<PAGE>

                                 United States
                      Securities and Exchange Commission
                            Washington, D.C. 20549

                                   FORM 10-Q

                                  (MARK ONE)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934
For the Quarterly Period Ended March 31, 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  0-22356



                                FRIEDMAN'S INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)



                 Delaware                               58-2058362
      -------------------------------               -------------------
      (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)                Identificaiton No.)



          4 West State Street
        Savannah, Georgia 31401                             31401
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)



                                (912) 233-9333
             ----------------------------------------------------
             (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
                                               ----     ----

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

  The number of shares of Registrant's Class A Common Stock $.01 par value per
share, outstanding at May 13, 2001 was 13,320,100.

  The number of shares of Registrant's Class B Common Stock $.01 par value per
share, outstanding at May 13, 2001 was 1,196,283.
<PAGE>

                                     Index

                                Friedman's Inc.


Part I.  Financial Information

Item 1.  Consolidated Financial Statements (Unaudited)

         Income Statements - Three and six months ended March 31, 2001 and April
         1, 2000

         Balance Sheets - March 31, 2001, April 1, 2000 and September 30, 2000

         Statements of Cash Flows - Six months ended March 31, 2001 and April 1,
         2000

         Notes to Consolidated Financial Statements

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

Part II. Other Information

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

Item 6.  Exhibits and Reports on Form 8-K

Signatures
<PAGE>

Part I.  Financial Information
Item 1.
                                FRIEDMAN'S INC.
                        Consolidated Income Statements
                                  (Unaudited)
              (In thousands, except per share and share amounts)

<TABLE>
<CAPTION>



                                                               Three months ended    Six months ended
                                                               March 31,  April 1,  March 31,   April 1,
                                                                 2001       2000      2001        2000
                                                               ---------  --------  ---------  ---------
<S>                                                            <C>       <C>       <C>        <C>
Net sales.....................................................  $88,106   $80,403   $261,541   $231,821

Operating Costs and Expenses:
  Cost of goods sold including occupancy,
     distribution and buying..................................   47,717    43,516    134,852    121,990
  Selling, general and administrative.........................   33,265    29,369     89,415     75,740
  Depreciation and amortization...............................    2,966     2,324      5,882      4,543
                                                                -------   -------   --------   --------
Income from operations........................................    4,158     5,194     31,392     29,548

Interest and other income from related party..................     (643)     (584)    (1,292)    (1,167)
Interest expense..............................................    1,238     1,114      2,661      2,131
                                                                -------   -------   --------   --------
Income before income taxes....................................    3,563     4,664     30,023     28,584
Income tax expense............................................    1,317     1,701     10,648     10,791
Minority interest...........................................       (198)        0       (400)         0
                                                                -------   -------   --------   --------
Net income....................................................  $ 2,444   $ 2,963   $ 19,775   $ 17,793
                                                                =======   =======   ========   ========
Earnings per share - basic....................................  $  0.17   $  0.21   $   1.37   $   1.23
                                                                =======   =======   ========   ========
Earnings per share - diluted..................................  $  0.17   $  0.21   $   1.37   $   1.23
                                                                =======   =======   ========   ========
Weighted average shares - basic...............................   14,494    14,438     14,483     14,433
Weighted average shares - diluted.............................   14,494    14,438     14,483     14,433

Number of stores open ........................................      635       574        635        574
</TABLE>

                See notes to consolidated financial statements.
<PAGE>

                                FRIEDMAN'S INC.
                          Consolidated Balance Sheets
              (In thousands, except per share and share amounts)

<TABLE>
<CAPTION>


                                                                           March 31,       April 1,     September 30,
                                                                              2001           2000            2000
                                                                           ---------       --------     -------------
                                                                                 (Unaudited)               (Note)
<S>                                                                        <C>             <C>          <C>
Assets
Current Assets:
  Cash..................................................................   $    420        $  1,042        $    459
  Accounts receivable, net of allowance for doubtful accounts of
     $15,550 at March 31, 2001, $14,173 at April 1, 2000 and $13,514
     at September 30, 2000..............................................    145,557         121,523         122,168
  Inventories...........................................................    140,488         128,462         121,607
  Deferred income taxes.................................................      3,107           3,629           3,105
  Other current assets..................................................      8,169           3,267           5,187
                                                                           --------        --------        --------
    Total current assets................................................    297,741         257,923         252,526

