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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-K

             [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended January 31, 2001

             [ ]  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:  000-26023

                              ALLOY ONLINE, INC.
         ------------------------------------------------------------
               Exact name of registrant as specified in charter

             DELAWARE                                   04-3310676
-----------------------------------         ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation  or organization)


                        151 WEST 26TH STREET, 11TH FLOOR
                              NEW YORK, NY  10001
         ------------------------------------------------------------
                    (Address of principal executive office)

                                 (212) 244-4307
         ------------------------------------------------------------
              (Registrant's telephone number, including area code)

       Securities registered pursuant to Section 12(b) of the Act:  NONE
          Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, PAR VALUE $0.01

     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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate market value of the Registrant's Common Stock held by non-
affiliates of the Registrant (without admitting that any person whose shares are
not included in such calculation is an affiliate) was $71,102,180 based on the
last sale price as reported by the Nasdaq National Market on April 10, 2001.

     As of April 10, 2001, the Registrant had 21,516,807 shares of Common Stock
outstanding.

Documents Incorporated By Reference

     The following documents (or parts thereof) are incorporated by reference
into the following parts of this Form 10-K: Certain information required in Part
III of this Annual Report on Form 10-K is incorporated from the Registrant's
Proxy Statement for the 2001 Annual Meeting of Stockholders.

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                                     PART I
ITEM 1.  BUSINESS.

OVERVIEW

     Alloy Online, Inc. ("Alloy") is a multi-channel media company and direct
marketer providing community, content and commerce to Generation Y, the
approximately 58 million boys and girls between the ages of 10 and 24. Alloy is
a leading brand for this influential generation, which the Census Bureau
estimates will grow 19.5% faster than the overall U.S. population and currently
accounts for more than $250 billion of annual disposable income. Our convergent
media model employs an array of integrated online and offline media and
marketing assets to reach the Generation Y market. Our Web site, www.alloy.com,
is a destination where Generation Y boys and girls can interact, share
information, explore compelling and relevant content, and shop. Our action
sports Web site, www.ccs.com, offers a complete line of action sports
(skateboarding, snowboarding and surfing) inspired clothing, shoes and hard
goods from leading industry brands. Each of these Web sites is complemented by a
significant direct mail catalog. We have also acquired a developer of books
targeted at Generation Y boys and girls, an action sports magazine and two
companies that provide Generation Y marketing services and market research. We
leverage our media assets and our ability to contact Generation Y boys and girls
("contact points") to drive sales of Generation Y-focused apparel, accessories
and action sports equipment, and sell comprehensive marketing and advertising
services packages to companies seeking to reach the Generation Y audience.

     Since our inception in 1996, we have experienced rapid growth, through both
organic growth and strategic acquisitions. Our revenues, primarily from
merchandise sales and complemented by advertising and sponsorship sales, have
grown from $2.0 million in fiscal 1997 to $91.2 million in the fiscal year ended
January 31, 2001 ("fiscal 2000"). In August 1997, we introduced our Alloy direct
mail catalog to attract additional visitors to our www.alloy.com Web site,
increase merchandise revenues and build recognition for the Alloy brand. In July
2000, we acquired CCS, Inc., a leading direct marketer to teenage boys. In
fiscal 2000, we mailed a total of approximately 36 million Alloy and CCS
catalogs to boys and girls of Generation Y. As a result of our online and off-
line marketing programs, catalog circulation, Web sites and acquisitions, Alloy
has developed a database of over 6.6 million Generation Y boys and girls that
have either requested one of our catalogs or who have registered for an activity
or service on one of our Web sites, thereby enabling us to market effectively to
specific segments of our audience. In addition to our sales of Generation Y-
focused merchandise, our community of Generation Y boys and girls presents an
important opportunity for marketers. Marketers are focusing on Generation Y
members because of their growing spending power and tendency to carry brand
loyalties established at a young age into adulthood. As a result, we pursue
sponsorship and other revenue opportunities to connect these marketers with our
Generation Y community.

GENERATION Y BACKGROUND

     In the United States, Generation Y is made up of the approximately 58
million boys and girls between the ages of 10 and 24. The United States Census
Bureau projects that Generation Y will continue to grow through 2015 when it
will reach 63.5 million people, an increase of approximately 9.5% from its 2000
level. Over the next 12 years, the Census Bureau estimates that the growth of
Generation Y will outpace the growth of the general population by 19.5%.
According to Teen Research Unlimited, Generation Y also accounts for more than
$250 billion in annual disposable income. We believe approximately 70% of the
disposable income of the Generation Y audience is discretionary.

THE ALLOY SOLUTION

     Alloy has developed and aggregated an array of branded media properties
that interact directly with the Generation Y demographic group.  Through these
media properties, Alloy sells Generation Y-focused merchandise and provides
engaging content and community services which appeal to teenagers.  The multiple
contact points that Alloy has established with Generation Y are conduits that
allow advertisers and direct marketers to reach our Generation Y audience
efficiently and effectively.  Our two key brands, Alloy and CCS, serve as
popular references for the Generation Y lifestyle and are associated with the
provision of contemporary, teen-focused merchandise including apparel,
accessories, room furnishings and action sports equipment.

     The following is a review of Alloy's media properties.

     o  Catalogs. Our Alloy and CCS catalogs are directed to the Generation Y
        girls and Generation Y boys markets, respectively. Each catalog is a
        leader in its target market. Alloy catalogs range from 48 to 96 pages

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        depending on the season and contain an assortment of apparel,
        accessories, footwear and room furnishings for Generation Y girls. We
        mail at least 10 versions of the Alloy catalog throughout the year. CCS
        catalogs range from 64 to 128 pages depending on the season and offer an
        assortment of action sports equipment, such as skateboards, snowboards
        and surfboards, and related apparel, accessories and footwear. We plan
        to mail at least 10 versions of the CCS catalog in fiscal 2001. Our
        combined circulation of the Alloy and CCS catalogs was approximately 36
        million catalogs in fiscal 2000. We plan to circulate in excess of 45
        million catalogs in fiscal 2001. Our merchandise offerings in our
        catalogs are selected from a wide range of the most popular brands and
        are continually updated to keep pace with trends and seasons. In
        addition to driving our merchandise revenues and Web site traffic, our
        catalogs serve as advertising vehicles for marketers seeking to reach
        the Generation Y members to whom we circulate our catalogs.

     o  Web sites. Our flagship Web site at www.alloy.com provides a
        comprehensive range of community, content and commerce services for
        Generation Y. We facilitate community activity among alloy.com users
        through a variety of free interactive services such as e-mail, instant
        messaging and real-time chat. Additionally, we provide member-generated
        interactive content areas such as topical message boards, opinion polls
        and surveys. Our Generation Y-focused editorial staff also provides
        advice in areas of interest to alloy.com users, such as relationships
        and fashion, in a forum where users can express their opinion. At
        alloy.com, we provide regularly updated content on topics of interest to
        Generation Y boys and girls, including music, relationships,
        celebrities, horoscopes, gossip, fashion trends, current events, sports
        and a variety of other key topics. Our professional editorial staff
        aggregates information from a variety of sources and develops an edited
        presentation of compelling and relevant Generation Y focused content.
        Our Web site at www.ccs.com provides action sports equipment and related
        apparel primarily targeted at Generation Y boys. Through the purchasing
        relationships we have developed with our Generation Y audience via our
        Alloy and CCS catalogs, our Web sites at www.alloy.com and www.ccs.com
        provide a trusted, appealing environment in which to shop. Our Web sites
        offer Generation Y members a wide range of merchandise that is
        specifically geared to their interests and tastes. Through alloy.com, we
        offer many of the same girls apparel items, outerwear, accessories,
        footwear, cosmetics and room furnishings that we offer in our Alloy
        catalogs. Through ccs.com, we offer many of the same action sports
        equipment and related accessories, apparel items and footwear that we
        offer in our CCS catalogs. We believe that our catalog circulation
        drives much of the commerce activities that occur on our Web sites in
        addition to general Web site visitation. As leading online destinations
        for Generation Y, Alloy's Web sites provide marketers with a powerful
        channel to advertise to this important consumer group. We currently
        offer marketers run-of-site and premium placement advertisements, as
        well as sponsorships of games, sweepstakes, and other Web site
        activities.

     o  Books. Through our 17th Street Productions subsidiary which we acquired
        in January 2000, Alloy develops books primarily for teenagers. 17th
        Street Productions generates ideas and storylines for books and/or book
        series and then arranges with publishers and authors to produce and
        distribute the works. Within 17th Street Productions, we introduced
        AlloyBooks in fiscal 2000 and through which we have produced a series of
        books that expand on user-generated content from our www.alloy.com Web
        site. In December 2000 we acquired GirlPress to produce books for
        teenage girls and these book development activities occur within our
        17th Street Productions subsidiary. 17th Street Productions retains the
        intellectual property rights to developed books which we market to
        entertainment companies seeking to develop the content into other media
        such as movies and television.

     o  Magazines. Commencing in fiscal 2000, Alloy partnered with Scholastic,
        Inc. to develop Alloygirl Magazine, a lifestyle magazine for teenage
        girls. Under the terms of this arrangement, Alloy's magazine development
        and production costs are funded by Scholastic and subscriptions are sold
        by Scholastic through its in-school book fair program. Alloy sells the
        advertising in Alloygirl magazine to marketers seeking to reach
        Alloygirl's teenage readership. In February 2001, Alloy acquired
        Strength Magazine, a lifestyle magazine for teenage boys. Strength
        Magazine allows Alloy's advertisers to reach Generation Y boys.

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OUR STRATEGY

     Alloy's objective is to become the leading Generation Y-focused convergent
media and marketing company.  We intend to achieve our objective through the
following strategies:

     Enhance and Acquire Strong Brands. We plan to continue building Alloy as
our flagship teen brand known for high quality, Generation Y-focused community,
content and commerce for both boys and girls. We plan to continue associating
our CCS brand with action sports activities, merchandise and lifestyle popular
with Generation Y boys. We believe that these brands allow us to build customer
loyalty rapidly and efficiently. Our widely and frequently circulated Alloy and
CCS catalogs play the primary role in promoting and reinforcing our brands.

     Grow and Monetize our Generation Y Name Database.  Through a combination of
catalog circulation, advertising and acquisition, Alloy has accumulated a
database of catalog requesters and registered Web site users in excess of 6.6
million Generation Y names, of which approximately 1.5 million names have
purchased merchandise from either the Alloy or CCS catalogs or Web sites. We
intend to increase the size of our name database through increased catalog
circulation, marketing via Alloy-owned media assets, selective advertising and
acquisitions. We believe that an enlarged name database, combined with our
established skills in marketing merchandise to Generation Y and arranging
advertising packages for marketers trying to reach our Generation Y community,
should expand Alloy's total revenue opportunity.

     Leverage our Relationships with Advertisers. Over the past two fiscal
years, Alloy has developed larger and more comprehensive advertising programs
with companies seeking to reach our growing Generation Y audience. Major
advertising clients include Procter & Gamble, Johnson & Johnson, Eastman Kodak
and Coca Cola Company. Through internal development and acquisition, we plan to
increase the number of Alloy's contact points with members of Generation Y to
offer these clients greater and more effective access to the target demographic.

     Expand Media Reach.  We intend to pursue a comprehensive, cross media
strategy in order to continuously serve and interact with Generation Y. Our
frequently circulated catalogs are the centerpiece of this effort, with our
engaging and entertaining Web sites constantly providing current teen-focused
community, content and commerce. Our books and magazines reach Generation Y
members in the offline world, while partnerships with AT&T Wireless, Sprint PCS
and UPOC carry selected Web site content onto wireless devices. Our strategic
and financial partnership with Liberty Digital, Inc. positions us to capitalize
on commerce and content opportunities in the interactive television space as
this medium develops, while our cross-property marketing agreement with
Musicland gives Alloy marketing presence in Sam Goody retail music stores
throughout the United States.

     Make Strategic Acquisitions.  We pursue acquisitions in an effort to
achieve any or all of the four strategic objectives discussed above.  In July
2000, we acquired Kubic Marketing, Inc., the owner of CCS, thereby adding to our
portfolio a leading direct marketer to Generation Y boys and approximately 1.5
million new names to our database, of which approximately 450,000 were
established buyers.  In December 2000, we acquired Triple Dot Communications,
Inc., a marketing services company that provides marketing consulting and
program creation for companies trying to reach the Generation Y demographic. In
January 2001, we acquired Y-Access LLC, a unit of Triple Dot Communications,
Inc. that specializes in market research focused on teenagers. In February 2001,
we acquired Strength Magazine, a skateboarding lifestyle magazine that primarily
targets Generation Y boys. In April 2001, we acquired Carnegie Communications,
Inc. which provides information on colleges and universities to teenagers, their
parents and guidance counselors.

     Strengthen Co-ed Community.  Through www.alloy.com, we plan to continue
fostering a community that appeals to both boys and girls, using our other media
contact points with Generation Y members as feeders to this flagship Web site.
We believe that a successful Generation Y community site is largely dependent on
dynamic boy-girl interaction. We will continue to create an engaging environment
for youths of both sexes to meet and "hang out" by presenting information,
products and services that have co-ed appeal.

     Continue to Improve User Experience.  We intend to enhance the appeal of
our Web sites by continuously developing our content, services and community-
oriented features. We aggregate, edit and refresh high quality and popular
information, products and services to satisfy the evolving interests and tastes
of the members of Generation Y. New games, contests and sweepstakes are
introduced frequently. Many areas of our Web sites encourage interaction with
our audience, providing a dynamic stream of user-generated content.

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     Enhance Web Site and Technology Infrastructure.  We will continue to invest
in infrastructure technologies and transaction-processing systems to support our
expected growth. We will continue to incorporate third party technologies that
will efficiently and effectively support our fulfillment, commerce, transaction-
processing and communications capabilities. We also intend to increase the
automation and efficiency of our supply chain and fulfillment activities to
enhance our customers' shopping experience.

     Expand Internationally.  We believe that significant opportunities exist to
address the global adoption of the Internet and the international demand for
Generation Y-focused community, content and commerce. The size of Generation Y
internationally and the emergence of a global youth culture that is heavily
influenced by the U.S. present substantial overseas opportunities. We believe
that a presence in these markets will enhance our long-term competitive
position. Towards that end, we have translated selected content areas of the
alloy.com Web site into other languages and circulated CCS catalogs in Japan on
a trial basis. We intend to further explore these opportunities to extend the
overseas reach of our brands and to create strategic relationships in targeted
international markets.

MERCHANDISING

     Our merchandising strategy is designed to minimize fashion risk and
facilitate speed to market and product assortment flexibility. Our objective is
to reflect, not to lead, Generation Y styles and tastes. We select merchandise
from what we believe are the best existing designers and producers allowing us
to stay current with the tastes of the market rather than to predict future
fashion trends. Our buyers and merchandisers work closely with our many vendors
to tailor products to our specifications, rather than design and produce our own
line. By doing this, we are able to minimize design risk and make final product
selections only two to three months before the products are brought to market,
not the typical six to nine months for many apparel retailers. We believe this
strategy significantly reduces our trend risk and is consistent with our role as
a "conveyor" of the Generation Y lifestyle.

     Our organization and operational processes support our merchandising
strategy. Our buyers have significant experience with retail and media companies
that market to Generation Y. We believe our staff has a proven ability to
identify desirable products and ensure that our vendors meet specific guidelines
regarding product quality and production time. At present, we use primarily
domestic vendors who must have the ability to produce and ship products within
two to eight weeks. This speed to market gives us flexibility to incorporate
the latest trends into our product mix and to better serve the evolving tastes
of Generation Y.

     Our merchandising strategy also enables us to control closely our inventory
levels. We typically purchase less than 50% of our initial sales estimates and
rely on quick re-order ability. Because we do not make aggressive initial
orders, we believe we are able to limit our risk of excess inventory.
Additionally, we use our Web sites to offer special product prices as part of
our "Bargain Basement" section and periodically mail various sales circulars to
our customers to sell slower moving inventory.

     Alloy and CCS have created strong brand identities among our vendors. We
believe that presence on our Web sites and in our circulating catalogs is a
valuable marketing tool for our vendors and, as a result, our vendors typically
grant us online and catalog exclusivity for each product we select. We believe
this exclusivity makes the merchandise in the Alloy and CCS catalogs more
attractive to our target audience and protects us from direct price comparisons.
At any one time, our merchandise selection includes more than 75 vendors. No
vendor accounts for more than 5% percent of our sales. Brands currently offered
through Alloy include nationally recognized names such as Vans, Roxy/Quiksilver
and Skechers, as well as smaller, niche producers, including Paris Blues, Free
People and Mudd.  CCS carries merchandise and equipment from major skate brands
such as World Industries, Osiris and Birdhouse.  Our merchandising and buying
organization consists of approximately 20 professionals and support staff.

ORDERING, FULFILLMENT AND CUSTOMER SERVICE

     In order to take, fulfill and ship orders for merchandise in our Alloy
catalogs and alloy.com Web site, we use a full-service, integrated call center
and fulfillment center with trained personnel.  This call center and fulfillment
center is provided by a specialized third party fulfillment services company.

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Contracting with a third party has allowed us to grow rapidly without incurring
major capital expenditures or dedicating management resources to build and staff
an in-house call and fulfillment center. This has also allowed us to maintain a
high level of customer service during our period of rapid growth. In May 2000,
we engaged a new fulfillment service provider to take advantage of reduced
charges and the more scaleable and flexible fulfillment platform of the new
provider. Our new provider has over 400,000 square feet of warehouse space and a
400 seat call center in Martinsville, Virginia available to support our
anticipated business growth.

     Orders from the CCS catalog and ccs.com Web site are handled through our
own call center and warehouse facilities located in San Luis Obispo, California.
The call center and warehouse are staffed with our own employees.  These
arrangements are substantially similar to those CCS had in place prior to
Alloy's acquisition of CCS in July 2000.  The CCS fulfillment unit has
approximately 150,000 square feet of warehouse space and a 100 seat call center
in San Luis Obispo.

     We believe that high levels of customer service and support are critical to
the value of our services and to retaining and expanding our customer base. Our
Alloy trained customer service representatives are available 24 hours a day, 7
days per week through multiple toll-free telephone numbers. Our CCS trained
customer service representatives are available from 8:00 a.m. to 1:00 a.m.
Eastern Standard Time, 7 days per week. The representatives are able to guide
customers through the order process, monitor order progress and provide general
information about our products such as sizing advice and product features.

INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY

     The technology infrastructure of our operations provides continuous
availability of our online services. All of the critical components of the
system are redundant, which allows continuous service in case of unexpected
component failure, maintenance and upgrades.

     Currently, we license commercially available technology whenever possible
in lieu of dedicating our financial and human resources to developing online
infrastructure solutions. Our contracts for the provision of services regarding
maintenance and operation of our www.alloy.com Web site are between us and
OneSoft Corporation, a third party provider located in Annandale, Virginia which
was acquired by Etensity Acquisition Subsidiary, Inc. in January 2001. Etensity
has assumed OneSoft's obligations under these contracts. Exodus Communications,
Inc., a third party provider in Sterling, Virginia provides us with co-location
and bandwidth (i.e., our Internet connection). We are currently defining
our relationship with Exodus and preparing the appropriate contracts. Our
infrastructure is scaleable allowing us to adjust quickly to our rapidly
expanding user base.

     Our operations are dependent on our ability to maintain our computer and
telecommunications systems in effective working order and to protect our systems
against damage from fire, natural disaster, power loss, telecommunications
failure or similar events. Our servers are powered by an uninterruptible power
supply to provide back-up power at the operations facility within seconds of a
power outage.

     Our systems are copied to backup tapes each night and regularly stored at
an off-site storage facility. We have implemented these various redundancies and
backup measures in order to minimize the risk associated with damage from fire,
power loss, telecommunications failure, break-ins, computer viruses and other
events beyond our control.

SALES OF SECURITIES

     On April 14, 2000, Alloy consummated a financial and strategic arrangement
with Liberty Digital, Inc., a subsidiary of Liberty Media Group, Inc., pursuant
to which Alloy issued 2,922,694 shares of its common stock to a subsidiary of
Liberty Digital in exchange for $10 million in cash and 837,740 shares of
Liberty Digital common stock. In addition, in connection with the transaction,
our directors appointed Lee Masters, Liberty Digital's President and CEO, to
fill a newly created vacancy on our board of directors. As of March 1, 2001, Mr.
Masters resigned from the board and the directors elected Mr. Edward Monnier,
Director, Business Development & Strategy at Liberty Digital, to serve the
remainder of Mr. Masters' term which expires in fiscal 2001 and to stand for re-
election to the board.

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COMPETITION

     The offline and online Generation Y market is rapidly evolving and
intensely competitive. Our catalogs compete with other catalog retailers and
direct marketers, some of which may specifically target our customers. Current
and new competitors can launch new Web sites at relatively low cost. We
currently or potentially compete with a variety of other companies serving
segments of the Generation Y market including various mail-order retailers,
various Web-based retailers, various Generation Y traditional retailers, either
in their physical or online stores, and various online service providers that
offer products of interest to our Generation Y consumers, including America
Online and Microsoft Network.

     Many of our current and potential store-based, catalog and online
competitors have longer operating histories, larger customer or user bases and
significantly greater financial, marketing and other resources than we do. In
addition, competitors could enter into exclusive distribution arrangements with
our vendors and deny us access to their products. If we face increased
competition, our business, operating results and financial condition may be
materially and adversely affected.

     We compete for users and advertisers with many media companies, including
companies that attempt, as we do, to target Generation Y consumers. These
include the teen-focused magazines such as Seventeen, YM, Teen and Teen People;
teen-focused television and cable channels such as the WB Network and MTV; Web
sites primarily focused on the Generation Y demographic group; and online
service providers with teen-specific channels, such as America Online.

     We believe that our principal competitive advantages are:

     o  the prominent and trusted brands that Alloy has developed in the
        Generation Y market, and

     o  our ability to deliver targeted Generation Y audiences to advertisers
        through cost-effective, cross-media advertising programs.

