##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended January 31, 2005                                                  
| 
|o |  | 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, Inc.


Exact name of registrant as specified in charter


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

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


PREFERRED STOCK PURCHASE RIGHTS


o þ


o


þ o
















---










INDEX


|                                                                                                                            |  |                                                                                                                      |  |     
|--------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                            |  |                                                                                                                      |  | Page
|                                                                                                                            |  |                                                                                                                      |  |     
|PART I                                                                                                                     
|Item 1.                                                                                                                     |  | Business                                                                                                             |  | 2   
|Item 2.                                                                                                                     |  | Properties                                                                                                           |  | 18  
|Item 3.                                                                                                                     |  | Legal Proceedings                                                                                                    |  | 18  
|Item 4.                                                                                                                     |  | Submission of Matters to a Vote of Security
    Holders                                                              |  | 20  
|PART II                                                                                                                    
|Item 5.                                                                                                                     |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  | 20  
|Item 6.                                                                                                                     |  | Selected Financial Data                                                                                              |  | 22  
|Item 7.                                                                                                                     |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  | 24  
|Item 7A.                                                                                                                    |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  | 37  
|Item 8.                                                                                                                     |  | Financial Statements and Supplementary
    Data                                                                      |  | 37  
|Item 9.                                                                                                                     |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  | 37  
|Item 9A.                                                                                                                    |  | Controls and Procedures                                                                                              |  | 38  
|Item 9B.                                                                                                                    |  | Other Information                                                                                                    |  | 38  
|PART III                                                                                                                   
|Item 10.                                                                                                                    |  | Directors and Executive Officers of the
    Registrant                                                               |  | 38  
|Item 11.                                                                                                                    |  | Executive Compensation                                                                                               |  | 39  
|Item 12.                                                                                                                    |  | Security Ownership of Certain Beneficial
    Owners and Management                                                   |  | 39  
|Item 13.                                                                                                                    |  | Certain Relationships and Related
    Transactions                                                                   |  | 39  
|Item 14.                                                                                                                    |  | Principal Accountant Fees and Services                                                                               |  | 39  
|PART IV                                                                                                                    
|Item 15.                                                                                                                    |  | Exhibits and Financial Statement
    Schedules                                                                       |  | 39  
|SIGNATURES                                                                                                                  |  |                                                                                                                     
|Signatures                                                                                                                  |  | 40                                                                                                                  
|EXHIBITS                                                                                                                    |  |                                                                                                                     
|Exhibit Index                                                                                                               |  | 41                                                                                                                  
|CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE                                                                              |  |                                                                                                                     
|Index to Consolidated Financial Statements
    and Schedule                                                                 |  | F-1                                                                                                                 
|EX-10.32: OUTSIDE DIRECTOR COMPENSATION ARRANGEMENTS                                                                       
|EX-10.33: COMPENSATION ARRANGEMENTS                                                                                        
|EX-10.34: FORM OF NONQUALIFIED STOCK OPTION AGREEMENT FOR 2002 NON-QUALIFIED OPTION PLAN                                   
|EX-10.35: FORM OF NONQUALIFIED STOCK OPTION AGREEMENT FOR RESTATED 1997 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
|EX-10.36: FORM OF INCENTIVE STOCK OPTION AGREEMENT FOR RESTATED 1997 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN   
|EX-10.37: FORM OF NONQUALIFIED STOCK OPTION AGREEMENT FOR ITURF INC. AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN        
|EX-10.38: FORM OF INCENTIVE STOCK OPTION AGREEMENT FOR ITURF INC. AMENDMENT AND RESTATED 1999 STOCK INCENTIVE PLAN         
|EX-10.39: FORM OF RESTRICTED STOCK AGREEMENT                                                                               
|EX-10.40: FORM OF RESTRICTED STOCK AGREEMENT                                                                               
|EX-21.1: SUBSIDIARIES OF ALLOY, INC.                                                                                       
|EX-23.1: CONSENT OF BDO SEIDMAN, LLP                                                                                       
|EX-23.2: CONSENT OF KPMG, LLP                                                                                              
|EX-31.1: CERTIFICATION                                                                                                     
|EX-31.2: CERTIFICATION                                                                                                     
|EX-32.1: CERTIFICATION                                                                                                     
|EX-32.2: CERTIFICATION                                                                                                     



1



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Overview
















| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Broad Access to Generation Y. Our collection of media,
    marketing and retail assets enables us to reach a significant
    portion of the approximately 60 million Generation Y
    consumers by:



| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | circulating over 66 million direct mail catalogs annually;                                                                                                                          
|
| |  | producing college guides, books and recruitment publications;                                                                                                                       
|
| |  | owning and operating 55 dELiA*s retail stores, including 6
    outlet stores, in 22 states;                                                                                         
|
| |  | owning and operating over 50,000 display media boards on college
    and high school campuses throughout the United States;                                                         
|
| |  | placing advertising in over 2,600 college and high school
    newspapers; and                                                                                                       
|
| |  | interacting with our registered online user base that, as of
    January 31, 2005 was comprised more than 4 million
    individuals who subscribed to our targeted e-mail magazines.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Comprehensive Generation Y Database. As of
    January 31, 2005, our database contained information about
    approximately 31 million individuals, including
    approximately 8.8 million individuals who have purchased
    products directly from us. In addition to names and addresses,
    our database contains a variety of valuable information that may
    include age, purchasing history, stated interests, on-line
    behavior, educational level and socioeconomic factors. We
    continually refresh and grow our database with information we
    gather through our media properties, marketing services, retail
    stores and direct marketing programs, as well as through

2



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##### Table of Contents



| |  |                                                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | acquisitions of companies that have database information. We
    analyze this data in detail, which we believe enables us to not
    only improve response rates from our own direct sales efforts
    but also to offer advertisers cost-effective ways of reaching
    highly targeted audiences.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Established Retail Brands and Marketing Franchises. Our
    principal retail brands and marketing franchises are well known
    by Generation Y consumers and by advertisers that target this
    market. Alloy, dELiA*s, CCS and Dans Comp are recognized
    brands among Generation Y consumers. Each of these multi-media
    brands targets a specific segment of the youth market through
    retail stores, catalogs and/or websites. For advertisers, our
    portfolio of marketing franchises, providing services under the
    Alloy Media + Marketing umbrella name, includes established
    marketers that target the youth market such as Market Place
    Media, 360 Youth, Alloy Marketing and Promotions, On Campus
    Marketing and Private Colleges & Universities, which
    collectively have over 60 years of experience in creating
    and implementing advertising and marketing programs targeting
    the youth market.
|
| |  | Strong Relationship with Advertisers and Marketing
    Partners. We provide advertisers and marketing partners with
    highly targeted, measurable and effective means to reach the
    Generation Y audience. Our seasoned advertising sales force of
    over 120 professionals has established strong relationships with
    youth marketers. During fiscal year ended January 31, 2005,
    we had over 1,800 advertising clients, including AT&T
    Wireless (Cingular), Citibank, Geico, Paramount Pictures,
    Procter & Gamble, Qwest Communications, Simon Brand
    Ventures, and Verizon Wireless.                                                                                                                                                                                                                                                                                                                                     





| |                                    
| | -----------------------------------
| | Alloy Merchandising Group:         
|
| | 1. Direct Marketing                
|
| | 2. Retail Stores                   
|
| | Alloy Media + Marketing:           
|
| | 3. Sponsorship and Other Activities

Alloy Merchandising Group


Direct Marketing Segment






Alloy


dELiA*s


3



---



##### Table of Contents



CCS


Dans Comp




| |                          
| | -------------------------
| | Direct Marketing Strategy











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



4



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##### Table of Contents













Retail Stores Segment




Store Operations.


5



---



##### Table of Contents







Alloy Media + Marketing


Sponsorship and Other Activities Segment








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Alloy Marketing and Promotions
    (AMP)  AMP is our promotional
    marketing unit specializing in event and field marketing,
    sampling and acquisitions programs, Internet design services and
    consumer research. AMP clients include AT&T, Verizon
    Wireless, LOreal, Hasbro, Panasonic, New Balance and
    Paramount Pictures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | 360 Youth  360 Youth is our media and
    marketing arm that provides media and advertising placement
    solutions for marketers targeting young adults. 360 Youth
    enables Fortune 500 companies and other advertising clients
    to reach millions of consumers each month through a
    comprehensive mix of programs incorporating proprietary media
    assets such as school-based media boards, websites and catalogs,
    as well as college, high school, military base and
    multi-cultural newspapers. We own and operate over 50,000
    display media boards that are located in high traffic areas on
    college and high school campuses, movie theaters, and other
    locations. These one, two or three panel display media boards
    often feature full color, backlit advertising as well as
    scrolling electronic messaging. Through our newspaper
    advertising units, we are able to connect advertisers with more
    than 55 million readers throughout the United States.
|
| |  | American Multicultural Marketing(AMM)/
    Market Place Media (MPM)  AMM and
    MPM are our media placement agencies serving the college,
    multi-cultural and military markets for a variety of non-company
    owned print and broadcast properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Alloy Education  Alloy Education includes
    among others: Private Colleges & Universities, American
    Colleges & Universities, Careers and Colleges
    Magazines, Careers and Colleges, eStudentLoan.com and
    Wintergreen Orchard House.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

6



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Private Colleges & Universities 
    Under the Private Colleges & Universities brand, we
    publish over 30 editions of targeted college guides
    providing information about private colleges and universities
    and the admissions process to college-bound high school
    students, their parents, and high-school guidance counselors.
    Our editions target students based on academic achievement,
    geography and special interests such as science and medicine,
    among others. We distribute our guidebooks to college-bound
    students across the United States. Complementing our published
    college and university guides, our Private Colleges &
    Universities websites (WWW.PRIVATECOLLEGES.COM and
    WWW.CAREERSANDCOLLEGES.COM) provide information on colleges and
    universities to college-bound high school students. Hundreds of
    colleges and universities advertise their programs and recruit
    students via these websites.
|
| |  | Careers and Colleges  Our Careers and Colleges
    magazine is published four times a year and distributed to high
    school students via high school guidance counselors. It is an
    advertiser-supported publication that provides advice to
    students on choosing a career, selecting a school and paying for
    college.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | EStudentLoan  Our eStudentLoan websites
    (WWW.ESTUDENTLOAN.COM and WWW.ABS-OLUTELYSCHOLARSHIPS.COM)
    feature college scholarship and financial aid database search
    engines. These websites complement our college recruitment
    publications and websites to serve the college-bound segment of
    Generation Y.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Alloy Entertainment(formerly 17th Street
    Productions)  Through Alloy Entertainment, we
    develop youth entertainment properties including books and
    concepts for television series and motion pictures. We believe
    we are the largest packager of books for the teen market. Some
    of our properties include Sweet Valley High, The Sisterhood
    of the Traveling Pants, Gossip Girl and The A-List.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Alloy Out-of-Home  Alloy Out-of-Home is our
    media board unit. Through this unit we offer third party
    advertisers access to more than 50,000 media boards located
    throughout the United States in high traffic areas, including
    college and university campuses, high school locker rooms and
    restaurants. Alloy Out-of-Home includes our Insite Advertising
    and Onsite Promotions divisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Insite Advertising  InSite is our national
    indoor media company targeting consumers between the ages of
    18-34, which we acquired in March 2004.                       
|
| |  | Onsite Promotions  OnSite Promotions is the
    event-marketing and promotions division of InSite, which creates
    customized promotional programs for out-of-home agencies.



| |   |                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Alloy Mall Marketing Services(AMMS)  AMMS is a marketing and
    promotion division. Currently, AMMS is functioning as an
    independent contractor for XM Satellite Radio, Inc.
    (XM) offering customers XM programming packages at
    kiosks stationed in malls throughout the United States.

On Campus Marketing (OCM)






| |                             
| | ----------------------------
| | Sales & Marketing Salesforce





| |   |                                                               
| | - | --------------------------------------------------------------
| |  | advertising in our custom publications, catalogs and websites;
|
| |  | advertising on our display media boards;                      

7



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| |   |                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------
| |  | marketing programs such as product sampling, customer
    acquisition programs and promotional events; and
|
| |  | advertising in college, high school, military base and
    multi-cultural newspapers.                     



Infrastructure, Operations and Technology








Competition




Seventeen, YM, Teen Teen People;




8



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| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size and level of detail in our database;                                                                                             
|
| |  | our relationships with advertisers and marketing partners;                                                                                
|
| |  | the consumer and media brands we have developed in the
    Generation Y market;                                                           
|
| |  | our knowledge of the Generation Y audience and our ability
    through our marketing franchises to continually analyze the
    market; and
|
| |  | our ability to deliver targeted Generation Y audiences to
    advertisers through cost-effective, cross-media advertising
    programs.   

Seasonality




Intellectual Property




Government Regulation








9



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10



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Employees






Financial Information About Segments




Website Access to Reports




Risk Factors That May Affect Future Results




Risks Related to Our Businesses




| |                                                             
| | ------------------------------------------------------------
| | We may not be able to achieve or maintain
    profitability.





| |                                         
| | ----------------------------------------
| | Our business may not grow in the future.



11



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| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may fail to use our Generation Y database and our
    expertise in marketing to Generation Y consumers successfully,
    and we may not be able to maintain the quality and size of our
    database.





| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our success depends largely on the value of our brands,
    and if the value of our brands were to diminish, our business
    would be adversely affected.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to protect the confidentiality of our
    proprietary information and know-how, the commercial value of
    our technology could be reduced.



12



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| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be involved in lawsuits to protect or enforce our
    intellectual property or proprietary rights that could be
    expensive and time-consuming.







| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Our revenues and income could decline due to general
    economic trends, declines in consumer spending and
    seasonality.





| |                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are considering a spin-off of all or a portion of our
    merchandising business from our media and marketing services
    business, and the resulting companies businesses may not
    succeed as stand-alone entities.





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | We compete with other retailers for sales and locations in
    our retail store operations.



13



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| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Closing stores or curtailing certain operations could
    result in significant asset impairments and significant costs to
    us.





| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | dELiA*s exclusive branding activities could lead to
    increased inventory obsolescence and could harm our relations
    with other vendors.





| |                                                           
| | ----------------------------------------------------------
| | We depend largely upon a single distribution
    facility.





| |                                                    
| | ---------------------------------------------------
| | We may be required to recognize impairment charges.





14



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| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our strategy contemplates strategic acquisitions. Our
    inability to acquire suitable businesses or to manage their
    integration could harm our business.





| |                                        
| | ---------------------------------------
| | Our catalog response rates may decline.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | We rely on third-party vendors for merchandise, and they
    may not perform as we expect they will.





| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our key vendors may fail or be unable to expand with us;                                                                                                                                  
|
| |  | we may lose or cease doing business with one or more key vendors;                                                                                                                         
|
| |  | our current vendor terms may be changed to require increased
    payments in advance of delivery, and we may not be able to fund
    such payments through our current credit facility; or
|
| |  | our ability to procure products may be limited.                                                                                                                                           



15



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| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | We must effectively manage our vendors to minimize
    inventory risk and maintain our margins.







| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Competition may adversely affect our business and cause
    our stock price to decline.





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely on third parties for some essential business
    operations, and disruptions or failures in service may adversely
    affect our ability to deliver goods and services to our
    customers.





| |                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our key personnel to operate our business,
    and we may not be able to hire enough additional management and
    other personnel to manage our growth.





| |                                                                                
| | -------------------------------------------------------------------------------
| | We may be required to collect sales tax in our direct
    marketing operations.



16



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| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could face liability from, or our ability to conduct
    business could be adversely affected by, government and private
    actions concerning personally identifiable data, including
    privacy.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We could face liability for information displayed in our
    print publication media or displayed on or accessible via our
    websites.





| |                                                                      
| | ---------------------------------------------------------------------
| | We could face liability for breaches of security on the
    Internet.



Risks Relating to Our Common Stock




| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Our stock price has been volatile, is likely to continue
    to be volatile, and could decline substantially.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | We are a defendant in class action and other lawsuits and
    defending these litigations could hurt our business.



17



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| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Terrorist attacks and other acts of wider armed conflict
    may have an adverse effect on the United States and world
    economies and may adversely affect our business.





| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Delaware law and our organizational documents and
    stockholder rights plan may inhibit a takeover.










|        |           
|------- | ----------
|Item 2. | Properties



|                 |  |                                                   |  |           |         | 
|---------------- |  | ------------------------------------------------- |  | --------- | ------- | 
|                 |  |                                                   |  | Appr. Sq.
|Location         |  | Use                                               |  | Footage  
|                 |  |                                                   |  |          
|New York, NY     |  | Corporate office                                  |  |           | 40,000  | 
|Chicago, IL      |  | Advertising and sales office                      |  |           | 16,000  | 
|Los Angeles, CA  |  | Advertising and sales office                      |  |           | 7,400   | 
|Boston, MA       |  | Advertising and sales office                      |  |           | 18,000  | 
|Mt. Vernon, IN   |  | Dans Comp general office, call center, warehouse |  |           | 40,000  | 
|Cranbury, NJ     |  | 360 Youth general office, AMP warehouse           |  |           | 80,000  | 
|New York, NY     |  | dELiA*s general office space                      |  |           | 36,000  | 
|Westerville, OH  |  | Call center                                       |  |           | 15,000  | 
|Hanover, PA      |  | Warehouse and fulfillment center                  |  |           | 360,000 | 
|West Trenton, NJ |  | OCM office and warehouse                          |  |           | 18,000  | 
|Chambersburg, PA |  | OCM warehouse                                     |  |           | 90,000  | 






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



18



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19



---



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|        |                                                  
|------- | -------------------------------------------------
|Item 4. | Submission of Matters to Vote of Security Holders






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities

Market Information




|                                     |  |             |      |     |  |   |      | 
|------------------------------------ |  | ----------- | ---- | --- |  | - | ---- | 
|                                     |  | Common     
|                                     |  | Stock Price
|                                     |  |            
|                                     |  | High        |      | Low
|                                     |  |             |      |    
|FISCAL 2004 (Ended January 31, 2005) |  |             |      |     |  |   |      | 
|First Quarter                        |  | $           | 5.83 |     |  | $ | 4.56 | 
|Second Quarter                       |  |             | 6.80 |     |  |   | 4.38 | 
|Third Quarter                        |  |             | 5.20 |     |  |   | 3.07 | 
|Fourth Quarter                       |  |             | 8.24 |     |  |   | 3.82 | 
|FISCAL 2003 (Ended January 31, 2004) |  |             |      |     |  |   |      | 
|First Quarter                        |  | $           | 6.35 |     |  | $ | 4.28 | 
|Second Quarter                       |  |             | 8.00 |     |  |   | 5.85 | 
|Third Quarter                        |  |             | 7.40 |     |  |   | 4.04 | 
|Fourth Quarter                       |  |             | 5.69 |     |  |   | 4.11 | 



20



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Stockholders




Dividends




Unregistered Sales of Securities






Issuer Purchases of Equity Securities




|                                   |  |              |         |               |  |                     |      |                      |  |  |   |  |  |   |           | 
|---------------------------------- |  | ------------ | ------- | ------------- |  | ------------------- | ---- | -------------------- |  |  | - |  |  | - | --------- | 
|                                   |  |              |         |               |  | Total Number of     |      | Approximate Dollar  
|                                   |  |              |         |               |  | Shares Purchased as |      | Value of Shares that
|                                   |  | Total Number |         | Average Price |  | Part of Publicly    |      | May Yet be          
|                                   |  | of Shares    |         | Paid per      |  | Announced           |      | Purchased Under     
|                                   |  | Purchased(1) |         | Share(1)      |  | Program(2)          |      | the Program(2)      
|                                   |  |              |         |               |  |                     |      |                     
|Nov. 1, 2004 through Nov. 30, 2004 |  |              |        |               |  |                     |     |                      |  |  |  |  |  | $ | 7,016,000 | 
|Dec. 1, 2004 through Dec. 31, 2004 |  |              | 48,057  |               |  | $                   | 6.50 |                      |  |  |  |  |  |   | 7,016,000 | 
|Jan. 1, 2005 through Jan. 31, 2005 |  |              | 75,548  |               |  | $                   | 6.64 |                      |  |  |  |  |  |   | 7,016,000 | 
|Total                              |  |              | 123,605 |               |  | $                   | 6.59 |                      |  |  |  |  |  |   |           | 






|    |                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These columns reflect the surrender to the Company of
    123,605 shares of Common Stock to satisfy tax withholding
    obligations in connection with the vesting of restricted stock
    to employees.                                                                                 
|   
|(2) | On January 29, 2003, the Company announced that the Board
    of Directors authorized the purchase of up to $10 million
    of the Companys Common Stock. We purchased
    600,000 shares for approximately $3.0 million during
    the first quarter of fiscal 2003 under this program.