Equipment and improvements, net.........................................     56,463          49,734          56,420
Tradename rights, net...................................................      5,258           5,728           5,493
Other assets............................................................      3,579           4,384           3,995
                                                                           --------        --------        --------
     Total assets.......................................................   $363,041        $317,769        $318,434
                                                                           ========        ========        ========
Liabilities and Stockholders' Equity
Current Liabilities:
  Accounts payable......................................................   $ 49,900        $ 37,470        $ 40,494
  Accrued liabilities...................................................     20,804          22,964          15,772
                                                                           --------        --------        --------
     Total current liabilities..........................................     70,704          60,434          56,266

Bank debt...............................................................     59,304          45,853          48,430
Deferred income taxes and other.........................................      1,769           2,026           2,221
Minority interest in equity of subsidiaries.............................        665                             490

Stockholders' Equity:
  Preferred stock, par value $.01, 10,000,000 shares authorized;
     and none issued....................................................          -               -               -
  Class A common stock, par value $.01, 25,000,000 shares
     authorized, 13,320,100, 13,250,857 and 13,271,207 issued and
     outstanding at March 31, 2001, April 1, 2000 and
     September 30, 2000, respectively...................................        133             133             133
  Class B common stock, par value $.01, 7,000,000 shares
     authorized, 1,196,283 issued and outstanding.......................         12               2              12
  Additional paid-in-capital............................................    119,014         118,681         118,767
  Retained earnings.....................................................    112,600          91,815          93,290
  Stock purchase loans..................................................     (1,160)         (1,185)         (1,175)
                                                                           --------        --------        --------
        Total stockholders' equity......................................    230,599         209,456         211,027
                                                                           --------        --------        --------
        Total liabilities and stockholders' equity......................   $363,041        $317,769        $318,434
                                                                           ========        ========        ========
</TABLE>
Note:   The balance sheet at September 30, 2000 has been derived from the
        audited financial statements at that date but does not include all the
        information and footnotes required by generally accepted accounting
        principles for complete financial statements.


                See notes to consolidated financial statements.



<PAGE>

                                FRIEDMAN'S INC.
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
                                (In thousands)

<TABLE>
<CAPTION>


                                                                          Six months ended
                                                                         March 31,  April 1,
                                                                            2001      2000
                                                                         ---------  --------
<S>                                                                      <C>        <C>
Operating Activities:
 Net income....................................................          $ 19,775   $ 17,793
 Adjustments to reconcile net income to cash
  provided by (used in) operating activities:
  Depreciation and amortization................................             5,882      4,543
  Provision for doubtful accounts..............................            27,187     21,027
  Income from related party....................................              (168)      (166)
  Changes in assets and liabilities:
   Increase in accounts receivable.............................           (50,577)   (44,770)
   Increase in inventories.....................................           (18,881)   (14,334)
   (Increase) decrease in other assets.........................            (2,044)       908
   Increase in accounts payable and accrued liabilities........            15,743      7,150
                                                                         --------   --------
    Net cash used by operating activities......................            (3,083)    (7,849)
Investing Activities:
 Additions to equipment and improvements.......................            (7,658)    (9,648)
 Repayments of employee stock purchases........................                15         15
                                                                         --------   --------
   Net cash used in investing activities.......................            (7,643)    (9,633)
Financing Activities:
 Proceeds from bank borrowings.................................            10,874     17,669
 Proceeds from employee stock purchases and options exercised..               247        139
 Payment of cash dividend......................................              (434)      (360)
                                                                         --------   --------
   Net cash provided by investing activities...................            10,687     17,448
                                                                         --------   --------
Decrease in cash...............................................               (39)       (34)
Cash, beginning of period......................................               459      1,076
                                                                         --------   --------
Cash, end of period............................................          $    420   $  1,042
                                                                         ========   ========
</TABLE>


           See notes to condensed consolidated financial statements.