     Many of our current and potential competitors, however, may have greater
financial or technical resources and we could face additional competitive
pressures that would have a material and adverse effect on our business, results
of operations and financial condition.

INTELLECTUAL PROPERTY

     We have registered the Alloy name, among other trademarks, with the U.S.
Patent and Trademark Office. Applications for the registration of our other
trademarks and service marks are currently pending. We also use trademarks,
trade names, logos and endorsements of our suppliers and partners with their
permission. We are not aware of any pending material conflicts concerning our
marks or our use of others' intellectual property.

GOVERNMENT REGULATION

     We are subject, both directly and indirectly, to various laws and
governmental regulations relating to our business. The Internet is rapidly
evolving and there are few laws or regulations directly applicable to online
commerce and community Web sites. Due to the increasing popularity and use of
the Internet, governmental authorities in the United States and abroad may adopt
laws and regulations to govern Internet activities. Laws with respect to online
commerce may cover issues such as pricing, distribution and characteristics and
quality of products and services. Laws with respect to community Web sites may
cover content, copyrights, libel, obscenity and personal privacy.  Any new
legislation or regulation or the application of existing laws and regulations to
the Internet could have a material and adverse effect on our business, results
of operations and financial condition.

     Although our online transmissions generally originate in New York and
Virginia, the governments of other states or foreign countries might attempt to
regulate our transmissions or levy sales or other taxes relating to our
activities. As our products and services are available over the Internet
anywhere in the world, multiple jurisdictions may claim that we are required to
qualify to do business as a foreign corporation in each of those jurisdictions.

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Our failure to qualify as a foreign corporation in a jurisdiction where we are
required to do so could subject us to taxes and penalties for the failure to
qualify. It is possible that state and foreign governments might also attempt to
regulate our transmissions of content on our Web site or prosecute us for
violations of their laws. For example, a French court has recently ruled that a
U.S. Web site must comply with French laws regarding content.  We cannot assure
you that state or foreign governments will not charge us with violations of
local laws or that we might not unintentionally violate these laws in the
future.

     The U.S. Congress recently enacted the Children's Online Privacy Protection
Act of 1998 or "COPPA". The Federal Trade Commission promulgated regulations
implementing COPPA on October 21, 1999 which became effective on April 21, 2000.
The principal COPPA requirements apply to Web sites, or those portions of Web
sites, directed to children under age 13. COPPA mandates that individually
identifiable information about minors under the age of 13 not be collected, used
or displayed without first obtaining informed parental consent that is
verifiable in light of present technology. As a part of our efforts to comply
with the new requirements, we have decided not to provide many of our services
to children under the age of 13. This will likely dissuade some percentage of
our customers from using our Web site, which may adversely affect our business.
While we believe that our Web site is compliant with COPPA, our efforts may not
have been successful. If this is the case, we may face litigation with the
Federal Trade Commission or individuals, which would adversely affect our
business.

     A number of government authorities both in the United States and abroad are
increasing their focus on online privacy issues and the use of personal
information.  The U.S. Federal Trade Commission and attorneys general in several
states have investigated the use by some Internet companies of personal
information.  Our business could be adversely affected if new regulations
regarding the use of personal information are introduced, or if government
authorities choose to investigate our privacy practices.  The recently adopted
European Union Directive on the Protection of  Personal Data may affect our
ability to make our Web sites available in Europe if we do not afford adequate
privacy to European users.  Similar legislation was recently passed in Canada
and Australia and may have a similar effect.  The Canadian law will be
implemented in stages over the next few years, while the Australian Amendment
(Privacy Sector) Act 2000 becomes effective in December 2001, with an additional
12 months extended to small businesses.

EMPLOYEES

     As of January 31, 2001, we had 585 full and part-time employees. None of
our employees is represented by a labor union or is the subject of a collective
bargaining agreement. We consider relations with our employees to be good.

RECENT DEVELOPMENTS

     On February 16, 2001, Alloy received an investment of $10 million from
St. Paul Venture Capital VI, LLC ("SPVC VI") in exchange for 1,052,632 shares of
our Series A Preferred Stock, which are immediately convertible into 877,193
shares of our common stock.  In addition, SPVC VI received a warrant to purchase
307,018 shares of our common stock at an exercise price of $12.83 per share.
The Series A Preferred Stock is redeemable after five years and pays an annual
dividend of 3% payable in additional shares of Series A Preferred Stock.

     On February 21, 2001, Alloy completed the acquisition of Strength Magazine
from Rapid Service Company ("Rapid Service"), an Ohio corporation, pursuant to
which we issued 99,909 shares of unregistered common stock to Rapid Service.
Strength Magazine, operating out of Cincinnati, Ohio, is a lifestyle magazine
primarily for teenage boys focusing on skateboarding and music.  It is available
via subscription and newsstands.

     In March 2001, Alloy unwound its collared equity derivative position
on 600,000 shares of common stock of Liberty Digital, Inc. ("LDIG") received in
connection with Alloy's financing and strategic arrangement with LDIG and sold
the underlying shares.  We received a total of $15,101,760 in cash proceeds from
these transactions.  Our $15 million committed credit facility which was secured
by the collared LDIG shares was reduced to $500,000 upon the consummation of
these transactions.

     On April 12, 2001, Alloy completed the acquisition of all the capital stock
of Landon Media Group, Inc. ("Landon"), a Massachusetts corporation with a
principal place of business in Westford, Massachusetts, in exchange for
1,314,348 shares of unregistered common stock, $5 million in cash, four future
quarterly cash payments of $700,000 each, and warrants to purchase additional
shares of common stock pursuant to the terms and conditions of the warrants.
Landon's primary asset as of the effective time of the acquisition was 100% of
the issued and outstanding capital stock of Carnegie Communications, Inc., a
Delaware corporation ("Carnegie").  Carnegie produces publications and Web sites
that profile colleges and universities which are distributed to high school
students, parents and guidance counselors.

FINANCIAL INFORMATION ABOUT SEGMENTS

     Financial information about Alloy's segments is summarized in Note 14 to
Consolidated Financial Statements presented in Item 8 of this Report on Form
10-K.


                                       8
<PAGE>

ITEM 2.  PROPERTIES.

     Our principal office is located at 151 West 26th Street, New York, New York
10001, where we lease approximately 20,000 square feet of space. We lease an
additional 7,000 square feet in New York City which houses a photo studio.
In San Luis Obispo, California, Phase Three, Inc., which does business as CCS,
leases a 150,000 square foot warehouse, along with approximately 20,000 square
feet for the call center and corporate offices. Alloy leases approximately
3,000 square feet of office space in Marina Del Rey, California and
approximately 2,000 square feet of office space in Chicago, Illinois for our
local advertising sales offices. Triple Dot Communications, Inc. leases
approximately 8,000 square feet of office space in Boston, Massachusetts.

ITEM 3.  LEGAL PROCEEDINGS.

     As of the date of the filing of this Form 10-K, we were not a party to any
lawsuit or proceeding which is likely, in the opinion of management, to have a
material adverse effect on our financial position, results of operations and
cash flows.

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

     No matters were submitted for a vote of our stockholders during the fourth
quarter of fiscal 2000.


                                       9
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

     Our Common Stock began trading on The Nasdaq National Market on May 14,
1999 under the symbol "ALOY." The following table sets forth, for the periods
indicated, the high and low sales prices for our Common Stock, as reported by
The Nasdaq National Market since it commenced public trading.
<TABLE>
<CAPTION>

                                                           COMMON STOCK
                                                          --------------
FISCAL YEAR ENDED JANUARY 31, 2000 and 2001                HIGH    LOW
--------------------------------------------------------  ------  ------
<S>                                                       <C>     <C>

Second Quarter ended July 31, 1999 (from May 14, 1999)..  $23.19  $ 9.75
Third Quarter ended October 31, 1999....................  $16.50  $ 8.75
Fourth Quarter ended January 31, 2000...................  $22.12  $10.44
First Quarter ended April 30, 2000......................  $20.25  $ 7.88
Second Quarter ended July 31, 2000......................  $15.12  $10.00
Third Quarter ended October 31, 2000....................  $11.38  $ 5.75
Fourth Quarter ended January 31, 2001...................  $ 9.00  $ 6.50
</TABLE>

STOCKHOLDERS

     As of April 23, 2001, there were approximately 150 stockholders of record,
and according to our estimates, approximately 3,500 beneficial owners of our
common stock.

DIVIDENDS

     We have not paid cash dividends to our stockholders since our inception and
we do not plan to pay cash dividends in the foreseeable future. We currently
intend to retain all future earnings, if any, to finance our future growth.

UNREGISTERED SALES OF SECURITIES

     On December 29, 2000, as partial consideration for our acquisition of all
of the issued and outstanding capital stock of Triple Dot Communications, Inc.
("Triple Dot"), a Massachusetts corporation, we issued 274,117 shares of
unregistered common stock to the former stockholders of Triple Dot.  Of these
shares, 41,118 have been placed in escrow as security for the indemnification
obligations of the former stockholders of Triple Dot to Alloy under the
definitive merger agreement between Alloy, Alloy Acquisition Sub, Inc., a
Delaware corporation, Triple Dot, Gary Colen and Bryan Cadogan.  The shares of
unregistered common stock are subject to the restrictions set forth in separate
Investment Representation and Lockup Agreements between Alloy and each of the
former stockholders of Triple Dot. This transaction was exempt from registration
under the Securities Act of 1933, as amended, pursuant to Rule 505 of Regulation
D as the aggregate value of the transaction was less than $5,000,000.

     On January 5, 2001, as partial consideration for our acquisition of all of
the membership interests of Y-Access LLC (Y-Access), a Massachusetts limited
liability company, we issued 68,529 shares of unregistered common stock to the
former securityholders of Y-Access.  Of these shares, 10,279 have been placed in
escrow as security for the indemnification of obligations of the former
securityholders of Y-Access to Alloy under the definitive merger agreement
between Alloy, Triple Dot Communications, Inc., a Delaware corporation, Y-
Access, Gary Colen, Bryan Cadogan, Marta Loeb and Dwayne Pettigrew.  The shares
of unregistered common stock are subject to the restrictions set forth in the
separate Investment Representation and Lockup Agreements between Alloy and each
of the former securityholders of Y-Access.  This transaction was exempt from
registration under the Securities Act of 1933, as amended, pursuant to Rule 505
of Regulation D as the aggregate value of the transaction was less than
$5,000,000.

                                       10
<PAGE>

ITEM 6.

SELECTED FINANCIAL DATA.

     The following selected financial data is derived from our consolidated
financial statements and notes thereto. Selected financial data should be read
in conjunction with Alloy's Financial Statements and the corresponding Notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                                   Year Ended January 31,
                                                        --------------------------------------------------------------------------
                                                                1997           1998           1999            2000            2001
                                                        --------------------------------------------------------------------------
                                                                         (in thousands, except share and per share data)
<S>                                                       <C>            <C>            <C>            <C>             <C>
STATEMENTS OF OPERATIONS DATA(2):
Net merchandise revenues................................  $       25     $    1,985     $   11,243     $    30,952     $    76,736
Sponsorship and other revenues..........................           -              -            125           2,912          14,452
                                                        --------------------------------------------------------------------------

Total revenues..........................................          25          1,985         11,368          33,864          91,188
Cost of goods sold......................................          17          1,050          5,486          13,765          37,757
                                                        --------------------------------------------------------------------------

Gross profit............................................           8            935          5,882          20,099          53,431
Operating expenses:
Selling and marketing...................................          98          2,152         10,324          30,520          60,814
General and administrative..............................          28            682          1,683           5,423          10,659
Goodwill amortization...................................           -              -              -             332           8,573
                                                        --------------------------------------------------------------------------

Total operating expenses................................         126          2,834         12,007          36,275          80,046
                                                        --------------------------------------------------------------------------

Loss from operations....................................        (118)        (1,899)        (6,125)        (16,176)        (26,615)
Interest income (expense), net..........................          --             34           (239)          1,542           1,119
Realized loss on marketable securities and investments..          --             --             --              --          (4,193)
Charge for early retirement of debt.....................          --             --             --            (235)             --

Net loss................................................  $     (118)    $   (1,865)    $   (6,364)    $   (14,869)   $    (29,689)
                                                        ==========================================================================

Basic and diluted net loss per common share before
extraordinary item (1)..................................  $    (0.03)    $    (0.33)        $(0.75)         $(1.15)         $(1.61)
Extraordinary charge for early retirement of debt (1)...  $     0.00     $     0.00         $ 0.00          $(0.02)         $ 0.00
Basic and diluted net loss per common share(1)..........  $    (0.03)    $    (0.33)        $(0.75)         $(1.17)         $(1.61)
                                                        ==========================================================================

Weighted average basic and diluted common shares
outstanding:............................................   4,060,800      5,617,577      8,479,727      12,718,318      18,460,042
                                                        ==========================================================================
<CAPTION>
                                                                                        January 31,
                                                        --------------------------------------------------------------------------
                                                                1997           1998           1999            2000            2001
                                                        --------------------------------------------------------------------------
                                                                                       (in thousands)
<S>                                                     <C>              <C>            <C>            <C>             <C>
BALANCE SHEET DATA(2):
Cash and cash equivalents...............................  $       19     $    2,321     $    2,983     $    12,702     $     9,338
Working capital.........................................          38          2,451          5,266          30,179          25,400
Total assets............................................          47          3,166          7,407          57,668         106,908
Promissory notes, net...................................          --             --          3,945              --              --
Capital lease obligation, less current portion..........          --             --             40              --              --
Convertible redeemable preferred stock, net.............          --             --          4,836              --              --
Total stockholders' equity (deficit)....................          42          2,479         (3,046)         45,208          88,282
</TABLE>

(1) See Note 11 to the Financial Statements for an explanation of the
determination of the number of common shares used in computing the amount of
basic and diluted net loss per common share and net loss applicable to common
stockholders.
(2) See Note 3 to the Financial Statements for a description of the effect of
our acquisitions on the comparability of our selected financial information for
the fiscal years ended January 31, 2000 and January 31, 2001.

                                       11
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     The following discussion of the financial condition and results of
operation of Alloy should be read in conjunction with the Financial Statements
and the related Notes included elsewhere in this report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these forward-
looking statements as a result of various factors, including, but not limited
to, those under "Risk Factors That May Affect Future Results" and elsewhere in
this report.

OVERVIEW

     Alloy is a multi-channel media company and direct marketer providing
community, content and commerce to Generation Y, the approximately 58 million
boys and girls between the ages of 10 and 24. Alloy is a leading brand for this
influential generation, which the Census Bureau estimates will grow 19.5% faster
than the overall U.S. population and accounts for more than $250 billion of
annual disposable income. Our convergent media model employs an array of
integrated online and offline media and marketing assets to reach the
Generation Y market. Our Web site, www.alloy.com, is a destination where
Generation Y boys and girls can interact, share information, explore compelling
and relevant content, and shop. Our action sports Web site, www.ccs.com, offers
a complete line of action sports (skateboarding, snowboarding and surfing)
inspired clothing, shoes and hard goods from leading industry brands. Each of
these Web sites is complemented by a significant direct mail catalog.
We leverage our media assets and contact points with Generation Y boys and girls
to drive sales of teen-focused apparel, accessories and action sports equipment,
and sell comprehensive marketing and advertising services packages to companies
seeking to reach the Generation Y audience.

     Our revenues consist of merchandise revenues and sponsorship and other
revenues.  We generate merchandise revenues through both our catalogs and our
Web sites.  We generate sponsorship and other revenues primarily through the
sale of sponsorships, banner advertisements, co-marketing programs and other
revenue sharing arrangements on our Web sites and in our catalogs.  Revenues
from sales of merchandise are recognized at the time products are shipped to
customers.  Revenues from sponsorships, advertising and other arrangements are
recognized during the period in which the sponsorship or advertisement is
displayed, provided that no significant performance obligations remain and the
collection of the related receivable is probable.

     We were incorporated in January 1996, launched our www.alloy.com Web site
in August 1996 and began recognizing meaningful revenues in August 1997
following the distribution of our first Alloy catalog. To date, the majority of
our revenues have been generated through merchandise sales; however, we expect
sponsorship and other revenues to increase in future periods as a result of our
plans to increase visitors to our Web sites, expand the number and breadth of
our contact points with the Generation Y demographic group and further develop
our marketing and sales team to capitalize on our sponsorship, advertising and
other revenue opportunities. In May 1999, we issued 3,700,000 shares of common
stock in our initial public offering and received approximately $50.1 million in
net proceeds, after deduction of underwriter's commissions and discounts and
expenses related to our initial public offering. In April 2000, Alloy
consummated a financial and strategic arrangement with Liberty Digital, Inc., a
subsidiary of Liberty Media Group, Inc., pursuant to which Alloy issued
2,922,694 shares of its common stock to a subsidiary of Liberty Digital in
exchange for $10 million in cash and 837,740 shares of Liberty Digital common
stock.

     We incurred net losses of approximately $6.4 million for the fiscal year
ended January 31, 1999, $14.9 million for the fiscal year ended January 31,
2000, and $29.7 million for the fiscal year ended January 31, 2001. At January
31, 2001 we had an accumulated deficit of $52.9 million. The net losses and
accumulated deficit resulted primarily from the costs associated with developing
our www.alloy.com Web site and name database of Generation Y boys and girls,
attracting users to our www.alloy.com Web site, establishing the Alloy brand,
and amortizing goodwill resulting from acquisitions. Because of our plans to
continue to invest in marketing and promotion, to grow our name database through
catalog circulation, to hire additional employees, to develop our Web sites and
operating infrastructure, and to make strategic acquisitions, we expect to incur
significant net losses for the foreseeable future. Although we have experienced
revenue growth in recent periods, this growth may not be sustainable and,
therefore, these recent periods should not be considered indicative of future
performance. We may never achieve significant revenues or profitability, or if
we achieve significant revenues they may not be sustained in future periods.

                                       12
<PAGE>

     For purposes of the discussion below, the fiscal year ended January 31,
1999 is referred to as fiscal 1998; the fiscal year ended January 31, 2000 is
referred to as fiscal 1999; and the fiscal year ended January 31, 2001 is
referred to as fiscal 2000.

RESULTS OF OPERATIONS

     The following table sets forth the statement of operations data for the
periods indicated as a percentage of revenues:

<TABLE>
<CAPTION>
                                                                             Year ended January 31,
                                                                   ------------------------------------------
                                                                       1999            2000             2001
                                                                   -----------     ------------    ----------
<S>                                                                <C>             <C>             <C>
STATEMENTS OF OPERATIONS DATA..............................
Net merchandise revenues...................................            98.9%           91.4%            84.2%
Sponsorship and other revenues.............................             1.1             8.6             15.8

Total revenues.............................................           100.0           100.0            100.0
Cost of goods sold.........................................            48.3            40.6             41.4

Gross profit...............................................            51.7            59.4             58.6
Operating expenses:
 Selling and marketing.....................................            90.8            90.1             66.7
 General and administrative................................            14.8            16.0             11.7
 Amortization of goodwill..................................              --             1.0              9.4

Total operating expenses...................................           105.6           107.1             87.8

Loss from operations.......................................           (53.9)          (47.7)           (29.2)
Interest (expense) income, net.............................            (2.1)            4.5              1.2
Realized loss on marketable securities and investments.....              --              --             (4.6)
Charge for early retirement of debt........................              --            (0.7)              --

Net loss...................................................          (56.0)%         (43.9)%          (32.6)%
</TABLE>


FISCAL YEARS ENDED JANUARY 31, 1999, JANUARY 31, 2000 AND JANUARY 31, 2001

    Revenues

     Merchandise Revenues.  Net merchandise revenues increased from $11.2
million in fiscal 1998 to $31.0 million in fiscal 1999, a 175.3% increase, to
$76.7 million in fiscal 2000, a 147.9% increase. The increase in merchandise
revenues in fiscal 2000 was due primarily to the increased size of our name
database to which we marketed our merchandise offerings, an expansion of
marketing programs targeted to names outside of our database, our expanded
merchandise offerings, and the inclusion of merchandise sales from our CCS
catalog and ccs.com Web site from July 2000 when the CCS acquisition closed.
Pursuant to the consensus reached by the Emerging Issues Task Force ("EITF")
Issue No. 00-10, "Accounting for Shipping and Handling Revenues and Costs",
Alloy has reclassified in its consolidated statements of operations for the
years ended January 31, 1999 and 2000 shipping and handling revenues resulting
in an increase of net merchandise revenues of $1,158 and $2,698 for the years
ended January 31, 1999 and 2000, respectively.

     Sponsorship and Other Revenues. Sponsorship and other revenues increased to
$14.5 million in fiscal 2000 from $2.9 million in fiscal 1999, an increase of
396.3%, due primarily to the selling efforts by our in-house advertising sales
force which operated for the full year in fiscal 2000 versus approximately six
months in fiscal 1999. In addition, increased Web site traffic at www.alloy.com
and increased Alloy catalog circulation provided more advertising inventory to
sell in fiscal 2000 relative to fiscal 1999. In fiscal 1999, our in-house
advertising sales group commenced development of commercial relationships to
take advantage of the increased number of visitors to our Web site and our new
online services. As a result, sponsorship and other revenues amounted to $2.9
million in fiscal 1999 as compared to $125,000 in fiscal 1998.

     Cost of Goods Sold

     Cost of goods sold consists of the cost of the merchandise sold by Alloy
plus the freight cost to deliver the merchandise to the warehouse, together with
the direct costs attributable to the sponsorship and advertising programs we
provide and the publications we develop and produce. Our cost of goods sold
increased from $5.5 million in fiscal 1998; to $13.8 million in fiscal 1999, a
150.9% increase; to $37.8 million in fiscal 2000, a 174.3% increase. The
increase in cost of goods sold in fiscal 2000 as compared to fiscal 1999 and
fiscal 1999 as compared to fiscal 1998 was due primarily to the increase in
merchandise sales to Alloy's growing customer base.