21



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##### Table of Contents








|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.



|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |        | 
|-------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ------- |  | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                                   |                                                                            | Year Ended January 31,                         
|                                                                                                   |                                                                            |                                                
|                                                                                                   |                                                                            | 2005                                            |         | 2004    |  | 2003 |         | 2002    |  | 2001
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |     
|                                                                                                   |                                                                            | (In thousands, except share and per share data)
|STATEMENTS OF OPERATIONS DATA
    (1):                                                             |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Net direct marketing revenues
    (2)                                                              |                                                                            | $                                               | 154,256 |         |  | $    | 156,821 |         |  | $    | 167,572 |         |  | $ | 124,052 |        |  | $ | 76,736  |       
|Retail stores
    revenues(2)                                                                      |                                                                            |                                                 | 63,986  |         |  |      | 30,103  |         |  |      |        |         |  |   |        |        |  |   |        |       
|Sponsorship and other activities
    revenues(2)                                                   |                                                                            |                                                 | 184,251 |         |  |      | 185,024 |         |  |      | 131,758 |         |  |   | 41,570  |        |  |   | 14,452  |       
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Total revenues                                                                                     |                                                                            |                                                 | 402,493 |         |  |      | 371,948 |         |  |      | 299,330 |         |  |   | 165,622 |        |  |   | 91,188  |       
|Cost of revenues                                                                                   |                                                                            |                                                 | 208,349 |         |  |      | 189,379 |         |  |      | 145,148 |         |  |   | 68,858  |        |  |   | 37,757  |       
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Gross profit                                                                                       |                                                                            |                                                 | 194,144 |         |  |      | 182,569 |         |  |      | 154,182 |         |  |   | 96,764  |        |  |   | 53,431  |       
|Operating expenses:                                                                                |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|                                                                                                   | Selling and marketing                                                      |                                                 |         | 155,542 |  |      |         | 145,715 |  |      |         | 108,791 |  |   |         | 81,829 |  |   |         | 60,814 | 
|                                                                                                   | General and administrative                                                 |                                                 |         | 45,650  |  |      |         | 33,970  |  |      |         | 17,240  |  |   |         | 13,516 |  |   |         | 10,659 | 
|                                                                                                   | Amortization of goodwill and other intangible
    assets(5)                |                                                 |         | 6,275   |  |      |         | 7,887   |  |      |         | 5,554   |  |   |         | 18,316 |  |   |         | 8,573  | 
|                                                                                                   | Impairment of goodwill and other indefinite-lived intangible
    assets(5) |                                                 |         | 72,102  |  |      |         | 60,638  |  |      |         |        |  |   |         |       |  |   |         |       | 
|                                                                                                   | Impairment of other long-lived assets                                      |                                                 |         | 942     |  |      |         | 1,315   |  |      |         |        |  |   |         |       |  |   |         |       | 
|                                                                                                   | Restructuring charges                                                      |                                                 |         | 347     |  |      |         | 730     |  |      |         | 2,571   |  |   |         |       |  |   |         |       | 
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Total operating expenses                                                                           |                                                                            |                                                 | 280,858 |         |  |      | 250,255 |         |  |      | 134,156 |         |  |   | 113,661 |        |  |   | 80,046  |       
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|(Loss) income from operations                                                                      |                                                                            |                                                 | (86,714 | )       |  |      | (67,686 | )       |  |      | 20,026  |         |  |   | (16,897 | )      |  |   | (26,615 | )     
|Interest income (expense), net                                                                     |                                                                            |                                                 | (4,529  | )       |  |      | (2,003  | )       |  |      | 1,700   |         |  |   | 935     |        |  |   | 1,119   |       
|Other income                                                                                       |                                                                            |                                                 | 390     |         |  |      |        |         |  |      |        |         |  |   |        |        |  |   |        |       
|Realized (loss) gain on sale of marketable securities and
    write-off of investments, net        |                                                                            |                                                 | (755    | )       |  |      | (247    | )       |  |      | 97      |         |  |   | 658     |        |  |   | (4,193  | )     
|Provision (benefit) for income taxes                                                               |                                                                            |                                                 | 158     |         |  |      | 5,279   |         |  |      | (1,472  | )       |  |   | 296     |        |  |   |        |       
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Net (loss) income                                                                                  |                                                                            | $                                               | (91,766 | )       |  | $    | (75,215 | )       |  | $    | 23,295  |         |  | $ | (15,600 | )      |  | $ | (29,689 | )     
|Non-cash charge attributable to beneficial conversion feature of
    preferred stock
    issued(3) |                                                                            |                                                 |        |         |  |      |        |         |  |      |        |         |  |   | 6,745   |        |  |   |        |       
|Preferred stock dividends and accretion of discount                                                |                                                                            |                                                 | 1,608   |         |  |      | 1,944   |         |  |      | 2,100   |         |  |   | 3,013   |        |  |   |        |       
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       
|Net (loss) income attributable to common stockholders                                              |                                                                            | $                                               | (93,374 | )       |  | $    | (77,159 | )       |  | $    | 21,195  |         |  | $ | (25,358 | )      |  | $ | (29,689 | )     
|                                                                                                   |                                                                            |                                                 |         |         |  |      |         |         |  |      |         |         |  |   |         |        |  |   |         |       

22



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|                                                                                             |  |                                                 |            |      |  |      |            |      |  |      |            |  |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | - |  | - | ---------- | -
|                                                                                             |  | Year Ended January 31,                         
|                                                                                             |  |                                                
|                                                                                             |  | 2005                                            |            | 2004 |  | 2003 |            | 2002 |  | 2001
|                                                                                             |  |                                                 |            |      |  |      |            |      |  |     
|                                                                                             |  | (In thousands, except share and per share data)
|Basic net (loss) earnings attributable to common stockholders
    per common share
    (4)   |  | $                                               | (2.19      | )    |  | $    | (1.87      | )    |  | $    | 0.55       |  |  | $ | (1.02      | ) |  | $ | (1.61      | )
|                                                                                             |  |                                                 |            |      |  |      |            |      |  |      |            |  |  |   |            |   |  |   |            |  
|Weighted average basic common shares outstanding                                             |  |                                                 | 42,606,905 |      |  |      | 41,175,046 |      |  |      | 38,436,256 |  |  |   | 24,967,678 |   |  |   | 18,460,042 |  
|                                                                                             |  |                                                 |            |      |  |      |            |      |  |      |            |  |  |   |            |   |  |   |            |  
|Diluted net (loss) earnings attributable to common stockholders
    per common share
    (4) |  | $                                               | (2.19      | )    |  | $    | (1.87      | )    |  | $    | 0.53       |  |  | $ | (1.02      | ) |  | $ | (1.61      | )
|                                                                                             |  |                                                 |            |      |  |      |            |      |  |      |            |  |  |   |            |   |  |   |            |  
|Weighted average diluted common shares outstanding                                           |  |                                                 | 42,606,905 |      |  |      | 41,175,046 |      |  |      | 40,071,412 |  |  |   | 24,967,678 |   |  |   | 18,460,042 |  
|                                                                                             |  |                                                 |            |      |  |      |            |      |  |      |            |  |  |   |            |   |  |   |            |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 3 to the consolidated financial statements for a
    description of the effect of our acquisitions on the
    comparability of our selected financial information.                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | See Note 18 to the consolidated financial statements for
    financial data by reportable segment. In 2002, we changed the
    composition of our reportable segments. As a result, the amounts
    in the 2001 segment disclosures have been restated to conform to
    the 2002 composition of reportable segments.                                                                                                                                                                                            
|   
|(3) | See Note 10 to the consolidated financial statements for a
    description of the beneficial conversion features of our
    Series B Convertible Preferred Stock. The net loss
    attributable to common stockholders reflects the intrinsic value
    of the realization of a contingent beneficial conversion feature
    of preferred stock issued.                                                                                                                                                          
|   
|(4) | See Note 15 to the consolidated 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)
    income per common share and net (loss) income attributable to
    common stockholders per common share.                                                                                                                                                                                                     
|   
|(5) | In June 2001, the FASB issued SFAS No. 142,
    Goodwill and Other Intangible Assets. Under
    SFAS No. 142, goodwill and intangible assets with
    indefinite lives that were acquired after June 30, 2001 are
    no longer amortized but instead evaluated for impairment at
    least annually. With respect to goodwill and intangibles with
    indefinite lives that were acquired prior to July 1, 2001,
    Alloy adopted the nonamortization provisions of
    SFAS No. 142 as of February 1, 2002.

|                                                                  |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------------------------------------------------- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                  |  | January 31,   
|                                                                  |  |               
|                                                                  |  | 2005           |         | 2004 |  | 2003 |         | 2002 |  | 2001
|                                                                  |  |                |         |      |  |      |         |      |  |     
|                                                                  |  | (In thousands)
|BALANCE SHEET DATA:                                               |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Cash and cash equivalents                                         |  | $              | 25,137  |      |  | $    | 27,273  |      |  | $    | 35,187  |  |  | $ | 61,618  |  |  | $ | 9,338   | 
|Working capital                                                   |  |                | 34,914  |      |  |      | 32,292  |      |  |      | 45,737  |  |  |   | 65,430  |  |  |   | 25,400  | 
|Total assets                                                      |  |                | 359,133 |      |  |      | 450,009 |      |  |      | 434,600 |  |  |   | 310,207 |  |  |   | 106,908 | 
|Long-term debt and capital lease obligation, less current portion |  |                | 3,578   |      |  |      | 743     |      |  |      | 93      |  |  |   | 358     |  |  |   | 103     | 
|Convertible redeemable preferred stock, net                       |  |                | 16,042  |      |  |      | 14,434  |      |  |      | 15,550  |  |  |   | 15,046  |  |  |   |        | 
|Senior Convertible Debentures Due 2023                            |  |                | 69,300  |      |  |      | 69,300  |      |  |      |        |  |  |   |        |  |  |   |        | 
|Total stockholders equity                                        |  | $              | 192,736 |      |  | $    | 281,295 |      |  | $    | 345,442 |  |  | $ | 249,734 |  |  | $ | 88,282  | 

23



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Executive Summary and Outlook








sm


24



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##### Table of Contents







Critical Accounting Policies and Estimates








| |                    
| | -------------------
| | Revenue Recognition







25



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| |              
| | -------------
| | Catalog Costs







| |            
| | -----------
| | Inventories





| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |                               
| | ------------------------------
| | Goodwill and Intangible Assets



26



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| |                                                                        
| | -----------------------------------------------------------------------
| | Impairment of Goodwill and Other Indefinite-Lived
    Intangible Assets









| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets



27



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##### Table of Contents



Results of Operations and Financial Condition




| |                                   
| | ----------------------------------
| | Consolidated Results of Operations



|                                                                                                       |                   |                        |       |       |   |      |       |       |   |  |       |     | 
|------------------------------------------------------------------------------------------------------ | ----------------- | ---------------------- | ----- | ----- | - | ---- | ----- | ----- | - |  | ----- | --- | 
|                                                                                                       |                   | Year Ended January 31,
|                                                                                                       |                   |                       
|                                                                                                       |                   | 2005                   |       | 2004  |   | 2003
|                                                                                                       |                   |                        |       |       |   |     
|STATEMENTS OF OPERATIONS DATA                                                                          |                   |                        |       |       |   |      |       |       |   |  |       |    
|Net direct marketing revenues                                                                          |                   |                        | 38.3  | %     |   |      | 42.2  | %     |   |  | 56.0  | %  
|Retail stores revenues                                                                                 |                   |                        | 15.9  |       |   |      | 8.1   |       |   |  |      |    
|Sponsorship and other revenues                                                                         |                   |                        | 45.8  |       |   |      | 49.7  |       |   |  | 44.0  |    
|                                                                                                       |                   |                        |       |       |   |      |       |       |   |  |       |    
|Total revenues                                                                                         |                   |                        | 100.0 |       |   |      | 100.0 |       |   |  | 100.0 |    
|Cost of revenues                                                                                       |                   |                        | 51.8  |       |   |      | 50.9  |       |   |  | 48.5  |    
|Gross profit                                                                                           |                   |                        | 48.2  |       |   |      | 49.1  |       |   |  | 51.5  |    
|Operating expenses:                                                                                    |                   |                        |       |       |   |      |       |       |   |  |       |    
|Selling and marketing                                                                                  |                   |                        | 38.6  |       |   |      | 39.2  |       |   |  | 36.3  |    
|General and administrative                                                                             |                   |                        | 11.3  |       |   |      | 9.1   |       |   |  | 5.8   |    
|Amortization of other intangible assets                                                                |                   |                        | 1.6   |       |   |      | 2.1   |       |   |  | 1.9   |    
|Impairment of goodwill and other indefinite-lived intangible
    assets                                |                   |                        | 17.9  |       |   |      | 16.3  |       |   |  |      |    
|Impairment of long-lived assets                                                                        |                   |                        | 0.2   |       |   |      | 0.4   |       |   |  |      |    
|Restructuring charges                                                                                  |                   |                        | 0.1   |       |   |      | 0.2   |       |   |  | 0.8   |    
|Total operating expenses                                                                               |                   |                        | 69.7  |       |   |      | 67.3  |       |   |  | 44.8  |    
|(Loss) income from operations                                                                          |                   |                        | (21.5 | )     |   |      | (18.2 | )     |   |  | 6.7   |    
|Interest (expense) income, net                                                                         |                   |                        | (1.1  | )     |   |      | (0.5  | )     |   |  | 0.6   |    
|Realized (loss) gain on available-for-sale marketable securities
    and write-off of investments, net |                   |                        | (0.2  | )     |   |      | (0.1  | )     |   |  | 0.0   |    
|Provision (benefit) for income taxes                                                                   |                   |                        | 0.0   |       |   |      | 1.4   |       |   |  | (0.5  | )  
|                                                                                                       | Net (loss) income |                        |       | (22.8 | ) |      |       | (20.2 | ) |  |       | 7.8 | 
|Preferred stock dividends and accretion of discount                                                    |                   |                        | 0.4   |       |   |      | 0.5   |       |   |  | 0.7   |    
|Net (loss) income attributable to common stockholders                                                  |                   |                        | (23.2 | )%    |   |      | (20.7 | )%    |   |  | 7.1   | %  



| |                              
| | -----------------------------
| | Segment Results of Operations



|                              |  |                             |         |                         |  |      |         |              |  |              |         |   |  |  |       |   |  |  |       |   
|----------------------------- |  | --------------------------- | ------- | ----------------------- |  | ---- | ------- | ------------ |  | ------------ | ------- | - |  |  | ----- | - |  |  | ----- | --
|                              |  | For Years Ended January 31, |         | Percent Change         
|                              |  |                             |         |                        
|                              |  | 2005                        |         | 2004                    |  | 2003 |         | 2004 vs 2005 |  | 2003 vs 2004
|                              |  |                             |         |                         |  |      |         |              |  |             
|                              |  | Operating (Loss) Income     |         | Operating (Loss) Income
|                              |  |                             |         |                        
|Direct marketing              |  | $                           | 8,230   |                         |  | $    | (63,296 | )            |  | $            | 3,108   |   |  |  | NM    |   |  |  | NM    |   
|Retail stores                 |  |                             | (6,701  | )                       |  |      | (2,574  | )            |  |              |        |   |  |  | 160.3 | % |  |  | NM    |   
|Sponsorship and other         |  |                             | (53,771 | )                       |  |      | 25,258  |              |  |              | 29,210  |   |  |  | NM    |   |  |  | (13.5 | )%
|Corporate                     |  |                             | (34,472 | )                       |  |      | (27,074 | )            |  |              | (12,292 | ) |  |  | 27.3  |   |  |  | 120.3 |   
|                              |  |                             |         |                         |  |      |         |              |  |              |         |   |  |  |       |   |  |  |       |   
|Total operating (loss) income |  | $                           | (86,714 | )                       |  | $    | (67,686 | )            |  | $            | 20,026  |   |  |  | 28.1  | % |  |  | NM    |   
|                              |  |                             |         |                         |  |      |         |              |  |              |         |   |  |  |       |   |  |  |       |   






28



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##### Table of Contents



Fiscal 2004 Compared with Fiscal 2003




| |         
| | --------
| | Revenues

Total Revenues.


Direct Marketing Revenues.


Retail Stores Revenues.


Sponsorship and Other Activities Revenues.




| |                 
| | ----------------
| | Cost of Revenues







| |                         
| | ------------------------
| | Total Operating Expenses

Selling and Marketing.


29



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General and Administrative.


Amortization of Intangible Assets.


Goodwill and Other Indefinite-Lived Intangible Asset
Impairment.


Impairment of Other Long-Lived Asset


Restructuring Charges.




| |                              
| | -----------------------------
| | Income (Loss) from Operations

Total Loss from Operations.


Income (Loss) from Direct Marketing Operations.


30



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Loss from Retail Stores Operations.


Income (Loss) from Sponsorship and Other Activities
Operations.




| |                               
| | ------------------------------
| | Interest Income (Expense), Net





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Realized Gain (Loss) on Marketable Securities and
    Write-off of Investments, Net





| |                             
| | ----------------------------
| | Income Tax Benefit (Expense)



Fiscal 2003 Compared with Fiscal 2002




| |         
| | --------
| | Revenues

Total Revenues.


Direct Marketing Revenues.


Retail Stores Revenues.


31



---



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Sponsorship and Other Activities Revenues.




| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the addition of OCM revenue from the date of its acquisition in
    May 2003;                                                                          
|
| |  | the twelve months of revenue from MPM during fiscal 2003
    compared with the five and one half months of revenue from MPM
    during fiscal 2002; and
|
| |  | our expanding client base and our strengthened client
    relationships within our promotional marketing business units.                               



| |                 
| | ----------------
| | Cost of Revenues







| |                         
| | ------------------------
| | Total Operating Expenses

Selling and Marketing.




| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | the inclusion of dELiA*s selling and marketing expenses since
    September 2003;             
|
| |  | the inclusion of OCMs selling and marketing expenses since
    its acquisition in May 2003;  
|
| |  | increased information technology spending to support our
    expanded advertising sales force;
|
| |  | increased occupancy expenses of our expanded advertising sales
    and execution staff; and   
|
| |  | the hiring of additional sales and marketing personnel.                                       





32



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General and Administrative.




| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the addition of OCMs expenses since the acquisition date;                                                                                                                                
|
| |  | the inclusion of dELiA*s expenses since September 4, 2003,
    the acquisition date;                                                                                                      
|
| |  | an increase in compensation expense for additional personnel to
    handle our growing business;                                                                                          
|
| |  | the costs of an internal investigation into certain accounting
    matters; and                                                                                                           
|
| |  | increased expenses associated with growing a public company such
    as professional fees, insurance premiums, occupancy costs due to
    office expansions, and telecommunications costs.



Amortization of Intangible Assets.


Goodwill and Other Indefinite-Lived Intangible Asset
Impairment.


Impairment of Other Long-Lived Assets.


Restructuring Charges.


33



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| |                              
| | -----------------------------
| | Income (Loss) from Operations

Total Income (Loss) from Operations.


Income (Loss) from Direct Marketing Operations.


Loss from Retail Stores Operations.


Income from Sponsorship and Other Activities Operations.




| |                               
| | ------------------------------
| | Interest Income (Expense), Net





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Realized Gain (Loss) on Marketable Securities and
    Write-off of Investments, Net





| |                             
| | ----------------------------
| | Income Tax Benefit (Expense)



Liquidity and Capital Resources




34



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35



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Contractual Obligations




|                                               |  |       |         |                        |  |           |        |           |  |         |        |  |  |   |        |  |  |   |        | 
|---------------------------------------------- |  | ----- | ------- | ---------------------- |  | --------- | ------ | --------- |  | ------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                               |  |       |         | Payments Due By Period |  |          
|                                               |  |       |         |                        |  |          
|                                               |  |       |         | Less than              |  |           |        | More than
|Contractual Obligations                        |  | Total |         | 1 Year                 |  | 1-3 Years |        | 3-5 Years |  | 5 Years
|                                               |  |       |         |                        |  |           |        |           |  |        
|Senior Convertible Debentures due
    2023(a)  |  | $     | 69,300  |                        |  |           |       |           |  |         |       |  |  |   |       |  |  | $ | 69,300 | 
|Mortgage Loan Agreement                        |  |       | 2,791   |                        |  |           | 160    |           |  |         | 483    |  |  |   | 2,148  |  |  |   |       | 
|Operating Lease Obligations                    |  |       | 66,101  |                        |  |           | 12,721 |           |  |         | 21,738 |  |  |   | 17,726 |  |  |   | 13,916 | 
|Capital Lease Obligations (including interest) |  |       | 100     |                        |  |           | 42     |           |  |         | 54     |  |  |   | 4      |  |  |   |       | 
|Purchase
    Obligations(b)                    |  |       | 25,590  |                        |  |           | 25,315 |           |  |         | 271    |  |  |   | 4      |  |  |   |       | 
|Future Non-Compete Payments                    |  |       | 2,162   |                        |  |           | 240    |           |  |         | 380    |  |  |   | 1,542  |  |  |   |       | 
|                                               |  |       |         |                        |  |           |        |           |  |         |        |  |  |   |        |  |  |   |        | 
|Total                                          |  | $     | 166,044 |                        |  | $         | 38,478 |           |  | $       | 22,926 |  |  | $ | 21,424 |  |  | $ | 83,216 | 






|    |  |                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------
|(a) |  | The Senior Convertible Debentures due 2023 may be redeemed after
    August 1, 2008 at the option of the holder.
|   
|(b) |  | Our purchase obligations are primarily related to inventory
    commitments and service agreements.             



