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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

                                   FORM 10-KSB

[x]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 For the fiscal year ended December 31, 1999

                                       or

[_]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 (No Fee Required)  For the transition period
         from ___________ to ___________

                         Commission file number: 0-26151

                              fashionmall.com, Inc.

                 (Name of small business issuer in its charter)


                Delaware                                06-1544139
---------------------------------------  ---------------------------------------
     (State or other jurisdiction          (I.R.S. Employer Identification No.)
   of incorporation or organization)


                               575 Madison Avenue
                               New York, NY 10022
                                 (212) 891-6064
--------------------------------------------------------------------------------
(Address, zip code and telephone number of issuer's principal executive offices)

          Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of Each Exchange
           Title of Each Class                     on Which Registered
---------------------------------------  ---------------------------------------
                  NONE                                    NONE

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
--------------------------------------------------------------------------------
                                (Title of Class)

Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [x] No [_]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ ].

The issuer's revenues for its most recent fiscal year ended December 31, 1999
were $3,690,000.

The aggregate market value of the voting and non-voting common stock held by
non-affiliates at March 20, 2000 was $14,425,875.

The number of shares of common stock outstanding as of March 20, 2000 was
7,500,000.

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13, or 5(d) of the Exchange Act after the distribution of
securities under a plan confirm by a court. Yes [X] No [ ]

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                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      NONE
================================================================================

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                                     Part I

         This Annual Report on Form 10-KSB contains statements which constitute
forward-looking statements. These statements appear in a number of places in
this Form 10-KSB and include statements regarding the intent, belief or current
expectations of fashionmall.com, Inc. (together with its subsidiaries, the
"Company"). Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that the actual results may differ materially from those in the forward-looking
statements as a result of various factors. The information contained in this
Form 10-KSB, including, without limitation, the information under "Management's
Discussion and Analysis and "Description of Business" identifies important
factors that could cause or contribute to such differences. See "Description of
Business --Cautionary Statements Regarding Forward-Looking Statement"continued
in Item 6 of this Report.

Item 1.  Description of Business.

         We engage in the business, via the fashionmall.com web site, of
marketing, promoting and advertising fashion apparel and related accessories to
the public on the Internet. We combine an online shopping mall with fashion
content to provide a centralized site for manufacturers, retailers, magazines
and catalogs to advertise, display and sell their product lines.

         Pursuant to its initial public offering ("IPO") completed on May 21,
1999, IFM changed its name to fashionmall.com, Inc. ("fashionmall.com" or the
"Company"). In connection with the IPO and immediately prior thereto, the
existing members of IFM contributed all of their membership interests in IFM in
exchange for 4.5 million shares of common stock of the Company. On May 21, 1999,
the Company completed its IPO of 3.0 million shares of its common stock. The IPO
resulted in net proceeds, after related expenses, of approximately $35 million.

         Our principal executive offices are located at 575 Madison Avenue, New
York, New York 10022, and the telephone number is (212) 891-6064.

Overview

         fashionmall.com's web site, www.fashionmall.com, is a vertical portal
for the category of "fashion". fashionmall.com defines fashion as apparel,
accessories, footwear, beauty products, eyewear, jewelry, watches, home
furnishings and related lifestyle products and accessories. We combine the
concept, directed to the consumer, of an online shopping mall with fashion
content and shopping assistance merchandized from its multiple clients to
provide a centralized site for manufacturers, retailers, catalogs, e-commerce
sites and magazines to advertise, display and sell their product on the web.

Business objectives and strategies

         Our objective is to be the primary vertical portal for fashion on the
Internet.

         In order to achieve this objective, we intend to:

         - increase brand awareness and site traffic;

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         - expand the tenant base;

         - convert traffic into tenant fees;

         - convert traffic into incremental advertising and sponsorship
           revenues;

         - initiate a data aggregation and utilization strategy; and

         - create customer loyalty and retention.

Increase brand awareness and traffic

         We believe that continuing to build awareness of the fashionmall.com
brand is key in our effort to be the premier site for fashion/apparel on the
Internet. To accomplish this goal, we are focused on building traffic by
utilizing both traditional off-line advertising and on-line marketing. In 1999,
a significant expense was the marketing and advertising of the fashionmall.com
brand and site.

On-line advertising

         We utilize various on-line marketing techniques to increase traffic to
our vertical portal, including ad banners, buttons, sponsorships, content
integration, affiliate networks and e-mail marketing.

Off-line advertising

         We utilize numerous off-line marketing techniques to increase brand
recognition and brand trust, including print advertising, cooperative
advertising, outdoor advertising, spot television, trade show promotions and a
variety of alternative approaches such as printed coffee cups in New York city
restaurants and digital billboards in gift shops.