<PAGE>

                                FRIEDMAN'S INC.

                   Notes to Consolidated Financial Statements

                                  (Unaudited)

                                 March 31, 2001



Note A - Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.  Operating results for the three month and six month periods
ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending September 30, 2001.  For further information, refer
to the financial statements and footnotes thereto included in the Friedman's
Inc. Annual Report on Form 10-K for the year ended September 30, 2000.

Note B - Earnings per Share

     The dilutive effect of stock options on the weighted average number of
shares outstanding for the period was zero for the three months and six months
ended March 31, 2001 and April 1, 2000.
<PAGE>

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

     Certain of the matters discussed in this document and in documents
incorporated by reference in this document, including matters discussed under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," may constitute forward looking statements for purposes
of the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, and as such may involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of Friedman's Inc. ("Friedman's" or the "Company")  to be materially different
from future results performance or achievements expressed or implied by such
forward-looking statements.  The words "expect," "anticipate," "intend," "plan,"
"believe," "seek," "estimate," and similar expressions are intended to identify
such forward-looking statements.  The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including without limitation those discussed under
"Factors Affecting Future Performance" below .  All written or oral forward-
looking statements attributable to the Company are expressly qualified in their
entirety by these cautionary statements.

Three months ended March 31, 2001 compared to three months ended April 1, 2000
------------------------------------------------------------------------------

Results of Operations
---------------------

     Net sales increased 9.6% to $88.1 million for the three months ended March
31, 2001, from $80.4 million for the three months ended April 1, 2000. The
increase in net sales was attributable to the net addition of 61 new stores
since April 1, 2000, which was partially offset by a  comparable store net
merchandise sales decrease of 0.2% for the three months ended March 31, 2001.

     Cost of goods sold, including occupancy, distribution and buying, increased
9.7% to $47.7 million, or 54.2%, of net sales, for the three months ended March
31, 2001, versus $43.5 million, or 54.1% of net sales, for the three months
ended April 1, 2000. The increase in cost of goods sold was attributable to the
net addition of 61 new stores since April 1, 2000.

     Selling, general and administrative expenses increased 13.3% to $33.3
million for the three months ended March 31, 2001, from $29.4 million for the
three months ended April 1, 2000. As a percentage of net sales, selling, general
and administrative expenses increased to 37.8% of net sales for the three months
ended March 31, 2001 from 36.5% for the three months ended April 1, 2000.
Excluding the consolidation of internet operations, selling, general and
administrative expenses increased 11.4% to $32.7 million for the three months
ended March 31, 2001 and as a percentage of net sales, increased to 37.2% from
36.5% for the three months ended April 1, 2000. The increase as a percentage of
net sales was primarily the result of a non-comparable charge of $0.4 million
related to the closing of seven stores, and increased advertising expenses,
partially offset by improvements in operating expenses and an increase in net
earnings from credit operations. The increase in advertising was the result of
increased television advertising and direct mail inserts compared to the
comparable period last year. The improvement in operating expenses was primarily
due to improved expense management. The improvement in credit operations was
primarily the result of increases in credit revenues generated from customer
accounts receivable.

     Depreciation and amortization expenses increased 27.6% to $3.0 million for
the three months ended March 31, 2001, from $2.3 million for the three months
ended April 1, 2000. Depreciation and amortization expense as a percentage of
net sales was 3.4% for the three months ended March 31, 2001 compared to 2.9% in
the comparable period in the prior year.  Excluding the consolidation of
internet operations, depreciation and amortization expenses increased 25.1% to
$2.9 million for the three months ended March 31, 2001 and as a percentage of
net sales increased to 3.3% compared to 2.9% in the comparable period in the
prior year.  The increase in depreciation and amortization as a percentage of
net sales was due primarily to expenses associated with the accelerated
depreciation for seven store closings and the decrease in comparable store
sales.  In general, depreciation and amortization expenses as a percentage of
net sales may continue to increase as a result of additional investments in
stores, systems and infrastructure, but management does not believe that such
potential increases represent a material continuing trend.

