===============      ===============

Net income (loss) per share applicable to common shares:
       Basic net income (loss) per share.................................      $      (0.33)        $      (0.18)
                                                                               ===============      ===============
       Diluted net income (loss) per share...............................      $      (0.33)        $      (0.18)
                                                                               ===============      ===============
Weighted average shares and share equivalents outstanding................        10,416,142           10,427,511
                                                                               ===============      ===============

</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 30,          OCTOBER 28,
                                                                                    1999                 2000
                                                                               ---------------      ---------------
<S>                                                                            <C>                  <C>
Sales....................................................................      $    527,026         $    579,571
Cost of sales............................................................           258,988              285,619
                                                                               ---------------      ---------------
    Gross margin.........................................................           268,038              293,952
Selling, general and administrative expenses.............................           243,487              261,111
Depreciation and amortization............................................            12,618               13,030
                                                                               ---------------      ---------------
    Income (loss) from operations........................................            11,933               19,811
Interest expense, net....................................................            22,386               22,862
                                                                               ---------------      ---------------
    Income (loss) before income taxes ...................................           (10,453)              (3,051)
Provision (benefit) for income taxes.....................................            (3,277)                (492)
                                                                               ---------------      ---------------
    Net income (loss)....................................................      $     (7,176)        $     (2,559)
                                                                               ===============      ===============

Net income (loss) per share applicable to common shares:
       Basic net income (loss) per share.................................      $      (0.69)        $      (0.25)
                                                                               ===============      ===============
       Diluted net income (loss) per share...............................      $      (0.69)        $      (0.25)
                                                                               ===============      ===============
Weighted average shares and share equivalents outstanding................        10,411,880           10,423,595
                                                                               ===============      ===============
</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,        OCTOBER 28,
                                                                                         2000              2000
                                                                                   -------------     --------------
<S>                                                                                <C>                <C>
                                      ASSETS
Current assets
  Cash and cash equivalents....................................................      $    35,107       $     4,076
  Accounts receivable - department stores......................................           22,574            47,011
  Other receivables............................................................           31,075            44,608
  Merchandise inventories......................................................          279,336           350,415
  Prepaid expenses and other...................................................            2,083             3,289
                                                                                     -------------     --------------
     Total current assets......................................................          370,175           449,399
                                                                                     -------------     --------------
Fixed assets
  Equipment, fixtures and leasehold improvements...............................          110,017           122,060
  Less - accumulated depreciation and amortization.............................           40,439            47,200
                                                                                     -------------     --------------
     Fixed assets, net.........................................................           69,578            74,860
                                                                                     -------------     --------------
Deferred charges and other assets..............................................           20,484            20,478
Goodwill.......................................................................           96,805            95,737
                                                                                     =============     ==============
     Total assets..............................................................      $   557,042       $   640,474
                                                                                     =============     ==============

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Notes payable................................................................      $     -           $   124,476
  Accounts payable - trade.....................................................          149,799           110,275
  Accrued liabilities:
     Accrued salaries and benefits.............................................           23,094            19,622
     Accrued miscellaneous taxes...............................................            6,296             3,705
     Accrued interest..........................................................            5,321            10,952
     Other.....................................................................           19,729            21,452
  Income taxes payable.........................................................            6,668             5,430
  Deferred income taxes........................................................            1,681             1,566
                                                                                     -------------     --------------
     Total current liabilities.................................................          212,588           297,478
Long-term debt.................................................................          225,000           225,000
Other non-current liabilities..................................................           10,654            11,610
                                                                                     -------------     --------------
     Total liabilities.........................................................          448,242           534,088
                                                                                     -------------     --------------
Stockholders' equity
  Common Stock, par value $.01 per share; authorized 25,000,000 shares;
     issued and outstanding 10,416,353 and 10,429,753 shares, respectively.....              104               104
  Additional paid-in capital ..................................................           77,194            77,339
  Retained earnings ...........................................................           31,502            28,943
                                                                                     -------------     --------------
     Total stockholders' equity................................................          108,800           106,386
                                                                                     -------------     --------------
     Total liabilities and stockholders' equity................................      $   557,042       $   640,474
                                                                                     =============     ==============