         Although barter has declined significantly as a percentage of both
revenue and expense from 1999 to 1998, we have continued to obtain some print
advertising through barter arrangements. fashionmall.com provides promotional
space for magazines on the site in exchange for advertising in their print
publications. In 1999, we placed approximately $1,100,000 worth of advertising
through barter.

Expansion of our tenant base

                  We believe we have assembled a collection of well-recognized
brand name tenants. To accomplish our goal of being the preeminent
fashion/apparel destination on the Internet, we intend to continue to add to our
tenant roster through our dedicated sales force, which has grown from two
individuals immediately following our IPO to ten at the end of 1999.

                  fashionmall.com drives traffic to tenants representing a
variety of types of companies including: (i) manufacturers/brands, (ii)
retailers, (iii) catalogs, (iv) e-commerce sites and (v) magazines. As
fashionmall.com's brand and site recognition and traffic continues to increase,
we believe that we will be able to attract additional companies as tenants.

     Manufacturers/brands. Many of our tenants are the manufacturer, supplier
and/or retailer of brands of apparel, accessories, footwear and beauty
merchandise. Tenants lease space on fashionmall.com to drive traffic to their
free-standing web sites where they market, advertise and sell merchandise to the
consumer.

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     Catalogs. Catalog companies with freestanding web sites also lease space on
fashionmall.com's site to drive targeted traffic to their web sites. We have
recently added a dedicated account executive to focus on the catalog market, as
we believe this category can represent opportunities for additional tenants.

     Retailers. Retailers have become a much more significant component of our
client base. As with the other categories of tenants, these clients buy space on
fashionmall.com to drive traffic to their own dedicated web sites.

     E-Commerce sites. One of our largest areas of growth has come from new
companies that are web-based e-retailers. On-line retailers understand the
necessity of driving traffic to their sites and have responded favorably to the
new fashionmall.com "cost per click" model (see below). Examples of new clients
in this category include Ashford.com, Sephora.com, Fogdog.com, Miadora.com and
TheWeddingList.com.

     Magazines. Fashion trade, consumer and consumer lifestyle magazines use
fashionmall.com's web site to promote their own publication, solicit additional
advertising, deliver value back to advertisers and solicit subscriptions to
their publications. Magazine tenants generally display articles, or portions of
articles, highlighted as teasers to induce the consumer to subscribe to their
magazine and/or advertising.

Conversion of traffic into tenant fees

         We intend to leverage the strength of our traffic and brand to drive
revenue growth. In the fourth quarter of fiscal 1999, we shifted our standard
tenancy model to a "cost per click" revenue model, whereby our clients pay us
fees based on the amount of traffic we deliver to their site. fashionmall.com
visitors are linked to the client's freestanding web site through various
directories and indexes and we are paid for the delivery of that traffic whether
or not the visitors makes a purchase during that specific visit. We have phased
out third party site development and back end e-commerce management functions,
which provided lower margins as it required higher overhead and support expense.
We are currently focused on the traffic aggregation and delivery business. This
strategy will also apply to Outletmall.com as well, which we are migrating from
a direct e-commerce retailer into a traffic aggregation and delivery model
aligned with our core fashionmall.com business. Outletmall.com will become an
additional vertical portal for us which will lease space to manufacturers,
retailers and catalogs that sell off-price clearance and end-of-run merchandise
or have a dedicated clearance section on their web sites. We will be
discontinuing the low margin business of e-retailing and solidify our focus
entirely within the vertical portal marketplace.

         We have also begun to offer traditional banner and sponsorship
advertising sales. Traditional site advertising will be offered on a industry
standard CPM (Cost per thousand impressions) model based on the amount of
exposure delivered to the various ads.

Customer loyalty and retention

         Since our IPO, we have has increased our focus and investment in
creating loyalty and retention programs to encourage return traffic from site
visitors. We launched fashionmall.com Points, an on-line loyalty program to
accumulate points to reward visitors for activities on the site. These points
can be converted to merchandise or other rewards. We will continue to build on
this strategy to increase (i) return traffic to the site, (ii) accumulate
information on our visitors for our database, and (iii) build our e-mail
database.

         We have initiated a direct e-mail marketing and profiling campaign at
the end of 1999 and are focusing on building a meaningful e-mail database of our
visitors. E-mail registrants receive a weekly e-mail of client product offerings
and specials. We integrate click through client offerings into e-mails to
generate

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revenue, and, as we build the database of information on visitors, we intend to
offer promotions to the consumer and offer visitor profiles to our clients.