     Interest and other income from a related party increased to $643,000 for
the three months ended March 31, 2001 compared to $584,000 for the three months
ended April 1, 2000.  Interest expense increased to $1.2 million for the three
months ended March 31, 2001 compared to $1.1 million for the three months ended
April 1, 2000.  The
<PAGE>

increase in interest expense was due primarily to higher average outstanding
borrowings on the Company's line of credit and an increase in the Company's
effective interest rate. See "Liquidity and Capital Resources."

     Net income decreased by 17.5% to $2.4 million for the three months ended
March 31, 2001 compared to $3.0 million for the three months ended April 1,
2000.  Basic and diluted earnings per share decreased 19.0% to $0.17 per share
for the three months ended March 31, 2001 from $0.21 per share for the three
months ended April 1, 2000.  Excluding the charge for store closing costs and
the loss from internet operations, basic and diluted earnings per share remained
unchanged at $0.21 per share for the three months ended March 31, 2001.  Basic
and diluted weighted average common shares outstanding increased 0.4% to
14,494,000 for the three months ended March 31, 2001 from 14,438,000 for the
comparable period in the prior year.

Six months ended March 31, 2001 compared to six months ended April 1, 2000
--------------------------------------------------------------------------

Results of Operations
---------------------

     Net sales increased 12.8% to $261.5 million for the six months ended March
31, 2001 from $231.8 million for the six months ended April 1, 2000. The
increase in net sales was attributable to the net addition of 61 new stores
since January 1, 2000 and an increase in comparable store net merchandise sales
of  3.5% for the six months ended March 31, 2001.

     Cost of goods sold, including occupancy, distribution and buying, increased
10.5% to $134.9 million, or 51.6%, of net sales, for the six months ended March
31, 2001 versus $122.0 million, or 52.6% of net sales, for the six months ended
April 1, 2000.  The decrease as a percentage of net sales was primarily the
result of a higher merchandise gross margin rate as a percentage of net sales.
The higher merchandise gross margin rate was primarily due to less sales of
lower gross margin clearance merchandise as compared to the prior year.  In
general, cost of goods sold as a percentage of net sales may increase as a
result of the Company's merchandising and promotional activities, but management
does not believe that such potential increases represent a material continuing
trend.

     Selling, general and administrative expenses increased 18.1% to $89.4
million for the six months ended March 31, 2001, from $75.7 million for the six
months ended April 1, 2000.  As a percentage of net sales, selling, general and
administrative expenses increased to 34.2% of net sales for the six months ended
March 31, 2001 from 32.7% for the six months ended April 1, 2000.  Excluding the
consolidation of internet operations, selling, general and administrative
expenses increased 16.7% to $88.4 million for the six months ended March 31,
2001, and as a percentage of net sales, increased to 33.8% from 32.7% for the
six months ended April 1, 2000.  The increase as a percentage of net sales was
primarily the result of increases in advertising expenses and provision for bad
debts, partially offset by decreases in operating expenses.  The increase in
advertising was the result of increased television advertising and direct mail
inserts compared to the comparable period last year.  The increase in the
provision for bad debt as a percentage of net sales was primarily the result of
increased charge offs as compared to the comparable period last year.

     Depreciation and amortization expenses increased 29.5% to $5.9 million for
the six months ended March 31, 2001, from $4.5 million for the six months ended
April 1, 2000. Depreciation and amortization expense as a percentage of net
sales was 2.2% for the six months ended March 31, 2001 compared to 2.0% in the
comparable period in the prior year.  Excluding the consolidation of internet
operations, depreciation and amortization expenses increased 24.2% to $5.6
million for the six months ended March 31, 2001 and as a percentage of net sales
increased to 2.2% compared to 2.0% in the comparable period in the prior year.
In general, depreciation and amortization expenses as a percentage of net sales
may continue to increase as a result of additional investments in stores,
systems and infrastructure, but management does not believe that such potential
increases represent a material continuing trend.