</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>
                                                                                         FOREIGN
                                          COMMON STOCK       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)..............           -          -           -         (2,559)         -          (2,559)
  Exercise of stock options......          13,400      -            145        -             -             145
                                       -----------  ------   ----------   ---------    ---------     ---------
Balance, October 28, 2000
  (unaudited)....................      10,429,753  $  104    $   77,339   $  28,943    $    -        $ 106,386
                                       =========== ======    ==========   =========    =========     =========

</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 30,        OCTOBER 28,
                                                                                           1999               2000
                                                                                        ------------     -------------
<S>                                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)..............................................................       $   (3,445)      $    (1,859)
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization..................................................            4,452             4,754
  Other, net.....................................................................              349               298
  Changes in operating assets and liabilities:
     Increase in accounts and other receivables..................................           (8,529)          (19,656)
     Increase in merchandise inventories.........................................          (24,663)          (40,736)
     (Increase) decrease in prepaid expenses and other...........................             (248)              949
     Increase in accounts payable and accrued liabilities........................           22,075            23,420
                                                                                        ------------     -------------
        NET CASH USED IN OPERATING ACTIVITIES....................................          (10,009)          (32,830)
                                                                                        ------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements....................           (3,650)           (3,955)
  Deferred charges and other................................ ....................           (1,200)             (655)
                                                                                        ------------     -------------
NET CASH USED IN INVESTING ACTIVITIES............................................           (4,850)           (4,610)
                                                                                        ------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility........................................          145,285           173,520
  Principal payments on revolving credit facility................................         (130,824)         (136,602)
  Stock options exercised .......................................................               16                23
                                                                                        ------------     -------------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES..............................           14,477            36,941
                                                                                        ------------     -------------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................              (75)             (278)
                                                                                        ------------     -------------
        DECREASE IN CASH AND CASH EQUIVALENTS....................................             (457)             (777)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................................            4,640             4,853
                                                                                        ------------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.........................................       $    4,183       $     4,076
                                                                                        ============     =============

Supplemental disclosure of cash flow information:
  Interest paid..................................................................       $    2,745       $     2,708
  Income taxes paid..............................................................            3,006             1,725

</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 30,      OCTOBER 28,
                                                                                           1999              2000
                                                                                        ------------     -------------
<S>                                                                                    <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)..............................................................       $   (7,176)      $    (2,559)
  Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
  Depreciation and amortization..................................................           13,532            13,946
  Other, net.....................................................................            1,306             1,354
  Changes in operating  assets and  liabilities,  net of effect from purchase of
     J.B. Rudolph assets (Note 6):
     Increase in accounts and other receivables..................................          (32,353)          (44,943)
     Increase in merchandise inventories.........................................          (24,156)          (54,796)
     Increase in prepaid expenses and other......................................           (1,570)           (1,241)
     Decrease in accounts payable and accrued liabilities........................          (72,121)          (40,206)
                                                                                        ------------     -------------
        NET CASH USED IN OPERATING ACTIVITIES....................................         (122,538)         (128,445)
                                                                                        ------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements....................          (11,565)          (11,696)
  Deferred charges and other.....................................................           (6,413)           (1,730)
  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....................................          (17,978)          (26,487)
                                                                                        ------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility........................................          500,291           536,252
  Principal payments on revolving credit facility................................         (372,893)         (411,776)
  Stock options exercised........................................................              137               145
                                                                                        ------------     -------------
        NET CASH PROVIDED FROM FINANCING ACTIVITIES..............................          127,535           124,621
                                                                                        ------------     -------------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................             (164)             (720)
                                                                                        ------------     -------------
        DECREASE IN CASH AND CASH EQUIVALENTS....................................          (13,145)          (31,031)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................................           17,328            35,107
                                                                                        ------------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.........................................       $    4,183       $     4,076
                                                                                        ============     =============
Supplemental disclosure of cash flow information:
  Interest paid..................................................................       $   16,329       $    16,315
  Income taxes paid..............................................................            2,479             4,471

</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  October  28,  2000,  and the  results of  operations  and cash flows for the
thirteen  weeks and  thirty-nine  weeks  ended  October 30, 1999 and October 28,
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.