         We will continue to improve the functionality of the site for visitors
and to better understand the needs and desires of those visitors. Beyond merely
retaining traffic to our site and building a meaningful competitive barrier, we
believe the data mining opportunity has the potential of becoming a more
significant revenue opportunity.

Provide compelling and convenient shopping experience

         We will continue to enhance the value and convenience of
fashionmall.com's aggregated selection of vendors through a variety of means. We
intend to achieve this through investment in new technology as well as by
offering superior customer service. An example, which is currently in
development, is our Universal Shopping Basket. In addition, fashionmall.com
delivers value to our visitors and tenants through our investment in editorial
and advertorial resources and the resulting contextual selling content provided.

         Universal Shopping Basket (USB): We are currently developing a
fashionmall.com basket that will allow our visitors to register once with a
central profile. This profile will be used throughout our site or our client's
sites without re-entering the same personal information at each site. We intend
to pass the data seamlessly to client sites as well as retain all user
information centrally on the fashionmall.com site. Users will be able to
aggregate merchandise from all our client sites in one master basket.

         This feature will increase consumer retention through timesavings and
improve overall functionality and ease of use. fashionmall.com can reward
purchasing from all sites with fashionmall.com Points which can be redeemed for
merchandise. In addition, this function will allow us to accumulated data on
purchases and behavior. This data can then be used to enhance the customer
experience, improve client targeting, and create new revenue opportunities.

         We strive to offer our visitors entertaining and informative content,
including fashion articles covering news, trends and guides related to our
tenant offerings as well as other fashion/apparel related features which will
assist in their purchasing decisions. Our staff reviews client sites looking for
trends and special features which are then highlighted to lead the consumer
directly to the vendor or product creating additional sales opportunities for
our clients and click through revenue for us.

Personalized services

         As we continue to accumulate consumer data, our goal is to capitalize
on the unique capabilities of the Internet to maximize consumer buying
potential. We have started this process by identifying, through a questionnaire,
the unique interests of our visitors. As data is accumulated on our users, we
intend to be able to assist tenants to customize offerings on their site to
efficiently flow traffic to the most relevant vendor for that customer. We
expect this flow of information to increase our click through revenue.

         We believe that a strong understanding of our consumer demographics and
purchasing habits is a key element for the successful merchandising and
marketing of vendors, products and content. We intend to accumulate demographic
information from our customer base by requesting certain information when a
customer registers and by collecting data based on purchasing and browsing
behavior. Collecting such demographic consumer data will permit us to target
promotional e-mail directly to customers or to sell sponsorships of those
e-mails to advertisers and catalog companies. We continually monitor issues
related to the protection of consumer privacy on the Internet. Developments in
this area may have a significant impact on our ability to pursue this path of
expansion.

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Competition

         We compete with other web sites, including, in particular, apparel
shopping areas of Internet portals, for Internet advertisers' and e-commerce
marketers' dollars. The number of these web sites has increased significantly
and we expect such competition to continue to increase because there are no
substantial barriers to entry into our market. Competition may also increase as
a result of ongoing industry consolidation.

         Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. Increased
competition may result in reduced operating margins, loss of market share and a
diminished brand franchise.

Technology

         We use both commercially available software, as well as our own
proprietary software. Our systems combine our proprietary technologies and
commercially available licensed technologies. Our current strategy is to license
commercially available technology to augment internally developed solutions.
Like other Internet sites, our sites have, from time to time, experienced
interruption and outages. The uninterrupted operation of our site on the
Internet is essential to our business, and it is the job of our site operations
staff to ensure, to the greatest extent possible, the reliability of these
systems.

Trademarks and patents

         Our performance and ability to compete are dependent to a significant
degree on our proprietary knowledge. We regard our copyrighted material, domain
names, trade secrets and similar intellectual property as important, and rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers, partners and others to protect
our proprietary rights. We have registered the domain names "fashionmall.com"
and "Outletmall.com." There can be no assurance that we will be able to secure
significant protection for these names and our other proprietary information.
Other than our registration of the domain names, we do not have any other
protection for the "fashionmall.com" or "Outletmall.com" name. We do not believe
that we or anyone else can obtain protection for such names in the United
States. It is possible that competitors or others will adopt product or service
names similar to "fashionmall.com" or "Outletmall.com", thereby impeding our
ability to build brand identity and possibly leading to customer confusion. Our
inability to protect the names "fashionmall.com" and "Outletmall.com" adequately
could have a material adverse effect on us.

Government regulation

         We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity of the Internet and other
online services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet or other online services covering issues
such as user privacy, pricing, content, copyrights, distribution, and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for online commerce may prompt more stringent
consumer protection laws that may impose additional burdens on those companies
conducting business online.