     Interest and other income from a related party increased to $1.3 million
for the six months ended March 31, 2001 compared to $1.2 million for the six
months ended April 1, 2000.  Interest expense increased to $2.7 million for the
six months ended March 31, 2001 compared to $2.1 million for the three months
ended January 1, 2000.  The increase in interest expense was due primarily to
higher average outstanding borrowings on the Company's line of credit and an
increase in the Company's effective interest rate. See "Liquidity and Capital
Resources."

     Net income increased by 11.1% to $19.8 million for the six months ended
March 31, 2001 compared to $17.8 million for the six months ended April 1, 2000.
Basic and diluted earnings per share increased 11.4% to
<PAGE>

$1.37 per share for the six months ended March 31, 2001 from $1.23 per share for
the six months ended April 1, 2000. Excluding the charge for store closing costs
and the loss from internet operations, basic and diluted earnings per share
increased 15.4% to $1.42 per share for the six months ended March 31, 2001 from
$1.23 per share for the six months ended April 1, 2000. Basic and diluted
weighted average common shares outstanding increased 0.3% to 14,483,000 for the
six months ended March 31, 2001 from 14,433,000 for the comparable period in the
prior year.

Liquidity and Capital Resources
-------------------------------

     During the six months ended March 31, 2001, net cash used by the Company's
operating activities was $3.1 million compared to $7.9 million for the six
months ended April 1, 2000.  For the six months ended March 31, 2001, cash
provided by operations was favorably impacted, as compared to the prior year, by
increased net income and decreased net inventory levels, including accounts
payable, offset by increases in customer accounts receivable.

     Investing activities used cash of $7.6 million for the six months ended
March 31, 2001 compared to $9.6 million during the six months ended April 1,
2000.  The decrease was due primarily to the addition of 16 new stores for the
six months ended March 31, 2001 compared to 43 new stores for the comparable
period in the prior year.

     Financing activities provided $10.7 million of cash for the six months
ended March 31, 2001 compared to $17.4 million for the six months ended April 1,
2000.  This cash was mostly provided from bank borrowings for the six months
ended March 31, 2001.

     Currently, the Company has a $67.5 million senior secured revolving credit
facility maturing on September 15, 2002.  Borrowings under the credit facility
bear interest at either the federal funds rate plus 0.5%, the prime rate or, at
the Company's option, the eurodollar rate plus applicable margin ranging from
1.00% to 1.75%.  The applicable margin is determined based on a calculation of
the combined leverage ratio of the Company and Crescent Jewelers, an affiliate
of the Company. The facility contains certain financial covenants and is secured
by certain of the Company's assets.  At March 31, 2001, $59.3 million was
outstanding under the facility, with interest accruing on such borrowings in a
range from 6.4% to 8.5%.  Management believes that the Company's credit facility
will be sufficient to fund the Company's working capital requirements through
fiscal 2001.

     In connection with the credit facility, the Company provides certain credit
enhancements and guaranties the obligations of Crescent under its $112.5 million
senior secured revolving credit facility.  In consideration for this guaranty,
Crescent makes quarterly payments to the Company in an amount equal to 2% per
annum of the outstanding obligations of Crescent under its credit facility
during the preceding fiscal quarter.  In further consideration of this guaranty,
Crescent issued the Company a warrant to purchase 7,942,904 shares of Crescent's
non-voting Class A Common Stock, or approximately 50% of the capital stock of
Crescent on a fully diluted basis, for an exercise price of $500,000.

      On March 2, 2001, the Company's Board of Directors declared an increase in
its annual cash dividend from $0.06 per share on an annual basis to $0.07 per
share on an annual basis and subsequently declared a quarterly dividend of
$0.0175, payable on April 16, 2001, to Stockholders of record as of March 31,
2001.

                      FACTORS AFFECTING FUTURE PERFORMANCE

Our growth may place a strain on our resources and may affect adversely the
results of our operations.