                                       13
<PAGE>

     Alloy's gross profit as a percentage of total revenues increased from 51.7%
in fiscal 1998 to 59.4% in fiscal 1999 due to the relative growth in our
sponsorship and other revenues, our expanded merchandise offerings, and our
increased purchasing power with our merchandise vendors.  The decrease in our
gross profit as a percentage of total revenues from 59.4% in fiscal 1999 to
58.6% in fiscal 2000 was due to the inclusion of lower margin CCS merchandise
sales from July 2000 when our CCS acquisition closed, offset by an increased
overall percentage of higher margin sponsorship and other revenues generated in
fiscal 2000.

     Operating Expenses

     Selling and Marketing.  Selling and marketing expenses consist primarily of
Alloy and CCS catalog production and mailing costs; our call center and
fulfillment operations expenses; freight out to our merchandise customers;
salaries of our sales and marketing personnel; marketing costs; and expenses
related to the development, maintenance and marketing of our Web sites. These
selling and marketing expenses increased 99.3% from $30.5 million in fiscal 1999
to $60.8 million in fiscal 2000, due to the increased costs incurred in
marketing, selling and shipping to our expanded database; the hiring of
additional sales and marketing personnel; and increased spending on Web site
development and maintenance. These selling and marketing expenses increased
195.6% from $10.3 million in fiscal 1998 to $30.5 million in fiscal 1999, due to
the increased costs of marketing and selling to our growing database; more
extensive Web site promotion and development; the hiring of additional sales and
marketing personnel; and increased spending on advertising in a variety of media
to increase brand awareness, attract additional visitors to the alloy.com Web
site and grow online merchandise sales. As a percentage of total revenues, our
selling and marketing expenses decreased from 90.1% in fiscal 1999 to 66.7% in
fiscal 2000 after declining from 90.8% in fiscal 1998 to 90.1% in fiscal 1999.
The decrease from fiscal 1999 to fiscal 2000 resulted primarily from our more
targeted merchandise marketing to our enlarged name database, improved
fulfillment efficiencies resulting from increased shipping activity and reduced
general advertising and marketing activity. The decrease from fiscal 1998 to
fiscal 1999 was due primarily to more targeted merchandise marketing to more
productive names in our name database and fulfillment efficiencies associated
with higher order volumes, offset by an expanded advertising and marketing
campaign following our initial public offering in May 1999. Fulfillment expenses
have risen from $2.7 million in fiscal 1998 to $6.7 million in fiscal 1999 to
$12.1 million in fiscal 2000, but as a percentage of total revenues have fallen
from 24.1% in fiscal 1998 to 19.7% in fiscal 1999 to 13.2% in fiscal 2000.
Pursuant to the consensus reached in EITF Issue No. 00-10, Alloy has
reclassified in its consolidated statements of operations for the years ended
January 31, 1999 and 2000 shipping and handling revenues and the related
shipping and handling costs that were previously netted, with the residual
amount included in selling and marketing expenses. The impact of this
reclassification resulted in an increase of selling and marketing expenses of
$1,158 and $2,698 for the years ended January 31, 1999 and 2000, respectively.

    We expect selling and marketing expenses to continue to increase
significantly in future periods.  We believe that these increases will be
principally related to expanded catalog circulation targeted to our growing name
database and the costs associated with fulfilling and shipping an anticipated
increased number of merchandise orders resulting therefrom.  In addition, we
expect to continue hiring additional sales and marketing personnel in an effort
to drive increased advertising and sponsorship sales to companies that seek to
reach our Generation Y community.

     General and Administrative.  General and administrative expenses consist
primarily of salaries and related costs for our executive, administrative,
finance and management personnel, as well as support services and professional
service fees. These expenses increased 222.2% from $1.7 million in fiscal 1998
to $5.4 million in fiscal 1999 and 96.6% to $10.7 million in fiscal 2000. As a
percentage of total revenues, our general and administrative expenses increased
from 14.8% in fiscal 1998 to 16.0% in fiscal 1999 and decreased to 11.7% in
fiscal 2000. The increase in general and administrative expenses from fiscal
1998 to fiscal 1999 and from fiscal 1999 to fiscal 2000 was driven by an
increase in compensation expense for additional personnel to handle our growing
business, together with expenses incurred as a result of becoming a public
company after our initial public offering in May 1999, such as professional
fees, insurance premiums and public relations costs. We expect general and
administrative expenses to grow as we hire additional personnel and incur
additional expenses related to the growth of our business and our operations as
a public company.

     Amortization of Goodwill.  Amortization of goodwill was approximately $8.6
million in fiscal 2000 as compared to $332,000 in fiscal 1999 and zero in fiscal
1998.  These costs were recorded in connection with our acquisition of
substantially all of the assets of Celebrity Sightings, LLC in December 1999;
the merger of our acquisition subsidiary with and into 17th Street Acquisition
Corp., the sole stockholder of 17th Street Productions, Inc. in January 2000;
our acquisition of all the capital stock of Kubic Marketing, Inc. in July 2000;
our acquisition of all the capital stock of Triple Dot Communications, Inc. in
December 2000 and our acquisition of all of the membership interests of Y-Access
LLC in January 2001. These acquisitions were all accounted for under the
purchase

                                       14
<PAGE>

method of accounting. We anticipate that the future amortization of goodwill in
connection with these acquisitions will continue to be amortized on a straight-
line basis over three-to-five years for each of these transactions and will
amount to approximately $3.4 million per quarter until the end of fiscal 2002,
declining thereafter until the related goodwill is fully amortized. As further
discussed in RECENT ACCOUNTING PRONOUNCEMENTS below, the FASB has issued a
proposed statement regarding business combinations and intangible assets, which
is expected to be issued in June 2001. The proposal eliminates amortization of
goodwill and requires an annual impairment review of goodwill based on fair
value. Accordingly, future periods will be impacted by this statement, when
effective, for the elimination of amortization and potential impairments of
goodwill to be recognized.

     Loss from Operations

     As described above, we continue to invest heavily to build the Alloy and
CCS brands, grow and market to our customer database, enhance and attract
visitors to our Web sites, increase the number of our employees to support a
growing operation, and make strategic acquisitions. For the foregoing reasons,
our loss from operations increased from $6.1 million in fiscal 1998 to $16.2
million in fiscal 1999, an increase of 164.1%, and to $26.6 million in fiscal
2000, an increase of 64.5%.

     Interest (Expense) Income, Net

     Interest income net of expense includes income from our cash and cash
equivalents and from investments and expenses related to our financing
obligations. In fiscal 1998, we incurred net interest expense of $239,000 due to
the interest expense resulting from our issuance of promissory notes in May
1998, which exceeded our interest earned on cash balances held. In fiscal 1999
and fiscal 2000, we generated net interest income of $1.5 million and $1.1
million, respectively, due to the investment of proceeds raised in our initial
public offering and through our issuance of common stock to LDIG.

     Realized Loss on Marketable Securities and Investments and Charge for
Early Retirement of Debt

     In fiscal 2000, we sold 209,435 shares of LDIG common stock resulting in a
loss on sale of approximately $3.2 million.  We also wrote off a minority
investment in a private company in fiscal 2000 resulting in a loss on investment
of $1.0 million.  As a result of the early retirement of our outstanding
promissory notes upon the closing of the our initial public offering in May
1999, we incurred a one-time extraordinary charge of $235,000.

SELECTED UNAUDITED QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth unaudited quarterly statements of operations
data for each of the eight quarters ended January 31, 2001. In the opinion of
management, the unaudited financial results include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair presentation of our
results of operations for those periods. The quarterly data should be read in
conjunction with the Financial Statements and the related Notes appearing
elsewhere in this report. The results of operations for any quarter are not
necessarily indicative of the results of operations for any future period.

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                               Fiscal Quarter Ended (Unaudited)
                             -------------------------------------------------------------------------------------------------------
                               Apr. 30,    Jul. 31,      Oct. 31,      Jan. 31,    Apr. 30,      Jul. 31,     Oct. 31,    Jan. 31,
                                1999        1999          1999          2000          2000          2000       2000        2001
                             -------------------------------------------------------------------------------------------------------
                                                         (in thousands, except share and per share data)
<S>                          <C>          <C>          <C>          <C>           <C>          <C>          <C>         <C>
Net merchandise revenues     $    2,737   $    4,032   $    9,242   $    14,942   $    6,141   $    9,739   $   24,271  $    36,583
Sponsorship and other
revenues                            163          219          524         2,005        2,209        2,571        3,788        5,885
                             -------------------------------------------------------------------------------------------------------

Total revenues                    2,900        4,251        9,766        16,947        8,350       12,310       28,059       42,468
Cost of goods sold                1,249        1,899        4,125         6,492        3,001        4,462       12,351       17,942
Gross profit                      1,651        2,352        5,641        10,455        5,349        7,848       15,708       24,526
Operating expenses:
Selling and marketing             2,956        4,756        9,737        13,073        9,187       10,961       19,292       21,035
General and
administrative                      919        1,146        1,399         1,958        2,089        2,966        2,997        2,946
Amortization of goodwill             --           --           --           332          811        1,204        3,250        3,307
                             -------------------------------------------------------------------------------------------------------
 Total operating
 expenses                         3,875        5,902       11,136        15,363       11,276       15,131       25,539       27,288
                             -------------------------------------------------------------------------------------------------------
Loss from operations             (2,224)      (3,550)      (5,495)       (4,908)      (6,738)      (7,283)      (9,831)      (2,762)
Interest (expense)
income, net                         (78)         472          600           549          433          386          150          149
Realized loss on marketable
securities and investments           --           --           --            --           --           --           --       (4,193)
                             -------------------------------------------------------------------------------------------------------
Loss before extraordinary
item                             (2,302)      (3,078)      (4,895)       (4,359)      (6,305)      (6,897)      (9,681)      (6,806)
Extraordinary charge
for early retirement of debt         --         (235)          --            --           --           --           --           --

Net loss                      $  (2,302)  $   (3,313)  $   (4,895)  $    (4,359)  $   (6,305)  $   (6,897)  $   (9,681)  $   (6,806)

Basic and diluted net loss
per common share before
extraordinary item            $   (0.27)  $    (0.23)  $    (0.34)  $     (0.30)  $    (0.42)  $    (0.38)  $    (0.48)  $    (0.33)
Extraordinary charge for
early retirement of debt      $    0.00   $    (0.02)  $     0.00   $      0.00   $     0.00   $     0.00   $     0.00   $     0.00
Basic and diluted net loss
per common share              $   (0.27)  $    (0.25)  $    (0.34)  $     (0.30)  $    (0.42)  $    (0.38)  $    (0.48)  $    (0.33)

Weighted average basic and
diluted common shares
outstanding:                  8,711,878   13,411,623   14,231,774   14,387,298    15,160,546   17,958,137   20,270,050   20,386,684
                              =====================================================================================================
</TABLE>

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                    Percentage of Total Revenues
                              ------------------------------------------------------------------------
<S>                            <C>        <C>     <C>       <C>      <C>      <C>     <C>      <C>
Net merchandise revenues         94.4%     94.8%    94.6%     88.2%    73.6%    79.1%   86.5%    86.1%
Sponsorship and other
revenues                          5.6       5.2      5.4      11.8     26.4     20.9    13.5     13.9
                              -------------------------------------------------------------------------
Total revenues                  100.0     100.0    100.0     100.0    100.0    100.0   100.0    100.0
Cost of goods sold               43.1      44.7     42.2      38.3     35.9     36.2    44.0     42.2
                              -------------------------------------------------------------------------
Gross profit                     56.9      55.3     57.8      61.7     64.1     63.8    56.0     57.8
Operating expenses:
 Selling and marketing          101.9     111.8     99.8      77.1    110.1     89.1    68.7     49.6
 General and
 administrative                  31.7      27.0     14.3      11.6     25.0     24.1    10.7      6.9
 Amortization of goodwill          --        --       --       2.0      9.7      9.8    11.6      7.8
                              -------------------------------------------------------------------------
Total operating
expenses                        133.6     138.8    114.1      90.7    144.8    123.0    91.0     64.3
                              -------------------------------------------------------------------------

Loss from operations            (76.7)    (83.5)   (56.3)    (29.0)   (80.7)   (59.2)  (35.0)    (6.5)
Interest (expense) income,
net                               (2.7)    11.1      6.1       3.2      5.2      3.1     0.5      0.4
Recognized loss on marketable
securities and investments          --       --       --        --       --       --      --     (9.9)

Loss before extraordinary
item                             (79.4)   (72.4)   (50.2)    (25.8)   (75.5)   (56.1)  (34.5)   (16.0)
Extraordinary charge
for early retirement of debt        --     (5.5)      --        --       --       --      --       --

Net loss                         (79.4)%  (77.9)%  (50.2)%   (25.8)%  (75.5)%  (56.1)% (34.5)%  (16.0)%
                              =========================================================================
</TABLE>

          Our revenues have been increasing on a quarter-over-quarter basis as a
result of the growth of our name database to which we market our merchandise
offerings; our expanding marketing program to names outside of our name
database; our broadening merchandise assortment; the increasing sales of
sponsorships and advertising on our Web sites and in our catalogs to companies
seeking to market to our Generation Y audience; and strategic acquisitions we
have made, particularly the CCS acquisition in July 2000. The significant
increase in sponsorship and other revenues recognized during the fourth quarter
of fiscal 1999 and throughout fiscal 2000 reflects the success of our in-house
advertising sales team in attracting advertisers to our Web sites and catalogs.
We began building our in-house advertising sales force in the second quarter of
fiscal 1999. Since that time, the level of sponsorship and other revenues has
significantly increased, and in relation to the seasonality of our business,
such activities peak during the fourth quarter of our fiscal year. Our gross
profit as a percentage of total revenues has ranged between approximately 55%
and 64% with the higher percentages occurring in quarters that have a relatively
higher percentage of sponsorship and other revenues. Given the seasonality of
our business, the percentage of our sponsorship and other revenues to our total
quarterly revenues tends to peak in the first and second quarters of each fiscal
year. The level of our selling and marketing expenses is generally correlated
with our catalog circulation and merchandise selling cycle which peaks in the
third and fourth quarters of each fiscal year and troughs in the first and
second quarters. General and administrative expenses have been rising as a
result of increasing personnel, increasing operating costs of our growing
business and costs related to our being a public company. As a percentage of
revenues, our selling and marketing and general and administrative expenses tend
to decline in our fiscal third and fourth quarters due to seasonally higher
order volumes and order values relative to catalogs circulated, and the leverage
that we have on our fixed expense base when our revenues seasonally peak.

          We expect our quarterly revenues, margins and results of operations to
fluctuate significantly in the future. In addition, the results of any quarter
do not indicate results that should be expected for a full fiscal year. If our
revenues, margins or operating results fall below the expectations of securities
analysts and investors in some future periods, then the price of our common
stock could decline.

SEASONALITY

          Our historical revenues and operating results have varied
significantly from quarter to quarter due to seasonal fluctuations in consumer
purchasing patterns. Sales of apparel, accessories, footwear and action sports
equipment through our Web sites and catalogs have been higher in our third and
fourth fiscal quarters which contain the key back-to-school and holiday selling
seasons, than in our first and second fiscal quarters. We believe that
advertising and sponsorship sales will follow a similar pattern with higher
revenues in the third and fourth quarters as marketers more aggressively attempt
to reach our Generation Y audience during these major spending seasons.

                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     We have financed our operations primarily through the sale of equity and
debt securities as we have generated negative cash flow from operations since
our inception. In May 1999, we raised approximately $50.1 million in net
proceeds upon the closing of our initial public offering. In April 2000, we
raised $9.2 million in net cash proceeds and acquired 837,740 shares of LDIG
common stock in connection with our sale of 2,922,694 shares of Alloy common
stock to a subsidiary of LDIG. At January 31, 2001, we had approximately
$9.3 million of cash and cash equivalents and a further $16.1 million of
marketable securities. Our principal commitments at January 31, 2001 consisted
of accounts payable, accrued expenses and obligations under operating and
capital leases.

     Net cash used in operating activities was $5.3 million in fiscal 1998,
$12.1 million in fiscal 1999 and $17.6 million in fiscal 2000. The principal use
of cash for all periods was to fund our losses from operations.

     Net cash provided by investing activities was $5.3 million in fiscal 2000
due to the net effect of sales and maturities of marketable securities, offset
by the application of $12.9 million of the proceeds to the purchase of Kubic
Marketing, Inc., $3.0 million of capital expenditures and $1.0 million of
minority investments. Cash used in investing activities of $27.0 million in
fiscal 1999 consisted of $20.9 million for the purchase of marketable securities
with a portion of the proceeds from our initial public offering; $1.9 million
for capital expenditures for computers, office furniture and equipment;
$3.9 million as partial consideration for two business acquisitions; and
$250,000 for the acquisition of intangible assets consisting of a customer
mailing list and a Web site domain name.

     Net cash provided by financing activities was $5.9 million in fiscal 1998,
$48.8 million in fiscal 1999, and $8.9 million in fiscal 2000. In fiscal 2000,
we received $9.2 million in net cash proceeds in connection with our sale of
2,922,694 shares of Alloy common stock to a subsidiary of LDIG. In fiscal 1999,
we received $50.1 million in net proceeds from our initial public offering, as
well as the second $2.5 million cash installment from the sale of our Series A
Convertible Preferred Stock to Brand Equity Ventures I, LP. After the closing of
our initial public offering on May 19, 1999, we repaid $3.8 million of principal
on outstanding promissory notes. In addition, upon the consummation of our
initial public offering, all outstanding shares of Series A Convertible
Redeemable Preferred Stock were converted into 1,678,286 shares of common stock.
In fiscal 1998, we received $3.7 million in net proceeds from the issuance of
promissory notes and $2.3 million from the issuance of common stock. The net
cash raised in fiscal 1998, 1999 and 2000 was partially offset by payments of
our capitalized lease obligations.

     We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future as we build our
brand and customer database and that our operating expenses will be a material
use of our cash resources.  We believe that in light of our liquidity position
as of January 31, 2001 consisting of $25.4 million of cash and marketable
securities, together with the $10.0 million in cash we raised through our
issuance of Series A Preferred Stock to SPVC VI, our existing working capital
and cash flows from operations will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures, other than potential
acquisitions, for at least the next 24 months, although we will consider
attractive opportunities to raise additional capital should these opportunities
arise. If cash generated from operations is insufficient to satisfy our cash
needs, we may be required to raise additional funds. If we raise additional
funds through the issuance of equity securities, our existing shareholders may
experience significant dilution. Furthermore, additional financing may not be
available when needed or, if available, financing may not be on terms favorable
to us or our stockholders. If financing is not available when required or is not
available on acceptable terms, we may be unable to develop or enhance our
products or services. In addition, we may be unable to take advantage of
business opportunities or respond to competitive pressures. Any of these events
could have a material and adverse effect on our business, results of operations
and financial condition.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 and its related amendments in SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities", is effective for the
fiscal year beginning February 1, 2001. In July 2000, we purchased put options
and sold call options (referred to as collars) on a total of 600,000 shares of
Liberty Digital, Inc. ("LDIG") common stock, representing a portion of LDIG
common stock already owned by us as available-for-sale marketable securities.
The options allow us to sell LDIG common stock at various prices and have been
designated as a hedge against potential declines in the fair value of LDIG
common stock. The options expire on various dates beginning January 2003 through
July 2003. These options have been designated as fair value hedges pursuant to
SFAS No. 133. Upon adoption of SFAS No. 133, since we have already reflected the
fair value of the options outstanding in the financial statements, the impact
will be to reflect the fair value of the options as a cumulative effect of a
change in accounting principle of $9,297 as an increase to earnings in the
consolidated statement of operations and a corresponding adjustment to remove
this amount from accumulated other comprehensive income. The collars were
settled and the underlying LDIG stock was sold in March 2001 and, accordingly,
as of the end of the first quarter of fiscal 2001, there will be no continuing
impact of accounting for these derivative instruments. The net impact of the
adoption of SFAS 133 on February 1, 2001 and the settlement of the collars and
related sale of marketable securities in March 2001 will result in a gain of
approximately $1.1 million in the first quarter of fiscal 2001.

     We have no other derivative instruments or contracts with embedded
derivative features that currently must be considered with respect to SFAS Nos.
133 and 138.

     In July 2000, the Emerging Issues Task Force ("EITF") reached a consensus
with respect to Issue No. 00-10, "Accounting for Shipping and Handling Revenues
and Costs". The purpose of this issue discussion was to clarify the
classification of shipping and handling revenues and costs. The consensus
reached was that all shipping and handling billed to customers is revenue.
We adopted the provisions of this pronouncement in the third quarter of fiscal
2000, and have presented our consolidated statements of operations in accordance
with this issue. Furthermore, we reclassified our consolidated statements of
operations for the years ended January 31, 1999 and 2000 to conform with this
consensus as we previously netted shipping and handling revenues with the
related costs and included the residual amount as selling and marketing
expenses. The impact of this reclassification resulted in an increase of net
merchandise revenues of $1,158 and $2,698 for the years ended January 31, 1999
and 2000, respectively, offset by an equivalent increase in selling and
marketing expenses for these periods. Furthermore, EITF Issue No. 00-10 requires
that if shipping costs or handling costs are significant and are not included in
cost of sales, these costs and the line items which include them on the
consolidated statements of operations should be disclosed. We include these
costs in selling and marketing expenses in our consolidated statements of
operations. These costs were $1,160, $3,939 and $7,699 for the years ended
January 31, 1999, 2000 and 2001, respectively.

     The EITF is also discussing Issue No. 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables". This issue deals with the accounting
for contractual arrangements in which multiple revenue-generating activities
will be performed. The EITF is considering how to determine the units of
accounting in an arrangement and how to account for the components as well as
the direct costs incurred in connection with an arrangement. The key
consideration is the determination of objective measures of fair value. While
this issue was not applicable to historical transactions of Alloy, future
results may be impacted by applicable arrangements that are within the scope of
this issue. No final consensus has been reached with respect to these matters.