Off-Balance Sheet Arrangements




Effect of New Accounting Standards




Inflation




Forward-Looking Statements






36



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##### Table of Contents










|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Qualitative and Quantitative Disclosures About Market
    Risk








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure







37



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##### Table of Contents












|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Conclusion Regarding the Effectiveness of Disclosure
    Controls and Procedures





| |                                                                            
| | ---------------------------------------------------------------------------
| | Managements Annual Report on Internal Control Over
    Financial Reporting





| |                                                                        
| | -----------------------------------------------------------------------
| | Attestation Report of Independent Registered Public
    Accounting Firm





| |                                                         
| | --------------------------------------------------------
| | Changes in Internal Control Over Financial
    Reporting








|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



38



---



##### Table of Contents








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules















39



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##### Table of Contents






SIGNATURES






| |            
| | -----------
| | ALLOY, INC.



| |     |                       
| | --- | ----------------------
| | By: | /s/ MATTHEW C. DIAMOND

| |                            
| | ---------------------------
| |                            
| | Matthew C. Diamond         
| | Chairman of the Board      
| | and Chief Executive Officer





|                                                       |  |                                                                                               |  |                |  | 
|------------------------------------------------------ |  | --------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                              |  | Title                                                                                         |  | Date          
|                                                       |  |                                                                                               |  |               
|                                                      
|/s/ MATTHEW C. DIAMONDMatthew
    C. Diamond           |  | Chief Executive Officer
    (Principal Executive Officer)
    and Chairman                    |  | April 18, 2005
|                                                      
|/s/ JAMES K. JOHNSON,
    JR.James
    K. Johnson, Jr. |  | Chief Financial Officer
    (Principal Financial and
    Accounting Officer)
    and Director |  | April 18, 2005
|                                                      
|/s/ SAMUEL A. GRADESSSamuel
    A. Gradess             |  | Executive Vice President, Director                                                            |  | April 18,2005 
|                                                      
|/s/ PETER M. GRAHAMPeter
    M. Graham                 |  | Director                                                                                      |  | April 18, 2005
|                                                      
|/s/ EDWARD A. MONNIEREdward
    A. Monnier             |  | Director                                                                                      |  | April 18, 2005
|                                                      
|/s/ ANTHONY N. FIOREAnthony
    N. Fiore               |  | Director                                                                                      |  | April 18, 2005
|                                                      
|/s/ MATTHEW L. FESHBACHMatthew
    L. Feshbach         |  | Director                                                                                      |  | April 18, 2005
|                                                      
|/s/ JEFFREY HOLLENDERJeffrey
    Hollender             |  | Director                                                                                      |  | April 18, 2005

40



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##### Table of Contents



EXHIBIT INDEX


|        |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     
|Number  |    |     
|        |    |     
|        | 2  | .1   |  | Acquisition Agreement by and among Alloy, Inc., Dodger
    Acquisition Corp. and dELiA*s Corp., dated as of July 30,
    2003 (incorporated by reference to Alloys Current Report
    on Form 8-K filed July 31, 2003)                                                                                                                                                                                                           
|        | 3  | .1   |  | Restated Certificate of Incorporation of Alloy Online, Inc.
    (incorporated by reference to Alloys Registration
    Statement on Form S-1 filed March 10, 1999
    (Registration Number 333-74159))                                                                                                                                                                                                                            
|        | 3  | .2   |  | Certificate of Amendment of Certificate of Incorporation of
    Alloy Online, Inc. (incorporated by reference to Alloys
    Current Report on Form 8-K filed August 13, 2001)                                                                                                                                                                                                                                                    
|        | 3  | .3   |  | Certificate of Amendment of Restated Certificate of
    Incorporation of Alloy Online, Inc. (incorporated by reference
    to Alloys Current Report on Form 8-K filed
    March 13, 2002)                                                                                                                                                                                                                                        
|        | 3  | .4   |  | Certificate of Designations, Preferences and Rights of the
    Series B Convertible Preferred Stock of Alloy Online, Inc.
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed June 21, 2001)                                                                                                                                                                                                           
|        | 3  | .5   |  | Certificate of Designations of Series C Junior
    Participating Preferred Stock of Alloy, Inc. (incorporated by
    reference to Alloys Current Report on Form 8-K filed
    April 14, 2003)                                                                                                                                                                                                                                    
|        | 3  | .6   |  | Restated Bylaws (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                                                                                                            
|        | 4  | .1   |  | Form of Common Stock Certificate (incorporated by reference to
    Alloys Registration Statement on Form S-1 filed
    March 10, 1999 (Registration Number 333-74159))                                                                                                                                                                                                                                                           
|        | 4  | .2   |  | Warrant to Purchase Common Stock, dated as of November 26,
    2001, issued by Alloy, Inc. to MarketSource Corporation
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed December 11, 2001)                                                                                                                                                                                                          
|        | 4  | .3   |  | Warrant to Purchase Common Stock, dated as of January 28,
    2002, issued by Alloy, Inc. to Fletcher International Ltd.
    (incorporated by reference to Alloys Current Report on
    Form 8-K/A filed February 1, 2002)                                                                                                                                                                                                       
|        | 4  | .4   |  | Form of Warrant to Purchase Common Stock, dated as of
    June 19, 2001, issued by Alloy Online, Inc. to each of the
    purchasers of Alloys Series B Preferred Stock
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed June 21, 2001)                                                                                                                                                             
|        | 4  | .5   |  | Warrant to Purchase Common Stock, dated as of March 18,
    2002, issued by Alloy, Inc. to Craig T. Johnson (incorporated by
    reference to Alloys 2002 Annual Report on form 10-K
    filed May 1, 2003)                                                                                                                                                                                                                      
|        | 4  | .6   |  | Warrants to Purchase Common Stock, dated as of March 18,
    2002, issued by Alloy, Inc. to (i) Debra Lynn Millman,
    (ii) Kim Suzanne Millman, and (iii) Ronald J. Bujarski
    (substantially identical to Warrant referenced as
    Exhibit 4.5 in all material respects, and not filed with
    Alloys 2002 Annual Report on Form 10-K, filed
    May 1, 2003, pursuant to Instruction 2 of
    Item 601 of Regulation S-K)
|        | 4  | .7   |  | Warrant to Purchase Common Stock, dated as of November 1,
    2002, issued by Alloy, Inc. to Alan M. Weisman (incorporated by
    reference to Alloys 2002 Annual Report on form 10-K
    filed May 1, 2003)                                                                                                                                                                                                                     
|        | 4  | .8   |  | Form of 5.375% Global Convertible Senior Debenture due 2023 in
    the aggregate principal amount of $69,300,000 (incorporated by
    reference to Alloys Registration Statement on
    Form S-3 filed October 17, 2003 (Registration
    Number 333-109786))                                                                                                                                                                    
|        | 4  | .9   |  | Indenture between Alloy, Inc. and Deutsche Bank Trust Company
    Americas, dated as of July 23, 2003 (incorporated by
    reference to Alloys Registration Statement on
    Form S-3 filed October 17, 2003 (Registration
    Number 333-109786))                                                                                                                                                                               
|        | 10 | .1   |  | Alloy, Inc. Amended and Restated 1997 Employee, Director and
    Consultant Stock Option and Stock Incentive Plan (incorporated
    by reference to Alloys 2002 Annual Report on
    form 10-K filed May 1, 2003)                                                                                                                                                                                                                
|        | 10 | .1.1 |  | First Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys Proxy
    Statement on Schedule 14A filed on June 2, 2003)                                                                                                                                                                                         
|        | 10 | .1.2 |  | Second Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                               

41



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##### Table of Contents



|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .1.3  |  | Third Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys
    Quarterly Report on Form 10-Q, filed on December 10,
    2004                                                                                                                                                                                                             
|        | 10 | .2    |  | Amended and Restated Alloy, Inc. 2002 Incentive and
    Non-Qualified Stock Option Plan (incorporated by reference to
    Alloys 2002 Annual Report on Form 10-K filed
    May 1, 2003)                                                                                                                                                                                                                                                                     
|        | 10 | .3    |  | Employment Agreement dated February 1, 2004 between Matthew
    C. Diamond and Alloy Inc. (incorporated by reference to
    Alloys Annual Report on Form 10-K, filed on
    May 27, 2004.)                                                                                                                                                                                                                                                                  
|        | 10 | .4    |  | Employment Agreement dated February 1, 2004 between James
    K. Johnson, Jr. and Alloy, Inc. (incorporated by reference
    to Alloys Annual Report on Form 10-K, filed on
    May 27, 2004.)                                                                                                                                                                                                                                                              
|        | 10 | .5    |  | Employment Agreement dated April 19, 1999 between Samuel A.
    Gradess and Alloy Online, Inc. (incorporated by reference to
    Alloys Registration Statement on Form S-1 filed
    March 10, 1999 (Registration Number 333-74159))                                                                                                                                                                                                                        
|        | 10 | .6    |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between Matthew C. Diamond and Alloy
    Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                       
|        | 10 | .7    |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between James K. Johnson, Jr. and
    Alloy Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                    
|        | 10 | .8    |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between Samuel A. Gradess and Alloy
    Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                        
|        | 10 | .9    |  | Employment Offer Letter dated May 24, 2000 between Robert
    Bell and Alloy Online, Inc. (incorporated by reference to
    Alloys 2000 Annual Report on Form 10-K filed
    May 1, 2001)                                                                                                                                                                                                                                                                   
|        | 10 | .10   |  | Non-Competition and Confidentiality Agreement dated
    March 24, 2000 between Robert Bell and Alloy Online, Inc.
    (incorporated by reference to Alloys 2000 Annual Report on
    Form 10-K filed May 1, 2001)                                                                                                                                                                                                                                           
|        | 10 | .11   |  | Incentive Stock Option Agreement dated as of July 19, 2000
    between Alloy Online, Inc. and Robert Bell (incorporated by
    reference to Alloys 2000 Annual Report on Form 10-K
    filed May 1, 2001)                                                                                                                                                                                                                                                   
|        | 10 | .12   |  | Non-Qualified Stock Option Agreement dated as of July 19,
    2000 between Alloy Online, Inc. and Robert Bell (incorporated by
    reference to Alloys 2000 Annual Report on Form 10-K
    filed May 1, 2001)                                                                                                                                                                                                                                               
|        | 10 | .13   |  | Flexible Standardized 401(k) Profit Sharing Plan Adoption
    Agreement (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159)).                                                                                                                                                                                                                                              
|        | 10 | .14   |  | 1999 Employee Stock Purchase Plan (incorporated by reference to
    Amendment No. 2 to Alloys Registration Statement on
    Form S-1/ A filed April 22, 1999 (Registration
    Number 333-74159))                                                                                                                                                                                                                                                           
|        | 10 | .15   |  | Registration Rights Agreement, dated as of June 19, 2001,
    by and among Alloy Online, Inc, BayStar Capital, L.P., BayStar
    International, Ltd., Lambros, L.P., Crosslink Crossover
    Fund III, L.P., Offshore Crosslink Crossover Fund III
    Unit Trust, Bayview Partners, the Peter M. Graham Money Purchase
    Plan and Trust and Elyssa Kellerman (incorporated by reference
    to Alloys Current Report on Form 8-K filed
    June 20, 2001)
|        | 10 | .16   |  | Standard Office Lease between Arden Realty Finance Partnership,
    L.P. and Cass Communications, Inc., dated as of
    September 11, 1998 (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q filed
    September 14, 2001)                                                                                                                                                                                                             
|        | 10 | .16.1 |  | First Amendment to Standard Office Lease, dated as of
    November 1, 2001, by and between Arden Realty Finance
    Partnership, L.P. and Alloy, Inc. (incorporated by reference to
    Alloys 2001 Annual Report on Form 10-K filed
    May 1, 2002)                                                                                                                                                                                                       
|        | 10 | .17   |  | Lease Agreement by and between Bike Land, LLC and Dans
    Competition, Inc., dated September 28, 2001 (incorporated
    by reference to Alloys Quarterly Report on Form 10-Q
    filed December 17, 2001)                                                                                                                                                                                                                                                 

42



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##### Table of Contents



|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .18   |  | Modification to Lease, dated November 2, 1999, by and
    between Alloy, Inc. and Abner Properties Company, dated
    April 16, 2002 (incorporated by reference to Alloys
    Quarterly Report on Form 10-Q filed June 14, 2002)                                                                                                                                                                            
|        | 10 | .18.1 |  | Second Lease Modification Agreement between Alloy, Inc. and
    Abner Properties Company, c/o Williams Real Estate Co.,
    Inc., dated as of January 28, 2002 (incorporated by
    reference to Alloys Annual Report on Form 10-K filed
    May 1, 2002). Third lease modification dated
    August 31, 2002                                                                                               
|        | 10 | .18.2 |  | Third Lease Modification and Extension Agreement, dated as of
    August 31, 2002 between Abner Properties Company
    c/o Williams USA Realty Services, Inc. and Alloy, Inc.
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q filed December 16, 2002)                                                                                                                           
|        | 10 | .19   |  | Assignment and Assumption of Lease between Alloy, Inc. and
    Goldfarb & Abrandt dated as of February 1, 2002
    (incorporated by reference to Alloys Annual Report on
    Form 10-K filed May 1, 2002)                                                                                                                                                                                                   
|        | 10 | .20   |  | Amended and Restated 1996 Stock Incentive Plan of dELiA*s Inc.
    (incorporated by reference to dELiA*s Inc. Schedule 14A
    filed June 12, 1998)                                                                                                                                                                                                                                                          
|        | 10 | .20.1 |  | First Amendment to dELiA*s Inc. Amended and Restated 1996 Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                                                                 
|        | 10 | .21   |  | 1998 Stock Incentive Plan of dELiA*s Inc. (incorporated by
    reference to dELiA*s Inc. Annual Report on Form 10-K405,
    filed April 19, 1999)                                                                                                                                                                                                                                                            
|        | 10 | .21.1 |  | First Amendment to dELiA*s , Inc. 1998 Stock Incentive Plan
    (incorporated by reference to Alloys Registration
    Statement on Form S-8, filed October 17, 2003
    (Registration Number 333-109788))                                                                                                                                                                                                   
|        | 10 | .22   |  | iTurf Inc. 1999 Amended and Restated Stock Incentive Plan
    (incorporated by reference to Amendment No. 2 to the iTurf
    Inc. registration statement on Form S-1/ A filed
    April 6, 1999 (Registration No. 333-71123))                                                                                                                                                                                
|        | 10 | .22.1 |  | First Amendment to iTurf Inc. Amended and Restated 1999 Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                                                                   
|        | 10 | .23   |  | Lease Agreement dated May 3, 1995 between dELiA*s Inc. and
    The Rector, Church Wardens and Vestrymen of Trinity Church in
    the City of New York (the Lease Agreement);
    Modification and Extension of Lease Agreement, dated
    September 26, 1996 (incorporated by reference to the
    dELiA*s Inc. Registration Statement on Form S-1 filed
    January 25, 1999 (Registration No. 333-15153))
|        | 10 | .23.1 |  | Agreement dated April 4, 1997 between dELiA*s Inc. and The
    Rector, Church Wardens and Vestrymen of Trinity Church in the
    City of New York, amending the Lease Agreement (incorporated by
    reference to dELiA*s Inc. Annual Report on Form 10-K filed)                                                                                                                                             
|        | 10 | .23.2 |  | Agreement dated October 7, 1997 between dELiA*s Inc. and
    The Rector, Church Wardens and Vestrymen of Trinity Church in
    the City of New York, amending the Lease Agreement (incorporated
    by reference to dELiA*s Inc. Quarterly Report on Form 10-Q
    filed)                                                                                                                                    
|        | 10 | .24   |  | Amended and Restated Loan and Security Agreement by and among
    Wells Fargo Retail Finance LLC, as lender, and dELiA*s Corp., as
    lead borrower and agent for the other borrowers named within,
    dated October 14, 2004 (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q, filed on
    December 10, 2004)                                                                     
|        | 10 | .25   |  | Master License Agreement, dated February 24, 2003, by and
    between dELiA*s Brand LLC and JLP Daisy LLC (incorporated by
    reference to dELiA*s Current Report on Form 8-K filed
    February 26, 2003)                                                                                                                                                                                                  
|        | 10 | .26   |  | License Agreement, dated February 24, 2003, by and between
    dELiA*s Corp. and dELiA*s Brand LLC (incorporated by reference
    to dELiA*s Current Report on Form 8-K filed
    February 26, 2003)                                                                                                                                                                                                         
|        | 10 | .27   |  | Mortgage Note Modification Agreement and Declaration of No
    Set-Off, dated as of April 19, 2004, by and between dELiA*s
    Distribution Company and Manufacturers and Traders Trust Company
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q, filed on June 9, 2004)                                                                                                          

43



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|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .27.1 |  | Amendment to Construction Loan Agreement, dated as of
    April 19, 2004, by and between dELiA*s Distribution Company
    and Manufacturers and Traders Trust Company with the joinder of
    dELiA*s Corporation and Alloy, Inc. (incorporated by reference
    to Alloys Quarterly Report on Form 10-Q, filed on
    June 9, 2004)                     
|        | 10 | .27.2 |  | Second Amendment to Construction Loan Agreement, dated
    September 3, 2004, by and between Manufacturers and Traders
    Trust Company and dELiA*s Distribution Company with the joinder
    of dELiA*s Corporation and Alloy, Inc. (incorporated by
    reference to Alloys Quarterly Report on Form 10-Q,
    filed on December 10, 2004)            
|        | 10 | .27.3 |  | Continuing Guarantee, dated as of April 19, 2004, by and
    among dELiA*s Corporation (Guarantor), dELiA*s Distribution
    Company (Borrower) and Manufacturers and Traders Trust Company
    (Bank) (incorporated by reference to Alloys Quarterly
    Report on Form 10-Q, filed on June 9, 2004)                                                    
|        | 10 | .27.4 |  | Continuing Guarantee, dated as of April 19, 2004, by and
    among Alloy, Inc. (Guarantor), dELiA*s Distribution Company
    (Borrower) and Manufacturers and Traders Trust Company (Bank)
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q, filed on June 9, 2004)                                                            
|        | 10 | .28   |  | Employment Letter, dated October 27, 2003, between Alloy,
    Inc. and Robert Bernard (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q filed
    December 22, 2003)                                                                                                                                                                
|        | 10 | .29   |  | Alloy, Inc. Convertible Senior Debentures Purchase Agreement,
    dated as of July 17, 2003, by and among Alloy and the
    Initial Purchasers named therein. (incorporated by reference to
    Alloys Annual Report on Form 10-K filed on
    May 27, 2004.)                                                                                            
|        | 10 | .30   |  | Resale Registration Rights Agreement dated as of July 31,
    2003 between Alloy, Inc., Lehman Brothers, Inc., CIBC World
    Markets Corp., JP Morgan Securities, Inc. and SG Cowen
    Securities Corporation (incorporated by reference to
    Alloys Registration Statement on Form S-3, filed
    October 17, 2003 (Registration Number 333-109786))
|        | 10 | .31   |  | Sublease Agreement, dated as of December 3, 2003, by and
    between MarketSource, L.L.C. and 360 Youth, LLC.
    (incorporated by reference to Alloys Annual Report on
    Form 10-K filed on May 27, 2004)                                                                                                                                             
|        | 10 | .32   |  | Alloy, Inc. Outside Director Compensation Arrangements for
    fiscal year ending January 31, 2006*                                                                                                                                                                                                                                                       
|        | 10 | .33   |  | Alloy, Inc. Compensation Arrangements for Certain Named
    Executive Officers*                                                                                                                                                                                                                                                                           
|        | 10 | .34   |  | Form of Nonqualified Stock Option Agreement for 2002
    Non-Qualified Option Plan*                                                                                                                                                                                                                                                                       
|        | 10 | .35   |  | Form of Nonqualified Stock Option Agreement for Restated 1997
    Employee, Director and Consultant Stock Option Plan*                                                                                                                                                                                                                                    
|        | 10 | .36   |  | Form of Incentive Stock Option Agreement for Restated 1997
    Employee, Director and Consultant Stock Option Plan.*                                                                                                                                                                                                                                      
|        | 10 | .37   |  | Form of Nonqualified Stock Option Agreement for iTurf Inc.
    Amended and Restated 1999 Stock Incentive Plan*                                                                                                                                                                                                                                            
|        | 10 | .38   |  | Form of Incentive Stock Option Agreement for iTurf Inc.
    Amendment and Restated 1999 Stock Incentive Plan*                                                                                                                                                                                                                                             
|        | 10 | .39   |  | Form of Restricted Stock Agreement(1)*                                                                                                                                                                                                                                                                                                                    
|        | 10 | .40   |  | Form of Restricted Stock Agreement(2)*                                                                                                                                                                                                                                                                                                                    
|        | 21 | .1    |  | Subsidiaries of Alloy, Inc. as of January 31, 2005*                                                                                                                                                                                                                                                                                                       
|        | 23 | .1    |  | Consent of BDO Seidman, LLP*                                                                                                                                                                                                                                                                                                                              
|        | 23 | .2    |  | Consent of KPMG, LLP*                                                                                                                                                                                                                                                                                                                                     
|        | 31 | .1    |  | Certification of Matthew C. Diamond, Chief Executive Officer,
    dated April 15, 2005 as adopted pursuant to
    Section 302 of The Sarbanes-Oxley Act of 2002*                                                                                                                                                                                          
|        | 31 | .2    |  | Certification of James K. Johnson, Jr., Chief Financial
    Officer, dated April 15, 2005 as adopted pursuant to
    Section 302 of The Sarbanes-Oxley Act of 2002*                                                                                                                                                                                       
|        | 32 | .1    |  | Certification of Matthew C. Diamond, Chief Executive Officer,
    dated April 15, 2005, as adopted pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002*                                                                                                                                                                                         

44



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##### Table of Contents



|        |    |    |  |                                                                                                                                                                                                                                                             
|------- | -- | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |   
|Number  |    |   
|        |    |   
|        | 32 | .2 |  | Certification of James K. Johnson, Jr., Chief Financial
    Officer, dated April 18, 2005, as adopted pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002*                                                                                        
|        | 99 | .1 |  | Memorandum of Understanding relating to the proposed settlement
    of the action styled In Re Alloy, Inc. Securities Litigation,dated as of June 21, 2004 (incorporated by reference to
    Alloys Current Report on Form 8-K, filed on
    June 30, 2004)
|        | 99 | .2 |  | Letter agreement relating to the proposed settlement of the
    action styled Yeung Chan v. Diamond, et al., dated
    June 15, 2004 (incorporated by reference to Alloys
    Current Report on Form 8-K, filed on June 30, 2004)                          






|  |                
|- | ---------------
|* | Filed herewith.

45



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##### Table of Contents



ALLOY, INC. AND SUBSIDIARIES





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


|                             |                                                                                                                                   |      |  |      | 
|---------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ---- |  | ---- | 
|                             |                                                                                                                                   | Page
|                             |                                                                                                                                   |     
|Financial Statements         |                                                                                                                                   |      |  |     
|                             | Managements Report on Internal
    Control Over Financial Reporting                                                              |      |  | F-2  | 
|                             | Report of Independent Registered Public
    Accounting Firm on Internal Control Over
    Financial Reporting                      |      |  | F-3  | 
|                             | Reports of Independent Registered Public
    Accounting Firms (Financial Statements)                                              |      |  | F-4  | 
|                             | Consolidated Balance Sheets as of
    January 31, 2005 and 2004                                                                   |      |  | F-6  | 
|                             | Consolidated Statements of Operations and
    Comprehensive Income (Loss) for the Years Ended January 31,
    2005, 2004 and 2003 |      |  | F-7  | 
|                             | Consolidated Statements of Changes in
    Stockholders Equity for the Years Ended January 31,
    2005, 2004 and 2003            |      |  | F-8  | 
|                             | Consolidated Statements of Cash Flows for
    the Years Ended January 31, 2005, 2004 and 2003                                     |      |  | F-11 | 
|                             | Notes to Consolidated Financial
    Statements                                                                                    |      |  | F-13 | 
|Financial Statement Schedule |                                                                                                                                   |      |  |     
|                             | The following financial statement schedule is included herein:                                                                    |      |  |      | 
|                             | Schedule II  Valuation and
    Qualifying Accounts                                                                               |      |  | S-1  | 



F-1



---



##### Table of Contents






Managements Report on Internal Control Over Financial
Reporting


Internal Control  Integrated
Framework.