          The number of stores we operate has increased greatly during the past
three years.  For example, we opened approximately 70 net new stores from
December 1999 to December 2000, and have continued to expand our store base
during fiscal 2001.  The success of our expansion program will depend on the
performance of our existing stores, our ability to find suitable store locations
and our ability to hire and train qualified store personnel.  We anticipate that
there will continue to be significant competition among specialty retailers for
desirable store sites and qualified personnel.  Furthermore, if our operations
fail to generate sufficient cash flow, we may require additional capital to
finance our planned expansion.  Our growth has placed, and will continue to
place, significant demands on all aspects of our business, including our
management information and distribution systems and personnel.  For these
reasons, we may not be successful in continuing our growth or successfully
managing our growth which could result in a reduction in our historical revenue
growth or an increase in cost of goods sold which would directly and adversely
affect our earnings.
<PAGE>

Our industry is highly competitive, and if we fall behind our competitors, our
earnings and stock price may be adversely affected.

     The retail jewelry business is mature and highly competitive.  Our retail
jewelry business competes with national and regional jewelry chains, as well as
with local independently owned jewelry stores and chains.  We also compete with
other types of retailers who sell jewelry and gift items, such as department
stores, catalog showrooms, discounters, direct mail suppliers, television home
shopping networks and jewelry retailers who make sales through Internet sites.
Our credit operations compete with credit card companies and other providers of
consumer credit.  Management believes that Friedman's competes primarily on the
basis of selection of merchandise offered, pricing, quality of sales personnel,
advertising, ability to offer in-house credit, store location and reputation.
Many competitors are substantially larger and have greater financial resources
than we do.  We may not be able to compete successfully with such competitors.
Competition could cause us to lose customers, increase expenditures or reduce
pricing which could have a material adverse effect on our earnings.  See Item 1.
"Business - Competition."

Our results of operations may be significantly affected by a downturn in general
economic conditions.

     Jewelry is a luxury item, not a necessity product.  As a result, adverse
trends in the general economy, such as decreases in employment levels, wages and
salaries, may affect sales of our jewelry.  Historically, people spend less
money on luxury items, such as jewelry, during a decline in general economic
activity.  Also, negative developments in local economic conditions, such as
plant closings, industry slowdown and government employment cutbacks, may affect
sales of our jewelry.  We depend on customer traffic at the power strip centers
and malls where our stores are located.  A reduction in consumer spending due to
general economic conditions could negatively affect our net sales.

     A majority of our customers use credit (either from us or another consumer
credit source) to purchase jewelry from us.  When there are adverse trends in
the general economy or increases in interest rates, fewer people use credit.
General economic trends also affect our credit operations.  Any downturn in
general or local economic conditions in the markets in which we operate would
affect adversely our ability to collect outstanding credit accounts receivable.
See Item 6.  "Selected Financial Data" and  Item 1.  "Business - Credit
Operations."

Instances of litigation relating to the sale of credit insurance have increased
in the retail industry and our business could be adversely affected by this
litigation.

     States' Attorneys General and private plaintiffs have filed lawsuits
against other retailers relating to improper practices conducted in connection
with the sale of credit insurance in several jurisdictions around the country.
We offer credit insurance in all of our stores and encourage the purchase of
credit insurance products in connection with sales of merchandise on credit.
Similar litigation may be brought against us, and  we could be liable for
substantial damages or may be forced to incur substantial costs as part of an
out-of-court settlement.  This could have a material adverse affect our results
of operations and stock price.  Also, an adverse judgment could affect our
reputation and this could have a negative impact on sales of our jewelry and
credit insurance products.

Our business is highly seasonal, which may cause significant fluctuations in our
results.

     Our first fiscal quarter, which ends December 30, has historically been the
strongest quarter of the year in terms of net sales and operating income.  Any
substantial disruption of holiday season shopping or other events which affect
our first quarter results could have a material adverse effect on our
profitability for the whole year.  Our quarterly results of operations also may
fluctuate significantly as a result of a variety of factors, including the
following:

     . the timing of new store openings,

     . net sales contributed by new stores,

     . actions of competitors,

     . fluctuations in comparable store sales,

     . timing of certain holidays,

     . changes in our merchandise, and

     . general economic, industry and weather conditions that affect consumer
       spending.
<PAGE>

The loss of our president and chief executive officer or other key personnel
could significantly harm our business.