     The  Company'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.  As the
Company  had a net loss for the  thirteen  weeks  and  thirty-nine  weeks  ended
October 30, 1999 and October 28, 2000,  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 1999,  the only nonowner  change in equity related to the
foreign currency translation adjustment.  For the thirteen weeks and thirty-nine
weeks ended October 30, 1999, the comprehensive  loss was $4.0 million and $10.3
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,             OCTOBER 28,
                                                                               2000                    2000
                                                                          ----------------       ------------------
                                                                                       (IN THOUSANDS)

<S>                                                                        <C>                     <C>
   Jewelry goods - rings, watches and other fine jewelry
       (specific identification basis)...............................      $    283,717             $    355,887
   Less:  Excess of specific identification cost over LIFO
       inventory value...............................................             4,381                    5,472
                                                                          ----------------       ------------------
                                                                           $    279,336             $    350,415
                                                                          ================       ==================
</TABLE>

     The LIFO method had the effect of  increasing  the loss before income taxes
for the  thirteen  weeks ended  October 30, 1999 and October 28, 2000 by $95,000
and  $405,000,  respectively.  The effect of  applying  the LIFO  method for the
thirty-nine  weeks  ended  October 30, 1999 and October 28, 2000 was to increase
the loss before income taxes by $286,000 and  $1,092,000,  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 $421,267,000 at January 29, 2000 and October
28, 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 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) 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 October 28, 2000, amounts outstanding under the Gold
Consignment  Agreement totaled 104,869 fine troy ounces, valued at approximately
$27.7  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.  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 October 28,
2000, the Company had two open positions in futures  contracts for gold totaling
16,000 fine troy ounces,  valued at $4.2  million,  which expire  through  April
2001.

     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 has
determined  that the  existing  derivative  instruments,  consisting  of forward
contracts,  will be  designated  and accounted for as cash flow hedges as of the
February 4, 2001 adoption  date.  Upon  adoption,  the fair value of the forward
contracts  will  be  recorded,   as  either  an  asset  or  liability,   with  a
corresponding  adjustment to comprehensive income. The Company believes that the
designated hedges will be highly effective and the related hedge accounting will
not have a material impact on the Company's results of operations.  There are no
other freestanding or embedded derivative  instruments that have been identified
by the  Company as of October 28, 2000 and,  accordingly,  the Company  does not
expect to record any other adjustments pursuant to the adoption of 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                THIRTY-NINE WEEKS ENDED
                                   ---------------------------------     ---------------------------------
                                    OCTOBER 30,        OCTOBER 28,        OCTOBER 30,       OCTOBER 28,
                                        1999              2000               1999               2000
                                   ---------------    --------------     --------------    ---------------
                                                                (IN THOUSANDS)

<S>                               <C>                 <C>                <C>               <C>
     Minimum fees..............    $      4,297       $      2,985       $     12,935      $      9,008
     Contingent fees...........          24,396             28,412             73,405            86,542
                                   ---------------    --------------     --------------    ----------------
       Total...................    $     28,693       $     31,397       $     86,340      $     95,550
                                   ===============    ==============     ==============    ===============
</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 statements of operations for
the thirteen weeks and thirty-nine  weeks ended October 30, 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  thirty-nine  weeks ended October 28, 2000 are shown for
comparative purposes.