Employees

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         At March 20, 2000, we employed 43 employees as compared to prior to our
IPO when we employed 24. The additional personnel, including management, sales,
merchandising, technical and business development personnel were hired to help
facilitate our growth. In order to attract qualified personnel, we have offered
incentives such as stock options, stock awards and additional non-cash
compensation. We will continue to evaluate personnel needs on an ongoing basis
and will add additional personnel as necessary. None of our employees are
represented by a labor union, and we consider employee relations to be
satisfactory.

Item 2.  Description of Property.

         We maintain our executive offices in approximately 7,500 square feet of
space in New York, New York pursuant to a lease with Richard A. Eisner &
Company, LLP ("RAE"), one of our former principal stockholders, expiring in May
2000 at which time we plan to renew. Monthly lease payments are approximately
$30,000 per month.

Item 3.  Legal Proceedings.

           We are not a party to any material legal proceedings. In our normal
course of business we may be subject to certain litigation. In the opening of
the Company's management, settlements of litigation will not have a material
adverse effect on the Company's results of operations, financial position or
cash flows.

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

         There were no matters submitted to a vote of Stockholders during the
fourth quarter of the fiscal year ended 1999.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

     The Common Stock commenced trading on the Nasdaq National Market on May 21,
1999 under the symbol "FASH." The following table sets forth, for the fiscal
periods indicated, the high and low bid prices of our Common Stock as reported
by the Nasdaq National Market for periods on and subsequent to May 21, 1999.
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions.

                                                                  High      Low
                                                                  ----      ---

Fiscal Year 1999

         Quarter ended June 30, 1999..........................   $15.88    $6.38
         Quarter ended September 30, 1999.....................   $12.25    $5.00
         Quarter ended December 31, 1999......................   $ 8.25    $4.19

As of March 20,1999, there were approximately 84 holders of record of the Common
Stock.

     We have not paid dividends on the Common Stock since inception and do not
intend to pay any dividends to our stockholders in the foreseeable future. We
currently intend to retain earnings, if any, for the development of our
business. The declaration of dividends in the future will be at the election of
the Board of Directors and will depend upon the earnings, capital requirements,
financial position of the Company, general

s<PAGE>

economic conditions, and other factors the Board of Directors deems relevant.

Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.

     The following discussion should be read in conjunction with our
Consolidated Financial Statements and related notes thereto.

     All statements contained herein that are not historical facts, including
but not limited to, statements regarding the Company's current business strategy
and the Company's plans for future development and operations, are based upon
current expectations. These statements are forward-looking in nature and involve
a number of risks and uncertainties. Generally, the words "anticipates,"
"believes," "estimates," "expects" and similar expressions as they relate to the
Company and its management are intended to identify forward-looking statements.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are those set forth under the caption "Cautionary
Statements Regarding Forward-Looking Statements." The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which statements speak only as of the date made.

Overview

         Our web site, www.fashionmall.com, is a vertical portal for the
category of "fashion". fashionmall.com defines fashion to include apparel,
accessories, footwear, beauty products, eyewear, jewelry, watches, home
furnishings and related lifestyle products and accessories. We have combined the
concept of an online shopping mall with fashion content to provide a centralized
site for manufacturers, retailers, catalogs, e-commerce sites and magazines to
advertise, display and sell their product lines on the web.

         We intend to continue to develop strategic alliances and advertising
and marketing efforts, to build further brand awareness for the fashionmall.com
brand as well as increase traffic to our website. We believe that these efforts
will further enhance the existing tenant base and, in turn, create more consumer
traffic and additional tenant revenues.

         In January 2000, the Emerging Issue Task Force of the Financial
Accounting and Standards Board reached a consensus on EITF Issue 99-17,
"Accounting for Advertising Barter Transactions," which changed the method by
which barter revenues can be recognized as revenue. Barter transactions entered
into after January 20, 2000 should be accounted for at fair value on a
one-for-one basis with revenue received by the seller of the advertising for
similar advertising sold as a cash transaction. Revenue from barter transactions
amounted to $1,282,000 and $1,055,000 for the years ended December 31, 1999 and
1998, respectively. On a pro forma basis, revenue from barter transactions for
the year ended December 31, 1999 would have been $852,000 had the pronouncment
been in effect earlier.