     Our management and operations depend on the skills and experience of our
senior management team, including our President and Chief Executive Officer,
Bradley J. Stinn.  We believe that our ability to successfully implement our
growth strategies depends on the continued employment of our senior management
team.  The loss of Mr. Stinn or a significant number of other senior officers
could hurt us materially.  We do not have and do not contemplate entering into
employment agreements with, or obtaining key-man life insurance for, any senior
officer.

We may incur additional compensation expense because of our incentive
compensation arrangements.

     In October 1994, we made $1.5 million in incentive loans to each of Mr.
Stinn and Sterling B. Brinkley, our Chairman of the Board of Directors. The
loans mature in 2004. We agreed to forgive principal and interest payments on
these incentive loans if our Class A Common Stock reached certain prices. If we
forgive principal and interest payments, we will incur compensation expense
which reduces earnings. During 1995 and 1996, we incurred compensation expense
of $3 million with respect to the incentive loans. If the price of the Class A
Common Stock increases above the remaining price targets, we will incur an
additional $3 million in compensation expense. This compensation expense, if
incurred, will negatively impact earnings.

Fluctuations in the availability and prices of our merchandise may affect our
results of operations.

     We primarily sell jewelry made of gold and diamonds and, to a lesser
extent, other precious and semi-precious metals and stones. The prices of these
materials have been, and we expect for them to continue to be, subject to
significant volatility. Further, the supply and price of diamonds are
significantly influenced by a single entity, DeBeers Consolidated Mines Ltd. of
South Africa. We do not maintain long-term inventories or otherwise hedge
against fluctuations in the cost of gold or diamonds. A significant increase in
the price of gold and diamonds could adversely affect our sales and gross
margins.

     Our supply of diamonds comes primarily from South Africa, Botswana, Zaire,
the former Soviet republics and Australia. Changes in the social, political or
economic conditions in one or more of these countries could have an adverse
effect on our supply of diamonds. Any sustained interruption in the supply of
diamonds from these producing countries could adversely affect our product
costs, and as a result, our earnings.

Your stock value may be adversely affected because of the concentrated ownership
of our Class B Common Stock.

     Mr. Phillip E. Cohen controls all of our Class B Common Stock through his
ownership of MS Jewelers, the general partner of the partnership which owns the
Class B Common Stock.  The holders of Class B Common Stock have the right to
elect 75% of our directors and control the outcome of all other issues decided
by our stockholders, including major corporate transactions.  Mr. Cohen can
transfer the Class B Common Stock and its voting rights to a third party,
subject to certain limitations.  If Mr. Cohen were to convert the Class B Common
Stock into Class A Common Stock, he would control approximately 8.3% of the
Class A Common Stock.

Your stock value may be adversely affected because only holders of Class B
Common Stock may vote on corporate actions requiring stockholder approval.

     Holders of Class A Common Stock have the right to elect a minimum of 25% of
our directors.  As long as there are shares of Class B Common Stock outstanding,
holders of Class A Common Stock have no other voting rights, except as required
by law.  Mr. Cohen controls the outcome of substantially all matters submitted
to a vote of the stockholders.  Some potential investors may not like this
concentration of control and the price of Class A Common Stock may be adversely
affected.  Mr. Cohen's control of Friedman's may also discourage offers by third
parties to buy us or to merge with us.  Further, the interests of Mr. Cohen
could conflict with the interests of the holders of Class A Common Stock.
<PAGE>

Our business may be adversely affected by changes in laws and regulations
governing our business.