F-2



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm on


Internal Control over Financial Reporting








Internal Control 
Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated
Framework










F-3



---



##### Table of Contents



Report of Independent Registered Public Accounting Firm














Internal Control 
Integrated Framework








F-4



---



##### Table of Contents






Report of Independent Registered Public Accounting Firm












KPMG LLP








F-5



---



##### Table of Contents



ALLOY, INC.





CONSOLIDATED BALANCE SHEETS


|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |          |         | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | -------- | ------- |  | - | -------- | ------- | 
|                                     |                                                                                                                                                                                                                              | January 31,                               
|                                     |                                                                                                                                                                                                                              |                                           
|                                     |                                                                                                                                                                                                                              | 2005                                       |   | 2004    
|                                     |                                                                                                                                                                                                                              |                                            |   |         
|                                     |                                                                                                                                                                                                                              | (Amounts in thousands,                    
|                                     |                                                                                                                                                                                                                              | except share data)                        
|ASSETS                              
|CURRENT ASSETS:                      |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     | Cash and cash equivalents                                                                                                                                                                                                    |                                            | $ | 25,137   |         |  | $ | 27,273   |        
|                                     | Restricted cash                                                                                                                                                                                                              |                                            |   |         |         |  |   | 3,270    |        
|                                     | Marketable securities available-for-sale                                                                                                                                                                                     |                                            |   | 6,341    |         |  |   | 19,014   |        
|                                     | Accounts receivable, net of allowance for doubtful accounts of
    $2,429 and $3,336, respectively                                                                                                                           |                                            |   | 39,693   |         |  |   | 31,492   |        
|                                     | Inventories, net                                                                                                                                                                                                             |                                            |   | 29,099   |         |  |   | 29,021   |        
|                                     | Prepaid catalog costs                                                                                                                                                                                                        |                                            |   | 2,717    |         |  |   | 2,028    |        
|                                     | Other current assets                                                                                                                                                                                                         |                                            |   | 6,773    |         |  |   | 4,431    |        
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     |                                                                                                                                                                                                                              | Total current assets                       |   |          | 109,760 |  |   |          | 116,529 | 
|                                     | Marketable securities available-for-sale                                                                                                                                                                                     |                                            |   |         |         |  |   | 5,585    |        
|                                     | Property and equipment, net                                                                                                                                                                                                  |                                            |   | 24,517   |         |  |   | 27,234   |        
|                                     | Goodwill, net                                                                                                                                                                                                                |                                            |   | 207,104  |         |  |   | 274,796  |        
|                                     | Intangible and other assets, net                                                                                                                                                                                             |                                            |   | 17,752   |         |  |   | 25,865   |        
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     |                                                                                                                                                                                                                              | Total assets                               |   | $        | 359,133 |  |   | $        | 450,009 | 
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|CURRENT LIABILITIES:                 |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     | Accounts payable                                                                                                                                                                                                             |                                            | $ | 29,792   |         |  | $ | 28,740   |        
|                                     | Deferred revenues                                                                                                                                                                                                            |                                            |   | 18,144   |         |  |   | 15,124   |        
|                                     | Current portion of mortgage note payable                                                                                                                                                                                     |                                            |   | 160      |         |  |   | 2,914    |        
|                                     | Accrued expenses and other current liabilities                                                                                                                                                                               |                                            |   | 26,750   |         |  |   | 37,459   |        
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     |                                                                                                                                                                                                                              | Total current liabilities                  |   |          | 74,846  |  |   |          | 84,237  | 
|                                     | Mortgage note payable                                                                                                                                                                                                        |                                            |   | 2,631    |         |  |   |         |        
|                                     | Senior Convertible Debentures Due 2023                                                                                                                                                                                       |                                            |   | 69,300   |         |  |   | 69,300   |        
|                                     | Other long-term liabilities                                                                                                                                                                                                  |                                            |   | 3,578    |         |  |   | 743      |        
|                                     | Series B Redeemable Convertible Preferred Stock,
    $10,000 per share liquidation preference; $.01 par
    value; 3,000 shares designated; mandatorily redeemable on
    June 19, 2005; 1,340 shares issued and outstanding |                                            |   | 16,042   |         |  |   | 14,434   |        
|STOCKHOLDERS EQUITY:                |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     | Common Stock; $.01 par value; 200,000,000 shares
    authorized; 43,921,177 and 42,701,767 shares issued,
    respectively                                                                                                   |                                            |   | 439      |         |  |   | 427      |        
|                                     | Additional paid-in capital                                                                                                                                                                                                   |                                            |   | 415,879  |         |  |   | 412,594  |        
|                                     | Accumulated deficit                                                                                                                                                                                                          |                                            |   | (218,936 | )       |  |   | (127,170 | )      
|                                     | Deferred compensation                                                                                                                                                                                                        |                                            |   | (517     | )       |  |   | (1,411   | )      
|                                     | Accumulated other comprehensive loss                                                                                                                                                                                         |                                            |   | (31      | )       |  |   | (30      | )      
|                                     | Common Stock held in treasury, at cost; 763,042 and
    608,275 shares, respectively                                                                                                                                         |                                            |   | (4,098   | )       |  |   | (3,115   | )      
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     |                                                                                                                                                                                                                              | Total stockholders equity                 |   |          | 192,736 |  |   |          | 281,295 | 
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         
|                                     |                                                                                                                                                                                                                              | Total liabilities and stockholders equity |   | $        | 359,133 |  |   | $        | 450,009 | 
|                                     |                                                                                                                                                                                                                              |                                            |   |          |         |  |   |         



F-6



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##### Table of Contents



ALLOY, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


AND COMPREHENSIVE (LOSS) INCOME


|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |         |         | 
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ---------- | ------- | ------- | ---- | ---------- | ------- | ------- | - | ---------- | ------- | ------- | 
|                                                                                                         |                                                                                     | For the Years Ended January 31,                                              
|                                                                                                         |                                                                                     |                                                                              
|                                                                                                         |                                                                                     | 2005                                                                          |            | 2004    |         | 2003
|                                                                                                         |                                                                                     |                                                                               |            |         |         |     
|                                                                                                         |                                                                                     | (Amounts in thousands, except share                                          
|                                                                                                         |                                                                                     | and per share data)                                                          
|NET REVENUES:                                                                                            |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         | Net direct marketing revenues                                                       |                                                                               | $          | 154,256 |         |      | $          | 156,821 |         |   | $          | 167,572 |        
|                                                                                                         | Retail stores revenues                                                              |                                                                               |            | 63,986  |         |      |            | 30,103  |         |   |            |        |        
|                                                                                                         | Sponsorship and other activities revenues                                           |                                                                               |            | 184,251 |         |      |            | 185,024 |         |   |            | 131,758 |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         |                                                                                     | Total net revenues                                                            |            |         | 402,493 |      |            |         | 371,948 |   |            |         | 299,330 | 
|COST OF REVENUES:                                                                                        |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         | Cost of goods sold                                                                  |                                                                               |            | 117,365 |         |      |            | 99,820  |         |   |            | 79,912  |        
|                                                                                                         | Cost of sponsorship and other activities revenues                                   |                                                                               |            | 90,984  |         |      |            | 89,559  |         |   |            | 65,236  |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         |                                                                                     | Total cost of revenues                                                        |            |         | 208,349 |      |            |         | 189,379 |   |            |         | 145,148 | 
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Gross profit                                                                                             |                                                                                     |                                                                               | 194,144    |         |         |      | 182,569    |         |         |   | 154,182    |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|OPERATING EXPENSES:                                                                                      |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         | Selling and marketing                                                               |                                                                               |            | 155,542 |         |      |            | 145,715 |         |   |            | 108,791 |        
|                                                                                                         | General and administrative                                                          |                                                                               |            | 45,650  |         |      |            | 33,970  |         |   |            | 17,240  |        
|                                                                                                         | Amortization of intangible assets                                                   |                                                                               |            | 6,275   |         |      |            | 7,887   |         |   |            | 5,554   |        
|                                                                                                         | Impairment of goodwill and other indefinite-lived intangible
    assets             |                                                                               |            | 72,102  |         |      |            | 60,638  |         |   |            |        |        
|                                                                                                         | Impairment of long-lived assets                                                     |                                                                               |            | 942     |         |      |            | 1,315   |         |   |            |        |        
|                                                                                                         | Restructuring charges                                                               |                                                                               |            | 347     |         |      |            | 730     |         |   |            | 2,571   |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         |                                                                                     | Total operating expenses                                                      |            |         | 280,858 |      |            |         | 250,255 |   |            |         | 134,156 | 
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|(Loss) income from operations                                                                            |                                                                                     |                                                                               | (86,714    | )       |         |      | (67,686    | )       |         |   | 20,026     |        
|OTHER INCOME (EXPENSE):                                                                                  |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         | Interest income                                                                     |                                                                               |            | 370     |         |      |            | 687     |         |   |            | 1,701   |        
|                                                                                                         | Interest expense                                                                    |                                                                               |            | (4,899  | )       |      |            | (2,690  | )       |   |            | (1      | )      
|                                                                                                         | (Loss) gain on sales of marketable securities and write-off of
    investments, net |                                                                               |            | (755    | )       |      |            | (247    | )       |   |            | 97      |        
|                                                                                                         | Other income                                                                        |                                                                               |            | 390     |         |      |            |        |         |   |            |        |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|(Loss) income before income taxes                                                                        |                                                                                     |                                                                               | (91,608    | )       |         |      | (69,936    | )       |         |   | 21,823     |        
|Provision (benefit) for income taxes                                                                     |                                                                                     |                                                                               | 158        |         |         |      | 5,279      |         |         |   | (1,472     | )      
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Net (loss) income                                                                                        |                                                                                     |                                                                               | (91,766    | )       |         |      | (75,215    | )       |         |   | 23,295     |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Unrealized (loss) gain on available-for-sale marketable
    securities, net of realized gains and losses |                                                                                     |                                                                               | (1         | )       |         |      | (194       | )       |         |   | 217        |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Comprehensive (loss) income                                                                              |                                                                                     | $                                                                             | (91,767    | )       |         | $    | (75,409    | )       |         | $ | 23,512     |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Net (loss) income                                                                                        |                                                                                     | $                                                                             | (91,766    | )       |         | $    | (75,215    | )       |         | $ | 23,295     |        
|Preferred stock dividends and accretion of discount                                                      |                                                                                     |                                                                               | 1,608      |         |         |      | 1,944      |         |         |   | 2,100      |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Net (loss) income attributable to common stockholders                                                    |                                                                                     | $                                                                             | (93,374    | )       |         | $    | (77,159    | )       |         | $ | 21,195     |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|Basic and diluted net (loss) earnings per share of Common Stock:                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         |                                                                                     | Basic net (loss) earnings attributable to common stockholders
    per share   |            | $       | (2.19   | )    |            | $       | (1.87   | ) |            | $       | 0.55    | 
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|                                                                                                         |                                                                                     | Diluted net (loss) earnings attributable to common stockholders
    per share |            | $       | (2.19   | )    |            | $       | (1.87   | ) |            | $       | 0.53    | 
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING:                                                        |                                                                                     |                                                                               | 42,606,905 |         |         |      | 41,175,046 |         |         |   | 38,436,256 |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        
|WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING:                                                      |                                                                                     |                                                                               | 42,606,905 |         |         |      | 41,175,046 |         |         |   | 40,071,412 |        
|                                                                                                         |                                                                                     |                                                                               |            |         |         |      |            |         |         |   |            |        



F-7



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##### Table of Contents



ALLOY, INC.





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


For the Year Ended January 31, 2005


(Amounts in thousands, except share data)


|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |     |   |  |  |          |   |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ---------- |  | ----------- | --- | -------- |  | ------------- | ------- | --------------- |  | ------ | -------- | ------ |  | ----- | ------ | - |  | - | --- | - |  |  | -------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                   |  |              |            |            |  |             |     |          |  | Accumulated   |         |                 |  |       
|                                                                                                                                   |  | Common Stock |            | Additional |  |             |     |          |  | Other         |         | Treasury Shares |  |       
|                                                                                                                                   |  |              |            | Paid-In    |  | Accumulated |     | Deferred |  | Comprehensive |         |                 |  |       
|                                                                                                                                   |  | Shares       |            | Amount     |  | Capital     |     | Deficit  |  | Compensation  |         | Income (Loss)   |  | Shares |          | Amount |  | Total
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |      
|Balance, February 1, 2004                                                                                                          |  |              | 42,701,767 |            |  | $           | 427 |          |  | $             | 412,594 |                 |  | $      | (127,170 | )      |  | $     | (1,411 | ) |  | $ | (30 | ) |  |  | (608,275 | ) |  | $ | (3,115 | ) |  | $ | 281,295 |  
|Issuance of Common Stock for acquisitions of businesses                                                                            |  |              | 560,344    |            |  |             | 6   |          |  |               | 3,372   |                 |  |        |         |        |  |       |       |   |  |   |    |   |  |  | (31,162  | ) |  |   | (169   | ) |  |   | 3,209   |  
|Amortization of deferred compensation                                                                                              |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       | 2      |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   | 2       |  
|Issuance of Common Stock pursuant to the exercise of options and
    Common Stock purchases under the employee stock purchase plan |  |              | 186,066    |            |  |             | 2   |          |  |               | 836     |                 |  |        |         |        |  |       |       |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   | 838     |  
|Issuance of restricted stock                                                                                                       |  |              | 473,000    |            |  |             | 4   |          |  |               | 692     |                 |  |        |         |        |  |       | (696   | ) |  |   |    |   |  |  |         |   |  |   |       |   |  |   |        |  
|Shares of Common Stock used to satisfy tax withholding
    obligations                                                             |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       |       |   |  |   |    |   |  |  | (123,605 | ) |  |   | (814   | ) |  |   | (814    | )
|Amortization of restricted stock                                                                                                   |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       | 1,581  |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   | 1,581   |  
|Adjustment of stock options for terminated employees                                                                               |  |              |           |            |  |             |    |          |  |               | (7      | )               |  |        |         |        |  |       | 7      |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   |        |  
|Accretion of discount and dividends on Series B Convertible
    Preferred Stock                                                    |  |              |           |            |  |             |    |          |  |               | (1,608  | )               |  |        |         |        |  |       |       |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   | (1,608  | )
|Net loss                                                                                                                           |  |              |           |            |  |             |    |          |  |               |        |                 |  |        | (91,766  | )      |  |       |       |   |  |   |    |   |  |  |         |   |  |   |       |   |  |   | (91,766 | )
|Unrealized loss on available-for-sale marketable securities, net
    of realized gains and losses                                  |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       |       |   |  |   | (1  | ) |  |  |         |   |  |   |       |   |  |   | (1      | )
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |     |   |  |  |          |   |  |   |        |   |  |   |         |  
|Balance, January 31, 2005                                                                                                          |  |              | 43,921,177 |            |  | $           | 439 |          |  | $             | 415,879 |                 |  | $      | (218,936 | )      |  | $     | (517   | ) |  | $ | (31 | ) |  |  | (763,042 | ) |  | $ | (4,098 | ) |  | $ | 192,736 |  
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |     |   |  |  |          |   |  |   |        |   |  |   |         |  



F-8



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##### Table of Contents



ALLOY, INC.


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


For the Year Ended January 31, 2004


(Amounts in thousands, except share data)


|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |      |   |  |  |          |   |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ---------- |  | ----------- | --- | -------- |  | ------------- | ------- | --------------- |  | ------ | -------- | ------ |  | ----- | ------ | - |  | - | ---- | - |  |  | -------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                   |  |              |            |            |  |             |     |          |  | Accumulated   |         |                 |  |       
|                                                                                                                                   |  | Common Stock |            | Additional |  |             |     |          |  | Other         |         | Treasury Shares |  |       
|                                                                                                                                   |  |              |            | Paid-In    |  | Accumulated |     | Deferred |  | Comprehensive |         |                 |  |       
|                                                                                                                                   |  | Shares       |            | Amount     |  | Capital     |     | Deficit  |  | Compensation  |         | Income (Loss)   |  | Shares |          | Amount |  | Total
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |      
|Balance, February 1, 2003                                                                                                          |  |              | 40,082,024 |            |  | $           | 401 |          |  | $             | 396,963 |                 |  | $      | (51,955  | )      |  | $     |       |   |  | $ | 164  |   |  |  | (8,275   | ) |  | $ | (131   | ) |  | $ | 345,442 |  
|Issuance of Common Stock for acquisitions of businesses                                                                            |  |              | 2,165,048  |            |  |             | 21  |          |  |               | 11,150  |                 |  |        |         |        |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 11,171  |  
|Repurchase of Common Stock                                                                                                         |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       |       |   |  |   |     |   |  |  | (600,000 | ) |  |   | (2,984 | ) |  |   | (2,984  | )
|Revision of accrued issuance costs in connection with public and
    private stock offerings                                       |  |              |           |            |  |             |    |          |  |               | 102     |                 |  |        |         |        |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 102     |  
|Amortization of deferred compensation                                                                                              |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       | 12     |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 12      |  
|Issuance of Common Stock pursuant to the exercise of options and
    Common Stock purchases under the employee stock purchase plan |  |              | 193,190    |            |  |             | 2   |          |  |               | 854     |                 |  |        |         |        |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 856     |  
|Issuance of Common Stock for conversion of Series B
    Convertible Preferred Stock                                                |  |              | 261,505    |            |  |             | 3   |          |  |               | 3,057   |                 |  |        |         |        |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 3,060   |  
|Issuance of restricted stock                                                                                                       |  |              |           |            |  |             |    |          |  |               | 2,385   |                 |  |        |         |        |  |       | (2,385 | ) |  |   |     |   |  |  |         |   |  |   |       |   |  |   |        |  
|Amortization of restricted stock                                                                                                   |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       | 989    |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | 989     |  
|Issuance of stock options to employees                                                                                             |  |              |           |            |  |             |    |          |  |               | 27      |                 |  |        |         |        |  |       | (27    | ) |  |   |     |   |  |  |         |   |  |   |       |   |  |   |        |  
|Accretion of discount and dividends on Series B Convertible
    Preferred Stock                                                    |  |              |           |            |  |             |    |          |  |               | (1,944  | )               |  |        |         |        |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | (1,944  | )
|Net loss                                                                                                                           |  |              |           |            |  |             |    |          |  |               |        |                 |  |        | (75,215  | )      |  |       |       |   |  |   |     |   |  |  |         |   |  |   |       |   |  |   | (75,215 | )
|Unrealized loss on available-for-sale marketable securities, net
    of realized gains and losses                                  |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |         |        |  |       |       |   |  |   | (194 | ) |  |  |         |   |  |   |       |   |  |   | (194    | )
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |      |   |  |  |          |   |  |   |        |   |  |   |         |  
|Balance, January 31, 2004                                                                                                          |  |              | 42,701,767 |            |  | $           | 427 |          |  | $             | 412,594 |                 |  | $      | (127,170 | )      |  | $     | (1,411 | ) |  | $ | (30  | ) |  |  | (608,275 | ) |  | $ | (3,115 | ) |  | $ | 281,295 |  
|                                                                                                                                   |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |          |        |  |       |        |   |  |   |      |   |  |  |          |   |  |   |        |   |  |   |         |  



F-9



---



##### Table of Contents





ALLOY, INC.