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



<TABLE>
<CAPTION>


                                                                          THIRTEEN WEEKS ENDED
                                                   --------------------------------------------------------------------
                                                          OCTOBER 30, 1999                     OCTOBER 28, 2000
                                                              PROFORMA                              ACTUAL
                                                   --------------------------------     -------------------------------
<S>                                               <C>                <C>               <C>                 <C>
Sales .........................................  $  168,927              100.0%         $  189,728              100.0%
Cost of sales..................................      82,624               48.9              93,233               49.1
                                                 -----------         -----------        -----------         ------------
 Gross margin..................................      86,303               51.1              96,495               50.9
Selling, general and administrative
 expenses......................................      78,098               46.2              86,616               45.7
Depreciation and amortization..................       3,970                2.4               4,448                2.3
                                                 -----------         -----------        -----------         ------------
 Income (loss) from operations.................       4,235                2.5               5,431                2.9
Interest expense, net..........................       7,448                4.4               8,140                4.3
                                                 -----------         -----------        ----------          ------------
 Income (loss) before income taxes.............      (3,213)              (1.9)             (2,709)              (1.4)
Provision (benefit) for income taxes...........      (1,002)              (0.6)               (850)              (0.4)
                                                 -----------         -----------        ----------          ------------
 Net income (loss).............................  $   (2,211)              (1.3)%        $   (1,859)              (1.0)%
                                                 ===========         ===========        ==========          ============
Net income (loss) per share applicable to
 common shares:
 Basic net income (loss) per share.............  $    (0.21)                            $    (0.18)
                                                 ===========                            ===========
 Diluted net income (loss) per share...........  $    (0.21)                            $    (0.18)
                                                 ===========                            ===========
Weighted average shares and share
 equivalents outstanding.......................  10,416,142                             10,427,511
                                                 ===========                            ============
</TABLE>
                                       11
<PAGE>


                            FINLAY ENTERPRISES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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


<TABLE>
<CAPTION>


                                                                          THIRTY-NINE WEEKS ENDED
                                                   --------------------------------------------------------------------
                                                          OCTOBER 30, 1999                     OCTOBER 28, 2000
                                                              PROFORMA                              ACTUAL
                                                   --------------------------------     -------------------------------
<S>                                               <C>                <C>               <C>                 <C>
Sales .........................................  $  507,894              100.0%         $  579,571              100.0%
Cost of sales..................................     248,142               48.9             285,619               49.3
                                                 -----------         -----------        -----------         ------------
 Gross margin..................................     259,752               51.1             293,952               50.7
Selling, general and administrative
 expenses......................................     232,025               45.7             261,111               45.1
Depreciation and amortization..................      12,103                2.3              13,030                2.2
                                                 -----------         -----------        -----------         ------------
 Income (loss) from operations                       15,624                3.1              19,811                3.4
Interest expense, net..........................      20,737                4.1              22,862                3.9
                                                 -----------         -----------        ----------          ------------
 Income (loss) before income taxes.............      (5,113)              (1.0)             (3,051)              (0.5)
Provision (benefit) for income taxes...........      (1,170)              (0.2)               (492)              (0.1)
                                                 -----------         -----------        ----------          ------------
 Net income (loss).............................  $   (3,943)              (0.8)%        $   (2,559)              (0.4)%
                                                 ===========         ===========        ==========          ============
Net income (loss) per share applicable to
 common shares:
 Basic net income (loss) per share.............  $    (0.38)                            $    (0.25)
                                                 ===========                            ===========
 Diluted net income (loss) per share...........  $    (0.38)                            $    (0.25)
                                                 ===========                            ===========
Weighted average shares and share
 equivalents outstanding.......................  10,411,880                             10,423,595
                                                 ===========                            ============
</TABLE>


NOTE 8 - SUBSEQUENT EVENT

     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.  Under  the  program,  the  Company,  from  time to time,  at the
discretion  of  management,  may  purchase  its common  stock on the open market
through  September 29, 2001.  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.