     In February 2001, the FASB issued a Proposed Statement of Financial
Accounting Standards entitled, "Business Combinations and Intangible Assets --
Accounting for Goodwill". It is expected that the final adopted statement will
be issued in June 2001. Under this proposal, all amortization of goodwill will
cease, as of the effective date, and goodwill will be accounted for under a new
impairment-only approach. The impairment review will be based on measures of
fair value and will require charges against earnings in periods when impairments
exist. Accordingly, the proposed statement, when issued, will require Alloy to
discontinue amortization of goodwill and perform periodic impairment reviews, in
accordance with the proposed statement. Future results of Alloy could be
affected by the provisions of this proposed statement when issued and effective.


                                 18

<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     The following risk factors and other information included in this report
should be carefully considered.  The risks and uncertainties described below are
not the only ones we face.  Additional risks and uncertainties not presently
known to us or that we deem immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially and adversely affected.

RISKS RELATED TO OUR BUSINESS

     WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR POTENTIAL
FOR FUTURE SUCCESS. We were incorporated in January 1996 and did not begin to
generate meaningful revenues until August 1997. Accordingly, we have only a
limited operating history upon which you can evaluate our business and
prospects. You must consider the risks and uncertainties frequently encountered
by early stage companies in new and rapidly evolving markets, such as electronic
commerce. If we are unsuccessful in addressing these risks and uncertainties,
our business, results of operations and financial condition will be materially
and adversely affected.

     WE HAVE A HISTORY OF LOSSES, AND WE MAY NEVER BE PROFITABLE. Since our
inception in January 1996, we have incurred significant net losses, resulting
primarily from costs related to developing our Alloy Web site and database of
Generation Y names, attracting users to our Alloy Web site, establishing the
Alloy brand, hiring employees, making strategic acquisitions and becoming a
public company.  As of January 31, 2001, we had an accumulated deficit of
approximately $52.9 million. Because of our plans to continue to invest heavily
in marketing and promotion, including for our CCS Web site and brand, to hire
additional employees, to enhance our Web sites and operating infrastructure and
make additional strategic acquisitions, we may incur significant net losses for
the foreseeable future. If our revenue growth is slower than we anticipate or
our operating expenses exceed our expectations, our losses will be significantly
greater.  We may never achieve profitability.

     OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY SIGNIFICANT FLUCTUATIONS IN
OUR QUARTERLY OPERATING RESULTS. Our revenues for the foreseeable future will
remain primarily dependent on sales of merchandise appearing in our catalogs and
on our Web sites, and secondarily on sponsorship and advertising revenues. We
cannot forecast with any degree of certainty the number of visitors to our Web
sites, the extent of our merchandise sales or the amount of sponsorship and
advertising revenues.

                                       19
<PAGE>

     We expect our operating results to fluctuate significantly from quarter to
quarter. We have already experienced the effects of seasonality on our
merchandise sales, which are generally lower in the first and second quarters of
each year. We believe that sponsorship and advertising sales in traditional
media, such as television and radio, generally are lower in the first and third
calendar quarters of each year, while our sponsorship and advertising sales have
tended to be lower in our fiscal first and second quarters. If similar seasonal
and cyclical patterns emerge in Internet sponsorship and advertising spending,
these revenues may vary significantly based on these patterns.

     Other factors which may cause our operating results to fluctuate
significantly from quarter to quarter include:

     o  our ability to attract new and repeat visitors to our Web sites and
        convert them into customers;

     o  price competition;

     o  the level of merchandise returns we experience;

     o  unanticipated cost increases or delays in shipping, transaction
        processing and catalog production;

     o  unanticipated delays or cost increases with respect to product
        introductions;

     o  the reduction in consumer spending associated with a general slowdown
        of the U.S. economy;

     o  the costs, timing and impact of our sales and marketing initiatives;

     o  the costs of integrating businesses we acquire into our company; and

     o  the shifting views of consumers on Internet-based commerce and Internet-
        related companies.

     Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, our stock price may decline
substantially.

     OUR BUSINESS WILL SUFFER IF WE FAIL TO KEEP CURRENT WITH GENERATION Y
FASHION AND LIFESTYLE TRENDS. Our continued success will depend largely on our
ability to keep current with the changing fashion tastes and interests of our
Generation Y customers. If we fail to anticipate, identify or respond to changes
in styles, trends or brand preferences of our customers, we are likely to
experience reduced revenues from merchandise sales. Moreover, the Alloy or CCS
brands, and our other Generation Y brands, could be eroded by misjudgments in
merchandise selection or a failure to keep our community and content current
with the evolving preferences of our audience. These events would likely reduce
the number of visitors to our Web sites and limit opportunities for sponsorship
and advertising sales. As a consequence of these potential developments, our
business would suffer.

     OUR BUSINESS MAY NOT GROW IN THE FUTURE. Since our inception, we have
rapidly expanded our operations, growing from total revenues of $2.0 million in
fiscal 1997 to total revenues of $91.2 million in fiscal 2000. Our continued
future growth will depend to a significant degree on our ability to increase
revenues from our existing businesses, maintain existing sponsorship and
advertising relationships and develop new sponsorship and advertising
relationships, expand our product and content offerings to consumers, while
maintaining adequate gross margins, and implement other programs that increase
the circulation of our print catalogs and generate traffic to our Web sites. Our
ability to implement our growth strategy will also depend on a number of other
factors, many of which are or may be beyond our control, including (i) our
ability to select products that appeal to our customer base and effectively
market them to our target audience, (ii) our ability to make additional
strategic acquisitions, (iii) increasing use of the Internet for shopping by
consumers, (iv) the continued perception by participating advertisers and
sponsors that we offer an effective marketing channel for their products and
services, and (v) our ability to attract, train and retain qualified employees
and management. There is no assurance that we will be able to successfully
implement our growth strategy.

     OUR PLANS FOR INTERNATIONAL EXPANSION POSE ADDITIONAL RISKS. An aspect of
our growth strategy is to expand our business internationally, through our
catalogs as well as the Internet. We have limited experience in selling our
products and services internationally. Such expansion will place additional
burdens upon our management, personnel and financial resources and may cause us
to incur losses. We will also face different and additional competition in these
international markets. In addition, international expansion has certain unique
risks, such as regulatory requirements, legal uncertainty regarding liability,
tariffs and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, political instability and potentially adverse
tax implications. To the extent we expand our business internationally, we will
also become subject to risks associated with international monetary exchange
fluctuations. Any one of these risks could impair our ability to expand
internationally as well as have a material adverse impact upon our overall
business operations, growth and financial condition.

                                       20
<PAGE>

     OUR PLANNED ONLINE AND TRADITIONAL MARKETING CAMPAIGNS MAY NOT ATTRACT
SUFFICIENT ADDITIONAL VISITORS TO OUR WEB SITES OR MAY DETRACT FROM OUR IMAGE.
We plan to continue to pursue aggressive marketing campaigns online and in
traditional media to promote the Alloy and CCS brands and our other teen brands
and to attract an increasing number of visitors to our Web sites. We believe
that maintaining and strengthening the Alloy and CCS brands, as well as our
other teen brands, will be critical to the success of our business. This
investment in increased marketing carries with it significant risks, including
the following:

     o  Our advertisements may not properly convey the Alloy or CCS brand
        images, or the images of our other teen brands, or may even detract from
        our images. Unlike advertising on our Web sites which gives us immediate
        feedback and allows us promptly to adjust our messages, advertising in
        print and broadcast media is less flexible. These advertisements
        typically take longer and cost more to produce and consequently have
        longer run times. If we fail to convey the optimal message in these
        advertising campaigns, the impact may be more lasting and more costly to
        correct than on our Web sites.

     o  Even if we succeed in creating the right messages for our promotional
        campaigns, these advertisements may fail to attract new visitors to our
        Web sites at levels commensurate with their costs. We may fail to choose
        the optimal mix of television, radio, print and other media to deliver
        our message cost-effectively. Moreover, if these efforts are
        unsuccessful, we will face difficult and costly choices in deciding
        whether and how to redirect our marketing dollars cost-effectively.

     WE RELY HEAVILY ON THIRD PARTIES FOR ESSENTIAL BUSINESS OPERATIONS, AND
DISRUPTIONS OR FAILURES IN SERVICE MAY ADVERSELY AFFECT OUR ABILITY TO DELIVER
GOODS AND SERVICES TO OUR CUSTOMERS.

     General.  We depend on third parties for important aspects of our business,
including:

     o  Internet access;
     o  development of software for new Web site features;
     o  content; and
     o  telecommunications.

     We have limited control over these third parties, and we are not their only
client. We may not be able to maintain satisfactory relationships with any of
them on acceptable commercial terms. Further, we cannot be certain that the
quality of products and services that they provide may remain at the levels
needed to enable us to conduct our business effectively. Many of our agreements
with technology and content providers are on very favorable terms that do not
include license fees, but instead provide for revenue sharing. We may not be
able to renew these agreements on similar terms.

     Reliance on Etensity, Inc.  We rely heavily on Etensity, Inc. to maintain
and operate our www.alloy.com Web site in facilities in Sterling, Virginia. This
system's continuing and uninterrupted performance is critical to our success.
Growth in the number of users accessing our Web site may strain its capacity,
and we rely upon Etensity to upgrade our system's capacity in the face of this
growth. Our contracts for Web site hosting were between us and OneSoft
Corporation, which was acquired by Etensity Acquisition Subsidiary, Inc. in
January 2001. Etensity assumed all of OneSoft's obligations under these
contracts and Etensity is currently servicing us through its Managed and
Professional Services Divisions. Service provision from Etensity is untested and
there is no assurance that such service will be satisfactory. If Etensity does
not perform as we expect results of our business operations and financial
condition will be materially and adversely affected.

     Reliance on Exodus Communications, Inc.  We rely heavily on Exodus
Communications, Inc. ("Exodus") to provide us with co-location and bandwidth
services, (i.e., our connection to the Internet). We are currently negotiating
contracts with Exodus and there is no assurance that any such contracts will be
on terms favorable to us. Sustained or repeated system failures or interruptions
of our Web site connection services would reduce the attractiveness of our Web
site to customers and advertisers and could therefore have a material adverse
effect on our business.

     CCS Web site. Our CCS Web site is divided into two parts: content and
e-commerce. We rely heavily on Etensity, Inc. to maintain and operate the
content portion of our www.ccs.com Web site in facilities in Sterling,
Virginia. Our contracts for Web site hosting were between us and OneSoft
Corporation which was acquired by Etensity Acquisition Subsidiary, Inc. in
January 2001. Etensity assumed all of OneSoft obligations under these contracts
and is currently servicing us through its Managed and Professional Services
Divisions. Exodus Communications, Inc. provides us with the co-location and
bandwidth services relating to the content component of the www.ccs.com Web
site. We are currently negotiating contracts with Exodus and there is no
assurance that any such contract will be on terms favorable to us. The
e-commerce component of our www.ccs.com Web site is internally managed with all
equipment, web servers, data servers, software applications, routers and
firewalls physically located in San Luis Obispo, California. Our internal staff
provides the managed care services for this component.

     Reliance on Fulfillment Services Providers. We switched our fulfillment
services provider in May, 2000. We rely heavily on our third party fulfillment
services provider for the performance of order processing, order fulfillment,
customer service and shipping for merchandise sold via the alloy.com Web site
and the Alloy catalog. Disruptions or delays in these services could discourage
customers from ordering from us in the future and could therefore have a
material and adverse effect on our business.

                                       21
<PAGE>

     OUR MANAGEMENT IS NEW AND MAY HAVE DIFFICULTY MANAGING OUR EXPECTED GROWTH.
In order to execute our business plan, we must continue to grow significantly.
This growth will strain our personnel, management systems and resources. To
manage our growth, we must implement operational and financial systems and
controls, and recruit, train and manage new employees. Some key members of our
management have only recently been hired. These individuals have had little
experience working with our management team. We cannot be certain that we will
be able to integrate new executives and other employees into our organization
effectively. If we do not manage growth effectively, our business, results of
operations and financial condition will be materially and adversely affected.

     WE DEPEND ON OUR KEY PERSONNEL TO OPERATE OUR BUSINESS, AND WE MAY NOT BE
ABLE TO HIRE ENOUGH ADDITIONAL MANAGEMENT AND OTHER PERSONNEL AS OUR BUSINESS
GROWS. Our performance is substantially dependent on the continued services and
on the performance of our executive officers and other key employees,
particularly Matthew C. Diamond, our Chief Executive Officer, James K. Johnson,
Jr., our Chief Operating Officer and Samuel A. Gradess, our Chief Financial
Officer. The loss of the services of any of our executive officers could
materially and adversely affect our business. Additionally, we believe we will
need to attract, retain and motivate talented management and other highly
skilled employees to be successful. Competition for employees that possess
knowledge of both the Internet industry and the Generation Y market is intense.
We may be unable to retain our key employees or attract, assimilate and retain
other highly qualified employees in the future.

     INTENSE COMPETITION FROM INTERNET- AND CATALOG-BASED BUSINESSES MAY
DECREASE OUR MARKET SHARE, REVENUES AND GROSS MARGINS AND CAUSE OUR STOCK PRICE
TO DECLINE. We face intense competition in electronic commerce, catalog sales
and online services. Our Web sites and Alloy and CCS catalogs compete for
Generation Y customers with traditional department store retailers, catalog
retailers, direct marketers, specialty apparel and accessory retailers and
discount retailers. This competition is likely to increase because it is not
difficult to enter the online commerce market, and current and new competitors
can launch Web sites at relatively low cost. Competition could result in price
reductions for our products and services, reduced margins or loss of market
share. Consolidation within the online commerce industry may also increase
competition.

     The market for Internet users and community services is highly competitive
and rapidly evolving. Competition for users and advertisers is intense and is
expected to increase significantly. There are no substantial barriers to entry
in these markets. Such competition could result in fewer visitors to our Web
sites and reduced sponsorship and advertising revenues.

     Many of our existing competitors, as well as potential new competitors,
have longer operating histories, greater brand recognition, larger customer user
bases and significantly greater financial, technical and marketing resources
than we do. If we fail to compete effectively, our business will be materially
and adversely affected and our stock price will decline.

     WE MAY FAIL TO MANAGE SUCCESSFULLY AND USE OUR DATABASES OF WEB SITE USERS
AND CUSTOMERS. An important component of our business model involves the use of
our lists of catalog requesters and Web site registrants to target more
effectively direct marketing messages. We depend upon personal information we
collect from our Web site users for data we need to create direct mailing and e-
mailing lists, tailor our Web site offerings to the tastes of our Generation Y
users and attract marketers to our Web sites. We must continuously expand and
update our lists to identify new, prospective Generation Y customers. Names
derived from purchased or rented lists may generate lower response rates and,
therefore, a lower return on our investment in these lists. We must also
continually develop and refine our techniques for segmenting these lists to
maximize their usefulness to us and our marketing partners. If we fail to
capitalize on these important business assets, our business model will be less
successful. In addition, laws or regulations that could impair our ability to
collect or utilize user names and other information on our Web sites may
adversely affect our business. For example, a recently enacted federal law
limits our ability to collect personal information from Web site visitors who
may be under age 13. Any violation of this law could result in fines to Alloy.

     WE MUST EFFECTIVELY MANAGE OUR VENDORS TO MINIMIZE INVENTORY RISK AND
MAINTAIN OUR MARGINS. In order to fulfill our orders, we depend upon our vendors
to produce sufficient quantities of products according to schedule. We may
maintain high inventory levels in some categories of merchandise in an effort to
maintain satisfactory fulfillment rates for our customers. This may expose us to
risk of excess inventories and outdated merchandise, which could have a material
and adverse effect on our business. If we underestimate quantities and vendors
cannot restock, then we may disappoint customers who may turn to our
competitors. We also negotiate with our vendors to get the best quality
available at the best prices and increase our profit margins. Our failure to be
able to manage our vendors effectively would adversely affect our operating
results.

                                       22
<PAGE>

     WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER
WEB SITES TO INCREASE NUMBERS OF WEB SITE USERS AND INCREASE OUR REVENUES. We
intend to establish numerous strategic alliances with other popular Web sites to
increase the number of visitors to our Web sites. There is intense competition
for placements on these sites, and we may not be able to enter into these
relationships on commercially reasonable terms or at all. Even if we enter into
strategic alliances with other Web sites, they themselves may not attract
significant numbers of users. Therefore, our sites may not receive additional
users from these relationships. Moreover, we may have to pay significant fees to
establish these relationships. Our inability to enter into new distribution
relationships or strategic alliances and expand our existing ones could have a
material and adverse effect on our business.

     WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE. To be successful, we must adapt to rapidly changing Internet
technologies and continually enhance the features and services provided on our
Web sites. We could incur substantial, unanticipated costs if we need to modify
our Web sites, software and infrastructure to incorporate new technologies
demanded by our audience. We may use new technologies ineffectively or we may
fail to adapt our Web sites, transaction-processing systems and network
infrastructure to user requirements or emerging industry standards. If we fail
to keep pace with the technological demands of our Web-savvy audience for new
services, products and enhancements, our users may not use our Web sites and
instead use those of our competitors.

     WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR TRADEMARKS, WEB ADDRESSES AND
INTELLECTUAL PROPERTY RIGHTS. Our Alloy and CCS brand names and our Web
addresses, www.alloy.com and www.ccs.com, are critical to our success. We have
registered the "Alloy" and "CCS" names, along with other trademarks with the
U.S. Patent and Trademark Office. Applications for the registration of other
trademarks and service marks are currently pending. We cannot guarantee that any
of these trademark applications will be granted. In addition, we may not be able
to prevent third parties from acquiring Web addresses that are confusingly
similar to our addresses, which could harm our business.

     WE MAY EXPERIENCE FLUCTUATIONS IN POSTAGE AND PAPER EXPENSES. Catalog
production and distribution expenses represented approximately 42% of our total
revenues in the fiscal year ended January 31, 1999, approximately 34% of our
total revenues in the fiscal year ended January 31, 2000, and approximately 23%
of our total revenues in the fiscal year ended January 31, 2001. A substantial
portion of these expenses are attributable to paper and postage costs. Material
increases in paper or catalog delivery costs could have a material and adverse
effect on our business. In January 2001, the United States Postal Service
implemented rate increases of approximately 9% for mailing of our catalogs.

     WE MAY BE UNABLE TO IDENTIFY AND SUCCESSFULLY INTEGRATE POTENTIAL
ACQUISITIONS AND INVESTMENTS. We have acquired eight businesses and we may
acquire or make investments in other complementary businesses, products,
services or technologies on an opportunistic basis when we believe they will
assist us in carrying out our business strategy. We could have difficulty in
assimilating personnel and operations of the businesses we have acquired and may
have similar problems in future acquisitions. In addition, the key personnel of
the acquired companies may decide not to work for us. If we acquire products,
services or technologies, we could have difficulty in assimilating them into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses. Furthermore, we may have to
incur debt or issue equity securities to pay for any future acquisitions, the
issuance of which could be dilutive to our existing shareholders.

     WE ARE VULNERABLE TO NEW TAX OBLIGATIONS THAT COULD BE IMPOSED ON ONLINE
COMMERCE TRANSACTIONS. We do not expect to collect sales or other similar taxes
in respect of shipments of goods into most states. However, various states or
foreign countries may seek to impose sales tax obligations on us and other
online commerce and direct marketing companies. A number of proposals have been
made at the state and local levels that would impose additional taxes on the
sale of goods and services through the Internet. These proposals, if adopted,
could substantially impair the growth of online commerce and cause purchasing
through our Web site to be less attractive to customers as compared to
traditional retail purchasing. Existing legislation limits until October 2001
the ability of the states to impose taxes on Internet-based transactions.
Several bills recently have been introduced in the United States Congress that
would extend such tax moratorium for an additional five years.  Other similar
bills recently have been introduced to make the moratorium permanent.  Similar
bills were introduced in the last Congress but failed to become law.  Failure to
renew this moratorium could result in the imposition by various states of taxes
on online commerce. Further, states have attempted to impose sales taxes on
catalog sales from businesses such as ours. A successful assertion by one or
more states that we should have collected or be collecting sales taxes on the
sale of products could have a material and adverse effect on our business.

RISKS RELATED TO THE INTERNET INDUSTRY

     WE ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF THE INTERNET
INFRASTRUCTURE. Our industry is new and rapidly evolving. Our business would be
adversely affected if Internet usage and online commerce does not continue to
grow. Internet usage may be inhibited for a number of reasons, including:

                                       23
<PAGE>

     o  inadequate Internet infrastructure;

     o  inconsistent quality of service; or

     o  unavailability of cost-effective, high-speed service.

     If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth, or its performance and
reliability may decline. In addition, Web sites, including ours, have
experienced a variety of interruptions in their service as a result of outages
and other delays occurring throughout the Internet network infrastructure. If
these outages or delays frequently occur in the future, Web usage, including
usage of our Web sites, could grow slowly or decline.

     OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE ONLINE COMMERCE
MARKET, AND ON THE INCREASED ONLINE PURCHASING BY GENERATION Y, BOTH OF WHICH
ARE UNCERTAIN. Our future revenues and profits substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of commerce
by consumers. Demand for recently introduced services and products over the
Internet and online services is subject to a high level of uncertainty. The
development of the Internet and online services as a viable commercial
marketplace is subject to a number of factors, including the following:

    o  online commerce is at an early stage and buyers may be unwilling to shift
       their purchasing from traditional vendors to online vendors;

    o  insufficient availability of telecommunications services or changes in
       telecommunications services could result in slower response times; and

    o  the inability of our target demographic group to have regular access to a
       credit card could cause a slower growth in online commerce for us than
       for companies targeting consumers in general.

     ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN. The growth
of Internet sponsorships and advertising requires validation of the Internet as
an effective advertising medium. This validation has yet to occur fully. In
order for us to generate sponsorship and advertising revenues, marketers must
direct a significant portion of their budgets to the Internet and, specifically,
to our Web sites. To date, sales of Internet sponsorships and advertising
represent only a small percentage of total advertising sales. Also,
technological developments could slow the growth of sponsorships and advertising
on the Internet. For example, widespread use of filter software programs that
limit access to advertising on our Web site from the Internet user's browser
could reduce advertising on the Internet. Our business, financial condition and
operating results would be adversely affected if the market for Internet
advertising fails to develop or develops slower than expected.