     Federal and state consumer protection laws and regulations limit the manner
in which we may offer and extend credit and the various types of insurance that
we offer. Any adverse change in the regulation of credit could adversely affect
our net sales and cost of goods sold. For example, new laws or regulations could
limit the amount of interest or fees we could charge on consumer loan accounts,
or restrict our ability to collect on account balances. Compliance with, or any
violation of, existing and future laws or regulations could require us to make
material expenditures or otherwise adversely effect our business or financial
results.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The Company's market risk is limited to fluctuations in interest rates as
it pertains to the Company's borrowings under its credit facility.  The Company
pays interest on borrowings at either the federal funds rate plus 0.5%, the
prime rate or, at the Company's option, the eurodollar rate plus applicable
margin ranging from 1.00% to 1.75%.  If the interest rates on the Company's
borrowings average 100 basis points more in fiscal 2001 than they did in fiscal
2000, the Company's interest expense would increase and income before income
taxes would decrease by $499,000.  This amount is determined solely by
considering the impact of the hypothetical change in the interest rate on the
Company's borrowing cost without consideration for other factors such as actions
management might take to mitigate its exposure to interest rate changes.
<PAGE>

Part II.  Other Information


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

          At the Annual Meeting of Stockholders of the Company held on March 1,
          2001, the following matters were brought before and voted upon by the
          stockholders:

                              Class A Common Stock
                              --------------------

          1. A proposal to elect the following persons to the Board of Directors
          to serve until the 2002 Annual Meeting of Stockholders of the Company:


                                              For           Withhold Authority
                                              ---           ------------------
                John E. Cay III            11,444,975            104,523
                Robert W. Cruickshank      11,332,765            216,733
                David B. Parshall          11,441,245            108,253

                              Class B Common Stock
                              --------------------

          2.  A proposal to elect the following  persons to the Board of
          Directors to serve until the 2002 Annual Meeting of Stockholders of
          the Company:

                                               For          Withhold Authority
                                               ---          ------------------
                Bradley J. Stinn            1,196,283              0
                Sterling B. Brinkley        1,196,283              0
                Mark C. Pickup              1,196,283              0

          3. A proposal to ratify the selection of Ernst & Young LLP as
          independent certified public accountants of the Company for the fiscal
          year ending September 30, 2001:

                   For              Against          Abstain
                   ---              -------          -------
                1,196,283              0                0


          4.  A proposal to ratify an amendment to the 1994 Stock Option Plan
          for Outside Directors:

                   For              Against          Abstain
                   ---              -------          -------
                1,196,283              0                0



          5. A proposal to ratify an amendment to the 1999 Long-Term Incentive
          Plan:

                   For              Against          Abstain
                   ---              -------          -------
                1,196,283              0                0


Item 6.  Exhibits and Reports on Form 8-K

         The Company did not file a Current Report on Form 8-K during the three
         month period ended March 31, 2001.

         The exhibits to this report on Form 10-Q are listed on the Exhibit
         Index which immediately follows the signature page hereto.
<PAGE>

                                   Signatures

Pursuant to the requirements of Section 13 or 15(d) 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 on May 15, 2001.




                                  FRIEDMAN'S INC.

                            By:   /s/ Victor M. Suglia
                                  -----------------------------------------
                                  Victor M. Suglia
                                  Senior Vice President and Chief
                                  Financial Officer


<PAGE>

                                 EXHIBIT INDEX

Exhibit
Number

  3.1    Registrant's Certificate of Incorporation, as amended (incorporated by
         reference from Exhibit 4(a) to the Registrant's Registration Statement
         on Form S-8 (File No. 333-17755) dated March 21, 1997).

  3.2    Bylaws of the Registrant (incorporated by reference from Exhibit 3.2 to
         the Registrant's Registration Statement on Form S-1
         (File No. 33-67662), and amendments thereto, originally filed on
         August 19, 1993).

  4.1    See Exhibits 3.1 and 3.2 for provisions of the Certificate of
         Incorporation and Bylaws of the Registrant defining rights of holders
         of Class A and Class B Common Stock of the Registrant.

  4.2    Form of Class A Common Stock certificate of the Registrant
         (incorporated by reference from Exhibit 4.2 to the Registrant's
         Registration Statement on Form S-1 (File No. 33-67662), and amendments
         thereto, originally filed on August 19, 1993).