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


For the Year Ended January 31, 2003


(Amounts in thousands, except share data)


|                                                                                                                                                     |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |         |        |  |       |     |   |  |   |     |   |  |  |        |   |  |   |      |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ---------- |  | ----------- | --- | -------- |  | ------------- | ------- | --------------- |  | ------ | ------- | ------ |  | ----- | --- | - |  | - | --- | - |  |  | ------ | - |  | - | ---- | - |  | - | ------- | -
|                                                                                                                                                     |  |              |            |            |  |             |     |          |  | Accumulated   |         |                 |  |       
|                                                                                                                                                     |  | Common Stock |            | Additional |  |             |     |          |  | Other         |         | Treasury Shares |  |       
|                                                                                                                                                     |  |              |            | Paid-In    |  | Accumulated |     | Deferred |  | Comprehensive |         |                 |  |       
|                                                                                                                                                     |  | Shares       |            | Amount     |  | Capital     |     | Deficit  |  | Compensation  |         | Income (Loss)   |  | Shares |         | Amount |  | Total
|                                                                                                                                                     |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |         |        |  |      
|Balance, February 1, 2002                                                                                                                            |  |              | 34,916,877 |            |  | $           | 349 |          |  | $             | 324,719 |                 |  | $      | (75,250 | )      |  | $     | (31 | ) |  | $ | (53 | ) |  |  |       |   |  | $ |     |   |  | $ | 249,734 |  
|Issuance of Common Stock and warrants for acquisitions of
    businesses                                                                             |  |              | 803,628    |            |  |             | 8   |          |  |               | 11,421  |                 |  |        |        |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 11,429  |  
|Shares returned from escrow                                                                                                                          |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |        |        |  |       |    |   |  |   |    |   |  |  | (8,275 | ) |  |   | (131 | ) |  |   | (131    | )
|Amortization of deferred compensation                                                                                                                |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |        |        |  |       | 31  |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 31      |  
|Issuance of Common Stock pursuant to the exercise of options and
    warrants and the employee stock purchase plan, net of tax
    benefit of $2,481 |  |              | 225,050    |            |  |             | 2   |          |  |               | 4,403   |                 |  |        |        |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 4,405   |  
|Issuance of Common Stock for conversion of Series B
    Convertible Preferred Stock                                                                  |  |              | 136,469    |            |  |             | 2   |          |  |               | 1,594   |                 |  |        |        |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 1,596   |  
|Issuance of Common Stock and warrants in connection with private
    placements and public offering, net of expenses                                 |  |              | 4,000,000  |            |  |             | 40  |          |  |               | 56,926  |                 |  |        |        |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 56,966  |  
|Accretion of discount and dividends on Series B                                                                                                      |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |         |        |  |       |     |   |  |   |     |   |  |  |        |   |  |   |      |   |  |   |         |  
|Convertible Preferred Stock                                                                                                                          |  |              |           |            |  |             |    |          |  |               | (2,100  | )               |  |        |        |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | (2,100  | )
|Net income                                                                                                                                           |  |              |           |            |  |             |    |          |  |               |        |                 |  |        | 23,295  |        |  |       |    |   |  |   |    |   |  |  |       |   |  |   |     |   |  |   | 23,295  |  
|Unrealized gain on available-for-sale marketable securities, net
    of realized gains and losses                                                    |  |              |           |            |  |             |    |          |  |               |        |                 |  |        |        |        |  |       |    |   |  |   | 217 |   |  |  |       |   |  |   |     |   |  |   | 217     |  
|                                                                                                                                                     |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |         |        |  |       |     |   |  |   |     |   |  |  |        |   |  |   |      |   |  |   |         |  
|Balance, January 31, 2003                                                                                                                            |  |              | 40,082,024 |            |  | $           | 401 |          |  | $             | 396,963 |                 |  | $      | (51,955 | )      |  | $     |    |   |  | $ | 164 |   |  |  | (8,275 | ) |  | $ | (131 | ) |  | $ | 345,442 |  
|                                                                                                                                                     |  |              |            |            |  |             |     |          |  |               |         |                 |  |        |         |        |  |       |     |   |  |   |     |   |  |  |        |   |  |   |      |   |  |   |         |  



F-10



---



##### Table of Contents



ALLOY, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |         |        |        |          |  
|------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------------- | --------------------------------------------------- | ------ | ------ | ------ | ------- | ------ | ------- | ------- | ------- | ------ | ------ | -------- | -
|                                      |                                                                                              | For the Years Ended January 31,                                                          
|                                      |                                                                                              |                                                                                          
|                                      |                                                                                              | 2005                                                                                      |                                               | 2004                                                |        | 2003  
|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |       
|                                      |                                                                                              | (Amounts in thousands)                                                                   
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        
|                                      | Net (loss) income                                                                            |                                                                                           | $                                             | (91,766                                             | )      |        | $      | (75,215 | )      |         | $       | 23,295  |       
|                                      | Adjustments to reconcile net (loss) income to net cash provided
    by operating activities: |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |         |       
|                                      |                                                                                              | Depreciation and amortization                                                             |                                               |                                                     | 14,966 |        |        |         | 14,620 |         |         |         | 9,819  |       
|                                      |                                                                                              | Deferred tax expense (benefit)                                                            |                                               |                                                     |       |        |        |         | 4,606  |         |         |         | (4,606 | )     
|                                      |                                                                                              | Impairment of goodwill and other indefinite-lived intangible
    assets                   |                                               |                                                     | 72,102 |        |        |         | 60,638 |         |         |         |       |       
|                                      |                                                                                              | Impairment of long-lived assets                                                           |                                               |                                                     | 942    |        |        |         | 1,315  |         |         |         |       |       
|                                      |                                                                                              | Amortization of debt issuance costs                                                       |                                               |                                                     | 512    |        |        |         | 281    |         |         |         |       |       
|                                      |                                                                                              | Realized loss on sales of marketable securities and write-off of
    investments, net     |                                               |                                                     | 755    |        |        |         | 247    |         |         |         | 97     |       
|                                      |                                                                                              | Compensation charge for restricted stock                                                  |                                               |                                                     | 1,581  |        |        |         | 989    |         |         |         |       |       
|                                      |                                                                                              | Compensation charge for issuance of stock options and Common
    Stock                    |                                               |                                                     | 2      |        |        |         | 12     |         |         |         | 31     |       
|                                      |                                                                                              | Income tax benefit of exercised options on current year tax
    provision                 |                                               |                                                     |       |        |        |         |       |         |         |         | 1,224  |       
|                                      |                                                                                              | Changes in operating assets and liabilities  net of
    effect of business acquisitions: |                                               |                                                     |        |        |        |         |        |         |         |         |        |       
|                                      |                                                                                              |                                                                                           | Accounts receivable, net                      |                                                     |        | (7,725 | )      |         |        | (69     | )       |         |        | (1,376 | )       
|                                      |                                                                                              |                                                                                           | Inventories, net                              |                                                     |        | (78    | )      |         |        | 16,032  |         |         |        | (5,918 | )       
|                                      |                                                                                              |                                                                                           | Prepaid catalog costs                         |                                                     |        | (689   | )      |         |        | 831     |         |         |        | 238    |         
|                                      |                                                                                              |                                                                                           | Other assets                                  |                                                     |        | (1,828 | )      |         |        | 1,167   |         |         |        | 743    |         
|                                      |                                                                                              |                                                                                           | Accounts payable, accrued expenses, and other |                                                     |        | 1,685  |        |         |        | (13,452 | )       |         |        | 601    |         
|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        
|                                      |                                                                                              |                                                                                           |                                               | Net cash (used) provided by operating activities    |        |        | (9,541 | )       |        |         | 12,002  |         |        |        | 24,148   |  
|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        
|                                      | Purchase of marketable securities                                                            |                                                                                           |                                               | (3,054                                              | )      |        |        | (52,198 | )      |         |         | (77,000 | )     
|                                      | Proceeds from the sales and maturities of marketable securities                              |                                                                                           |                                               | 21,306                                              |        |        |        | 50,640  |        |         |         | 69,000  |       
|                                      | Capital expenditures                                                                         |                                                                                           |                                               | (5,847                                              | )      |        |        | (3,767  | )      |         |         | (4,317  | )     
|                                      | Sale and disposal of capital assets                                                          |                                                                                           |                                               | 304                                                 |        |        |        | 45      |        |         |         | 490     |       
|                                      | Cash paid in connection with acquisitions of businesses, net of
    cash acquired            |                                                                                           |                                               | (8,166                                              | )      |        |        | (66,728 | )      |         |         | (89,580 | )     
|                                      | Decrease in restricted cash                                                                  |                                                                                           |                                               | 3,270                                               |        |        |        |        |        |         |         |        |       
|                                      | Purchase of minority investment and other assets                                             |                                                                                           |                                               |                                                    |        |        |        |        |        |         |         | (750    | )     
|                                      | Purchase of mailing lists, domain names and marketing rights                                 |                                                                                           |                                               | (71                                                 | )      |        |        | (29     | )      |         |         | (4,850  | )     
|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        
|                                      |                                                                                              |                                                                                           |                                               | Net cash provided by (used) in investing activities |        |        | 7,742  |         |        |         | (72,037 | )       |        |        | (107,007 | )
|                                      |                                                                                              |                                                                                           |                                               |                                                     |        |        |        |         |        |         |         |        

F-11



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##### Table of Contents



ALLOY, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Continued)


|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |        |     |        | 
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------- | ------------------------------------------------ | ----- | ----- | ---- | ------ | ------ | ----- | ------ | ------- | ------ | --- | ------ | 
|                                                                          |                                                                                                        | For the Years Ended January 31,
|                                                                          |                                                                                                        |                                
|                                                                          |                                                                                                        | 2005                            |                                                  | 2004  |       | 2003
|                                                                          |                                                                                                        |                                 |                                                  |       |       |     
|                                                                          |                                                                                                        | (Amounts in thousands)         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                     |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          | Net proceeds from sale of Common Stock, net of expenses paid                                           |                                 |                                                  |      |       |      |        |       |       |        |         | 54,887 |    
|                                                                          | Gross proceeds from issuance of Debentures                                                             |                                 |                                                  |      |       |      |        | 69,300 |       |        |         |       |    
|                                                                          | Debt issuance costs                                                                                    |                                 |                                                  |      |       |      |        | (2,506 | )     |        |         |       |    
|                                                                          | Exercise of options and warrants and Common Stock purchases
    under the employee stock purchase plan |                                 |                                                  | 838   |       |      |        | 856    |       |        |         | 1,924  |    
|                                                                          | Repurchase of Common Stock                                                                             |                                 |                                                  | (814  | )     |      |        | (2,984 | )     |        |         |       |    
|                                                                          | Payment of credit facility                                                                             |                                 |                                                  |      |       |      |        | (5,000 | )     |        |         |       |    
|                                                                          | Net payments under line of credit agreements                                                           |                                 |                                                  |      |       |      |        | (6,937 | )     |        |         |       |    
|                                                                          | Payment of bank-loan                                                                                   |                                 |                                                  | (122  | )     |      |        | (38    | )     |        |         |       |    
|                                                                          | Payments of capitalized lease obligation                                                               |                                 |                                                  | (239  | )     |      |        | (570   | )     |        |         | (383   | )  
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          |                                                                                                        |                                 | Net cash (used) provided by financing activities |       |       | (337 | )      |        |       | 52,121 |         |        |     | 56,428 | 
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|Net decrease in cash and cash equivalents                                 |                                                                                                        |                                 | (2,136                                           | )     |       |      | (7,914 | )      |       |        | (26,431 | )     
|CASH AND CASH EQUIVALENTS, beginning of year                              |                                                                                                        |                                 | 27,273                                           |       |       |      | 35,187 |        |       |        | 61,618  |       
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|CASH AND CASH EQUIVALENTS, end of year                                    |                                                                                                        | $                               | 25,137                                           |       |       | $    | 27,273 |        |       | $      | 35,187  |       
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
    ACTIVITY: |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          | Cash paid during the year for:                                                                         |                                 |                                                  |       |       |      |        |        |       |        |         |        |    
|                                                                          |                                                                                                        | Interest                        |                                                  | $     | 4,294 |      |        | $      | 338   |        |         | $      | 1   |       
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          |                                                                                                        | Income taxes                    |                                                  | $     | 483   |      |        | $      | 1,628 |        |         | $      | 441 |       
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                              |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          | Issuance of Common Stock and warrants in connection with
    acquisitions (Note 3)                     |                                 | $                                                | 3,209 |       |      | $      | 11,171 |       |        | $       | 11,429 |    
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       
|                                                                          | Conversion of Series A and Series B Redeemable
    Convertible Preferred Stock into Common Stock       |                                 | $                                                |      |       |      | $      | 3,060  |       |        | $       | 1,596  |    
|                                                                          |                                                                                                        |                                 |                                                  |       |       |      |        |        |       |        |         |       



F-12



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##### Table of Contents



ALLOY, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |         
|-- | --------
|1. | Business







|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies



| |            
| | -----------
| | Fiscal Year





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





| |                    
| | -------------------
| | Revenue Recognition







F-13



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








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





| |                  
| | -----------------
| | Reclassifications





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





| |                
| | ---------------
| | Restricted Cash



F-14



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                      
| | ---------------------
| | Marketable Securities





| |                                                            
| | -----------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts





| |                             
| | ----------------------------
| | Unbilled Accounts Receivable





| |                             
| | ----------------------------
| | Concentration of Credit Risk





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





| |            
| | -----------
| | Inventories



F-15



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |              
| | -------------
| | Catalog Costs





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



|                                            |  |                  
|------------------------------------------- |  | -----------------
|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                     |  | 3 to 10 Years    
|Office furniture and fixtures               |  | 5 to 10 Years    
|Building                                    |  | 40 Years         
|Land                                        |  | N/A              



| |                                                          
| | ---------------------------------------------------------
| | Goodwill and Other Indefinite-Lived Intangible
    Assets







F-16



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets





| |                                               
| | ----------------------------------------------
| | Stock Option and Employee Stock Purchase Plans







F-17



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                                                                              |             |                        |          |       |   |      |         |       |   |   |         |      | 
|----------------------------------------------------------------------------------------------------------------------------- | ----------- | ---------------------- | -------- | ----- | - | ---- | ------- | ----- | - | - | ------- | ---- | 
|                                                                                                                              |             | Year Ended January 31,
|                                                                                                                              |             |                       
|                                                                                                                              |             | 2005                   |          | 2004  |   | 2003
|                                                                                                                              |             |                        |          |       |   |     
|                                                                                                                              |             | (Amounts in thousands,
|                                                                                                                              |             | except per share data)
|Net (loss) income attributable to common stockholders                                                                         |             | $                      | (93,374  | )     |   | $    | (77,159 | )     |   | $ | 21,195  |     
|Add: Total stock-based employee compensation costs included in
    reported net (loss) income, net of taxes                   |             |                        | 1,583    |       |   |      | 1,001   |       |   |   | 31      |     
|Less: Total stock-based employee compensation costs determined
    under fair value based method for all awards, net of taxes |             |                        | (8,252   | )     |   |      | (12,965 | )     |   |   | (14,290 | )   
|                                                                                                                              |             |                        |          |       |   |      |         |       |   |   |         |     
|Pro forma net (loss) income attributable to common stockholders                                                               |             | $                      | (100,043 | )     |   | $    | (89,123 | )     |   | $ | 6,936   |     
|                                                                                                                              |             |                        |          |       |   |      |         |       |   |   |         |     
|Basic (loss) earnings attributable to common stockholders per
    share:                                                      |             |                        |          |       |   |      |         |       |   |   |         |     
|                                                                                                                              | As reported |                        | $        | (2.19 | ) |      | $       | (1.87 | ) |   | $       | 0.55 | 
|                                                                                                                              | Pro forma   |                        | $        | (2.35 | ) |      | $       | (2.16 | ) |   | $       | 0.18 | 
|Diluted (loss) earnings attributable to common stockholders per
    share:                                                    |             |                        |          |       |   |      |         |       |   |   |         |     
|                                                                                                                              | As reported |                        | $        | (2.19 | ) |      | $       | (1.87 | ) |   | $       | 0.53 | 
|                                                                                                                              | Pro forma   |                        | $        | (2.35 | ) |      | $       | (2.16 | ) |   | $       | 0.17 | 



|                         |  |                                 |         |      |  |      |         |  |  |  |         | 
|------------------------ |  | ------------------------------- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                         |  | For the Years Ended January 31,
|                         |  |                                
|                         |  | 2005                            |         | 2004 |  | 2003
|                         |  |                                 |         |      |  |     
|Risk-free interest rates |  |                                 | 3.43%   |      |  |      | 2.97%   |  |  |  | 3.62%   | 
|Expected lives           |  |                                 | 5 years |      |  |      | 5 years |  |  |  | 5 years | 
|Expected volatility      |  |                                 | 68%     |      |  |      | 74%     |  |  |  | 82%     | 
|Expected dividend yields |  |                                 |        |      |  |      |        |  |  |  |        | 







| |             
| | ------------
| | Income Taxes



F-18



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                              
| | -----------------------------
| | Net (Loss) Earnings Per Share





| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements



Inventory Costs: an amendment of ARB No. 43,
Chapter 4


Share-Based Payment Accounting for Stock Issued to Employees Statement of Cash
Flows.




|   |             
|-- | ------------
|3. | Acquisitions



F-19



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                          
| | -----------------------------------------
| | Unaudited Pro Forma Financial Information





|                                                                                                                         |         |                       |          |       |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------------ | ------- | --------------------- | -------- | ----- | - | - | ------- | ----- | -
|                                                                                                                         |         | For the Years Ended  
|                                                                                                                         |         | January 31,          
|                                                                                                                         |         |                      
|                                                                                                                         |         | 2004                  |          | 2003 
|                                                                                                                         |         |                       |          |      
|                                                                                                                         |         | (In thousands, except
|                                                                                                                         |         | per share data)      
|                                                                                                                         |         | (Unaudited)          
|Net revenue                                                                                                              |         | $                     | 439,460  |       |   | $ | 436,962 |      
|Net (loss) before cumulative effect of change in accounting
    principle                                                |         |                       | (100,318 | )     |   |   | (13,540 | )    
|Net (loss) income                                                                                                        |         |                       | (100,318 | )     |   |   | 1,843   |      
|Preferred stock dividend and accretion                                                                                   |         |                       | 1,944    |       |   |   | 2,100   |      
|Net (loss) attributable to common stockholders                                                                           |         | $                     | (102,262 | )     |   | $ | (257    | )    
|Net (loss) attributable to common stockholders before cumulative
    effect of change in accounting principle per share: |         |                       |          |       |   |   |         |      
|                                                                                                                         | Basic   |                       | $        | (2.48 | ) |   | $       | (0.41 | )
|                                                                                                                         | Diluted |                       | $        | (2.48 | ) |   | $       | (0.41 | )
|Net income (loss) attributable to common stockholders per share:                                                         |         |                       |          |       |   |   |         |      
|                                                                                                                         | Basic   |                       | $        | (2.48 | ) |   | $       | (0.01 | )
|                                                                                                                         | Diluted |                       | $        | (2.48 | ) |   | $       | (0.01 | )





| |    |                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------
| | 1. | Elimination of historical amortization expense recorded by
    legacy dELiA*s related to definite-lived intangible assets.
|
| | 2. | Recording of:                                                                                                             



| |   |                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | amortization expense related to the estimated fair value of
    identified intangible assets from the purchase price allocation,
    which are being amortized over their estimated useful lives
    which range from 2 to 6 years, of approximately $529,000 in
    fiscal 2002 and $309,000 in fiscal 2003;



| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the adjustment to increase interest expense from borrowings to
    finance the dELiA*s acquisition by approximately
    $1.7 million in fiscal 2003 and $2.9 million in fiscal
    2002;
|
| |  | the adjustment to decrease deferred rent expense by
    approximately $266,000 in fiscal 2003 and $447,000 in fiscal
    2002.                                                          
|
| |  | the adjustment to decrease depreciation expense by approximately
    $292,000 in fiscal 2003 and $500,000 in fiscal 2002.                                                               

F-20



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                        
| | -----------------------
| | Fiscal 2004 Acquisition



| |                         
| | ------------------------
| | InSite Advertising, Inc.



|                           |  |            |       |             |  |           
|-------------------------- |  | ---------- | ----- | ----------- |  | ----------
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Customer relationships     |  | $          | 915   |             |  | 3 years   
|Non-competition agreements |  |            | 250   |             |  | 5 years   
|Trademarks                 |  |            | 200   |             |  | indefinite
|                           |  |            |       |             |  |           
|                           |  | $          | 1,365 |             |  |           



| |                         
| | ------------------------
| | Fiscal 2003 Acquisitions



| |                                                                      
| | ---------------------------------------------------------------------
| | OCM Direct, Inc., Collegiate Carpets, Inc. and Carepackages,
    Inc.



F-21



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |            |       |             |  |             
|-------------------------- |  | ---------- | ----- | ----------- |  | ------------
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Websites                   |  | $          | 425   |             |  | 3 years     
|Customer relationships     |  |            | 2,000 |             |  | 8 years     
|Non-competition agreements |  |            | 811   |             |  | 48-58 months
|Trademarks                 |  |            | 900   |             |  | indefinite  
|                           |  |            |       |             |  |             
|                           |  | $          | 4,136 |             |  |             



| |        
| | -------
| | dELiA*s





|                                               |  |   |        | 
|---------------------------------------------- |  | - | ------ | 
|ASSETS                                        
|Current assets                                 |  | $ | 28,652 | 
|Fixed assets                                   |  |   | 20,161 | 
|Other assets                                   |  |   | 130    | 
|Intangible assets                              |  |   | 4,004  | 
|Goodwill                                       |  |   | 40,204 | 
|                                               |  |   |        | 
|Total Assets                                   |  | $ | 93,151 | 
|LIABILITIES                                   
|Accounts payable and other current liabilities |  | $ | 29,232 | 
|Short-term debt                                |  |   | 6,911  | 
|Notes payable                                  |  |   | 2,987  | 
|Other liabilities                              |  |   | 1,385  | 
|                                               |  |   |        | 
|Total Liabilities                              |  | $ | 40,515 | 
|NET ASSETS ACQUIRED                            |  | $ | 52,636 | 
|                                               |  |   |        | 

F-22



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                                                                    |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Book value of net liabilities acquired                                                                              |  | $ | (3,185 | )
|Adjusted for write-off of intangible assets and deferred
    financing cost                                         |  |   | 230    |  
|                                                                                                                    |  |   |        |  
|Adjusted book value of net liabilities acquired                                                                     |  |   | (3,415 | )
|Remaining allocation:                                                                                               |  |   |        |  
|Intangible assets                                                                                                   |  |   | 4,004  |  
|Goodwill                                                                                                            |  |   | 40,204 |  
|Restructuring costs                                                                                                 |  |   | (3,928 | )
|Adjustment to fair value property, plant and equipment                                                              |  |   | (2,542 | )
|Reduction of deferred revenues related to a licensing agreement
    that has no future legal performance obligation |  |   | 16,500 |  
|Reduction of deferred rent liability in conjunction with the
    fair valuation of leases                           |  |   | 1,813  |  
|                                                                                                                    |  |   |        |  
|Total purchase price allocation                                                                                     |  | $ | 52,636 |  
|                                                                                                                    |  |   |        |  







| |                
| | ---------------
| | CollegeClub.com



|                           |  |            |     |             |  |           
|-------------------------- |  | ---------- | --- | ----------- |  | ----------
|                           |  | Fair Value |     | Useful Life
|                           |  |            |     |            
|Websites                   |  | $          | 260 |             |  | 3 years   
|Customer relationships     |  |            | 150 |             |  | 3 years   
|Non-competition agreements |  |            | 40  |             |  | 2 years   
|Trademarks                 |  |            | 25  |             |  | indefinite
|                           |  |            |     |             |  |           
|                           |  | $          | 475 |             |  |           



| |                         
| | ------------------------
| | Fiscal 2002 Acquisitions



| |               
| | --------------
| | Girlfriends LA



F-23



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |            |       |             |  |           
|-------------------------- |  | ---------- | ----- | ----------- |  | ----------
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Websites                   |  | $          | 146   |             |  | 2 years   
|Mailing lists              |  |            | 550   |             |  | 4 years   
|Non-competition agreements |  |            | 60    |             |  | 3 years   
|Trademarks                 |  |            | 490   |             |  | indefinite
|                           |  |            |       |             |  |           
|                           |  | $          | 1,246 |             |  |           





| |                                  
| | ---------------------------------
| | Student Advantage Marketing Group



|                           |  |            |       |             |  |  |           | 
|-------------------------- |  | ---------- | ----- | ----------- |  |  | --------- | 
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Client relationships       |  | $          | 1,600 |             |  |  | 2.5 years | 
|Non-competition agreements |  |            | 100   |             |  |  | 3 years   | 
|                           |  |            |       |             |  |  |           | 
|                           |  | $          | 1,700 |             |  |  |           | 



| |                   
| | ------------------
| | Market Place Media



F-24



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |            |       |             |  |           
|-------------------------- |  | ---------- | ----- | ----------- |  | ----------
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Websites                   |  | $          | 50    |             |  | 3 years   
|Client relationships       |  |            | 2,400 |             |  | 3 years   
|Non-competition agreements |  |            | 700   |             |  | 3 years   
|Trademarks                 |  |            | 4,700 |             |  | indefinite
|                           |  |            |       |             |  |           
|                           |  | $          | 7,850 |             |  |           



| |                           
| | --------------------------
| | YouthStream Media Networks



|                           |  |            |       |             |  |  |            | 
|-------------------------- |  | ---------- | ----- | ----------- |  |  | ---------- | 
|                           |  | Fair Value |       | Useful Life
|                           |  |            |       |            
|Websites                   |  | $          | 25    |             |  |  | 2.5 years  | 
|Client relationships       |  |            | 800   |             |  |  | 2.5 years  | 
|Non-competition agreements |  |            | 100   |             |  |  | 1.5 years  | 
|Trademarks                 |  |            | 135   |             |  |  | indefinite | 
|                           |  |            |       |             |  |  |            | 
|                           |  | $          | 1,060 |             |  |  |            | 



| |                         
| | ------------------------
| | Career Recruitment Media