     BREACHES OF SECURITY ON THE INTERNET MAY SLOW THE GROWTH OF ONLINE COMMERCE
AND WEB ADVERTISING AND SUBJECT US TO LIABILITY. The need to securely transmit
confidential information (such as credit card and other personal information)
over the Internet has been a significant barrier to online commerce and
communications over the Web. Any well-publicized compromise of security could
deter more people from using the Web or from using it to conduct transactions
that involve transmitting confidential information, such as purchases of goods
or services. Furthermore, decreased traffic and online sales as a result of
general security concerns could cause advertisers to reduce their amount of
online spending. To the extent that our activities or the activities of third
party contractors involve the storage and transmission of information, such as
credit card numbers, security breaches could disrupt our business, damage our
reputation and expose us to a risk of loss or litigation and possible liability.
We could be liable for claims based on unauthorized purchases with credit card
information, impersonation or other similar fraud claims. Claims could also be
based on other misuses of personal information, such as for unauthorized
marketing purposes. We may need to spend a great deal of money and use other
resources to protect against the threat of security breaches or to alleviate
problems caused by security breaches.

     WE COULD FACE LIABILITY FOR INFORMATION DISPLAYED ON AND COMMUNICATIONS
THROUGH OUR WEB SITES AND IN OUR PRINT PUBLICATIONS. We may be subjected to
claims for defamation, negligence, copyright or trademark infringement or based
on other theories relating to the information we publish on our Web sites and in
our print publications. These types of claims have been brought, sometimes
successfully, against Internet companies as well as print publications in the
past. Based on links we provide to other Web sites, we could also be subjected
to claims based upon online content we do not control that is accessible from
our Web sites. Claims may also be based on statements made and actions taken as
a result of participation in our chat rooms or as a result of materials posted
by members on bulletin boards at our Web sites. We also offer e-mail services,
which may subject us to potential risks, such as:

                                       24
<PAGE>

     o  liabilities or claims resulting from unsolicited e-mail;

     o  lost or misdirected messages;

     o  illegal or fraudulent use of e-mail; or

     o  interruptions or delays in e-mail service.

     These claims could result in substantial costs and a diversion of our
management's attention and resources.

     EFFORTS TO REGULATE OR ELIMINATE THE USE OF MECHANISMS WHICH AUTOMATICALLY
COLLECT INFORMATION ON USERS OF OUR WEB SITE MAY INTERFERE WITH OUR ABILITY TO
TARGET OUR MARKETING EFFORTS AND TAILOR OUR WEB SITE OFFERINGS TO THE TASTES OF
OUR USERS. Web sites typically place a tracking program on a user's hard drive
without the user's knowledge or consent. These programs automatically collect
data on anyone visiting a Web site. Web site operators use these mechanisms for
a variety of purposes, including the collection of data derived from users'
Internet activity. Most currently available Web browsers allow users to elect to
remove these mechanisms at any time or to prevent this information from being
stored on their hard drive. In addition, some commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of  these
tracking mechanisms. Any reduction or limitation in the use of this software
could limit the effectiveness of our sales and marketing efforts.

     WE COULD FACE ADDITIONAL BURDENS ASSOCIATED WITH GOVERNMENT REGULATION OF
AND LEGAL UNCERTAINTIES SURROUNDING THE INTERNET. Any new law or regulation
pertaining to the Internet, or the application or interpretation of existing
laws, could increase our cost of doing business or otherwise have a material and
adverse effect on our business, results of operations and financial condition.
Laws and regulations directly applicable to Internet communications, commerce
and advertising are becoming more prevalent. The law governing the Internet,
however, remains largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing laws
governing intellectual property, copyright, privacy, obscenity, libel and
taxation apply to the Internet. In addition, the growth and development of
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad. We also may be subject to future
regulation not specifically related to the Internet, including laws affecting
direct marketers.


SAFE HARBOR PROVISION

     Statements in this report expressing our expectations and beliefs regarding
our future results or performance are forward-looking statements that involve a
number of substantial risks and uncertainties. When used in this Form 10-K, the
words "anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. Our actual future results may differ
significantly from those stated in any forward-looking statements. These
statements include statements regarding our ability to increase revenues,
generate multiple revenue streams, increase visitors to our Web sites and build
customer loyalty; our ability to develop our sales and marketing teams; our
ability to expand and capitalize on our sales and marketing efforts; our ability
to capitalize on our promotions, sponsorship, advertising and other revenue
opportunities; our ability to build the Alloy and CCS brand names and develop
our online community in a way that appeals to both boys and girls; our ability
to develop commercial relationships with advertisers and other Web sites; our
Web sites' appeal to marketers and users; our ability to meet anticipated cash
needs for working capital and capital expenditures for the next 24 months; our
ability to enhance our infrastructure technology, transaction-processing and
automation capabilities of our Web sites; our ability to increase the efficiency
of our supply chain and fulfillment system; our ability to expand into
international markets; our ability to expand and utilize our name database; our
ability to identify desirable products and to continue to limit our risks of
excess inventory; our continued ability to provide high levels of customer
service and support, our ability to manage our vendors to maintain our profit
margins; our ability to identify and integrate potential acquisitions and
investments; and our continued ability to contact and successfully market to the
increasing Generation Y audience.

     Such statements are based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by the forward-looking statements.
We caution that there can be no assurance that actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including but not
limited to the following: our expected future losses; our planned sales and
marketing campaigns may not attract sufficient additional visitors to our Web
sites; our planned sales and marketing campaigns may not increase our revenues
or generate additional revenue streams; we lack experienced management and
personnel; we may fail to further develop our internal sales and marketing
organization to attract promotions, sponsorship, advertising and other revenues;
we may not be able to adapt as internet technologies and customer demands
continue to evolve; increased competition in the online commerce market would
reduce our revenues; and we may experience business disruptions with third
parties that provide us with essential business operations.

                                       25
<PAGE>

     As a result of the foregoing and other factors, we may experience material
fluctuations in future operating results on a quarterly or annual basis which
could materially and adversely affect our business, financial condition,
operating results and stock price. We are not under any duty to update any of
the forward-looking statements in this report to conform these statements to
actual results, unless required by law. For further information, refer to the
more specific risks and uncertainties discussed above and throughout this
report.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

     As of the end of Fiscal 2000, Alloy was exposed to market risk as a result
of our holding of 628,305 shares of LDIG common stock. Market risk with respect
to this holding refers to the risk of loss arising from adverse changes in
LDIG's stock price. In order to illustrate the effect of changes in LDIG's stock
price, we provide the following sensitivity analysis. Had the stock price of
LDIG been 10% lower at January 31, 2001, the value of our LDIG holding would
have been lower by approximately $620,000.

     In July 2000, we entered into a series of three "cashless collars" with a
financial services institution with respect to 600,000 LDIG shares owned by us.
Each of the cashless collars covers 200,000 shares of LDIG and has stated terms
of approximately 30 months, 33 months and 36 months, respectively. In effect, we
purchased put options that give us the right to require the counterparty to buy
600,000 LDIG shares from us in 30 to 36 months at an average price of
approximately $27.88 per share. We simultaneously sold call options giving the
counterparty the right to buy 600,000 LDIG shares from Alloy in 30 to 36 months
at an average price of approximately $51.70 per share. Since the purchase price
of the put options was equal to the proceeds from the sale of the call options,
the collar transactions were at no cost to us. In March 2001, Alloy unwound
its collared equity derivative position on 600,000 shares of common stock of
LDIG received in connection with Alloy's financing and strategic arrangement
with LDIG and sold the underlying shares, leaving Alloy with no remaining
holding of LDIG common stock.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                    ALLOY ONLINE, INC. FINANCIAL STATEMENTS
                         INDEX TO FINANCIAL STATEMENTS

                                                                            Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS...................................  27

FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of January 31, 2000 and 2001................  28

Consolidated Statements of Operations and Comprehensive Loss for the Years
Ended January 31, 1999, 2000 and 2001......................................  29

Consolidated Statements of Changes in Stockholders' (Deficit) Equity and
Accumulated Other Comprehensive (Loss) Income for the Years Ended
January 31, 1999, 2000 and 2001............................................  30

Consolidated Statements of Cash Flows for the Years Ended January 31, 1999,
2000 and 2001..............................................................  31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................  32

SCHEDULE II -- Valuation and Qualifying Accounts...........................  49

     ALLOY ONLINE, INC. SELECTED QUARTERLY UNAUDITED RESULTS OF OPERATIONS

See disclosure contained under Item 7, appearing at page 16 of this Annual
Report on Form 10-K.

                                       26
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders of
Alloy Online, Inc.:

We have audited the accompanying consolidated balance sheets of Alloy Online,
Inc. (a Delaware corporation) and subsidiaries as of January 31, 2000 and 2001,
and the related consolidated statements of operations and comprehensive loss,
statements of changes in stockholders' equity and accumulated other
comprehensive (loss) income and cash flows for each of the three years in the
period ended January 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alloy Online, Inc. and
subsidiaries as of January 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 2001 in conformity with accounting principles generally accepted in
the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of valuation and qualifying
accounts is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.


                                         /s/ ARTHUR ANDERSEN LLP


New York, New York
March 9, 2001 (except with respect to
the matters discussed in Note 15, as
to which the date is April 12, 2001)



                                       27
<PAGE>

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                              January 31,
                                                                                                     ----------------------------
                                            ASSETS                                                     2000                2001
                                            ------                                                   --------            --------
<S>                                                                                                <C>                <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                                           $ 12,702            $  9,338
 Marketable securities                                                                                 20,971              16,064
 Accounts receivable                                                                                    2,693               3,416
 Inventories                                                                                            3,981              13,200
 Prepaid catalog costs                                                                                  1,011               1,330
 Other current assets                                                                                   1,281                 575
                                                                                                     --------            --------
          Total current assets                                                                         42,639              43,923

 PROPERTY AND EQUIPMENT, net                                                                            2,187               5,841
 GOODWILL, net                                                                                         12,349              55,963
 OTHER ASSETS                                                                                             493               1,181
                                                                                                     --------            --------
          Total assets                                                                               $ 57,668            $106,908
                                                                                                     ========            ========

                            LIABILITIES AND STOCKHOLDERS' EQUITY
                            ------------------------------------

CURRENT LIABILITIES:
 Accounts payable                                                                                    $  7,297            $  9,860
 Accrued expenses and other current liabilities                                                         5,163               8,663
                                                                                                     --------            --------
          Total current liabilities                                                                    12,460              18,523

LONG-TERM LIABILITIES                                                                                       -                 103

COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY:
 Preferred stock; $.01 par value; 5,000,000 shares authorized; no shares issued or
  outstanding                                                                                               -                   -
 Common stock; $.01 par value; 50,000,000 shares authorized; 14,686,437 and 21,245,958
  shares issued and outstanding, respectively                                                             147                 212
 Additional paid-in capital                                                                            68,948             140,864
 Accumulated deficit                                                                                  (23,216)            (52,905)
 Deferred compensation                                                                                   (593)               (728)
 Accumulated other comprehensive (loss) income                                                            (78)                839
                                                                                                     --------            --------
          Total stockholders' equity                                                                   45,208              88,282
                                                                                                     --------            --------
          Total liabilities and stockholders' equity                                                 $ 57,668            $106,908
                                                                                                     ========            ========
</TABLE>

The accompanying Notes are an integral part of these consolidated balance
sheets.
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                              For the Years Ended January 31,
                                                                              -------------------------------
                                                                              1999          2000          2001
                                                                              ----          ----          ----
<S>                                                                       <C>          <C>          <C>
REVENUES:
 Net merchandise revenues                                                 $   11,243   $    30,952   $    76,736
 Sponsorship and other revenues                                                  125         2,912        14,452
                                                                          ----------   -----------   -----------

          Total revenues                                                      11,368        33,864        91,188

Cost of goods sold                                                             5,486        13,765        37,757
                                                                          ----------   -----------   -----------

          Gross profit                                                         5,882        20,099        53,431
                                                                          ----------   -----------   -----------

OPERATING EXPENSES:
 Selling and marketing                                                        10,324        30,520        60,814
 General and administrative                                                    1,683         5,423        10,659
 Goodwill amortization                                                             -           332         8,573
                                                                          ----------   -----------   -----------

          Total operating expenses                                            12,007        36,275        80,046
                                                                          ----------   -----------   -----------

Loss from operations                                                          (6,125)      (16,176)      (26,615)

OTHER INCOME (EXPENSE):
 Interest income                                                                 125         1,695         1,138
 Interest expense                                                               (364)         (153)          (19)
 Realized loss on marketable securities and investments                            -             -        (4,193)
                                                                          ----------   -----------   -----------

Net loss before extraordinary item                                            (6,364)      (14,634)      (29,689)

Charge for early retirement of debt (Note 13)                                      -          (235)            -
                                                                          ----------   -----------   -----------

Net loss                                                                      (6,364)      (14,869)      (29,689)

Net unrealized (loss) gain on available-for-sale marketable securities             -           (78)          917
                                                                          ----------   -----------   -----------

Comprehensive loss                                                        $   (6,364)  $   (14,947)  $   (28,772)
                                                                          ==========   ===========   ===========
NET LOSS PER COMMON SHARE (Note 11):
 Basic and Diluted:
  Net loss per common share before extraordinary item                     $    (0.75)  $     (1.15)  $     (1.61)
  Extraordinary loss on early retirement of debt                                   -         (0.02)            -
                                                                          ----------   -----------   -----------
  Net loss per common share                                               $    (0.75)  $     (1.17)  $     (1.61)
                                                                          ==========   ===========   ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 Basic and diluted                                                         8,479,727    12,718,318    18,460,042
                                                                          ==========   ===========   ===========
</TABLE>

The accompanying Notes are an integral part of these consolidated statements.

<PAGE>
   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY AND
                 ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
            (Amounts in thousands, except share and per share data)



<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                            Common Stock                                                      Other
                                        -------------------     Additional     Accumulated   Deferred     Comprehensive
                                        Shares       Amount   Paid-In Capital    Deficit   Compensation   (Loss) Income      Total
                                        ----------  -------   ---------------  ----------- ------------   -------------    -------
<S>                                     <C>         <C>       <C>              <C>         <C>            <C>             <C>
BALANCE, January 31, 1998                7,768,167   $  78     $   4,384       $  (1,983)       $    -          $    -    $  2,479
 Issuance of shares in connection
  with anti-dilution protection
  included in private placement            711,560       7            (7)              -             -               -           -
 Issuance of warrants to purchase
  common stock                                   -       -           213               -             -               -         213
 Issuance of stock options to
  consultants and employees                      -       -           858               -          (230)              -         628
 Amortization of deferred
  compensation                                   -       -             -               -             5               -           5
 Accretion of preferred stock
  issuance costs                                 -       -            (7)              -             -               -          (7)
 Net loss                                        -       -             -          (6,364)            -               -      (6,364)
                                        ----------   -----     ---------       ---------        ------          ------    --------

BALANCE, January 31, 1999                8,479,727      85         5,441          (8,347)         (225)              -      (3,045)
 Proceeds from issuance of
  common stock in connection with
  an initial public offering, net
  of issuance costs                      3,700,000      37        50,112               -             -               -      50,149
 Issuance of common stock in
  connection with acquisitions
  (Note 3)                                 415,794       4         7,679               -             -               -       7,683
 Conversion of Series A Convertible
  Redeemable Preferred Stock             1,678,286      17         4,829               -             -               -       4,846
 Issuance of stock options to
  employees and consultants                      -       -           857               -          (857)              -           -
 Amortization of deferred compensation           -       -             -               -           189               -         489
 Issuance of common stock pursuant
  to the exercise of options and
  warrants and the employee stock
  purchase plan                            412,630       4            43               -             -               -          47
 Accretion of preferred stock
  issuance costs                                 -       -           (13)              -             -               -         (13)
 Net loss                                        -       -             -         (14,869)            -               -     (14,859)
 Unrealized loss on available-for-
  sale marketable securities                     -       -             -               -             -             (78)        (78)
                                        ----------   -----     ---------       ---------        ------          ------    --------
BALANCE, January 31, 2000               14,686,437     147        68,948         (23,216)         (593)            (78)     45,208
 Issuance of common stock in
  connection with acquisitions
  and exchange transaction
  (Notes 3 and 4)                        6,533,321      65        71,299               -             -               -      71,364
 Issuance of stock options to
  consultants                                    -       -           577               -          (577)              -           -
 Amortization of deferred
  compensation                                   -       -             -               -           442               -         442
 Issuance of common stock pursuant
  to the exercise of options and
  warrants and the employee stock
  purchase plan                             26,200       -            40               -             -               -          40
 Net loss                                        -       -             -         (29,689)            -               -     (29,689)
 Net unrealized gain on available-
  for-sale marketable securities                 -       -             -               -             -             917         917
                                        ----------   -----     ---------       ---------        ------          ------    --------
BALANCE, January 31, 2001               21,245,958   $ 212     $ 140,864       $ (52,905)       $ (728)         $  839    $ 88,282
                                        ==========   =====     =========       =========        ======          ======    ========
</TABLE>

The accompanying Notes are an integral part of these consolidated statements.
<PAGE>

ALLOY ONLINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                           For the Years Ended January 31,
                                                                                         ----------------------------------
                                                                                            1999        2000         2001
                                                                                         ----------   ---------   ---------
<S>                                                                                     <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                                 $   (6,364)  $ (14,869)  $ (29,689)
 Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization                                                                 107         632       9,861
  Realized loss on marketable securities and investments                                          -           -       4,193
  Loss on early retirement of debt                                                                -         235           -
  Compensation charge for issuance of options and common stock                                  441         489         442
  Accrued interest on promissory notes                                                          278           -           -
  Changes in operating assets and liabilities,
     net of businesses acquired:
   Accounts receivable                                                                         (146)     (1,853)       (393)
   Inventories                                                                                 (298)     (3,165)     (2,872)
   Prepaid catalog costs                                                                       (202)       (585)       (160)
   Other assets                                                                                (151)     (1,276)        369
   Accounts payable and accrued expenses                                                      1,064       8,306         668
                                                                                         ----------   ---------   ---------
       Net cash used in operating activities                                                 (5,271)    (12,086)    (17,581)
                                                                                         ----------   ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of marketable securities                                                                -     (20,908)    (25,261)
 Proceeds from sale of marketable securities                                                      -           -      47,421
 Acquisitions of businesses, net of cash acquired                                                 -      (3,949)    (12,884)
 Purchase of minority investment                                                                  -           -      (1,000)
 Purchase of mailing lists and domain name                                                       (4)       (250)          -
 Capital expenditures                                                                           (10)     (1,901)     (2,969)
                                                                                         ----------   ---------   ---------
       Net cash (used in) provided by investing activities                                      (14)    (27,008)      5,307
                                                                                         ----------   ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net proceeds from sale of common stock                                                           -      50,149       9,218
 Net proceeds from issuance of promissory notes                                               3,657           -           -
 Net proceeds from issuance of preferred stock                                                2,329       2,497           -
 Proceeds from exercise of options and warrants to purchase common stock                          -          47          11
 Payments of principal on promissory notes                                                        -      (3,810)          -
 Payments of capitalized lease obligation                                                       (38)        (70)       (319)
                                                                                         ----------   ---------   ---------
       Net cash provided by financing activities                                              5,948      48,813       8,910
                                                                                         ----------   ---------   ---------

Net increase (decrease) in cash and cash equivalents                                            663       9,719      (3,364)

CASH AND CASH EQUIVALENTS, beginning of year                                                  2,321       2,983      12,702
                                                                                         ----------   ---------   ---------
CASH AND CASH EQUIVALENTS, end of year                                                   $    2,984   $  12,702   $   9,338
                                                                                         ==========   =========   =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash paid during the year for:
  Interest                                                                               $        -   $     402   $      16
                                                                                         ==========   =========   =========
  Income taxes                                                                           $        -   $       2   $       -
                                                                                         ==========   =========   =========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Issuance of common stock in connection with acquisitions (Note 3)                       $        -   $   7,683   $  42,600
                                                                                         ==========   =========   =========
 Issuance of common stock in connection with exchange transaction (Note 4)               $        -   $       -   $  19,530
                                                                                         ==========   =========   =========
 Marketable securities received in connection with exchange transaction (Note 4)         $        -   $       -   $  19,530
                                                                                         ==========   =========   =========
 Conversion of preferred stock into common stock                                         $        -   $   4,846   $       -
                                                                                         ==========   =========   =========
</TABLE>

The accompanying Notes are an integral part of these consolidated statements.
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)

1.  BUSINESS
    --------

Alloy Online, Inc. ("Alloy" or the "Company") was incorporated in Delaware in
January 1996, and launched its Internet web site (www.alloy.com) in August 1996.
Alloy is a multi-channel media company and direct marketer providing community,
content and commerce to the Generation Y marketplace (boys and girls between
the ages of 10 and 24). Alloy's convergent media model employs an array of
integrated online and offline media and marketing assets to reach the Generation
Y market. Alloy's web site, www.alloy.com, is a destination where Generation Y
boys and girls can interact, share information, explore relevant content, and
shop. The Company's action sports web site, www.ccs.com, offers a complete line
of action sports (skateboarding, snowboarding and surfing) inspired clothing,
shoes and hard goods from leading industry brands. Each of Alloy's web sites is
complemented by a significant direct mail catalog. Alloy has also acquired a
developer of books targeted at Generation Y boys and girls, two companies that
provide Generation Y marketing services and market research, and an action
sports magazine. The Company leverages its media assets and contact points with
Generation Y boys and girls to drive sales of teen-focused apparel, accessories
and action sports equipment, and sell comprehensive marketing and advertising
services packages to companies seeking to reach the Generation Y audience.