Results of Operations

Year Ended December 31, 1999 vs. Year Ended December 31, 1998

         Site Revenues. Total revenues increased by $1,635,000 or 80% to
$3,690,000 for the year ended December 31, 1999 as compared to $2,055,000 for
the year ended December 31, 1998. Barter revenue increased by $227,000 or 21 %
to $1,282,000 for the year ended December 31, 1999 from $1,055,000 for the year
ended December 31, 1998. Barter revenue represented 35% and 51% of total
revenues for the years ended December 31, 1999 and 1998, respectively. The
revenue increase was due to increased industry acceptance of the fashionmall.com
model resulting in additional new clients and increased rates for space on
fashionmall.com based on traffic growth.

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         Expenses. Total expenses of the business increased by $8,640,000 or
423% to $10,684,000 for the year ended December 31, 1999 from $2,044,000 for the
year ended December 31, 1998. During the year ended December 31, 1999, we
incurred certain non-cash, one-time charges relating to the IPO as follows:
general and administrative expense relating to the Chazen options for
$1,291,000, general and administrative expense for options issued to employees
in the second quarter ended June 30, 1999 in the amount of $1,662,000, and other
expense for financing and interest cost of $737,000 in connection with the
Chazen financing. The total amount of these transactions for the year ended
December 31, 1999 was $3,690,000. We will incur addition future non-cash
compensation charges in connection with the Chazen options of approximately
$110,000 over each of the next six (6) quarters. The remaining increase was due
to increased expenditures for technical staff, advertising, equipment and
infrastructure development to support the growth of our business.

         Site Development, Merchandise and Content Expense. Site development,
merchandise and content expenses increased by $342,000 or 126% to $612,000 for
the year ended December 31, 1999 from $270,000 for the year ended December 31,
1998. The increase was primarily due to increased payroll costs for site
development related salaries, increased costs of content creation and the
purchase of merchandise for Outletmall.com.

         Advertising and Marketing Expense. Advertising and marketing expenses
increased by $2,701,000 or 245% to $3,805,000 for the year ended December 31,
1999 from $1,104,000 for the year ended December 31, 1998. The increase is
primarily due to increased print, outdoor and other advertising on behalf of the
fashionmall.com brand as well as online banner advertising programs. We expect
these expenses to continue as we pursue our growth strategy and market the
fashionmall.com brand through both traditional and online advertising.

         Selling Expenses. Selling expenses increased by $132,000 or 51% to
$389,000 for the year ended December 31, 1999 from $257,000 for the year ended
December 31, 1998. The selling expense increases primarily due to the increase
of our sales force. We expect these expenses to continue to increase as we
pursue our growth strategy and hire additional sales personnel.

         General and Administrative Expenses. General and administrative
expenses increased by $5,465,000 or 1323% to $5,878,000 for the year ended
December 31, 1999 from $413,000 for the year ended December 31, 1998. During the
year ended December 31, 1999, we incurred certain non-cash, one-time charges
relating to the IPO. These charges include an expense relating to the Chazen
options for $1,291,000 and an expense for options issued to employees in the
second quarter ended June 30, 1999 in the amount of $1,662,000. The total amount
of these transactions for the year ended December 31, 1999 was $2,953,000. We
will incur additional non-cash compensation charges in connection with the
Chazen options of approximately $110,000 over the next six (6) quarters. The
remaining increase was primarily due to increased consulting and payroll
expenses associated with the management team and additional support staff
required by our growth. We expect these expenses to increase substantially as
additional personnel are hired and additional expenses are incurred. These
increased expenses will relate to growing our business and operating as a public
company.

         Other Income and Expense. Interest and dividend income increased by
$1,430,000 or 47,667% to $1,433,000 for the year ended December 31, 1999 from
$3,000 for the year ended December 31, 1998. During the year ended December 31,
1999, such amounts were earned primarily from our cash balances and short-term
investments. The increase in funds can be attributed to raising approximately
$35,000,000, net of related expenses, in connection with the IPO, approximately
$7,400,000 as a result of the Taubman investment and approximately $1,000,000,
net of the promissory note repayment, as a result of the FM/CCP investment.
Interest and financing costs increased by $717,000 or 3,585% to $737,000 for the
year ended December 31, 1999 from $20,000 for the year ended December 31, 1998.
During the year ended December 31, 1999, we

<PAGE>

incurred non-cash interest and financing charges of $737,000 in connection with
the FM/CCP financing and certain transactions made in conjunction with the IPO.

Year Ended December 31, 1998 vs. Year Ended December 31, 1997

Site Revenues. Total revenues increased by $802,000, or 64%, to $2,055,000 for
the year ended December 31, 1998, as compared to $1,253,000 for the year ended
December 31,1997. Barter revenue increased by $321,000, or 44%, to $1,055,000
for the year ended December 31, 1998, as compared to $734,000 for the year ended
December 31, 1997. The increase was due to increased industry acceptance of the
fashionmall.com model resulting in additional new clients and increased rates
for space on fashionmall.com based on traffic growth.