                                       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 30,        OCTOBER 28,       OCTOBER 30,      OCTOBER 28,
                                                                     1999               2000              1999             2000
                                                                 -------------      -------------     -------------   ------------
<S>                                                              <C>                <C>               <C>                 <C>
Sales......................................................        100.0%             100.0%            100.0%              100.0%
Cost of sales..............................................         49.4               49.1              49.1                49.3
                                                                 -------------      -------------     -------------  -------------
    Gross margin...........................................         50.6               50.9              50.9                50.7
Selling, general and administrative expenses...............         46.7               45.7              46.2                45.1
Depreciation and amortization..............................          2.4                2.3               2.4                 2.2
                                                                 -------------      -------------     -------------  -------------
    Income (loss) from operations..........................          1.5                2.9               2.3                 3.4
Interest expense, net......................................          4.5                4.3               4.3                 3.9
                                                                 -------------      -------------     -------------  -------------
    Income (loss) before income taxes......................         (3.0)              (1.4)             (2.0)               (0.5)
Provision (benefit) for income taxes.......................         (1.0)              (0.4)             (0.6)               (0.1)
                                                                 -------------      -------------     -------------  -------------
    Net income (loss)......................................         (2.0)%             (1.0)%            (1.4)%              (0.4)%
                                                                 =============      =============     =============  =============
</TABLE>

THIRTEEN WEEKS ENDED OCTOBER 28, 2000 COMPARED WITH THIRTEEN WEEKS ENDED
OCTOBER 30, 1999

     SALES.  Sales for the thirteen weeks ended October 28, 2000 increased $14.4
million, or 8.2%, over the comparable period in 1999. On a domestic basis, sales
increased $20.8 million, or 12.3%, over the 1999 period.  Comparable  department
sales (departments open for the same months during comparable periods) increased
0.6%.  Management  attributes this nominal increase in the comparable department
sales 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
$13.4 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  October 28, 2000,  Finlay  opened  twelve
departments  and closed two  departments.  The openings  and  closings  were all
within existing store groups.

     GROSS  MARGIN.  Gross  margin for the  period  increased  by $7.8  million,
primarily as a result of the sales  increase.  As a percentage  of sales,  gross
margin  increased by 0.3%. On a domestic basis,  gross margin as a percentage of
sales  decreased  by 0.2%  primarily  attributable  to an  increase  in the LIFO
provision of $0.3 million.

                                       13
<PAGE>


     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses ("SG&A") increased $4.8 million, or 5.9%, 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 1.0%, and on a domestic basis
by 0.5%, as a result of the leveraging of these expenses.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  increased by
$0.3 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 $0.5 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 $0.2 million primarily
due to a higher  weighted  average  interest  rate  (8.6%  for the  2000  period
compared  to 8.1% for the  comparable  period in 1999)  offset by a decrease  in
average  borrowings  ($347.1  million for the period in 2000  compared to $360.0
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 $1.9  million  for the 2000 period was
$1.6  million  less  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 $0.3 million less than the net loss in the prior period,  which totaled $2.2
million.

          THIRTY-NINE  WEEKS ENDED OCTOBER 28, 2000  COMPARED  WITH  THIRTY-NINE
WEEKS ENDED OCTOBER 30, 1999

     SALES.  Sales for the  thirty-nine  weeks ended October 28, 2000  increased
$52.5  million,  or 10.0%,  over the  comparable  period in 1999.  On a domestic
basis, sales increased $71.7 million, or 14.1%, over the 1999 period. Comparable
department  sales  increased  4.4%.  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.  These  factors  were  offset  by a  general  softening  in the  retail
environment  in  the  third  quarter.  Sales  from  the  operation  of  net  new
departments  contributed $30.2 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  thirty-nine  weeks ended  October 28,  2000,  Finlay  opened 80
departments and closed 16 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 16 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 $25.9  million,
primarily as a result of the sales  increase.  As a percentage  of sales,  gross
margin  decreased by 0.2%. On a domestic basis,  gross margin as a percentage of
sales decreased by 0.4% primarily  attributable to (i)  management's  efforts to