Alloy's revenues consist primarily of merchandise sales from its catalogs and
Web sites, as well as sponsorship revenues generated from third party
advertising on its Web sites and in its print catalogs. Alloy currently has two
operating segments: direct marketing and content. The direct marketing segment
is comprised of the Company's catalog and web site operations, including its
sponsorship activities, which are an integral part of the Company's direct
marketing strategy. The content segment is currently comprised primarily of the
Company's book development and publishing activities, as well as various media
extensions and sales of book content. To date, revenues of the content segment
have not been significant. All reportable segment data pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of
an Enterprise" has been provided in Note 14.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ------------------------------------------

Fiscal Year
-----------

Alloy's fiscal year ends on January 31.  All references herein to a particular
fiscal year refer to the year ended January 31, following the particular year
(i.e., "fiscal 2000" refers to the fiscal year ending, January 31, 2001).

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of Alloy and its
wholly-owned subsidiaries.  All significant intercompany balances and
transactions have been eliminated.

Revenue Recognition
-------------------

Merchandise revenues are recognized at the time the products are shipped to
customers net of an allowance for sales returns, which is determined in
accordance with Alloy's return policy and based on historical experience and
forecasted trends. Alloy is subject to seasonal fluctuations in its merchandise
sales and results of operations.  Alloy expects its net sales and operating
results generally to be lower in the first half of each fiscal year, as compared
to the second half of each fiscal year.

In July 2000, the Emerging Issues Task Force ("EITF") reached a consensus with
respect to Issue No. 00-10, "Accounting for Shipping and Handling Revenues and
Costs". The purpose of this issue discussion was to clarify the classification
of shipping and handling revenues and costs. The consensus reached was that all
shipping and handling billed to customers is revenue. The Company adopted the
provisions of this pronouncement in the third quarter of fiscal 2000, and has
presented its consolidated statements of operations in accordance with this
issue. Furthermore, the Company has reclassified its consolidated statements of
operations for the years ended January 31, 1999 and 2000 to conform with this
consensus as the Company previously netted shipping and handling revenues with
the related costs and included the residual amount as selling and marketing
expenses. The impact of this reclassification resulted in an increase of net
merchandise revenues of $1,158 and $2,698 for the years ended January 31, 1999
and 2000, respectively, offset by an equivalent increase in selling and
marketing expenses for
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


these periods. Furthermore, EITF Issue No. 00-10 requires that if shipping costs
or handling costs are significant and are not included in cost of sales, these
costs and the line items which include them on the consolidated statements of
operations should be disclosed. Alloy includes these costs in selling and
marketing expenses in its consolidated statements of operations. These costs
were $1,160, $3,939 and $7,699 for the years ended January 31, 1999, 2000 and
2001, respectively.

Sponsorship revenues consist primarily of advertising provided for third parties
in the Company's online properties.  The Company also provides printed
advertisements in its catalogs.  Revenue under these arrangements is recognized
as the contracted advertising is delivered pursuant to the terms of each
arrangement, and when any other obligations of the Company are performed,
provided that collectibility is deemed probable, as determined by the Company.
Delivery of advertising is completed either in the form of the display of an
"impression" for advertising on the Company's Web sites, or over the economic
life of a print catalog (see "Catalog Costs") for printed advertisements.
Associated advertising costs are recognized as incurred, and any direct-response
advertising costs are recorded over the economic life of each catalog offering,
in accordance with the American Institute of Certified Public Accountants
Statement of Position 93-7, "Reporting on Advertising Costs".

Other revenues consist of book development/publishing revenue and other service
contracts related to certain of the businesses acquired since 1999. The revenues
and related expenses earned and incurred in connection with publishing
activities are recognized upon publication of such property.  Any amounts
received prior to publication are treated as advances, and classified as a
current liability. Costs paid prior to publication are deferred and classified
as other current assets in the consolidated balance sheets.  Contract revenues
are recognized upon the delivery of the services and when no significant Company
performance obligation remains.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents
-------------------------

For purposes of the statements of cash flows, Alloy considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.  Alloy maintains cash balances in excess of federally insured
amounts with commercial banks.

Marketable Securities
----------------------

The Company accounts for investments in marketable securities in accordance with
the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".  Accordingly, marketable securities are classified as
available-for-sale and are reported at fair value, with changes in fair value
recognized as a component of stockholders' equity within accumulated other
comprehensive (loss) income.  Gains and losses on the disposition of securities
are recognized on the specific identification method in the period in which they
occur.
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


Credit Risk
-----------

Alloy performs credit card authorizations and check verifications of its
customers prior to shipment of merchandise. Credit risk is limited due to the
collection of payments in advance or at time of shipment and Alloy's large
number of diversified customers.  Alloy performs periodic credit evaluations of
its other accounts receivable (sponsorship, book development and other
contracts).  Credit losses have historically been consistent with management's
expectations. The consolidated allowance for doubtful accounts was $172 and
$1,456 at January 31, 2000 and 2001, respectively.

Fair Value of Financial Instruments
-----------------------------------

The carrying amounts for cash and cash equivalents, accounts receivable,
accounts payable and obligations under capital leases approximate fair value due
to the short maturities of these instruments.  Marketable securities, including
derivative financial instruments, are carried at their fair values in the
accompanying consolidated balance sheets.  Alloy calculates the fair value of
financial instruments and includes this additional information in the notes to
financial statements when the fair value is different than the book value of
those financial instruments.  When the fair value approximates book value, no
additional disclosure is made.  Alloy uses quoted market prices whenever
available to calculate these fair values.  When quoted market prices are not
available, Alloy uses standard pricing models for various types of financial
instruments which take into account the present value of estimated future cash
flows.

Inventories
-----------

Inventories, which consist of finished goods, are stated at the approximate of
lower of cost (first-in, first-out) or market value.

Catalog Costs
-------------

Catalog costs consists of catalog production and mailing costs.  Catalog costs
are capitalized and charged to expense over the expected future revenue stream,
which is principally three to four months from the date the catalogs are mailed.
Deferred catalog costs as of January 31, 2000 and 2001 were approximately $1,011
and $1,331, respectively.  Catalog costs expensed for the years ended January
31, 1999, 2000 and 2001 were approximately $4,836, $11,560 and $20,700,
respectively, and are included within selling and marketing expenses in the
accompanying consolidated statements of operations.

Property and Equipment
----------------------

Property and equipment are stated at cost.  Depreciation is computed using the
straight-line method over the following estimated useful lives:

  Computer equipment under capitalized leases     Life of the lease
  Leasehold improvements                          Life of the lease
  Computer software and equipment                 3 to 5 years
  Machinery and equipment                         5 to 7 years
  Office furniture and fixtures                   5 to 10 years

Goodwill
--------

Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired (Note 3).  Total goodwill of $12,349 and $55,963 as of
January 31, 2000 and 2001, respectively, is stated net of accumulated
amortization of $332 and $8,904 as of January 31, 2000 and 2001, respectively.
Goodwill is being amortized on a straight-line basis over lives ranging from
three to five years.
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


Intangible Assets
-----------------

Alloy's intangible assets are included within the Other Assets section of the
balance sheet.  Alloy's purchased intangible assets consist of its domain name
and mailing lists, which are being amortized on a straight-line basis over
periods of three to five years.

Long-Lived Assets
-----------------

In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of," Alloy periodically reviews
long-lived assets and identifiable intangibles, including goodwill, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to the fair value of the asset as measured by the future net cash flows (on an
undiscounted basis) expected to be generated by the asset.  If such assets are
considered to be impaired, the impairment to be recognized would be measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. No impairment adjustments were recorded during the three years ended
January 31, 2001.

Stock Based Compensation
------------------------

SFAS No. 123, "Accounting for Stock-Based Compensation," allows companies to
account for stock-based compensation in accordance with the provisions of SFAS
No. 123 or the provisions of Accounting Principles Bulletin No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), but requires pro forma disclosure in
the footnotes to the financial statements as if the measurement provisions of
SFAS No. 123 had been adopted. Alloy has elected to account for its stock-based
compensation to employees in accordance with the provisions of APB 25 and has
provided the disclosures required under SFAS No. 123 in Note 9.  Stock-based
compensation to non-employees is accounted for pursuant to SFAS No. 123.

Income Taxes
------------

Alloy accounts for income taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes." Under the asset and liability method of SFAS No. 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry-forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes the
enactment date.

Net Loss Per Share
------------------

Basic and diluted net loss per share are computed and presented in accordance
with SFAS No. 128, "Earnings per Share".  Basic net loss per share was
determined by dividing net loss by the weighted-average number of common shares
outstanding during each period. Contingently issuable shares are excluded from
the calculation of basic net loss per share until the contingency related to the
shares is resolved.  Diluted net loss per share of the Company excludes the
impact of certain potentially dilutive securities because inclusion of these
instruments would be anti-dilutive, as a result of the net loss incurred.  A
reconciliation of the net loss available for common stockholders and the number
of shares used in computing basic and diluted net loss per share is provided in
Note 11.

Derivative Instruments and Hedging Activities
---------------------------------------------

In July 2000, Alloy purchased put options and sold call options (referred to as
collars) on a total of 600,000 shares of Liberty Digital, Inc. ("LDIG") common
stock, representing a portion of LDIG common stock already owned by Alloy as
available-for-sale marketable securities. The options allow Alloy to sell LDIG
common stock at various prices and have been designated as a hedge against
potential declines in the fair value of LDIG common stock. The options expire on
various dates beginning January 2003 through July 2003. The net fair values of
the options were $9,297 on January 31, 2001 and they have been classified as
available-for-sale marketable securities with a corresponding unrealized gain
included in accumulated other comprehensive income in the accompanying
consolidated balance sheet.
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


Alloy is required to adopt the provisions of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and its related amendments in
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities", as of February 1, 2001.  These pronouncements require companies to
reflect the fair value of all derivative instruments, including those embedded
in other contracts, as assets or liabilities in an entity's balance sheet.
Changes in fair value of derivative instruments are generally reflected in
earnings, with the exception of certain hedging transactions, for which the
change in fair value may be accounted for as a component of other comprehensive
income, provided that certain criteria are met as specified in these
pronouncements.

The options referred to above have been designated as fair value hedges pursuant
to SFAS No. 133. Upon adoption of SFAS No. 133, Alloy will be required to
continue to reflect the fair value of the options outstanding on the balance
sheet and will adjust changes in fair value of the options through the statement
of operations. The impact of the adoption of SFAS No. 133 on February 1, 2001
will be to reflect the fair value of the options as a cumulative effect of a
change in accounting principle of $9,297 as an increase to earnings in the
consolidated statement of operations and a corresponding adjustment to remove
this amount from accumulated other comprehensive income. Reference is made to
Note 15 for discussion of related transactions subsequent to January 31, 2001.

There are no other derivative instruments or contracts with embedded derivative
features as of January 31, 2001 that must be considered with respect to the
adoption of SFAS No. 133 on February 1, 2001.

3.  ACQUISITIONS
    ------------

The Company completed two acquisitions during fiscal 1999 and four acquisitions
during fiscal 2000, all of which have been accounted for under the purchase
method of accounting.  The results of operations of the acquired businesses are
included in the consolidated financial statements from the dates of acquisition.
The description of the Company's business acquisitions is as follows:

Fiscal 1999
-----------

Celebrity Sightings
-------------------

In December 1999, Alloy acquired substantially all of the assets and assumed
certain liabilities of Celebrity Sightings, LLC, a business based in Marina del
Rey, California that operated a teen entertainment-based Web site destination
that combines the elements of an online entertainment magazine with an online
community of popular teen stars.  Alloy has integrated the Web site into the
entertainment channel of the www.alloy.com Web site.  The total purchase
consideration was $5,355, including 200,616 of Alloy's common stock, which had a
value of $3,837 (or $19.125 per share) at the time of the acquisition.  In
accordance with the terms of the acquisition agreement, 20,061 shares were
placed in escrow and subsequently released in December 2000, in accordance with
the provisions of the related agreements.  The excess of the purchase price over
the fair values of the net assets acquired was approximately $5,309 and has been
recorded as goodwill and is being amortized on a straight-line basis over a term
of three years.

17th Street Productions
------------------------

In January 2000, Alloy purchased all of the outstanding shares of 17th Street
Acquisition Corp. ("17th Street"), a New York based developer and producer of
media properties for teens, for $4,372, including expenses of the acquisition.
Alloy exchanged 215,178 shares of its common stock, which had a value of $3,846
(or $17.875 per share) at the time of the acquisition, as part of the purchase
consideration. In accordance with the acquisition agreements, 64,522 shares were
placed in escrow and subsequently released in February 2001 pursuant to the
terms of release provided in the related agreements. Alloy also made payments of
$2,107 to the former sole stockholder of a subsidiary of 17th Street, which
was acquired by 17th Street in October 1999. Alloy recorded $7,371 of goodwill
in connection with this purchase, which amount represented the excess of the
purchase price over the fair values of the net assets acquired. The goodwill for
this purchase is being amortized on a straight-line basis over a term of five
years.

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


Fiscal 2000
-----------

Kubic Marketing (CCS)
---------------------

In July 2000, Alloy acquired all of the outstanding capital stock of Kubic
Marketing, Inc. ("Kubic"), a Delaware corporation with a principal place of
business in San Luis Obispo, California, through a tax-free merger. Kubic is the
holding company for its wholly-owned subsidiary, Phase Three, Inc. (which does
business as CCS), which is a mail order catalog and Internet marketer of
skateboards, snowboards and related apparel, equipment and accessories in the
United States. In connection with the acquisition, Alloy issued to the former
stockholder of Kubic (i) 3,267,981 shares of Alloy's common stock, $.01 par
value per share, having a value of $40,000 (or $12.24 per share) on the date of
the acquisition, of which 544,962 shares were placed in escrow subject to the
terms of the related acquisition agreements, and (ii) a warrant to purchase
shares of Alloy's restricted common stock, $.01 par value per share, in an
aggregate amount, if any, as determined pursuant to the provisions of the
warrant. The warrant is exercisable only during the period beginning 12 months
and ending 15 months following the closing of the acquisition. The warrant has
an exercise price equal to the par value of the underlying shares. The number of
shares, if any, that may be purchased pursuant to the warrant will be determined
by the monthly average price of Alloy's common stock for each of the 12 months
following the closing of the acquisition.  To the extent that the sum of the
Monthly Balances at the anniversary date, as defined and calculated pursuant to
the warrant agreement, exceeds $21,000, the warrant will be deemed to have
expired unexercised and have no further force or effect. The value of the
warrant, if any, will be determined upon resolution of the contingent conditions
cited in the warrant agreement and could result in a change to the purchase
price allocation and future amortization of goodwill. In addition, in connection
with obtaining the consent to the acquisition by certain of the lenders to Kubic
and its stockholder's other subsidiaries, Alloy paid $10,000 in cash from its
existing cash reserves to such lenders to retire certain debt obligations of
Kubic. Alloy recorded approximately $48,785 of goodwill representing the net
excess of purchase consideration over the fair value of the net assets acquired,
based upon a preliminary purchase price allocation. The resulting goodwill is
being amortized over a period of five years.

Other Acquisitions
------------------

In December 2000, the Company acquired the outstanding stock of Triple Dot
Communications, Inc. ("Triple Dot"), a Massachusetts corporation, having a place
of business in Boston, Massachusetts.  Triple Dot is a marketing services
company that provides advice and marketing programs for companies trying to
reach teenagers.  In addition, in January 2001, the Company acquired an
affiliate of Triple Dot, Y-Access LLC ("Y-Access"), a Massachusetts limited
liability company, having a place of business in Boston, Massachusetts.  Y-
Access is a market research company that specializes in the Generation Y market.
Pursuant to the related acquisition agreements, the aggregate consideration paid
was $2,600, which consisted of 342,646 shares of Alloy's common stock, $.01 par
value (or $7.59 per share), of which a total of 51,398 shares were placed in
escrow in accordance with the terms of the related agreements.  The excess of
the purchase price over the fair values of the net assets acquired was
approximately $3,403 and has been recorded as goodwill and is being amortized on
a straight-line basis over a term of five years.

In addition, the Company, through its 17th Street subsidiary acquired the
assets and assumed certain liabilities of Girl Press LLC ("Girl Press"), a
California limited liability company having a place of business in Santa Monica,
California for cash consideration of $112. The amount paid approximated the fair
value of the assets acquired at the date of acquisition. Girl Press is a
developer of books and other entertainment content for teenage girls.

The allocations of purchase price for the fiscal 2000 acquisitions were based on
preliminary estimates of fair value. Accordingly, the amount of goodwill may be
adjusted to reflect the final allocation of purchase price, pursuant to
Accounting Principles Board Opinion No. 16, "Accounting for Business
Combinations".
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


The following unaudited proforma information presents a summary of Alloy's
consolidated results of operations as if each of the above acquisitions had
taken place on February 1, 1999:

                                                  Fiscal Year Ended January 31,
                                                  -----------------------------
                                                     2000              2001
                                                  ----------         ----------

    Revenues                                       $ 75,379           $113,009
    Net loss before extraordinary items             (26,307)           (34,465)
    Net loss                                        (26,542)           (34,465)

    Basic and diluted net loss per share before
     extraordinary items                           $  (1.64)          $  (1.73)
    Basic and diluted net loss per share           $  (1.66)          $  (1.73)

These unaudited proforma results have been prepared for comparative purposes
only and include adjustments for additional amortization expense as a result of
goodwill and estimated reductions in interest income as a result of cash
consideration used for the acquisitions.  They do not purport to be indicative
of the results of operations that actually would have resulted had the
combinations occurred on February 1, 1999, or of future results of operations of
the consolidated entities.

4.  EXCHANGE TRANSACTION
    --------------------

On April 14, 2000, the Company entered into a financial and strategic
arrangement with Liberty Digital, Inc. ("LDIG"), a subsidiary of Liberty Media
Group, Inc., pursuant to which the Company issued 2,922,694 shares of its common
stock to a subsidiary of LDIG in exchange for $10,000 in cash and 837,740 shares
of LDIG common stock having a fair value of $19,530. The Company's common shares
exchanged represented 19.9% of the then issued and outstanding common stock
immediately prior to the transaction. Subsequent to the transaction, LDIG had a
16.6% ownership interest in Alloy's issued and outstanding common stock. Both
parties have agreed to limit the future disposition of the common stock
exchanged for a period of one year from the effective dates of the registration
statements. More specifically, both the Company and LDIG are prohibited from
selling more than 25% of the shares issued to each during any consecutive 90-day
period within one year of the effective date of the respective registration
statements.

5.  MARKETABLE SECURITIES
    ---------------------

Alloy did not own any marketable securities at January 31, 1999.  Fair values of
corporate debt securities and equity securities are based upon quoted market
prices.  The following is a summary of current available-for-sale marketable
securities at January 31, 2000 and 2001, respectively:

                                                            January 31, 2000

<TABLE>
<CAPTION>
                                                            Gross        Gross
                                                          Unrealized   Unrealized
                                             Amortized     Holding      Holding     Estimated Fair
                                               Cost         Gains        Losses         Value
    <S>                                      <C>          <C>          <C>          <C>
    Corporate debt securities                 $20,908      $      -     $   (78)        $20,830
    Equity securities                             141             -           -             141
                                              -------      --------     -------         -------
    Total available-for-sale securities       $21,049      $      -     $   (78)        $20,971
                                              =======      ========     =======         =======
</TABLE>

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


                                                             January 31, 2001
<TABLE>
<CAPTION>
                                                            Gross        Gross
                                                          Unrealized   Unrealized
                                             Amortized     Holding      Holding     Estimated Fair
                                               Cost         Gains        Losses         Value
    <S>                                      <C>          <C>          <C>          <C>
    Corporate debt securities                  $   530       $    -      $     -        $   530
    Equity securities                           14,695        9,297       (8,458)        15,534
                                               -------       ------      -------        -------
    Total available-for-sale securities        $15,225       $9,297      $(8,458)       $16,064
                                               =======       ======      =======        =======
</TABLE>

In the year ended January 31, 2001, the Company realized a loss of $3,193 on
sales of marketable securities. The Company had no sales of marketable
securities for the year ended January 31, 2000. As of January 31, 2000 and 2001,
all of the debt securities held by the Company had contractual maturities of
less than one year.

6.  PROPERTY AND EQUIPMENT
    ----------------------

At January 31, 2000 and 2001, property and equipment, net consists of the
following:

                                               2000           2001
                                             ---------     ---------

    Equipment under capitalized leases        $   169       $   621
    Computer equipment                          2,031         5,289
    Machinery and equipment                       228           698
    Office furniture and fixtures                 200           617
    Leasehold improvements                        797           977
                                              -------       -------
                                                3,425         8,202

    Less: accumulated depreciation             (1,238)       (2,361)
                                              -------       -------
                                              $ 2,187       $ 5,841
                                              =======       =======

Depreciation and amortization expense related to property and equipment was $21,
$192 and $1,223 for the years ended January 31, 1999, 2000 and 2001,
respectively.

7.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
    ----------------------------------------------

As of January 31, 2000 and 2001, accrued expenses and other current liabilities
consist of the following:

                                               2000         2001
                                              -------      ------

    Compensation and benefits                 $  398       $1,320
    Deferred revenues                          2,055        1,560
    Other                                      2,710        5,783
                                              ------       ------
                                              $5,163       $8,663
                                              ======       ======

8.  CREDIT AGREEMENT
    ----------------

In October 2000, The Company entered into a credit agreement (the "Credit
Agreement") with Royal Bank of Canada, Grand Cayman (North America No.1), (the
"Lender").  The Credit Agreement lasts for a duration of three years from
inception (expires on October 19, 2003) and calls for the Lender to make
available to the Company revolving credit loans and letters of credit in the
aggregate principal amount not to exceed $15,055, the proceeds of which may be
used to finance the working capital requirements of the Company and its
subsidiaries in the ordinary course of business and for other general corporate
purposes.  This facility was originally collateralized by marketable securities
and related derivative put options. As further discussed in Note 15, as a result
of the settlement of the put options and sale of the underlying securities, the
facility limit was reduced from $15,055 to $500.