Expenses. Total expenses of the business increased from $1,251,000 in the year
ended December 31, 1997 to $2,044,000 for the year ended December 31, 1998. The
increase was due to increased expenditures for technical staff, increased barter
advertising and increased equipment and infrastructure needs. We capitalize
costs incurred in the process of creating software for site use. The capitalized
software costs are amortized on a straight-line basis over the estimated useful
life of two years. At December 31, 1998, approximately $67,000 of capitalized
software costs have been incurred; prior to 1998, such costs were not material.
Amortization expense for the year ended December 31, 1998, was $9,000 and is
included in general and administrative expenses.

Site Development, Merchandise and Content Expense. Site development, merchandise
and content expenses increased by $120,000, or 80%, to $270,000 for the year
ended December 31, 1998, as compared to $150,000 for the year ended December 31,
1997. The increase was primarily due to increased payroll for site development
related salaries as well as increased costs of content creation and merchandise
for our web site.

Advertising and Marketing Expense. Advertising and marketing expenses increased
by $408,000, or 59%, to $1,104,000 for the year ended December 31, 1998, as
compared to $696,000 for the year ended December 31, 1997. The increase was
primarily due to increased barter advertising expense primarily related to
increased print advertising on behalf of the fashionmall.com brand and some
online banner advertising programs. We expect these expenses will continue to
increase significantly as we pursue a growth strategy and market the
fashionmall.com brand through both print and online advertising.

Selling Expenses. Selling expenses increased by $135,000, or 111%, to $257,000
for the year ended December 31, 1998, as compared to $122,000 for the year ended
December 31, 1997. The increase was primarily due to increased salaries for
sales staff. We expect these expenses will continue to increase significantly,
as we pursue an aggressive growth strategy and hire additional sales personnel.

General and Administrative Expenses. General and administrative expenses
increased by $130,000, or 46%, to $413,000 for the year ended December 31, 1998,
as compared to $283,000 for the year ended December 31, 1997. The increase was
primarily due to increased payroll expenses associated with the management team
and additional support staff required by our growth. We expect these expenses to
increase as additional personnel are hired and additional expenses are incurred.
These increased expenses will relate to growing our business and operating as a
public company.

Liquidity and Capital Resources

         From inception, we have financed substantially all of our operations
from private investment and the proceeds from our IPO. A lesser portion has been
financed with cash generated from operations.

<PAGE>

         As of December 31, 1999, the Company had cash, cash equivalents and
marketable securities on hand of $41,566,000. Of this amount, the cash and cash
equivalents portion was $34,114,000 and the marketable securities portion was
$7,452,000. As of December 31, 1998, cash, cash equivalents and marketable
securities were $82,000. The increase in funds can be attributed to raising
approximately $35,000,000, net of related expenses, in connection with the our
IPO, approximately $7,400,000 as a result of the Taubman investment and
approximately $1,000,000, net of the promissory note repayment, as a result of
the FM/CCP investment. We expect that our current cash position without taking
revenues into account will be sufficient to meet our cash requirements for at
least the next two years.

         Net cash used in operating activities was $644,000 for the year ended
December 31, 1999 as compared to net cash provided by operating activities of
$2,000 for the year ended December 31, 1998. Net cash used in operating
activities for the year ended December 31, 1999 was primarily due to increased
consulting and payroll expenses associated with the management team and
additional support staff required by our growth as well as increased
expenditures for advertising, equipment and infrastructure development.

         Net cash used in investing activities was $7,903,000 for the year ended
December 31, 1999 as compared to net cash used in investing activities of
$61,000 for the year ended December 31, 1998. Net cash used in investing
activities for the year ended December 31, 1999 was due to an investment in
marketable securities and the purchase of software, property and equipment. Net
cash used in investing activities for the year ended December 31, 1998 was
primarily due to costs associated with the development of software.

         Net cash provided by financing activities was $42,579,000 for the year
ended December 31, 1999 as compared to net cash provided by financing activities
of $61,000 for the year ended December 31, 1998. Net cash provided by financing
activities for the year ended December 31, 1999 was primarily due to the
proceeds received from the Company's IPO and the Taubman Investment. Net cash
provided by financing activities for the year ended December 31, 1998 was due to
proceeds from the repayment of loans.