                                       14

<PAGE>

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 $0.8
million.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased $17.6 million,
or 7.2%,  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
1.1%,  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  $2.0  million for the  thirty-nine  weeks ended
October 30, 1999. There were no such expenses recorded in the current year.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  increased by
$0.4 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 $0.9 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 $0.5 million primarily
due to a higher  weighted  average  interest  rate  (8.6%  for the  2000  period
compared  to 8.1% for the  comparable  period in 1999)  offset by a decrease  in
average  borrowings  ($324.1  million for the period in 2000  compared to $334.6
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 $2.6  million  for the 2000 period was
$4.6  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 $1.3 million lower than the net loss in the prior period, which totaled $3.9
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 thirty-nine
weeks ended October 30, 1999 and October 28, 2000, capital  expenditures totaled
$11.6 million and $11.7 million  (exclusive of the fixed assets  acquired in the
J.B. Rudolph Acquisition,  which totaled $4.0 million),  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 $151.9 million at October
28,  2000,  a decrease of $5.7  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  including fixed

                                       15
<PAGE>

assets acquired in the J.B. Rudolph Acquisition. 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 October 28, 2000 were $124.5 million, compared
to a zero  balance at January 29, 2000 and $127.4  million at October 30,  1999.
The average amounts outstanding under the Revolving Credit Agreement were $109.6
million and $99.1 million for the  thirty-nine  weeks ended October 30, 1999 and
October  28,  2000,  respectively.   The  maximum  amount  outstanding  for  the
thirty-nine weeks ended October 28, 2000 was $145.7 million,  at which point the
unused  excess  availability  was  $75.0  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.  Under  the  program,  the  Company,  from  time to time,  at the
discretion  of  management,  may  purchase  its common  stock on the open market
through  September 29, 2001.  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.

     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.
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 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.

     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
$7.8 million.


                                       16
<PAGE>


     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
October 28,  2000,  $421.3  million of  consignment  merchandise  was on hand as
compared to $355.1 million at October 30, 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 Balance Reduction Requirement.  As of October 28, 2000, Finlay's
outstanding  borrowings  were $349.5  million,  which  included a $75.0  million
balance under the Senior  Debentures,  a $150.0 million balance under the Senior
Notes and a $124.5 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
October 28,  2000,  amounts  outstanding  under the Gold  Consignment  Agreement
totaled 104,869 fine troy ounces, valued at approximately $27.7 million.  Finlay
Jewelry is in discussions  with its gold consignor  regarding an increase in the
existing  limits  under  the Gold  Consignment  Agreement.  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 more timely sales and inventory
information to facilitate  merchandising  solutions.  These systems will provide
the foundation  for future  productivity  and expense  control  initiatives.  At
October 28, 2000, a total of  approximately  $12.1 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  expects  these  systems to be  completed  by mid-2001  and
anticipates it will spend an additional $6-9 million.

     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

                                       17
<PAGE>


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.  For the year ended
January 29, 2000,  the gain or loss on open futures  contracts was not material.
At October 28, 2000, the Company had two open positions in futures contracts for
gold  totaling  16,000 fine troy ounces,  valued at $4.2  million,  which expire
through April 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  for  each of the
thirty-nine week periods ended October 30, 1999 and October 28, 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,  although the Company did achieve a net
profit in the second quarter this 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 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 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 $4.2 million at October 28, 2000,  which expire
through April 2001.

                                       19


<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.

       27         Financial Data Schedule.

       99         Not applicable.

B.       REPORTS ON FORM 8-K

     On December 1, 2000,  the Company  filed with the  Securities  and Exchange
Commission  a  Current  Report on Form 8-K  reporting  the  announcement  by the
Company of the approval by its Board of Directors of a stock repurchase  program
to acquire up to $20 million of outstanding common stock.


                                       20

<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 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)
                                       21