There were no amounts outstanding at January 31, 2001 under the Credit
Agreement.

<PAGE>
ALLOY ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


9.  STOCK-BASED COMPENSATION PLANS
    ------------------------------

Stock Options:
-------------

During fiscal 1997, Alloy's Board of Directors adopted a Stock Option Plan (the
"Plan"). The Plan as restated, authorizes the granting of options, the exercise
of which would allow up to an aggregate of 4,000,000 shares of Alloy's common
stock to be acquired by the holders of the options. The number of shares under
the Plan authorized for the granting of options was raised to 8,000,000 pursuant
to a shareholder vote on July 21, 2000. The options can take the form of
Incentive Stock Options ("ISOs") or Non-qualified Stock Options ("NQSOs").
Options may be granted to employees, directors and consultants. ISOs and NQSOs
are granted in terms not to exceed ten years and become exercisable as set forth
when the option is granted. Options may be exercised in whole or in part.
Vesting terms of the options range from immediately vesting to a ratable vesting
period of ten years. The exercise price of the ISOs must be at least equal to
100% of the fair market price of Alloy's common stock on the date of grant. In
the case of a plan participant who owns directly or by reason of the applicable
attribution rules in Section 424(d) of the United States Internal Revenue Code
of 1986, as amended, more than 10% of the total combined voting power of all
classes of stock of Alloy, the exercise price shall not be less than 110% of the
fair market value on the date of grant. ISOs must be exercised within five to
ten years from the date of grant depending on the participant's ownership in
Alloy. The exercise price of all NQSO's granted under the Plan shall be
determined by Alloy's Board of Directors at the time of grant. The Plan will
terminate on June 30, 2007.

In fiscal 1998, Alloy entered into option agreements with certain of its
employees that required Alloy to pay the full exercise price of their options.
Alloy valued the options granted under these agreements using the fair value of
the common stock at the date of grant. Alloy recorded compensation expense of
approximately $105 for the year ended January 31, 1999, in connection with the
granting of these options.

Alloy applies APB 25 in accounting for options issued to employees under the
Plan and, accordingly, recognizes compensation expense for the difference
between the fair value of the underlying common stock and the grant price of the
option at the date of grant. Alloy applies SFAS No. 123 to issuances of stock-
based compensation to non-employees and accordingly recognizes the fair value of
the stock options and warrants issued as compensation expense over the service
period or vesting period, whichever is shorter. The fair value assumptions used
for awards to non-employees are consistent with the assumptions listed for the
pro forma impact of awards to employees. Had compensation cost been determined
consistent with SFAS No. 123, Alloy's net loss and loss per share for fiscal
1998 would have remained unchanged due to the fact that the fair market value of
the options granted using the options-pricing Black-Scholes model was equal to
the fair market value of the underlying common stock at the date of the grant
and compensation charges were included in the consolidated results for the year
ended January 31, 1999. Accordingly, the presentation of pro forma information
pursuant to SFAS No. 123 is not required for fiscal 1998. The following
summarizes the pro forma impact on earnings of options granted to employees had
they been accounted for pursuant to the fair value method required by SFAS No.
123 for the years ended January 31,:

                                               2000              2001
                                               ----              ----
          Net loss:
           As reported                     $(14,869)         $(29,689)
           Pro forma                       $(17,376)         $(36,439)

          Net loss per share:
           As reported                     $  (1.17)         $  (1.61)
           Pro forma                       $  (1.37)         $  (1.97)

<PAGE>

ALLOY ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)

The following is a summary of Alloy's stock option activity:

<TABLE>
<CAPTION>
                                                                   For the Years Ended January 31,
                                          ---------------------------------------------------------------------------------
                                                    1999                          2000                       2001
                                          ------------------------     -------------------------   ------------------------
                                                          Weighted                      Weighted                   Weighted
                                                          Average                       Average                    Average
                                                          Exercise                      Exercise                   Exercise
                                            Shares         Price          Shares          Price      Shares          Price
                                          ---------       --------     -----------      --------   ----------      --------
     <S>                                  <C>             <C>          <C>              <C>        <C>             <C>
     Outstanding, beginning of year         183,705       $   0.26         389,553      $   0.67    2,064,427      $  15.75
      Granted                               392,148           0.67       2,072,534         15.79    2,229,500         11.69
      Exercised                                -                          (381,660)         0.75      (18,048)         0.60

      Canceled or expired                  (186,300)         (0.27)        (16,000)        14.05     (266,750)        13.84
                                          ---------       --------     -----------      --------   ----------      --------

     Outstanding, end of year               389,553       $   0.67       2,064,427      $  15.75    4,009,129      $  13.69
                                          =========       ========     ===========      ========   ==========      ========
     Exercisable, end of year               362,481       $   0.67          77,738      $  12.49      510,007      $  14.87
                                          =========       ========     ===========      ========   ==========      ========

     Weighted-average fair value of
      options granted during the year     $    2.77            N/A     $     11.38           N/A   $     6.84           N/A
                                          =========        =======     ===========      ========   ==========       =======

</TABLE>

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
                                                        For the Years Ended January 31
                                                 ---------------------------------------------
                                                     1999            2000               2001
                                                 -----------      ----------         ---------
    <S>                                           <C>             <C>                <C>
    Risk-free interest rates                         5.25%            5.95%            5.97%
    Expected lives                                   5 years          6 years          5 years
    Expected volatility                              50%              50%              75%
    Expected dividend yields                         -                -                -
</TABLE>


Summarized information about Alloy's stock options outstanding and exercisable
at January 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                                Outstanding                           Exercisable
       ------------------       -----------------------------------------      --------------------------
                                                                 Average                         Average
            Exercise                                             Exercise                        Exercise
           Price Range            Options   Average Life          Price           Options         Price
       ------------------       ---------  -------------        ---------         -------       ---------
       <S>                      <C>        <C>                  <C>               <C>           <C>
          $ 0.60 - $ 0.60          74,448    8.0 Years             $ 0.60          18,048          $ 0.60
          $ 6.50 - $ 9.63         978,250    9.7 Years             $ 7.62          27,000          $ 7.07
          $ 9.81 - $14.69         851,750    9.0 Years             $12.68          76,208          $12.47
          $14.75 - $21.44       1,912,921    8.5 Years             $16.65         388,751          $16.55
          $22.50 - $26.25         191,760    8.1 Years             $24.60            -                -
       --------------------------------------------------------------------------------------------------
          $ 0.60 - $26.25       4,009,129    8.9 Years             $13.69         510,007          $14.87
       ==================================================================================================
</TABLE>

In fiscal 1998, Alloy entered into an agreement with a consultant and provided
that Alloy grant to the consultant an option to purchase 282,000 shares of
common stock at an exercise price of $0.71 per share and pay to the consultant
the full exercise price of his option. This option is fully exercisable from the
date of grant and expires ten years after the date of the grant. Alloy has
valued the options granted to the consultant using the fair market value of the
common stock at the date of grant. This agreement and the nullification of the
original agreement resulted in Alloy charging additional compensation expense of
approximately $356 for the year ended January 31, 1999.

<PAGE>

ALLOY ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)

The consultant provided the Company with services in connection with the
development of strategic plans for human resources and market development. This
non-employee was the only shareholder who rendered services to the Company and
received compensation in the form of equity rights. Although there is no formal
agreement between the parties, these services have been provided from time-to-
time. There is no formal or informal commitment for the consultant to provide
additional services to the Company in the future.

Warrants:
--------

The following table summarizes all common stock and preferred stock warrant
activity:

                                              For the Years Ended January 31
                                             ----------------------------------
                                               1999         2000          2001
                                             --------     -------       -------
    Outstanding, beginning of year               -        517,261       478,858
     Warrants issued                          517,261        -             -
     Warrants exercised                          -        (38,403)       (5,678)
                                              -------     -------       -------
    Outstanding, end of year                  517,261     478,858       473,180
                                              =======     =======       =======

The weighted average fair value of the warrants granted during fiscal 1998 was
estimated as $0.38, using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of 0%, volatility of 50%, risk-free
interest rate of 5.25% and expected lives of 3 years. At January 31, 2001, the
warrants have a weighted average exercise price of $5.059 per share and weighted
average remaining contractual term of .41 years.

In connection with the execution of a capital lease for computer equipment,
Alloy issued a warrant to purchase 11,280 shares of a common stock at an
exercise price of $2.66 per share. The warrant is exercisable at the earlier of
June 30, 2003 or the closing of an initial public offering. The warrant was
exercised in May 1999. Alloy recorded prepaid interest, in the amount of $21,
based on the fair value of the warrant and is amortizing such amount over the
life of the capital lease obligation. The weighted average fair value of this
warrant was estimated as $21 using the Black-Scholes option-pricing model with
the following assumptions: dividend yield of 0%, volatility of 50%, risk-free
interest rate of 5.25% and expected life of five years.

Employee Stock Purchase Plan:
----------------------------

In April 1999, Alloy adopted the 1999 Employee Stock Purchase Plan (the
"Employee Stock Plan"). The Employee Stock Plan allows eligible employees, as
defined in the Employee Stock Plan, to purchase Alloy's common stock pursuant to
section 423 of the Internal Revenue Code of 1986, as amended. A total of 500,000
shares of Alloy's common stock have been made available for sale under the
Employee Stock Plan, subject to certain capitalization adjustments specified in
the plan document. The Employee Stock Plan will terminate on April 16, 2009
unless terminated sooner by the Board of Directors. The Employee Stock Plan
allows for purchases of common stock under a series of six-month offering
periods commencing February 1 and August 1 of each year, the frequency of dates
and duration of which may be changed by the Board of Directors. Eligible
employees can elect to participate through payroll deductions between 1% and 10%
of compensation that will be credited to the participant's account. The terms of
the Employee Stock Plan provide for the granting of an option on the first day
of each six-month offering period ("Offering Date") to each eligible employee to
purchase Alloy's common stock on the last day of each six-month offering period
("Exercise Date") at a price equal to the lower of 85% of the fair market value
of a share of Alloy's common stock at the Offering Date or 85% of the fair
market value of a share of Alloy's common stock on the Exercise Date.

The number of shares under the option will be determined by dividing an eligible
employee's accumulated contributions prior to the Exercise Date and retained in
the participant's account as of the Exercise Date by the lower of 85% of the
fair market value of a share of Alloy's common stock on the Offering Date, or
85% of the fair market value of a share of Alloy's common stock on the Exercise
Date. Unless a participant withdraws from the Employee Stock Plan, his or her
option for the purchase of shares will be exercised automatically on the
Exercise Date of the relative six-month offering period.
<PAGE>

ALLOY ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)

Shares Reserved for Future Issuance:

At January 31, 2001, shares reserved for future issuance are as follows:

    Preferred Stock                                5,000,000
    Stock Option Plan                              7,600,292
    Warrants                                         473,180
    Employee Stock Plan                              495,885
                                                  ----------
                                                  13,566,912
                                                  ==========

10.  INCOME TAXES
     ------------

The difference between the total expected tax expense (benefit) (using the
statutory rate of 34%) and tax expense for the years ended January 31, 2000 and
2001 is accounted for as follows:

<TABLE>

                                                              1999              2000              2001
                                                              ----              ----              ----
     <S>                                                      <C>               <C>               <C>
     Expected tax benefit at federal statutory rate            (34%)             (34%)             (34%)
     Future state benefit, net of federal benefit              (10%)             (10%)             (10%)
     Non-deductible expenses and other                           -                 -                 -
     Increase in valuation allowance                            44%               44%               44%
                                                              ----              ----              ----
                                                                 -                 -                 -
                                                              ====              ====              ====
</TABLE>

At January 31, 2000 and 2001, significant components of deferred income tax
assets and liabilities consist of the following:

<TABLE>

                                                             2000             2001
                                                             ----             ----
     <S>                                                  <C>               <C>
     Deferred income tax assets:
      Expenses not currently deductible                   $   1,332         $  3,724
      Valuation allowance                                    (1,332)          (3,724)
                                                          ---------         --------
        Total current                                             -                -
                                                          ---------         --------
      Net operating loss carryforwards                        8,276           16,236
      Deferred compensation                                     217              362
      Depreciation and amortization                              12                -
                                                         ----------         --------
                                                              8,505           16,598
      Valuation allowance                                    (8,505)         (16,213)
                                                         ----------         --------
        Total non-current                                         -              385
                                                         ----------         --------
          Total deferred income tax assets                        -              385
                                                         ----------         --------

     Deferred income tax liabilities:
      Depreciation and amortization                               -             (303)
      Other non-current                                           -              (82)
                                                         ----------         --------
          Total deferred income tax liabilities                   -             (385)
                                                         ----------         --------
           Net deferred income tax assets                $        -         $      -
                                                         ==========         ========

     Net current deferred income tax assets              $       -          $      -
     Net non-current deferred income tax assets                  -                 -
                                                         ----------         --------
      Net deferred income tax assets                     $       -          $      -
                                                         ==========         ========
</TABLE>

For federal income tax purposes, the Company has unused net operating loss
("NOL") carryforwards of $36,899 at January 31, 2001 expiring through 2021. The
U.S. Tax Reform Act of 1986 contains provisions that limit the NOL carryforwards
available to be used in any given year upon the occurrence of certain events,
including a significant change of ownership. The Company has not assessed the
impact of these provisions on the availability of Company loss carryovers.

<PAGE>

ALLOY ONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share data)

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion of all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during periods in which
those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. Due to the Company's operating
losses, there is uncertainty surrounding whether the Company will ultimately
realize its deferred tax assets. Accordingly, these assets have been fully
reserved.

11.  NET LOSS PER SHARE
     ------------------

The Company follows the provisions of SFAS No. 128, "Earnings Per Share". In
accordance with this statement, basic net loss per common share is computed by
dividing net loss by the weighted-average number of common shares outstanding.
Diluted net loss per common share is computed by dividing net loss by the
weighted-average number of common shares and dilutive common share equivalents
and convertible securities then outstanding.

The following table sets forth the computation of basic and diluted net loss per
share:


<TABLE>
                                                                             Year Ended January 31,
                                                                   ------------------------------------------
                                                                      1999           2000            2001
                                                                   ----------     -----------     -----------
     <S>                                                           <C>            <C>             <C>
     Numerator:
     ----------
     Net loss before extraordinary item                            $   (6,364)    $   (14,634)    $   (29,689)
     Accretion of preferred stock                                          (7)            (13)           -
                                                                   ----------     -----------     -----------
     Net loss available to common stockholders before
      extraordinary item                                               (6,371)        (14,647)        (29,689)
     Extraordinary loss                                                  -               (235)           -
                                                                   ----------     -----------     -----------

     Net loss available to common stockholders                     $   (6,371)    $   (14,882)    $   (29,689)
                                                                   ==========     ===========     ===========

     Denominator:
     ------------
     Denominator for basic and diluted net loss per share:
      Weighted average shares                                       8,479,727      12,718,318      18,460,042
                                                                   ==========     ===========     ===========

     Basic and diluted net loss per share before extraordinary
      item                                                         $    (0.75)    $     (1.15)    $     (1.61)
     Extraordinary loss                                                   -             (0.02)            -
                                                                   ----------     -----------     -----------

     Basic and diluted net loss per share                          $    (0.75)    $     (1.17)    $     (1.61)
                                                                   ==========     ===========     ===========
</TABLE>

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


12.  COMMITMENTS AND CONTINGENCIES
     -----------------------------

Leases
------

Alloy leases office space and certain computer equipment under noncancellable
leases with various expiration dates through 2010. As of January 31, 2001,
future net minimum lease payments were as follows:

<TABLE>
<CAPTION>
                                                                 Capital        Operating
                    Year ending January 31,                       Lease           Lease
         ---------------------------------------------------  -------------   -------------
        <S>                                                   <C>             <C>
        2002                                                       $135           $1,700
        2003                                                         97            1,471
        2004                                                          6            1,266
        2005                                                          -            1,254
        2006                                                          -            1,027
        Thereafter                                                    -            2,522
                                                                   ----           ------

               Total minimum lease payments                        $238           $9,240
                                                                   ====           ======
</TABLE>

Rent expense was approximately $33, $88 and $962 for the years ended January 31,
1999, 2000 and 2001, respectively, under noncancellable operating leases.

Ordering, Fulfillment and Customer Service
------------------------------------------

On March 31, 2000, Alloy entered into an agreement with a third party service
organization ("TPS") whereby the TPS provides Alloy with comprehensive call
center and order fulfillment services in support of the direct marketing
operations of the Alloy catalog and the www.alloy.com Web site. All aspects
relating to fulfillment of customer orders are handled by the TPS, including
receipt and processing of customer orders, shipment of merchandise to customers
and customer service. In consideration for performance of the services provided
by the TPS during the contract term, Alloy paid the TPS an initial start-up fee
and is charged a fixed fee per order processed plus a pass-through of the
variable costs, primarily labor, involved in order processing. The agreement
with the TPS expires in May 2003.

Sales Tax
---------

Alloy does not collect sales or other similar taxes on shipments of goods into
most states. However, various states or foreign countries may seek to impose
sales tax obligations on Alloy. A number of proposals have been made at the
state and local levels that would impose additional taxes on the sale of goods
and services through the Internet. In 1999, the United States Congress has
passed legislation limiting for three years the ability of the states to impose
taxes on Internet-based transactions. Failure to renew this legislation could
result in the imposition by various states of taxes on e-commerce. A successful
assertion by one or more states that Alloy should have collected or be
collecting sales taxes on the sale of products could have a material effect on
Alloy's operations.

Litigation
----------

In the normal course of business, the Company is a party to various claims
and/or litigation. Management believes that the settlement of all such claims
and/or litigation, considered in the aggregate will not have a material adverse
effect on the Company's financial position and results of operations.


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except share and per share data)


Letters of Credit
-----------------

As of January 31, 2001, the Company had $762 in standby letters of credit with
two banks for the purposes of supporting an operating lease and purchasing
inventory.

13.  EXTRAORDINARY ITEMS
     -------------------

In connection with the Alloy's initial public offering in May 1999, the Company
redeemed its outstanding promissory notes including accrued interest thereon for
$4,212. The extraordinary charge of $235 resulted from the full recognition of
the remaining unamortized deferred financing costs and unamortized discount on
these notes, which had an original maturity of May 2001.

14.  SEGMENT REPORTING
     -----------------

Alloy has two operating segments: direct marketing and content, as described in
Note 1. Alloy's management reviews financial information related to these
operating segments and uses the measure of operating (loss) earnings before
goodwill amortization and extraordinary items to evaluate performance and
allocated resources. Interest income and interest expense are reviewed on a net
basis at the corporate level. Income taxes are centrally managed at the
corporate level and deferred income taxes are not allocated by segment. The
accounting policies of the segments are the same as those described in Note 2.
Fiscal 1998 did not have any activities related to the content segment and
accordingly, the consolidated results for the year ended January 31, 1999 are
the same as for the direct marketing segment.

Reportable data for Alloy's operating segments were as follows for the years
ended January 31, 2000 and 2001:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                              Direct
                                             Marketing      Content       All Other        Consolidated
------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>          <C>               <C>
RESULTS FOR THE FISCAL YEAR ENDED
JANUARY 31, 2000:
Revenue from external customers             $ 33,780         $    84        $    --           $ 33,864

Operating loss before goodwill
amortization and extraordinary items         (15,841)             (3)            --            (15,844)
Goodwill amortization                           (295)            (37)            --               (332)
Interest income, net                              --              --          1,542              1,542
(Loss) income before taxes and
extraordinary items                          (16,136)            (40)         1,542            (14,634)
Extraordinary items                               --              --           (235)              (235)
Net (loss) income                           $(16,136)        $   (40)       $ 1,307           $(14,869)

Total depreciation and amortization              551              37             44                632

Total assets                                  15,823           8,172         33,673             57,668

Capital expenditures                        $  1,901              --             --           $  1,901

RESULTS FOR THE FISCAL YEAR ENDED
JANUARY 31, 2001:
Revenue from external customers             $ 88,500         $ 2,688        $    --           $ 91,188

Operating loss before goodwill
amortization                                 (17,969)            (73)            --            (18,042)
Goodwill amortization                         (7,099)         (1,474)            --             (8,573)
Interest income, net                               --             --          1,119              1,119
Realized loss on marketable securities and
investments                                        --             --         (4,193)            (4,193)
Loss before taxes                            (25,068)         (1,547)        (3,074)           (29,689)
Net loss                                    $(25,068)        $(1,547)       $(3,074)          $(29,689)

Total depreciation and amortization            8,356           1,505             --              9,861

Total assets                                   75,002          6,504         25,402            106,908

Capital expenditures                        $   2,954        $    15             --           $  2,969
</TABLE>


15.  SUBSEQUENT EVENTS
     -----------------

On February 16, 2001, the Board of Directors of the Company authorized the
designation of a series of the Company's $.01 par value preferred stock
consisting of 1,850,000 shares of the authorized unissued preferred stock as a
Series A Convertible Preferred Stock (the "Series A Preferred Stock"). The
Series A Preferred Stock has a par value of $.01 per share with a liquidation
preference of $9.50 per share. The Series A Preferred Stock pays an annual
dividend of 3%, payable in additional shares of Series A Preferred Stock. In
addition, the Series A Preferred Stock is mandatorily redeemable on February 16,
2006, at a price of $9.50 per share, plus accrued and unpaid cash dividends
thereon. The Series A Preferred Stock is convertible at the holder's option into
common stock of the Company as is determined by dividing $9.50 by the initial
conversion price of $11.40 and multiplying by each share of Series A Preferred
Stock to be converted. The initial conversion price is subject to adjustment for
stock splits, stock dividends and combinations of common stock and other events
as specified in the related Certificate of Designation, Preferences and Rights
of Series A Convertible Preferred Stock of Alloy Online, Inc. At any time after
February 15, 2003, if the reported closing sales price of Alloy's common stock
exceeds $25 per share for a period of ten consecutive trading days, the Company
has the option to require the holders of all, but not less than all, shares of
the Series A Preferred Stock to convert their shares into common stock of the
Company.