         As part of the Taubman investment, the Company entered into an
agreement with TRG Net Investors LLC ("TRG Net"), an affiliate of Taubman
Centers, Inc., a real estate investment trust and a mall developer in the U.S.,
whereby TRG Net purchased, for $7,417,000, a 9.9% membership interest in our
predecessor LLC (the "Series B Interest") and warrants (the "Warrants") to
purchase an additional 10% membership interest. Upon closing of the IPO, the
Series B Interest was contributed for 824,084 shares of convertible preferred
stock (the "Preferred Stock"), which in turn is convertible into an aggregate of
824,084 common shares and warrants that can be exercised to purchase 924,898
common shares. The Preferred Stock is convertible into 824,084 shares of common
stock for one year beginning on May 26, 2000 at an effective conversion price of
$9.00 per share and the exercise price of the warrants is $13.00 per share. Upon
closing of Taubman's investment (the "Taubman Investment"), we allocated
$2,377,000 of the $7,417,000 to represent the fair value of the Warrants. The
remaining portion of the net proceeds of $5,040,000 represents the beneficial
conversion feature of the Preferred Stock, to be allocated to additional paid-in
capital and accreted to the book value of the Preferred Stock. The accretion
period will be one year, which began on May 26, 1999. For the year ended
December 31, 1999, we accreted $3,101,000 to the book value of the Preferred
Stock. Over the one-year accretion period, earnings per share will be negatively
impacted by the beneficial conversion feature amount of $5,040,000. In
connection with this transaction, Robert S. Taubman, the Chief Executive Officer
and the President of Taubman Centers, Inc., joined our Board of Directors.

         We have approximately $191,000 of inventory which is net of a $100,000
reserve. We have curtailed purchases of inventory as Outletmall.com migrates
from a direct e-commerce retailer into a traffic aggregation and delivery model
aligned with our core vertical portal business model.

Risk factors

Cautionary Statements Regarding Forward-Looking Statements.

         Statements in this Annual Report on Form 10-KSB under the captions
"Description of Business," "Management's Discussion and Analysis," and elsewhere
in this Form 10-KSB, as well as statements made in press releases and oral
statements that may be made by the Company or by officers, directors or
employees of the Company acting on the Company's behalf, that are not statements
of historical fact, constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
including those described in this Form 10-KSB under the caption "Risk Factors,"
that could cause the actual results of the Company to be materially different
from the historical results or from any future results expressed or implied by
such forward-looking statements. In addition to statements which explicitly
describe such risks and uncertainties, readers are urged to consider statements
with the terms "believes," "belief," "expects,"

<PAGE>

"plans," "anticipates," or "intends," to be uncertain and forward-looking. All
cautionary statements made in this Form 10-KSB should be read as being
applicable to all related forward-looking statements wherever they appear.
Investors should consider the following risk factors as well as the risks
described elsewhere in this Form 10-KSB.

We are an early stage company with a limited operating history, and we expect to
encounter risks frequently faced by early-stage companies in new and rapidly
evolving markets.

         We were founded in 1994 and fashionmall.com was launched in July 1995
and incorporated on February 26, 1999. Accordingly, we have a limited operating
history upon which the business can be evaluated. In order to be successful, we
must attract more traffic to fashionmall.com and generate significant tenant
fees and advertising and sponsorship revenues. However, as an early stage
company in a new and rapidly evolving market like the Internet, numerous risks
and uncertainties exist. Some of these risks and uncertainties relate to our
ability to:

     - develop further fashionmall.com awareness and brand loyalty;

     - attract a larger audience to, and increase frequency of use of,
       fashionmall.com's web site;

     - increase customer acceptance of the online purchase of apparel and
       related merchandise through our client's sites;

     - generate increased revenues through our web site from consumers, apparel
       manufacturers and retailers and other commercial vendors;

     - generate significant revenues from tenant fees, advertising and
       sponsorship;

     - anticipate and adapt to the changing market for Internet services;

     - respond to actions taken by our competitors;

     - manage our growth effectively;

     - increase and/or maintain our internal sales and merchandising force;

     - implement our advertising and marketing strategies;

     - develop and renew strategic relationships;

     - attract, retain and motivate qualified personnel;

     - offer content on our web site that is attractive to our visitors;

     - continue to upgrade and enhance our technologies and services to
       accommodate expanded service offerings and increased consumer traffic;
       and

     - integrate acquired businesses, technologies and services.

         We may not be successful in accomplishing any or all of these
objectives, and cannot be certain that

<PAGE>

the current level of revenues from our present operations will be maintained.

         Please see "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

We expect losses from operations, and future profitability remains uncertain.