F-25



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                           |  |            |     |             |  |  |            | 
|-------------------------- |  | ---------- | --- | ----------- |  |  | ---------- | 
|                           |  | Fair Value |     | Useful Life
|                           |  |            |     |            
|Websites                   |  | $          | 50  |             |  |  | 33 months  | 
|Client relationships       |  |            | 100 |             |  |  | 33 months  | 
|Non-competition agreements |  |            | 50  |             |  |  | 30 months  | 
|Trademarks                 |  |            | 75  |             |  |  | indefinite | 
|                           |  |            |     |             |  |  |            | 
|                           |  | $          | 275 |             |  |  |            | 



| |          
| | ---------
| | Old Glory



|                           |  |            |        |             |  |           
|-------------------------- |  | ---------- | ------ | ----------- |  | ----------
|                           |  | Fair Value |        | Useful Life
|                           |  |            |        |            
|Websites                   |  |            | $50    |             |  | 3 years   
|Mailing lists              |  |            | 450    |             |  | 7 years   
|Non-competition agreements |  |            | 200    |             |  | 4 years   
|Trademarks                 |  |            | 300    |             |  | indefinite
|                           |  |            |        |             |  |           
|                           |  |            | $1,000 |             |  |           





|   |                               
|-- | ------------------------------
|4. | Goodwill and Intangible Assets



|                                                                         |  |      |         |      |  |   |         |  
|------------------------------------------------------------------------ |  | ---- | ------- | ---- |  | - | ------- | -
|                                                                         |  | 2005 |         | 2004
|                                                                         |  |      |         |     
|Gross balance, beginning of year                                         |  | $    | 301,442 |      |  | $ | 296,999 |  
|Goodwill acquired during the year                                        |  |      | 6,277   |      |  |   | 60,967  |  
|Net adjustments to purchase price of prior acquisitions                  |  |      | (2,908  | )    |  |   | 224     |  
|Impairment of goodwill                                                   |  |      | (71,061 | )    |  |   | (56,748 | )
|                                                                         |  |      |         |      |  |   |         |  
|Gross balance, end of the year                                           |  |      | 233,750 |      |  |   | 301,442 |  
|Accumulated goodwill amortization, prior to the adoption of
    SFAS 142 |  |      | (26,646 | )    |  |   | (26,646 | )
|                                                                         |  |      |         |      |  |   |         |  
|Net balance, end of year                                                 |  | $    | 207,104 |      |  | $ | 274,796 |  
|                                                                         |  |      |         |      |  |   |         |  



| |                                                                  
| | -----------------------------------------------------------------
| | Impairment of Goodwill and Indefinite-Lived Intangible
    Assets



F-26



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










| |                                                 
| | ------------------------------------------------
| | Intangible Assets Related to Businesses Acquired



|                                  |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 
|--------------------------------- |  | ---------------------- | ------ | ---------------- |  | -------- | ------ | ------------ |  | ---------------- | ------ |  |  | - | ----- |  |  |  | --- | 
|                                  |  | January 31, 2005       |        | January 31, 2004
|                                  |  |                        |        |                 
|                                  |  | Gross                  |        |                  |  | Gross    |        |              |  | Weighted Average
|                                  |  | Carrying               |        | Accumulated      |  | Carrying |        | Accumulated  |  | Amortization    
|                                  |  | Amount                 |        | Amortization     |  | Amount   |        | Amortization |  | Period (Years)  
|                                  |  |                        |        |                  |  |          |        |              |  |                 
|                                  |  | (Amounts in thousands)
|Amortizable intangible assets:    |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 
|Mailing Lists                     |  | $                      | 3,929  |                  |  | $        | 3,374  |              |  | $                | 3,858  |  |  | $ | 2,416 |  |  |  | 4.3 | 
|Noncompetition Agreements         |  |                        | 4,551  |                  |  |          | 3,945  |              |  |                  | 5,060  |  |  |   | 2,527 |  |  |  | 3.5 | 
|Websites                          |  |                        | 2,114  |                  |  |          | 1,595  |              |  |                  | 2,890  |  |  |   | 961   |  |  |  | 3.0 | 
|Client Relationships              |  |                        | 9,060  |                  |  |          | 5,398  |              |  |                  | 7,405  |  |  |   | 2,441 |  |  |  | 3.8 | 
|Leasehold Interests               |  |                        | 300    |                  |  |          | 90     |              |  |                  | 300    |  |  |   | 41    |  |  |  | 6.5 | 
|                                  |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 
|                                  |  | $                      | 19,954 |                  |  | $        | 14,402 |              |  | $                | 19,513 |  |  | $ | 8,386 |  |  |  |     | 
|                                  |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 
|Nonamortizable intangible assets: |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 
|Trademarks                        |  | $                      | 8,694  |                  |  |          |       |              |  | $                | 9,535  |  |  |   |      |  |  |  | N/A | 
|                                  |  |                        |        |                  |  |          |        |              |  |                  |        |  |  |   |       |  |  |  |     | 



F-27



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |                      
|-- | ---------------------
|5. | Marketable Securities



|                          |                                     |                        |       |            |  |         |   |           |  |   |     |     |   |   |       |       | 
|------------------------- | ----------------------------------- | ---------------------- | ----- | ---------- |  | ------- | - | --------- |  | - | --- | --- | - | - | ----- | ----- | 
|                          |                                     | Gross                  |       | Gross      |  |         |   |          
|                          |                                     | Unrealized             |       | Unrealized |  |         |   | Estimated
|                          |                                     | Amortized              |       | Holding    |  | Holding |   | Fair     
|January 31, 2005          |                                     | Cost                   |       | Gains      |  | Losses  |   | Value    
|                          |                                     |                        |       |            |  |         |   |          
|                          |                                     | (Amounts in thousands)
|Corporate debt securities |                                     | $                      | 6,372 |            |  | $       |  |           |  | $ | (31 | )   |   | $ | 6,341 |      
|                          |                                     |                        |       |            |  |         |   |           |  |   |     |     |   |   |       |      
|                          | Total available-for-sale securities |                        | $     | 6,372      |  |         | $ |          |  |   | $   | (31 | ) |   | $     | 6,341 | 
|                          |                                     |                        |       |            |  |         |   |           |  |   |     |     |   |   |       |      

|                                  |                                     |   |        |        |  |   |   |   |  |   |     |     |   |   |        |        | 
|--------------------------------- | ----------------------------------- | - | ------ | ------ |  | - | - | - |  | - | --- | --- | - | - | ------ | ------ | 
|January 31, 2004                  |                                     |   |        |        |  |   |   |  
|                                  |                                     |   |        |        |  |   |   |  
|Taxable auction securities        |                                     | $ | 4,700  |        |  | $ |  |   |  | $ |    |     |   | $ | 4,700  |       
|Tax-advantaged auction securities |                                     |   | 6,000  |        |  |   |  |   |  |   |    |     |   |   | 6,000  |       
|Corporate debt securities         |                                     |   | 13,926 |        |  |   | 3 |   |  |   | (31 | )   |   |   | 13,898 |       
|Equity securities                 |                                     |   | 3      |        |  |   |  |   |  |   | (2  | )   |   |   | 1      |       
|                                  |                                     |   |        |        |  |   |   |   |  |   |     |     |   |   |        |       
|                                  | Total available-for-sale securities |   | $      | 24,629 |  |   | $ | 3 |  |   | $   | (33 | ) |   | $      | 24,599 | 
|                                  |                                     |   |        |        |  |   |   |   |  |   |     |     |   |   |        |       



|                        |  |                        |       |           |  |   |       | 
|----------------------- |  | ---------------------- | ----- | --------- |  | - | ----- | 
|                        |  | Gross                  |       |          
|                        |  | Unrealized             |       | Estimated
|                        |  | Amortized              |       | Fair     
|January 31, 2005        |  | Cost                   |       | Value    
|                        |  |                        |       |          
|                        |  | (Amounts in thousands)
|Due in one year or less |  | $                      | 6,372 |           |  | $ | 6,341 | 
|Due after one year      |  |                        |      |           |  |   |      | 
|                        |  |                        |       |           |  |   |       | 
|                        |  | $                      | 6,372 |           |  | $ | 6,341 | 
|                        |  |                        |       |           |  |   |       | 





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Realized (Loss) Gain on Marketable Securities and
    Write-off of Investments, Net



F-28



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |                  
|-- | -----------------
|6. | Long-Lived Assets



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



|                                                |  |                        |         |      |  |   |         |  
|----------------------------------------------- |  | ---------------------- | ------- | ---- |  | - | ------- | -
|                                                |  | 2005                   |         | 2004
|                                                |  |                        |         |     
|                                                |  | (Amounts in thousands)
|Computer equipment under capitalized leases     |  | $                      | 290     |      |  | $ | 318     |  
|Computer equipment                              |  |                        | 12,768  |      |  |   | 14,891  |  
|Machinery and equipment                         |  |                        | 11,055  |      |  |   | 8,665   |  
|Office furniture and fixtures                   |  |                        | 5,998   |      |  |   | 3,964   |  
|Leasehold improvements                          |  |                        | 9,825   |      |  |   | 10,123  |  
|Building                                        |  |                        | 6,159   |      |  |   | 6,159   |  
|Land                                            |  |                        | 500     |      |  |   | 500     |  
|                                                |  |                        |         |      |  |   |         |  
|                                                |  |                        | 46,595  |      |  |   | 44,620  |  
|Less: accumulated depreciation and amortization |  |                        | (22,078 | )    |  |   | (17,386 | )
|                                                |  |                        |         |      |  |   |         |  
|                                                |  | $                      | 24,517  |      |  | $ | 27,234  |  
|                                                |  |                        |         |      |  |   |         |  





| |                                
| | -------------------------------
| | Impairment of Long-Lived Assets







|   |                  
|-- | -----------------
|7. | Credit Facilities



| |            
| | -----------
| | Wells Fargo



F-29



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










| |                     
| | --------------------
| | JP Morgan Chase Bank



8.     Current Liabilities




| |                                               
| | ----------------------------------------------
| | Accrued Expenses and Other Current Liabilities



|                         |  |             |        |      |  |   |        | 
|------------------------ |  | ----------- | ------ | ---- |  | - | ------ | 
|                         |  | 2005        |        | 2004
|                         |  |             |        |     
|                         |  | (Amounts in
|                         |  | thousands) 
|Accrued sales tax        |  | $           | 1,493  |      |  | $ | 4,306  | 
|Credits due to customers |  |             | 3,052  |      |  |   | 5,754  | 
|Other                    |  |             | 22,205 |      |  |   | 27,399 | 
|                         |  |             |        |      |  |   |        | 
|                         |  | $           | 26,750 |      |  | $ | 37,459 | 
|                         |  |             |        |      |  |   |        | 



|   |                      
|-- | ---------------------
|9. | Long-Term Liabilities



| |                              
| | -----------------------------
| | Convertible Senior Debentures



F-30



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                      
| | ---------------------
| | Mortgage Note Payable





|    |                                                
|--- | -----------------------------------------------
|10. | Series B Redeemable Convertible Preferred Stock





F-31



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|    |                          
|--- | -------------------------
|11. | Common Stock Transactions







F-32



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                        
|--- | -----------------------
|12. | Stockholder Rights Plan





|    |                               
|--- | ------------------------------
|13. | Stock-based Compensation Plans



| |               
| | --------------
| | Stock options:





F-33



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |       |  |   |       |  |  |   |           |   |  |   |       | 
|-------------------------------------------------------------- |  | ------------------------------- | ---------- | ----- |  | -------- | ----- | ----- |  | -------- | ---------- | ----- |  | - | ----- |  |  | - | --------- | - |  | - | ----- | 
|                                                               |  | For the Years Ended January 31,
|                                                               |  |                                
|                                                               |  | 2005                            |            | 2004  |  | 2003    
|                                                               |  |                                 |            |       |  |         
|                                                               |  | Weighted                        |            |       |  | Weighted |       |       |  | Weighted |            |      
|                                                               |  | Average                         |            |       |  | Average  |       |       |  | Average  |            |      
|                                                               |  | Exercise                        |            |       |  | Exercise |       |       |  | Exercise |            |      
|                                                               |  | Shares                          |            | Price |  | Shares   |       | Price |  | Shares   |            | Price
|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |      
|Outstanding, beginning of year                                 |  |                                 | 7,683,935  |       |  | $        | 9.96  |       |  |          | 6,791,817  |       |  | $ | 11.64 |  |  |   | 6,016,148 |   |  | $ | 12.56 | 
|Options granted                                                |  |                                 | 1,694,131  |       |  |          | 4.89  |       |  |          | 2,012,089  |       |  |   | 5.26  |  |  |   | 1,697,150 |   |  |   | 9.19  | 
|Options exercised                                              |  |                                 | (85,233    | )     |  |          | 4.67  |       |  |          | (26,256    | )     |  |   | 4.42  |  |  |   | (190,846  | ) |  |   | 8.16  | 
|Options canceled or expired                                    |  |                                 | (2,021,765 | )     |  |          | 9.63  |       |  |          | (1,093,715 | )     |  |   | 11.97 |  |  |   | (730,635  | ) |  |   | 14.44 | 
|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |       |  |   |       |  |  |   |           |   |  |   |       | 
|Outstanding, end of year                                       |  |                                 | 7,271,068  |       |  | $        | 8.92  |       |  |          | 7,683,935  |       |  | $ | 9.95  |  |  |   | 6,791,817 |   |  | $ | 11.64 | 
|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |       |  |   |       |  |  |   |           |   |  |   |       | 
|Exercisable, end of year                                       |  |                                 | 3,873,845  |       |  | $        | 11.21 |       |  |          | 3,333,285  |       |  | $ | 12.32 |  |  |   | 2,013,637 |   |  | $ | 13.33 | 
|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |       |  |   |       |  |  |   |           |   |  |   |       | 
|Weighted-average fair value of options granted during the year |  | $                               | 2.94       |       |  |          | N/A   |       |  | $        | 3.41       |       |  |   | N/A   |  |  | $ | 6.20      |   |  |   | N/A   | 
|                                                               |  |                                 |            |       |  |          |       |       |  |          |            |       |  |   |       |  |  |   |           |   |  |   |       | 

F-34



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                |  |             |           |              |  |       |           |          |  |       |       |  |  |  |           |  |  |   |       | 
|--------------- |  | ----------- | --------- | ------------ |  | ----- | --------- | -------- |  | ----- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |  | Outstanding |           | Exercisable 
|                |  |             |           |             
|                |  |             |           | Average      |  |       |           | Average 
|Exercise        |  |             |           | Exercise     |  |       |           | Exercise
|Price Range     |  | Options     |           | Average Life |  | Price |           | Options  |  | Price
|                |  |             |           |              |  |       |           |          |  |      
|$0.60 - $0.61   |  |             | 5,348     |              |  |       | 4.0 Years |          |  | $     | 0.60  |  |  |  | 5,348     |  |  | $ | 0.60  | 
|$2.64 - $3.90   |  |             | 300,756   |              |  |       | 9.7 Years |          |  | $     | 3.81  |  |  |  | 6,414     |  |  | $ | 3.71  | 
|$4.02 - $6.02   |  |             | 2,438,114 |              |  |       | 8.8 Years |          |  | $     | 4.82  |  |  |  | 385,575   |  |  | $ | 4.65  | 
|$6.03 - $9.00   |  |             | 1,871,445 |              |  |       | 6.5 Years |          |  | $     | 7.69  |  |  |  | 1,306,897 |  |  | $ | 7.89  | 
|$9.09 - $13.63  |  |             | 1,313,250 |              |  |       | 6.4 Years |          |  | $     | 12.03 |  |  |  | 982,232   |  |  | $ | 12.10 | 
|$13.65 - $19.25 |  |             | 1,305,155 |              |  |       | 6.0 Years |          |  | $     | 16.06 |  |  |  | 1,155,504 |  |  | $ | 16.23 | 
|$20.90 - $22.00 |  |             | 37,000    |              |  |       | 6.0 Years |          |  | $     | 21.14 |  |  |  | 31,875    |  |  | $ | 21.14 | 
|                |  |             |           |              |  |       |           |          |  |       |       |  |  |  |           |  |  |   |       | 
|$0.60 - $22.00  |  |             | 7,271,068 |              |  |       | 7.3 Years |          |  | $     | 8.92  |  |  |  | 3,873,845 |  |  | $ | 11.21 | 
|                |  |             |           |              |  |       |           |          |  |       |       |  |  |  |           |  |  |   |       | 



| |          
| | ---------
| | Warrants:



|                               |                              |                                 |           |         |   |      |           |         |  |  |           |         |  
|------------------------------ | ---------------------------- | ------------------------------- | --------- | ------- | - | ---- | --------- | ------- |  |  | --------- | ------- | -
|                               |                              | For the Years Ended January 31,
|                               |                              |                                
|                               |                              | 2005                            |           | 2004    |   | 2003
|                               |                              |                                 |           |         |   |     
|Outstanding, beginning of year |                              |                                 | 1,917,295 |         |   |      | 1,813,559 |         |  |  | 1,690,635 |        
|                               | Warrants issued              |                                 |           |        |   |      |           | 103,736 |  |  |           | 136,767 |  
|                               | Warrants exercised           |                                 |           |        |   |      |           |        |  |  |           | (13,843 | )
|                               | Warrants canceled or expired |                                 |           | (10,000 | ) |      |           |        |  |  |           |        |  
|                               |                              |                                 |           |         |   |      |           |         |  |  |           |        
|Outstanding, end of year       |                              |                                 | 1,907,295 |         |   |      | 1,917,295 |         |  |  | 1,813,559 |        
|                               |                              |                                 |           |         |   |      |           |         |  |  |           |        





| |                 
| | ----------------
| | Restricted Stock





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan



F-35



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








| |                                     
| | ------------------------------------
| | Shares Reserved for Future Issuance:



|                                     |  |                     |            |      |  |  |            | 
|------------------------------------ |  | ------------------- | ---------- | ---- |  |  | ---------- | 
|                                     |  | For the Years Ended
|                                     |  | January 31,        
|                                     |  |                    
|                                     |  | 2005                |            | 2004
|                                     |  |                     |            |     
|Preferred Stock                      |  |                     | 2,093,463  |      |  |  | 1,981,866  | 
|Stock Option Plans                   |  |                     | 17,231,798 |      |  |  | 17,675,031 | 
|Warrants                             |  |                     | 1,907,295  |      |  |  | 1,917,295  | 
|Employee Stock Plan                  |  |                     | 188,412    |      |  |  | 289,245    | 
|5.375% Senior Convertible Debentures |  |                     | 8,274,628  |      |  |  | 8,274,628  | 
|                                     |  |                     |            |      |  |  |            | 
|                                     |  |                     | 29,695,596 |      |  |  | 30,138,065 | 
|                                     |  |                     |            |      |  |  |            | 

F-36



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |             
|--- | ------------
|14. | Income Taxes



|                                 |         |                        |     |      |  |      |       |       |   |   |        |        |  
|-------------------------------- | ------- | ---------------------- | --- | ---- |  | ---- | ----- | ----- | - | - | ------ | ------ | -
|                                 |         | 2005                   |     | 2004 |  | 2003
|                                 |         |                        |     |      |  |     
|                                 |         | (Amounts in thousands)
|Current:                         |         |                        |     |      |  |      |       |       |   |   |        |       
|                                 | State   |                        | $   | 158  |  |      | $     | 307   |   |   | $      | 1,114  |  
|                                 | Federal |                        |     |     |  |      |       | 366   |   |   |        |       |  
|                                 |         |                        |     |      |  |      |       |       |   |   |        |       
|                                 |         |                        | 158 |      |  |      | 673   |       |   |   | 1,114  |       
|Deferred:                        |         |                        |     |      |  |      |       |       |   |   |        |       
|                                 | State   |                        |     |     |  |      |       | (286  | ) |   |        | 191    |  
|                                 | Federal |                        |     |     |  |      |       | 4,892 |   |   |        | (2,777 | )
|                                 |         |                        |     |      |  |      |       |       |   |   |        |       
|                                 |         |                        |    |      |  |      | 4,606 |       |   |   | (2,586 | )     
|                                 |         |                        |     |      |  |      |       |       |   |   |        |       
|Net Income Tax Expense/(Benefit) |         | $                      | 158 |      |  | $    | 5,279 |       |   | $ | (1,472 | )     
|                                 |         |                        |     |      |  |      |       |       |   |   |        |       



|                                        |  |      |     |      |  |      |     |    |  |  |     |   
|--------------------------------------- |  | ---- | --- | ---- |  | ---- | --- | -- |  |  | --- | --
|                                        |  | 2005 |     | 2004 |  | 2003
|                                        |  |      |     |      |  |     
|Computed expected tax (benefit) expense |  |      | (34 | )%   |  |      | (35 | )% |  |  | 35  | % 
|State taxes, net of federal benefit     |  |      | (2  | )%   |  |      |    |    |  |  | 7   |   
|Non-deductible expenses                 |  |      | 1   | %    |  |      | 1   | %  |  |  | 1   | % 
|Goodwill impairment                     |  |      | 21  | %    |  |      | 29  | %  |  |  |    |   
|Change in valuation allowance           |  |      | 10  | %    |  |      | 13  | %  |  |  | (50 | )%
|Change in future state tax rate         |  |      | 4   | %    |  |      |    |    |  |  |    |   
|                                        |  |      |     |      |  |      |     |    |  |  |     |   
|Total expense (benefit)                 |  |      | 0   | %    |  |      | 8   | %  |  |  | (7  | )%
|                                        |  |      |     |      |  |      |     |    |  |  |     |   