Also on February 16, 2001, Alloy received an investment of $10,000 from St. Paul
Venture Capital VI, LLC ("SPVC VI") in exchange for 1,052,632 shares of Alloy's
Series A Preferred Stock, which are immediately convertible into 877,193 shares
of our common stock. In addition, SPVC VI received a warrant to purchase 307,018
shares of Alloy's common stock at an exercise price of $12.83 per share. Based
upon the terms of this transaction, there is a beneficial conversion feature as
of the date of the transaction in the amount of approximately $2.8 million
which will reduce earnings available to common shareholders in the first quarter
of fiscal 2001.

On February 21, 2001, Alloy completed the acquisition of Strength Magazine from
Rapid Service Company ("Rapid Service"), an Ohio corporation, pursuant to which
the Company issued 99,909 shares of unregistered common stock to Rapid Service,
having a value of $1,180 (or $11.81 per share on the transaction date). Strength
Magazine, operating out of Cincinnati, Ohio, is a lifestyle magazine primarily
for teenage boys focusing on skateboarding and music. It is available via
subscription and newsstands.

In March 2001, Alloy settled its collared equity derivative position on 600,000
shares of LDIG common stock and sold the underlying shares. The Company received
a total of $15,102 in net cash proceeds from these transactions. Alloy's $15,055
committed credit facility which was secured by the collared LDIG shares was
reduced to $500 upon the consummation of these transactions. The net impact of
this transaction and the adoption of SFAS No. 133 described in Note 2 will
result in a gain of approximately $1.1 million in the first quarter of fiscal
2001.

On April 12, 2001, Alloy completed the acquisition of all the capital stock of
Landon Media Group, Inc. ("Landon"), a Massachusetts corporation with a
principal place of business in Westford, Massachusetts, in exchange for
1,314,348 shares of unregistered common stock, having a value of $9,800 (or
$7.45 per share on the transaction date), $5,000 in cash, four future quarterly
cash payments of $700 each, and contingently issuable warrants to purchase
additional shares pursuant to the warrants' terms. Landon's primary asset as of
the effective time of the acquisition was 100% of the issued and outstanding
capital stock of Carnegie Communications, Inc., a Delaware corporation
("Carnegie"). Carnegie produces publications and Web sites that profile colleges
and universities which are distributed to high school students, parents and
guidance counselors.

<PAGE>

                                                                     SCHEDULE II

                              ALLOY ONLINE, INC.

                       VALUATION AND QUALIFYING ACCOUNTS

                               (AMOUNTS IN 000s)

<TABLE>
<CAPTION>
                                         Balance at
                                         Beginning of       Charged to                         Balance at
        Description                      Period             Expenses         Deductions        End of period
                                         ------------       ----------       ----------        -------------
<S>                                      <C>                <C>              <C>               <C>
Allowance for doubtful accounts
January 31, 1999                         $          -       $       12       $        -        $          12
January 31, 2000                                   12              162                2                  172
January 31, 2001                                  172            1,284                -                1,456
</TABLE>



<TABLE>
<CAPTION>
                                         Balance at
                                         Beginning of       Charged to                         Balance at
        Description                      Period             Expenses         Deductions        End of period
                                         ------------       ----------       ----------        -------------
<S>                                      <C>                <C>              <C>               <C>
Reserve for sales returns and
allowances
January 31, 1999                         $         15       $    1,097       $    1,055        $          57
January 31, 2000                                   57            4,984            4,532                  509
January 31, 2001                                  509            9,415            9,158                  766
</TABLE>

<PAGE>

    ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                             FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Information About Directors and Executive
Officers," and "Section 16(a) Beneficial Ownership Reporting Compliance" in our
Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 11.  EXECUTIVE COMPENSATION.

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Executive Compensation" in our Proxy
Statement for the 2001 Annual Meeting of Stockholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The response to this item is incorporated by reference from the discussion
responsive thereto under the caption "Information About Alloy Online Stock
Ownership" in our Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The response to this item is incorporated by reference from the discussion
responsive thereto under the captions "Certain Relationships and Related Party
Transactions" and "Executive Compensation -- Employment Contracts and Change of
Control Arrangements" in our Proxy Statement for the 2001 Annual Meeting of
Stockholders.



                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A)  FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

     (1) Consolidated Financial Statements.

     See "Index to Financial Statements" at Item 8 to this Annual Report on Form
     10-K.

     (2) Financial Statement Schedules.

     See "Index to Financial Statements" at Item 8 to this Annual Report on Form
     10-K.

     (3)  Exhibits.

                                       28

<PAGE>

     The following exhibits are filed with this report or incorporated by
reference as set forth below.

EXHIBIT
NUMBER        DESCRIPTION OF DOCUMENT


  2.1   Asset Purchase Agreement dated as of December 1, 1999 by and among Alloy
        Online, Inc., Alloy Acquisition Corporation and Celebrity Sightings,
        LLC (incorporated by reference to Alloy Online's Current Report on
        Form 8-K dated December 21, 1999).

  2.2   Agreement and Plan of Reorganization dated as of January 21, 2000, by
        and between Alloy Online, Inc., Alloy Acquisition Sub, Inc., 17th Street
        Acquisition Corp. and Leslie N. Morgenstein and Ann Brashares
        (incorporated by reference to Alloy Online's Current Report on Form 8-K
        dated August, 2, 2000).

  2.3   Agreement and Plan of Reorganization dated as of July 17, 2000, by and
        between Alloy Online, Inc., Alloy Acquisition Sub, Inc., Kubic
        Marketing, Inc. and SWI Holdings LLC (incorporated by reference to Alloy
        Online's Current Report on Form 8-K dated August 2, 2000).

  3.1   Restated Certificate of Incorporation of Alloy Online, Inc.
        (incorporated by reference into  Alloy Online's Registration Statement
        on Form S-1 (Registration Number 333-74159)).

  3.2   Restated Bylaws (incorporated by reference into Alloy Online's
        Registration Statement on Form  S-1 (Registration Number 333-74159)).

  3.3   See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
        Incorporation and  Restated Bylaws of Alloy Online for the instruments
        defining the rights of holders of common  stock of Alloy Online.

 10.1   Lease Agreement between Alloy Online, Inc. and Abner Properties, c/o
        Williams Real Estate Co.,  Inc., dated as of November 2, 1999
        (incorporated by reference to Alloy Online's 2000 Annual Report on
        form 10-K dated June 14, 2000).

 10.2   First Lease Modification Agreement between Alloy Online, Inc. and
        Abner Properties, c/o Williams Real Estate Co., Inc., dated December 18,
        2000.

 10.3   Sublease Letter Agreement between Guidance Solutions, Inc. and
        Celebrity Sightings, LLC, dated as of November 23, 1999 (incorporated
        by reference to Alloy Online's 2000 Annual Report on form 10-K dated
        June 14, 2000).

 10.4   Agreement of Lease between Irving Realty Co. and Daniel Weiss
        Associates, Inc., dated as of  May 8, 1996 (incorporated by reference
        to Alloy Online's 2000 Annual Report on form 10-K dated June 14, 2000).

 10.5   Sublease Agreement between United Parcel Service and Central Coast
        Surfboards dated May 15, 1996, as amended by the First Addendum to
        Sublease Agreement dated October 1, 1998.

 10.6   Lease Agreement dated January 27, 1992 between Arthur Segal Trust, c/o
        Patterson Realty and Central Coast Surfboards, as amended by the First
        Lease Amendment dated April 29, 1994, and as further amended by the
        Second Lease Amendment (undated), and as further amended by the Third
        Lease Amendment (undated).

 10.7   Termination of Fulfillment Services Agreement, Settlement Agreement
        and Release of Claims between Online Direct, Inc. and Alloy Online,
        Inc. dated as of April 14, 2000 (incorporated by reference to Alloy
        Online's 2000 Annual Report on Form 10-K dated June 14, 2000).

 10.8   Services Agreement between Distribution Associates, Inc. and Alloy
        Online, Inc. dated as of March 31, 2000 (incorporated by reference to
        Alloy Online's 2000 Annual Report on Form 10-K dated June 14, 2000).

 10.9   Services Agreement, dated February 9, 1999, between OneSoft
        Corporation and the Registrant (incorporated by reference into Alloy
        Online's Registration Statement on Form S-1 (Registration  Number 333-
        74159)).

 10.10  Restated 1997 Employee, Director and Consultant Stock Option Plan
        (incorporated by reference  into Alloy Online's Registration Statement
        on Form S-8 dated October 20, 2000 (Registration Number 333-74159)).

 10.11  Employment Agreement dated April 19, 1999 between Matthew C. Diamond
        and Alloy Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159)).

                                       29
<PAGE>

 10.12  Employment Agreement dated April 19, 1999 between James K. Johnson,
        Jr. and Alloy Online, Inc. (incorporated by reference into Alloy
        Online's Registration Statement on Form S-1 (Registration Number 333-
        74159)).

 10.13  Employment Agreement dated April 19, 1999 between Samuel A. Gradess
        and Alloy Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration  Number 333-74159)).

 10.14  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between Matthew C. Diamond and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.15  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between James K. Johnson, Jr. and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.16  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between Samuel A. Gradess and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.17  Employment Letter dated February 22, 1999 between Neil Vogel and Alloy
        Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159)).

 10.18  Non-Qualified Stock Option Agreement dated as of August 2, 1999
        between Neil Vogel and Alloy Online, Inc. (incorporated by reference
        into Alloy Online's 2000 Annual Report on Form 10-K.)

 10.19  Non-Qualified Stock Option Agreement dated as of November 4, 1999
        between Neil Vogel and Alloy Online, Inc. (incorporated by reference
        into Alloy Online's 2000Annual Report on Form 10-K.)

 10.20  Employment Offer Letter dated May 24, 2000 between Robert Bell and
        Alloy Online, Inc.

 10.21  Non-Competition and Confidentiality Agreement dated March 24, 2000
        between Robert Bell and Alloy Online, Inc.

 10.22  Incentive Stock Option Agreement dated as of July 19, 2000 between
        Alloy Online, Inc. and Robert Bell.

 10.23  Non-Qualified Stock Option Agreement dated as of July 19, 2000 between
        Alloy Online, Inc. and Robert Bell.

 10.24  Flexible Standardized 401(k) Profit Sharing Plan Adoption Agreement
        (incorporated by reference into Alloy Online's Registration Statement
        on Form S-1 (Registration Number 333-74159)).

 10.25  1999 Employee Stock Purchase Plan (incorporated by reference into
        Alloy Online's Registration Statement on Form S-1 (Registration Number
        333-74159)).

 10.26  Investment Representation and Lockup Agreement dated as of January 21,
        2000 by and between Alloy Online, Inc. and Leslie N. Morgenstein
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated February 7, 2000).

 10.27  Investment Representation and Lockup Agreement dated as of January 21,
        2000 by and between Alloy Online, Inc. and Ann Brashares (incorporated
        by reference to Alloy Online's Current Report on Form 8-K dated
        February 7, 2000).

 10.28  Escrow Agreement dated as of January 21, 2000 by and among Alloy
        Online, Inc., Alloy Acquisition Sub., Inc., Leslie N. Morgenstein, Ann
        Brashares and State Street Bank and Trust Company, as Escrow Agent
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated February 7, 2000).

 10.29  Investment Representation and Lockup Agreement dated as of December 1,
        1999 by and between Alloy Online, Inc. and Celebrity Sightings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated December 21, 1999).

 10.30  Escrow Agreement dated as of December 1, 1999 by and among Alloy
        Online, Inc., Alloy Acquisition Corporation, Celebrity Sightings, LLC
        and State Street Bank and Trust Company, as Escrow Agent (incorporated
        by reference to Alloy Online's Current Report on Form 8-K dated
        December 21, 1999).

 10.31  Warrant to Purchase Shares of Common Stock of Alloy Online, Inc. dated
        as of July 18, 2000 between Alloy Online, Inc. and SWI Holdings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated August 2, 2000).

 10.32  Investment Representation and Lockup Agreement dated as of July 18,
        2000, by and between Alloy Online, Inc. and SWI Holdings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated August 2, 2000).

                                       30
<PAGE>

 10.33  Amendment to Loan and Security Agreement, dated as of July 18, 2000, by
        and among Phase Three, Inc., the financial institutions party thereto
        and  the other parties named therein (incorporated by reference to
        Alloy Online's Current Report on Form 8-K dated August 2, 2000).

  21.1  Subsidiaries of Alloy Online, Inc.
  23.2  Consent of Arthur Andersen LLP
  24.1  Power of Attorney (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159).

(B)  REPORTS ON FORM 8-K:

     None.

                                       31
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  May 1, 2001              Alloy Online, Inc.

                                    By:  /s/  Matthew C. Diamond
                                       --------------------------------------
                                              Matthew C. Diamond
                                              Chairman of the Board and Chief
                                              Executive Officer



       SIGNATURE                    TITLE                          DATE

    /s/ Matthew C. Diamond       Chief Executive Officer        May 1, 2001
-----------------------------    (Principal Executive Officer)
    Matthew C. Diamond           and Chairman


    /s/ Samuel A. Gradess        Executive Vice President,      May 1, 2001
----------------------------     Chief Financial Officer
    Samuel A. Gradess            Chief (Principal Financial and
                                 Accounting Officer) and
                                 Director


    /s/ James K. Johnson, Jr.    Executive Vice President,      May 1, 2001
-----------------------------    Chief Operating Officer and
    James K. Johnson, Jr.        Director



    /s/ Peter M. Graham          Director                       May 1, 2001
----------------------------
    Peter M. Graham



    /s/ David Yarnell            Director                       May 1, 2001
----------------------------
    David Yarnell


    /s/ Edward A. Monnier        Director                       May 1, 2001
----------------------------
    Edward A. Monnier

                                       32
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT


  2.1   Asset Purchase Agreement dated as of December 1, 1999 by and among Alloy
        Online, Inc., Alloy Acquisition Corporation and Celebrity Sightings,
        LLC (incorporated by reference to Alloy Online's Current Report on
        Form 8-K dated December 21, 1999).

  2.2   Agreement and Plan of Reorganization dated as of January 21, 2000, by
        and between Alloy Online, Inc., Alloy Acquisition Sub, Inc., 17th Street
        Acquisition Corp. and Leslie N. Morgenstein and Ann Brashares
        (incorporated by reference to Alloy Online's Current Report on Form 8-K
        dated August, 2, 2000).

  2.3   Agreement and Plan of Reorganization dated as of July 17, 2000, by and
        between Alloy Online, Inc., Alloy Acquisition Sub, Inc., Kubic
        Marketing, Inc. and SWI Holdings LLC (incorporated by reference to
        Alloy Online's Current Report on Form 8-K dated August 2, 2000).

  3.1   Restated Certificate of Incorporation of Alloy Online, Inc.
        (incorporated by reference into  Alloy Online's Registration Statement
        on Form S-1 (Registration Number 333-74159)).

  3.2   Restated Bylaws (incorporated by reference into Alloy Online's
        Registration Statement on Form  S-1 (Registration Number 333-74159)).

  3.3   See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
        Incorporation and  Restated Bylaws of Alloy Online for the instruments
        defining the rights of holders of common  stock of Alloy Online.

 10.1   Lease Agreement between Alloy Online, Inc. and Abner Properties, c/o
        Williams Real Estate Co.,  Inc., dated as of November 2, 1999
        (incorporated by reference to Alloy Online's 2000 Annual Report on
        form 10-K dated June 14, 2000).

 10.2   First Lease Modification Agreement between Alloy Online, Inc. and
        Abner Properties, c/o Williams Real Estate Co., Inc., dated December 18,
        2000.

 10.3   Sublease Letter Agreement between Guidance Solutions, Inc. and
        Celebrity Sightings, LLC, dated as of November 23, 1999 (incorporated
        by reference to Alloy Online's 2000 Annual Report on form 10-K dated
        June 14, 2000).

 10.4   Agreement of Lease between Irving Realty Co. and Daniel Weiss
        Associates, Inc., dated as of  May 8, 1996 (incorporated by reference
        to Alloy Online's 2000 Annual Report on form 10-K dated June 14,
        2000).

 10.5   Sublease Agreement between United Parcel Service and Central Coast
        Surfboards dated May 15, 1996, as amended by the First Addendum to
        Sublease Agreement dated October 1, 1998.

 10.6   Lease Agreement dated January 27, 1992 between Arthur Segal Trust, c/o
        Patterson Realty and Central Coast Surfboards, as amended by the First
        Lease Amendment dated April 29, 1994, and as further amended by the
        Second Lease Amendment (undated), and as further amended by
        the Third Lease Amendment (undated).

 10.7   Termination of Fulfillment Services Agreement, Settlement Agreement
        and Release of Claims between Online Direct, Inc. and Alloy Online,
        Inc. dated as of April 14, 2000 (incorporated by reference to Alloy
        Online's 2000 Annual Report on Form 10-K dated June 14, 2000).

 10.8   Services Agreement between Distribution Associates, Inc. and Alloy
        Online, Inc. dated as of March 31, 2000 (incorporated by reference to
        Alloy Online's 2000 Annual Report on Form 10-K dated June 14, 2000).

 10.9   Services Agreement, dated February 9, 1999, between OneSoft
        Corporation and the Registrant (incorporated by reference into Alloy
        Online's Registration Statement on Form S-1 (Registration  Number 333-
        74159)).

 10.10  Restated 1997 Employee, Director and Consultant Stock Option Plan
        (incorporated by reference  into Alloy Online's Registration Statement
        on Form S-8 dated October 20, 2000 (Registration Number 333-74159)).

 10.11  Employment Agreement dated April 19, 1999 between Matthew C. Diamond
        and Alloy Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159)).

                                       33
<PAGE>

 10.12  Employment Agreement dated April 19, 1999 between James K. Johnson,
        Jr. and Alloy Online, Inc. (incorporated by reference into Alloy
        Online's Registration Statement on Form S-1 (Registration Number 333-
        74159)).

 10.13  Employment Agreement dated April 19, 1999 between Samuel A. Gradess
        and Alloy Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration  Number 333-74159)).

 10.14  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between Matthew C. Diamond and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.15  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between James K. Johnson, Jr. and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.16  Non-Competition and Confidentiality Agreement dated November 24, 1998
        between Samuel A. Gradess and Alloy Online, Inc. (incorporated by
        reference into Alloy Online's Registration Statement on Form S-1
        (Registration Number 333-74159)).

 10.17  Employment Letter dated February 22, 1999 between Neil Vogel and Alloy
        Online, Inc. (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159)).

 10.18  Non-Qualified Stock Option Agreement dated as of August 2, 1999
        between Neil Vogel and Alloy Online, Inc. (incorporated by reference
        into Alloy Online's 2000 Annual Report on Form 10-K.)

 10.19  Non-Qualified Stock Option Agreement dated as of November 4, 1999
        between Neil Vogel and Alloy Online, Inc. (incorporated by reference
        into Alloy Online's 2000Annual Report on Form 10-K.)

 10.20  Employment Offer Letter dated May 24, 2000 between Robert Bell and
        Alloy Online, Inc.

 10.21  Non-Competition and Confidentiality Agreement dated March 24, 2000
        between Robert Bell and Alloy Online, Inc.

 10.22  Incentive Stock Option Agreement dated as of July 19, 2000 between
        Alloy Online, Inc. and Robert Bell.

 10.23  Non-Qualified Stock Option Agreement dated as of July 19, 2000 between
        Alloy Online, Inc. and Robert Bell.

 10.24  Flexible Standardized 401(k) Profit Sharing Plan Adoption Agreement
        (incorporated by reference into Alloy Online's Registration Statement
        on Form S-1 (Registration Number 333-74159)).

 10.25  1999 Employee Stock Purchase Plan (incorporated by reference into
        Alloy Online's Registration Statement on Form S-1 (Registration Number
        333-74159)).

 10.26  Investment Representation and Lockup Agreement dated as of January 21,
        2000 by and between Alloy Online, Inc. and Leslie N. Morgenstein
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated February 7, 2000).

 10.27  Investment Representation and Lockup Agreement dated as of January 21,
        2000 by and between Alloy Online, Inc. and Ann Brashares (incorporated
        by reference to Alloy Online's Current Report on Form 8-K dated
        February 7, 2000).

 10.28  Escrow Agreement dated as of January 21, 2000 by and among Alloy
        Online, Inc., Alloy Acquisition Sub., Inc., Leslie N. Morgenstein, Ann
        Brashares and State Street Bank and Trust Company, as Escrow Agent
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated February 7, 2000).

 10.29  Investment Representation and Lockup Agreement dated as of December 1,
        1999 by and between Alloy Online, Inc. and Celebrity Sightings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated December 21, 1999).

 10.30  Escrow Agreement dated as of December 1, 1999 by and among Alloy
        Online, Inc., Alloy Acquisition Corporation, Celebrity Sightings, LLC
        and State Street Bank and Trust Company, as Escrow Agent (incorporated
        by reference to Alloy Online's Current Report on Form 8-K dated
        December 21, 1999).

 10.31  Warrant to Purchase Shares of Common Stock of Alloy Online, Inc. dated
        as of July 18, 2000 between Alloy Online, Inc. and SWI Holdings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated August 2, 2000).

 10.32  Investment Representation and Lockup Agreement dated as of July 18,
        2000, by and between Alloy Online, Inc. and SWI Holdings, LLC
        (incorporated by reference to Alloy Online's Current Report on Form 8-
        K dated August 2, 2000).

                                       34

<PAGE>

 10.33  Amendment to Loan and Security Agreement, dated as of July 18, 2000, by
        and among Phase Three, Inc., the financial institutions party thereto
        and  the other parties named therein (incorporated by reference to
        Alloy Online's Current Report on Form 8-K dated August 2, 2000).

 21.1   Subsidiaries of Alloy Online, Inc.

 23.2   Consent of Arthur Andersen LLP

 24.1   Power of Attorney (incorporated by reference into Alloy Online's
        Registration Statement on Form S-1 (Registration Number 333-74159).

(B)  REPORTS ON FORM 8-K:

     None.

                                       35