F-37



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                          |                                                   |                                |         |        |        |   |         |        |        |  
|------------------------- | ------------------------------------------------- | ------------------------------ | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                          |                                                   | 2005                           |         | 2004  
|                          |                                                   |                                |         |       
|                          |                                                   | (Amounts in thousands)        
|Deferred tax assets:      |                                                   |                                |         |        |        |   |         |       
|                          | Accruals and reserves                             |                                | $       | 6,433  |        |   | $       | 10,001 |       
|                          | Deferred compensation                             |                                |         | 674    |        |   |         | 435    |       
|                          | Property and equipment                            |                                |         | 3,104  |        |   |         | 3,096  |       
|                          | Other                                             |                                |         | 7,243  |        |   |         | 739    |       
|                          | Net operating loss and capital loss carryforwards |                                |         | 36,859 |        |   |         | 28,437 |       
|                          |                                                   |                                |         |        |        |   |         |       
|Gross deferred tax assets |                                                   |                                | 54,313  |        |        |   | 42,708  |       
|Valuation allowance       |                                                   |                                | (45,711 | )      |        |   | (36,309 | )     
|                          |                                                   |                                |         |        |        |   |         |       
|                          |                                                   | Total deferred tax assets      |         |        | 8,602  |   |         |        | 6,399  |  
|                          |                                                   |                                |         |        |        |   |         |       
|Deferred tax liabilities: |                                                   |                                |         |        |        |   |         |       
|                          | Goodwill                                          |                                |         | (2,709 | )      |   |         | (749   | )     
|                          | Identified intangible assets                      |                                |         | (1,397 | )      |   |         | (4,308 | )     
|                          | Other                                             |                                |         | (4,496 | )      |   |         | (1,342 | )     
|                          |                                                   |                                |         |        |        |   |         |       
|                          |                                                   | Total deferred tax liabilities |         |        | (8,602 | ) |         |        | (6,399 | )
|                          |                                                   |                                |         |        |        |   |         |       
|                          | Net deferred tax assets                           |                                | $       |       |        |   | $       |       |       
|                          |                                                   |                                |         |        |        |   |         |       



F-38



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|15. | Net (Loss) Earnings Per Share



|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|---------------------------------------------------------------------------------------------------- |  | ---------------------- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | 
|                                                                                                     |  | Year Ended January 31,
|                                                                                                     |  |                       
|                                                                                                     |  | 2005                   |            | 2004 |  | 2003
|                                                                                                     |  |                        |            |      |  |     
|NUMERATOR:                                                                                           |  |                        |            |      |  |      |            |   |  |   |            | 
|Net (loss) income                                                                                    |  | $                      | (91,766    | )    |  | $    | (75,215    | ) |  | $ | 23,295     | 
|Dividends and accretion on preferred stock                                                           |  |                        | 1,608      |      |  |      | 1,944      |   |  |   | 2,100      | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|Net (loss) income attributable to common stockholders                                                |  | $                      | (93,374    | )    |  | $    | (77,159    | ) |  | $ | 21,195     | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|DENOMINATOR:                                                                                         |  |                        |            |      |  |      |            |   |  |   |            | 
|Denominator for basic and diluted (loss) earnings attributable
    to common stockholders per share: |  |                        |            |      |  |      |            |   |  |   |            | 
|Weighted average basic common shares outstanding                                                     |  |                        | 42,606,905 |      |  |      | 41,175,046 |   |  |   | 38,436,256 | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|Contingently issuable Common Stock pursuant to acquisitions                                          |  |                        |           |      |  |      |           |   |  |   | 959,045    | 
|Options to purchase Common Stock                                                                     |  |                        |           |      |  |      |           |   |  |   | 676,111    | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|Weighted average diluted common shares outstanding                                                   |  |                        | 42,606,905 |      |  |      | 41,175,046 |   |  |   | 40,071,412 | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|Basic (loss) earnings attributable to common stockholders per
    share                              |  | $                      | (2.19      | )    |  | $    | (1.87      | ) |  | $ | 0.55       | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 
|Diluted (loss) earnings attributable to common stockholders per
    share                            |  | $                      | (2.19      | )    |  | $    | (1.87      | ) |  | $ | 0.53       | 
|                                                                                                     |  |                        |            |      |  |      |            |   |  |   |            | 



|                                                                               |       |             |           |            |  |      |           |            |  |  |           |           | 
|------------------------------------------------------------------------------ | ----- | ----------- | --------- | ---------- |  | ---- | --------- | ---------- |  |  | --------- | --------- | 
|                                                                               |       | January 31,
|                                                                               |       |            
|                                                                               |       | 2005        |           | 2004       |  | 2003
|                                                                               |       |             |           |            |  |     
|Options to purchase Common Stock                                               |       |             | 7,690,342 |            |  |      | 7,326,014 |            |  |  | 6,115,706 |          
|Warrants to purchase Common Stock                                              |       |             | 1,914,795 |            |  |      | 1,873,452 |            |  |  | 1,813,559 |          
|Conversion of Series A and Series B Redeemable
    Convertible preferred stock |       |             | 1,376,354 |            |  |      | 1,377,254 |            |  |  | 1,506,363 |          
|Contingently issuable common shares pursuant to acquisitions                   |       |             | 132,903   |            |  |      |          |            |  |  |          |          
|Conversion of 5.375% Convertible Debentures                                    |       |             | 8,274,628 |            |  |      | 8,103,484 |            |  |  |          |          
|Restricted stock                                                               |       |             | 214,000   |            |  |      | 300,000   |            |  |  |          |          
|                                                                               |       |             |           |            |  |      |           |            |  |  |           |          
|                                                                               | Total |             |           | 19,603,022 |  |      |           | 18,980,204 |  |  |           | 9,435,628 | 
|                                                                               |       |             |           |            |  |      |           |            |  |  |           |          

F-39



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|16. | Commitments and Contingencies



| |       
| | ------
| | Leases



|                             |  |                        |     |           |  |          |        |  |  |   |      |  
|---------------------------- |  | ---------------------- | --- | --------- |  | -------- | ------ |  |  | - | ---- | -
|                             |  | Capital                |     | Operating |  | Sublease
|Year Ending January 31,      |  | Leases                 |     | Leases    |  | Rent    
|                             |  |                        |     |           |  |         
|                             |  | (Amounts in thousands)
|2006                         |  | $                      | 42  |           |  | $        | 12,721 |  |  | $ | (296 | )
|2007                         |  |                        | 31  |           |  |          | 11,697 |  |  |   | (67  | )
|2008                         |  |                        | 23  |           |  |          | 10,041 |  |  |   |     |  
|2009                         |  |                        | 4   |           |  |          | 9,451  |  |  |   |     |  
|2010                         |  |                        |    |           |  |          | 8,275  |  |  |   |     |  
|Thereafter                   |  |                        |    |           |  |          | 13,916 |  |  |   |     |  
|                             |  |                        |     |           |  |          |        |  |  |   |      |  
|Total minimum lease payments |  | $                      | 100 |           |  | $        | 66,101 |  |  | $ | (363 | )
|                             |  |                        |     |           |  |          |        |  |  |   |      |  
|Imputed interest             |  |                        | 9   |           |  |          |        |  |  |   |      |  
|                             |  |                        |     |           |  |          |        |  |  |   |      |  
|Capital lease obligations    |  | $                      | 91  |           |  |          |        |  |  |   |      |  
|                             |  |                        |     |           |  |          |        |  |  |   |      |  







| |          
| | ---------
| | Sales Tax





| |           
| | ----------
| | Litigation



F-40



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










F-41



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|    |                      
|--- | ---------------------
|17. | Restructuring Charges









F-42



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                                            |  |             |     |             |  |                 |        |       |  |   |      |   |  |   |        |  
|------------------------------------------- |  | ----------- | --- | ----------- |  | --------------- | ------ | ----- |  | - | ---- | - |  | - | ------ | -
|                                            |  | Asset       |     | Contractual |  | Severance &     |        |      
|Type of Cost                                |  | Impairments |     | Obligations |  | Personnel Costs |        | Total
|                                            |  |             |     |             |  |                 |        |      
|Balance at January 31, 2003                 |  | $           |    |             |  | $               | 1,596  |       |  | $ |     |   |  | $ | 1,596  |  
|Restructuring Costs Fiscal 2003             |  |             | 31  |             |  |                 | 655    |       |  |   | 44   |   |  |   | 730    |  
|dELiA*s Restructuring Costs                 |  |             |    |             |  |                 | 6,311  |       |  |   | 212  |   |  |   | 6,523  |  
|Payments and Write-offs Fiscal 2003         |  |             | (31 | )           |  |                 | (2,519 | )     |  |   | (82  | ) |  |   | (2,632 | )
|                                            |  |             |     |             |  |                 |        |       |  |   |      |   |  |   |        |  
|Balance at January 31, 2004                 |  |             |    |             |  |                 | 6,043  |       |  |   | 174  |   |  |   | 6,217  |  
|Restructuring Costs Fiscal 2004             |  |             | 55  |             |  |                 |       |       |  |   | 292  |   |  |   | 347    |  
|Payments and Write-offs Fiscal 2004         |  |             | (55 | )           |  |                 | (1,829 | )     |  |   | (348 | ) |  |   | (2,232 | )
|Adjustment of dELiA*s Opening Balance Sheet |  |             |    |             |  |                 | (2,477 | )     |  |   | (118 | ) |  |   | (2,595 | )
|                                            |  |             |     |             |  |                 |        |       |  |   |      |   |  |   |        |  
|Balance at January 31, 2005                 |  | $           |    |             |  | $               | 1,737  |       |  | $ |     |   |  | $ | 1,737  |  
|                                            |  |             |     |             |  |                 |        |       |  |   |      |   |  |   |        |  



|                                          |  |             |       |             |  |   |       | 
|----------------------------------------- |  | ----------- | ----- | ----------- |  | - | ----- | 
|                                          |  | January 31, |       | January 31,
|                                          |  | 2005        |       | 2004       
|                                          |  |             |       |            
|CCS facility, San Luis Obispo, California |  | $           | 423   |             |  | $ | 1,066 | 
|dELiA*s restructuring liability           |  |             | 1,314 |             |  |   | 5,151 | 
|                                          |  |             |       |             |  |   |       | 
|Total                                     |  | $           | 1,737 |             |  | $ | 6,217 | 
|                                          |  |             |       |             |  |   |       | 





|    |                  
|--- | -----------------
|18. | Segment Reporting



F-43



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                              |                  |                |   |         |  |             |   |           |  |       |   |         |  |  |   |        |  |  |   |         | 
|----------------------------- | ---------------- | -------------- | - | ------- |  | ----------- | - | --------- |  | ----- | - | ------- |  |  | - | ------ |  |  | - | ------- | 
|                              |                  |                |   |         |  | Sponsorship |   |           |  |      
|                              |                  | Direct         |   | Retail  |  | and Other   |   |           |  |      
|                              |                  | Marketing      |   | Stores  |  | Activities  |   | Corporate |  | Total
|                              |                  |                |   |         |  |             |   |           |  |      
|                              |                  | (In thousands)
|Total Assets                  |                  |                |   |         |  |             |   |           |  |       |   |         |  |  |   |        |  |  |   |        
|                              | January 31, 2005 |                | $ | 96,981  |  |             | $ | 17,454    |  |       | $ | 202,323 |  |  | $ | 42,375 |  |  | $ | 359,133 | 
|                              | January 31, 2004 |                |   | 100,516 |  |             |   | 20,963    |  |       |   | 261,642 |  |  |   | 66,888 |  |  |   | 450,009 | 
|                              | January 31, 2003 |                |   | 116,275 |  |             |   |          |  |       |   | 248,313 |  |  |   | 70,012 |  |  |   | 434,600 | 
|Capital Expenditures          |                  |                |   |         |  |             |   |           |  |       |   |         |  |  |   |        |  |  |   |        
|                              | January 31, 2005 |                | $ | 2,168   |  |             | $ | 402       |  |       | $ | 2,310   |  |  | $ | 967    |  |  | $ | 5,847   | 
|                              | January 31, 2004 |                |   | 1,347   |  |             |   |          |  |       |   | 832     |  |  |   | 1,588  |  |  |   | 3,767   | 
|                              | January 31, 2003 |                |   | 237     |  |             |   |          |  |       |   | 1,952   |  |  |   | 2,128  |  |  |   | 4,317   | 
|Depreciation and Amortization |                  |                |   |         |  |             |   |           |  |       |   |         |  |  |   |        |  |  |   |        
|                              | January 31, 2005 |                | $ | 3,579   |  |             | $ | 2,855     |  |       | $ | 6,692   |  |  | $ | 1,835  |  |  | $ | 14,961  | 
|                              | January 31, 2004 |                |   | 3,450   |  |             |   | 1,355     |  |       |   | 8,494   |  |  |   | 1,321  |  |  |   | 14,620  | 
|                              | January 31, 2003 |                |   | 2,969   |  |             |   |          |  |       |   | 6,311   |  |  |   | 539    |  |  |   | 9,819   | 
|Goodwill                      |                  |                |   |         |  |             |   |           |  |       |   |         |  |  |   |        |  |  |   |        
|                              | January 31, 2005 |                | $ | 61,545  |  |             | $ |          |  |       | $ | 145,559 |  |  | $ |       |  |  | $ | 207,104 | 
|                              | January 31, 2004 |                |   | 64,957  |  |             |   |          |  |       |   | 209,839 |  |  |   |       |  |  |   | 274,796 | 

|                                                                                    |  |                         |         |      |  |      |         |   |  |   |         |  
|----------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                    |  | Operating (Loss) Income
|                                                                                    |  |                        
|                                                                                    |  | 2005                    |         | 2004 |  | 2003
|                                                                                    |  |                         |         |      |  |     
|                                                                                    |  | (In thousands)         
|Direct marketing                                                                    |  | $                       | 8,230   |      |  | $    | (63,296 | ) |  | $ | 3,108   |  
|Retail stores                                                                       |  |                         | (6,701  | )    |  |      | (2,574  | ) |  |   |        |  
|Sponsorship and other activities                                                    |  |                         | (53,771 | )    |  |      | 25,258  |   |  |   | 29,210  |  
|Corporate                                                                           |  |                         | (34,472 | )    |  |      | (27,074 | ) |  |   | (12,292 | )
|                                                                                    |  |                         |         |      |  |      |         |   |  |   |         |  
|Total                                                                               |  |                         | (86,714 | )    |  |      | (67,686 | ) |  |   | 20,026  |  
|Interest income (expense), net                                                      |  |                         | (4,529  | )    |  |      | (2,003  | ) |  |   | 1,700   |  
|Other income                                                                        |  |                         | 390     |      |  |      |        |   |  |   |        |  
|                                                                                    |  |                         |         |      |  |      |         |   |  |   |         |  
|(Loss) gain on sales of marketable securities and write-off of
    investments, net |  |                         | (755    | )    |  |      | (247    | ) |  |   | 97      |  
|                                                                                    |  |                         |         |      |  |      |         |   |  |   |         |  
|(Loss) income before income taxes                                                   |  | $                       | (91,608 | )    |  | $    | (69,936 | ) |  | $ | 21,823  |  
|                                                                                    |  |                         |         |      |  |      |         |   |  |   |         |  





F-44



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










|    |                 
|--- | ----------------
|19. | Subsequent Event



F-45



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##### Table of Contents



ALLOY, INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|20. | Quarterly Results (Unaudited)



|                                                                            |                   |                             |        |                             |   |         |         |         |   |         |         |         |  |         |         |         |   |   |        |      |   |   |        |      |   |   |         |        |   |   |         |         |  
|--------------------------------------------------------------------------- | ----------------- | --------------------------- | ------ | --------------------------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- |  | ------- | ------- | ------- | - | - | ------ | ---- | - | - | ------ | ---- | - | - | ------- | ------ | - | - | ------- | ------- | -
|                                                                            |                   | Year Ended January 31, 2005 |        | Year Ended January 31, 2004
|                                                                            |                   |                             |        |                            
|                                                                            |                   | First                       |        | Second                      |   | Third   |         | Fourth  |   | First   |         | Second  |  | Third   |         | Fourth 
|                                                                            |                   | Quarter                     |        | Quarter                     |   | Quarter |         | Quarter |   | Quarter |         | Quarter |  | Quarter |         | Quarter
|                                                                            |                   |                             |        |                             |   |         |         |         |   |         |         |         |  |         |         |        
|Total net revenues                                                          |                   | $                           | 87,847 |                             |   | $       | 86,565  |         |   | $       | 110,003 |         |  | $       | 118,078 |         |   | $ | 69,444 |      |   | $ | 80,501 |      |   | $ | 105,751 |        |   | $ | 116,252 |        
|Gross profit                                                                |                   |                             | 41,220 |                             |   |         | 42,145  |         |   |         | 53,173  |         |  |         | 57,606  |         |   |   | 31,469 |      |   |   | 39,376 |      |   |   | 53,278  |        |   |   | 58,446  |        
|Total operating expenses                                                    |                   |                             | 49,767 |                             |   |         | 51,361  |         |   |         | 49,959  |         |  |         | 129,771 |         |   |   | 32,502 |      |   |   | 39,942 |      |   |   | 53,582  |        |   |   | 124,229 |        
|(Loss) income from operations                                               |                   |                             | (8,547 | )                           |   |         | (9,216  | )       |   |         | 3,214   |         |  |         | (72,165 | )       |   |   | (1,033 | )    |   |   | (566   | )    |   |   | (304    | )      |   |   | (65,783 | )      
|                                                                            | Net (loss) income |                             |        | (9,243                      | ) |         |         | (11,155 | ) |         |         | 1,966   |  |         |         | (73,334 | ) |   |        | (388 | ) |   |        | (321 | ) |   |         | (6,817 | ) |   |         | (67,689 | )
|Net (loss) income attributable to common stockholders                       |                   | $                           | (9,637 | )                           |   | $       | (11,556 | )       |   | $       | 1,561   |         |  | $       | (73,742 | )       |   | $ | (841   | )    |   | $ | (1,023 | )    |   | $ | (7,210  | )      |   | $ | (68,085 | )      
|Basic net income (loss) attributable to common stockholders per
    share   |                   | $                           | (0.23  | )                           |   | $       | (0.27   | )       |   | $       | 0.04    |         |  | $       | (1.72   | )       |   | $ | (0.02  | )    |   | $ | (0.02  | )    |   | $ | (0.17   | )      |   | $ | (1.62   | )      
|Diluted net income (loss) attributable to common stockholders
    per share |                   | $                           | (0.23  | )                           |   | $       | (0.27   | )       |   | $       | 0.04    |         |  | $       | (1.72   | )       |   | $ | (0.02  | )    |   | $ | (0.02  | )    |   | $ | (0.17   | )      |   | $ | (1.62   | )      

F-46



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##### Table of Contents






SCHEDULE II


ALLOY, INC.


VALUATION AND QUALIFYING ACCOUNTS


|                                                                               |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |        | 
|------------------------------------------------------------------------------ | ---------------- | ---------------------- |  | --------- |  | ---------- |  | ------------- |  |  |  | ------ |  |  |  | ------ | 
|                                                                               |                  | Balance at             |  |           |  |            |  |              
|                                                                               |                  | Beginning of           |  |           |  | Usage/     |  | Balance at   
|Description                                                                    |                  | Period                 |  | Additions |  | Deductions |  | End of Period
|                                                                               |                  |                        |  |           |  |            |  |              
|                                                                               |                  | (Amounts in thousands)
|Allowance for doubtful accounts:                                               |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |       
|                                                                               | January 31, 2005 |                        |  | 3,336     |  |            |  | 1,558         |  |  |  | 2,465  |  |  |  | 2,429  | 
|                                                                               | January 31, 2004 |                        |  | 3,410     |  |            |  | 1,024         |  |  |  | 1,098  |  |  |  | 3,336  | 
|                                                                               | January 31, 2003 |                        |  | 2,143     |  |            |  | 1,724         |  |  |  | 457    |  |  |  | 3,410  | 
|Reserve for sales returns and allowances:                                      |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |       
|                                                                               | January 31, 2005 |                        |  | 1,479     |  |            |  | 21,889        |  |  |  | 22,319 |  |  |  | 1,049  | 
|                                                                               | January 31, 2004 |                        |  | 1,271     |  |            |  | 23,189        |  |  |  | 22,981 |  |  |  | 1,479  | 
|                                                                               | January 31, 2003 |                        |  | 953       |  |            |  | 22,034        |  |  |  | 21,716 |  |  |  | 1,271  | 
|Reserve for inventory:                                                         |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |       
|                                                                               | January 31, 2005 |                        |  | 7,366     |  |            |  | 1,904         |  |  |  | 2,761  |  |  |  | 6,509  | 
|                                                                               | January 31, 2004 |                        |  | 5,731     |  |            |  | 2,322         |  |  |  | 687    |  |  |  | 7,366  | 
|                                                                               | January 31, 2003 |                        |  | 7,345     |  |            |  |              |  |  |  | 1,614  |  |  |  | 5,731  | 
|Valuation allowance for deferred tax assets:                                   |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |       
|                                                                               | January 31, 2005 |                        |  | 36,309    |  |            |  | 9,402         |  |  |  |       |  |  |  | 45,711 | 
|                                                                               | January 31, 2004 |                        |  | 2,755     |  |            |  | 33,554        |  |  |  |       |  |  |  | 36,309 | 
|                                                                               | January 31, 2003 |                        |  | 19,470    |  |            |  |              |  |  |  | 16,715 |  |  |  | 2,755  | 
|Unamortized discount on Series A and Series B
    Convertible Preferred Stock: |                  |                        |  |           |  |            |  |               |  |  |  |        |  |  |  |       
|                                                                               | January 31, 2005 |                        |  | 1,024     |  |            |  |              |  |  |  | 737    |  |  |  | 287    | 
|                                                                               | January 31, 2004 |                        |  | 2,074     |  |            |  |              |  |  |  | 1,050  |  |  |  | 1,024  | 
|                                                                               | January 31, 2003 |                        |  | 3,205     |  |            |  |              |  |  |  | 1,131  |  |  |  | 2,074  | 

S-1



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##### Table of Contents






EXHIBIT INDEX


|        |    |    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |   
|Number  |    |   
|        |    |   
|        | 2  | .1 |  | Acquisition Agreement by and among Alloy, Inc., Dodger
    Acquisition Corp. and dELiA*s Corp., dated as of July 30,
    2003 (incorporated by reference to Alloys Current Report
    on Form 8-K filed July 31, 2003)                                                                                                                                                                                                           
|        | 3  | .1 |  | Restated Certificate of Incorporation of Alloy Online, Inc.
    (incorporated by reference to Alloys Registration
    Statement on Form S-1 filed March 10, 1999
    (Registration Number 333-74159))                                                                                                                                                                                                                            
|        | 3  | .2 |  | Certificate of Amendment of Certificate of Incorporation of
    Alloy Online, Inc. (incorporated by reference to Alloys
    Current Report on Form 8-K filed August 13, 2001)                                                                                                                                                                                                                                                    
|        | 3  | .3 |  | Certificate of Amendment of Restated Certificate of
    Incorporation of Alloy Online, Inc. (incorporated by reference
    to Alloys Current Report on Form 8-K filed
    March 13, 2002)                                                                                                                                                                                                                                        
|        | 3  | .4 |  | Certificate of Designations, Preferences and Rights of the
    Series B Convertible Preferred Stock of Alloy Online, Inc.
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed June 21, 2001)                                                                                                                                                                                                           
|        | 3  | .5 |  | Certificate of Designations of Series C Junior
    Participating Preferred Stock of Alloy, Inc. (incorporated by
    reference to Alloys Current Report on Form 8-K filed
    April 14, 2003)                                                                                                                                                                                                                                    
|        | 3  | .6 |  | Restated Bylaws (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                                                                                                            
|        | 4  | .1 |  | Form of Common Stock Certificate (incorporated by reference to
    Alloys Registration Statement on Form S-1 filed
    March 10, 1999 (Registration Number 333-74159))                                                                                                                                                                                                                                                           
|        | 4  | .2 |  | Warrant to Purchase Common Stock, dated as of November 26,
    2001, issued by Alloy, Inc. to MarketSource Corporation
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed December 11, 2001)                                                                                                                                                                                                          
|        | 4  | .3 |  | Warrant to Purchase Common Stock, dated as of January 28,
    2002, issued by Alloy, Inc. to Fletcher International Ltd.
    (incorporated by reference to Alloys Current Report on
    Form 8-K/A filed February 1, 2002)                                                                                                                                                                                                       
|        | 4  | .4 |  | Form of Warrant to Purchase Common Stock, dated as of
    June 19, 2001, issued by Alloy Online, Inc. to each of the
    purchasers of Alloys Series B Preferred Stock
    (incorporated by reference to Alloys Current Report on
    Form 8-K filed June 21, 2001)                                                                                                                                                             
|        | 4  | .5 |  | Warrant to Purchase Common Stock, dated as of March 18,
    2002, issued by Alloy, Inc. to Craig T. Johnson (incorporated by
    reference to Alloys 2002 Annual Report on form 10-K
    filed May 1, 2003)                                                                                                                                                                                                                      
|        | 4  | .6 |  | Warrants to Purchase Common Stock, dated as of March 18,
    2002, issued by Alloy, Inc. to (i) Debra Lynn Millman,
    (ii) Kim Suzanne Millman, and (iii) Ronald J. Bujarski
    (substantially identical to Warrant referenced as
    Exhibit 4.5 in all material respects, and not filed with
    Alloys 2002 Annual Report on Form 10-K, filed
    May 1, 2003, pursuant to Instruction 2 of
    Item 601 of Regulation S-K)
|        | 4  | .7 |  | Warrant to Purchase Common Stock, dated as of November 1,
    2002, issued by Alloy, Inc. to Alan M. Weisman (incorporated by
    reference to Alloys 2002 Annual Report on form 10-K
    filed May 1, 2003)                                                                                                                                                                                                                     
|        | 4  | .8 |  | Form of 5.375% Global Convertible Senior Debenture due 2023 in
    the aggregate principal amount of $69,300,000 (incorporated by
    reference to Alloys Registration Statement on
    Form S-3 filed October 17, 2003 (Registration
    Number 333-109786))                                                                                                                                                                    
|        | 4  | .9 |  | Indenture between Alloy, Inc. and Deutsche Bank Trust Company
    Americas, dated as of July 23, 2003 (incorporated by
    reference to Alloys Registration Statement on
    Form S-3 filed October 17, 2003 (Registration
    Number 333-109786))                                                                                                                                                                               
|        | 10 | .1 |  | Alloy, Inc. Amended and Restated 1997 Employee, Director and
    Consultant Stock Option and Stock Incentive Plan (incorporated
    by reference to Alloys 2002 Annual Report on
    form 10-K filed May 1, 2003)                                                                                                                                                                                                                



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##### Table of Contents



|        |    |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     
|Number  |    |     
|        |    |     
|        | 10 | .1.1 |  | First Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys Proxy
    Statement on Schedule 14A filed on June 2, 2003)                                                                                                                                                                                                                    
|        | 10 | .1.2 |  | Second Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                                                          
|        | 10 | .1.3 |  | Third Amendment to Alloy, Inc. Amended and Restated 1997
    Employee, Director and Consultant Stock Option and Stock
    Incentive Plan (incorporated by reference to Alloys
    Quarterly Report on Form 10-Q, filed on December 10,
    2004                                                                                                                                                                                                             
|        | 10 | .2   |  | Amended and Restated Alloy, Inc. 2002 Incentive and
    Non-Qualified Stock Option Plan (incorporated by reference to
    Alloys 2002 Annual Report on Form 10-K filed
    May 1, 2003)                                                                                                                                                                                                                                                                     
|        | 10 | .3   |  | Employment Agreement dated February 1, 2004 between Matthew
    C. Diamond and Alloy Inc. (incorporated by reference to
    Alloys Annual Report on Form 10-K, filed on
    May 27, 2004.)                                                                                                                                                                                                                                                                  
|        | 10 | .4   |  | Employment Agreement dated February 1, 2004 between James
    K. Johnson, Jr. and Alloy, Inc. (incorporated by reference
    to Alloys Annual Report on Form 10-K, filed on
    May 27, 2004.)                                                                                                                                                                                                                                                              
|        | 10 | .5   |  | Employment Agreement dated April 19, 1999 between Samuel A.
    Gradess and Alloy Online, Inc. (incorporated by reference to
    Alloys Registration Statement on Form S-1 filed
    March 10, 1999 (Registration Number 333-74159))                                                                                                                                                                                                                        
|        | 10 | .6   |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between Matthew C. Diamond and Alloy
    Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                       
|        | 10 | .7   |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between James K. Johnson, Jr. and
    Alloy Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                    
|        | 10 | .8   |  | Non-Competition and Confidentiality Agreement dated
    November 24, 1998 between Samuel A. Gradess and Alloy
    Online, Inc. (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159))                                                                                                                                                                                        
|        | 10 | .9   |  | Employment Offer Letter dated May 24, 2000 between Robert
    Bell and Alloy Online, Inc. (incorporated by reference to
    Alloys 2000 Annual Report on Form 10-K filed
    May 1, 2001)                                                                                                                                                                                                                                                                   
|        | 10 | .10  |  | Non-Competition and Confidentiality Agreement dated
    March 24, 2000 between Robert Bell and Alloy Online, Inc.
    (incorporated by reference to Alloys 2000 Annual Report on
    Form 10-K filed May 1, 2001)                                                                                                                                                                                                                                           
|        | 10 | .11  |  | Incentive Stock Option Agreement dated as of July 19, 2000
    between Alloy Online, Inc. and Robert Bell (incorporated by
    reference to Alloys 2000 Annual Report on Form 10-K
    filed May 1, 2001)                                                                                                                                                                                                                                                   
|        | 10 | .12  |  | Non-Qualified Stock Option Agreement dated as of July 19,
    2000 between Alloy Online, Inc. and Robert Bell (incorporated by
    reference to Alloys 2000 Annual Report on Form 10-K
    filed May 1, 2001)                                                                                                                                                                                                                                               
|        | 10 | .13  |  | Flexible Standardized 401(k) Profit Sharing Plan Adoption
    Agreement (incorporated by reference to Alloys
    Registration Statement on Form S-1 filed March 10,
    1999 (Registration Number 333-74159)).                                                                                                                                                                                                                                              
|        | 10 | .14  |  | 1999 Employee Stock Purchase Plan (incorporated by reference to
    Amendment No. 2 to Alloys Registration Statement on
    Form S-1/ A filed April 22, 1999 (Registration
    Number 333-74159))                                                                                                                                                                                                                                                           
|        | 10 | .15  |  | Registration Rights Agreement, dated as of June 19, 2001,
    by and among Alloy Online, Inc, BayStar Capital, L.P., BayStar
    International, Ltd., Lambros, L.P., Crosslink Crossover
    Fund III, L.P., Offshore Crosslink Crossover Fund III
    Unit Trust, Bayview Partners, the Peter M. Graham Money Purchase
    Plan and Trust and Elyssa Kellerman (incorporated by reference
    to Alloys Current Report on Form 8-K filed
    June 20, 2001)
|        | 10 | .16  |  | Standard Office Lease between Arden Realty Finance Partnership,
    L.P. and Cass Communications, Inc., dated as of
    September 11, 1998 (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q filed
    September 14, 2001)                                                                                                                                                                                                             



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##### Table of Contents



|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .16.1 |  | First Amendment to Standard Office Lease, dated as of
    November 1, 2001, by and between Arden Realty Finance
    Partnership, L.P. and Alloy, Inc. (incorporated by reference to
    Alloys 2001 Annual Report on Form 10-K filed
    May 1, 2002)                                                                                                                                                       
|        | 10 | .17   |  | Lease Agreement by and between Bike Land, LLC and Dans
    Competition, Inc., dated September 28, 2001 (incorporated
    by reference to Alloys Quarterly Report on Form 10-Q
    filed December 17, 2001)                                                                                                                                                                                                 
|        | 10 | .18   |  | Modification to Lease, dated November 2, 1999, by and
    between Alloy, Inc. and Abner Properties Company, dated
    April 16, 2002 (incorporated by reference to Alloys
    Quarterly Report on Form 10-Q filed June 14, 2002)                                                                                                                                                                            
|        | 10 | .18.1 |  | Second Lease Modification Agreement between Alloy, Inc. and
    Abner Properties Company, c/o Williams Real Estate Co.,
    Inc., dated as of January 28, 2002 (incorporated by
    reference to Alloys Annual Report on Form 10-K filed
    May 1, 2002). Third lease modification dated
    August 31, 2002                                                                                               
|        | 10 | .18.2 |  | Third Lease Modification and Extension Agreement, dated as of
    August 31, 2002 between Abner Properties Company
    c/o Williams USA Realty Services, Inc. and Alloy, Inc.
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q filed December 16, 2002)                                                                                                                           
|        | 10 | .19   |  | Assignment and Assumption of Lease between Alloy, Inc. and
    Goldfarb & Abrandt dated as of February 1, 2002
    (incorporated by reference to Alloys Annual Report on
    Form 10-K filed May 1, 2002)                                                                                                                                                                                                   
|        | 10 | .20   |  | Amended and Restated 1996 Stock Incentive Plan of dELiA*s Inc.
    (incorporated by reference to dELiA*s Inc. Schedule 14A
    filed June 12, 1998)                                                                                                                                                                                                                                                          
|        | 10 | .20.1 |  | First Amendment to dELiA*s Inc. Amended and Restated 1996 Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                                                                 
|        | 10 | .21   |  | 1998 Stock Incentive Plan of dELiA*s Inc. (incorporated by
    reference to dELiA*s Inc. Annual Report on Form 10-K405,
    filed April 19, 1999)                                                                                                                                                                                                                                                            
|        | 10 | .21.1 |  | First Amendment to dELiA*s , Inc. 1998 Stock Incentive Plan
    (incorporated by reference to Alloys Registration
    Statement on Form S-8, filed October 17, 2003
    (Registration Number 333-109788))                                                                                                                                                                                                   
|        | 10 | .22   |  | iTurf Inc. 1999 Amended and Restated Stock Incentive Plan
    (incorporated by reference to Amendment No. 2 to the iTurf
    Inc. registration statement on Form S-1/ A filed
    April 6, 1999 (Registration No. 333-71123))                                                                                                                                                                                
|        | 10 | .22.1 |  | First Amendment to iTurf Inc. Amended and Restated 1999 Stock
    Incentive Plan (incorporated by reference to Alloys
    Registration Statement on Form S-8 filed October 17,
    2003 (Registration Number 333-109788))                                                                                                                                                                                   
|        | 10 | .23   |  | Lease Agreement dated May 3, 1995 between dELiA*s Inc. and
    The Rector, Church Wardens and Vestrymen of Trinity Church in
    the City of New York (the Lease Agreement);
    Modification and Extension of Lease Agreement, dated
    September 26, 1996 (incorporated by reference to the
    dELiA*s Inc. Registration Statement on Form S-1 filed
    January 25, 1999 (Registration No. 333-15153))
|        | 10 | .23.1 |  | Agreement dated April 4, 1997 between dELiA*s Inc. and The
    Rector, Church Wardens and Vestrymen of Trinity Church in the
    City of New York, amending the Lease Agreement (incorporated by
    reference to dELiA*s Inc. Annual Report on Form 10-K filed)                                                                                                                                             
|        | 10 | .23.2 |  | Agreement dated October 7, 1997 between dELiA*s Inc. and
    The Rector, Church Wardens and Vestrymen of Trinity Church in
    the City of New York, amending the Lease Agreement (incorporated
    by reference to dELiA*s Inc. Quarterly Report on Form 10-Q
    filed)                                                                                                                                    
|        | 10 | .24   |  | Amended and Restated Loan and Security Agreement by and among
    Wells Fargo Retail Finance LLC, as lender, and dELiA*s Corp., as
    lead borrower and agent for the other borrowers named within,
    dated October 14, 2004 (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q, filed on
    December 10, 2004)                                                                     



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##### Table of Contents



|        |    |       |  |                                                                                                                                                                                                                                                                                                                                                           
|------- | -- | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      
|Number  |    |      
|        |    |      
|        | 10 | .25   |  | Master License Agreement, dated February 24, 2003, by and
    between dELiA*s Brand LLC and JLP Daisy LLC (incorporated by
    reference to dELiA*s Current Report on Form 8-K filed
    February 26, 2003)                                                                                                                                               
|        | 10 | .26   |  | License Agreement, dated February 24, 2003, by and between
    dELiA*s Corp. and dELiA*s Brand LLC (incorporated by reference
    to dELiA*s Current Report on Form 8-K filed
    February 26, 2003)                                                                                                                                                      
|        | 10 | .27   |  | Mortgage Note Modification Agreement and Declaration of No
    Set-Off, dated as of April 19, 2004, by and between dELiA*s
    Distribution Company and Manufacturers and Traders Trust Company
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q, filed on June 9, 2004)                                                       
|        | 10 | .27.1 |  | Amendment to Construction Loan Agreement, dated as of
    April 19, 2004, by and between dELiA*s Distribution Company
    and Manufacturers and Traders Trust Company with the joinder of
    dELiA*s Corporation and Alloy, Inc. (incorporated by reference
    to Alloys Quarterly Report on Form 10-Q, filed on
    June 9, 2004)                     
|        | 10 | .27.2 |  | Second Amendment to Construction Loan Agreement, dated
    September 3, 2004, by and between Manufacturers and Traders
    Trust Company and dELiA*s Distribution Company with the joinder
    of dELiA*s Corporation and Alloy, Inc. (incorporated by
    reference to Alloys Quarterly Report on Form 10-Q,
    filed on December 10, 2004)            
|        | 10 | .27.3 |  | Continuing Guarantee, dated as of April 19, 2004, by and
    among dELiA*s Corporation (Guarantor), dELiA*s Distribution
    Company (Borrower) and Manufacturers and Traders Trust Company
    (Bank) (incorporated by reference to Alloys Quarterly
    Report on Form 10-Q, filed on June 9, 2004)                                                    
|        | 10 | .27.4 |  | Continuing Guarantee, dated as of April 19, 2004, by and
    among Alloy, Inc. (Guarantor), dELiA*s Distribution Company
    (Borrower) and Manufacturers and Traders Trust Company (Bank)
    (incorporated by reference to Alloys Quarterly Report on
    Form 10-Q, filed on June 9, 2004)                                                            
|        | 10 | .28   |  | Employment Letter, dated October 27, 2003, between Alloy,
    Inc. and Robert Bernard (incorporated by reference to
    Alloys Quarterly Report on Form 10-Q filed
    December 22, 2003)                                                                                                                                                                
|        | 10 | .29   |  | Alloy, Inc. Convertible Senior Debentures Purchase Agreement,
    dated as of July 17, 2003, by and among Alloy and the
    Initial Purchasers named therein. (incorporated by reference to
    Alloys Annual Report on Form 10-K filed on
    May 27, 2004.)                                                                                            
|        | 10 | .30   |  | Resale Registration Rights Agreement dated as of July 31,
    2003 between Alloy, Inc., Lehman Brothers, Inc., CIBC World
    Markets Corp., JP Morgan Securities, Inc. and SG Cowen
    Securities Corporation (incorporated by reference to
    Alloys Registration Statement on Form S-3, filed
    October 17, 2003 (Registration Number 333-109786))
|        | 10 | .31   |  | Sublease Agreement, dated as of December 3, 2003, by and
    between MarketSource, L.L.C. and 360 Youth, LLC.
    (incorporated by reference to Alloys Annual Report on
    Form 10-K filed on May 27, 2004)                                                                                                                                             
|        | 10 | .32   |  | Alloy, Inc. Outside Director Compensation Arrangements for
    fiscal year ending January 31, 2006*                                                                                                                                                                                                                                                       
|        | 10 | .33   |  | Alloy, Inc. Compensation Arrangements for Certain Named
    Executive Officers*                                                                                                                                                                                                                                                                           
|        | 10 | .34   |  | Form of Nonqualified Stock Option Agreement for 2002
    Non-Qualified Option Plan*                                                                                                                                                                                                                                                                       
|        | 10 | .35   |  | Form of Nonqualified Stock Option Agreement for Restated 1997
    Employee, Director and Consultant Stock Option Plan*                                                                                                                                                                                                                                    
|        | 10 | .36   |  | Form of Incentive Stock Option Agreement for Restated 1997
    Employee, Director and Consultant Stock Option Plan.*                                                                                                                                                                                                                                      
|        | 10 | .37   |  | Form of Nonqualified Stock Option Agreement for iTurf Inc.
    Amended and Restated 1999 Stock Incentive Plan*                                                                                                                                                                                                                                            
|        | 10 | .38   |  | Form of Incentive Stock Option Agreement for iTurf Inc.
    Amendment and Restated 1999 Stock Incentive Plan*                                                                                                                                                                                                                                             
|        | 10 | .39   |  | Form of Restricted Stock Agreement(1)*                                                                                                                                                                                                                                                                                                                    



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##### Table of Contents



|        |    |     |  |                                                                                                                                                                                                                                                             
|------- | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    
|Number  |    |    
|        |    |    
|        | 10 | .40 |  | Form of Restricted Stock Agreement(2)*                                                                                                                                                                                                                      
|        | 21 | .1  |  | Subsidiaries of Alloy, Inc. as of January 31, 2005*                                                                                                                                                                                                         
|        | 23 | .1  |  | Consent of BDO Seidman, LLP*                                                                                                                                                                                                                                
|        | 23 | .2  |  | Consent of KPMG, LLP*                                                                                                                                                                                                                                       
|        | 31 | .1  |  | Certification of Matthew C. Diamond, Chief Executive Officer,
    dated April 15, 2005 as adopted pursuant to
    Section 302 of The Sarbanes-Oxley Act of 2002*                                                                                            
|        | 31 | .2  |  | Certification of James K. Johnson, Jr., Chief Financial
    Officer, dated April 15, 2005 as adopted pursuant to
    Section 302 of The Sarbanes-Oxley Act of 2002*                                                                                         
|        | 32 | .1  |  | Certification of Matthew C. Diamond, Chief Executive Officer,
    dated April 15, 2005, as adopted pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002*                                                                                           
|        | 32 | .2  |  | Certification of James K. Johnson, Jr., Chief Financial
    Officer, dated April 15, 2005, as adopted pursuant to
    Section 906 of The Sarbanes-Oxley Act of 2002.*                                                                                       
|        | 99 | .1  |  | Memorandum of Understanding relating to the proposed settlement
    of the action styled In Re Alloy, Inc. Securities Litigation,dated as of June 21, 2004 (incorporated by reference to
    Alloys Current Report on Form 8-K, filed on
    June 30, 2004)
|        | 99 | .2  |  | Letter agreement relating to the proposed settlement of the
    action styled Yeung Chan v. Diamond, et al., dated
    June 15, 2004 (incorporated by reference to Alloys
    Current Report on Form 8-K, filed on June 30, 2004)                          






|  |                
|- | ---------------
|* | Filed herewith.