         Our ability to generate significant revenue is uncertain and we have
incurred substantial costs to create, launch and enhance fashionmall.com, to
build brand awareness and to grow our business. As of December 31, 1999, our
accumulated deficit was $9,102,000. We incurred a loss from operations in fiscal
1999 of $6,978,000 and had income from operations in fiscal 1998 of $11,000. We
expect losses from operations and negative cash flows for the foreseeable future
because we plan to incur significant expenses as we expand our advertising and
marketing programs, continue to develop and extend the fashionmall.com brand,
hire more management, sales and other personnel, expand our infrastructure and
data collection capabilities and we seek to acquire complementary businesses and
technologies. If revenues do not increase and if spending levels are not
adjusted accordingly, we may not generate sufficient revenues to achieve
profitability. Even if profitability is achieved, we may not sustain or increase
profitability on a quarterly or annual basis in the future. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

     We have experienced strains on our management because of past rapid growth,
and there are continued risks associated with our ability to manage our growth.

     Our ability to implement our business strategy in a rapidly evolving market
requires effective planning and management oversight. The anticipated future
operations will continue to place a significant strain on management, sales
personnel, information systems and resources. To manage the expected growth of
operations and personnel, we will be required to improve existing and implement
new operational and financial systems, procedures and controls, and to expand,
train and manage our limited employee base on a timely basis. Further, we will
be required to maintain and expand our relationships with various manufacturers,
retailers, Internet and other online service providers and other third parties
necessary to our business. We will need to hire and retain highly skilled
personnel to manage our expected growth. In addition, the current low price of
our stock price could inhibit our efforts to attract highly qualified personnel.
Our inability to manage our growth effectively would have a material adverse
affect on our business, results of operations and financial condition. Please
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of Business-- Employees."

     The loss of the services of our key personnel, or our failure to attract,
assimilate and retain other highly qualified personnel in the future, could
seriously harm our business.

     Our future success depends, in part, on the continued services of our
senior management, particularly Benjamin Narasin, our President and Chief
Executive Officer. It is also critical for us to be able to retain and motivate
key employees. The loss of the services of Mr. Narasin or any key employee would
have a material adverse effect on the business, results of operations and
financial condition. Except for Mr. Narasin, none of our officers or key
employees is currently bound by an employment agreement for any specific term.
Our relationships with these officers and key employees can be terminated at any
time. Our future success also depends on the ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, merchandising,
marketing and customer service personnel. Competition for such personnel is
intense, and we cannot be certain that we will be able to successfully attract,
assimilate or retain sufficiently qualified personnel. Our inability to do so
could have a material adverse effect on our business, results of operations and
financial condition. Please see "Description of Business-- Employees" and
"Management."

<PAGE>

     Our operating results are volatile, which could affect our and your ability
to predict our operating results for any given period and could also affect our
market price.

     You should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock is
likely to fall. We expect quarterly operating results to vary significantly in
the future due to a variety of factors, many of which are outside of our
control. These factors include:

     - the demand for marketing on the Internet in general or on fashionmall.com
       in particular;

     - traffic levels on fashionmall.com and on other web sites that refer
       consumers to fashionmall.com's web site;

     - the ability to attract and retain tenants and advertising partners;

     - the announcement or introduction of new or enhanced sites, services and
       products by us or our competitors;

     - the ability to attract and retain qualified personnel in a timely and
       effective manner;

     - acceptance by consumers and companies of the Internet for apparel and
       fashion-related products and advertising;

     - the ability to maintain and implement strategic alliances and
       relationships with manufacturers, retailers, magazines, catalogs,
       high-traffic web sites and portals and other third parties;

     - changes in tenant fees resulting from competition or other factors;

     - technical difficulties or system downtime affecting the Internet or the
       operation of fashionmall.com;

     - the amount and timing of our costs related to advertising and marketing
       efforts, sales and other initiatives and the timing of revenues generated
       from such activities;

     - fees that may need to be paid for distribution or content or other costs
       that may be incurred as operations are expanded;

     - changes in state and federal government regulations and their
       interpretations, especially with respect to the Internet;

     - costs related to possible acquisitions of businesses, technologies and
       services; and

     - general economic conditions and those conditions that specifically affect

<PAGE>

the Internet and Internet services.

     As we expect to be substantially dependent on revenues from tenant fees and
advertising for the foreseeable future, quarterly revenues are likely to be
particularly affected by traffic levels on fashionmall.com. Our operating
expenses are based on expectations of future traffic levels and revenues and are
relatively fixed in the short term. In particular, we have significantly
expanded the internal sales and merchandising force since the IPO. In addition,
in order to build brand awareness of fashionmall.com, we have significantly
increased the advertising and marketing budget since the IPO. Traffic levels and
revenues are difficult to forecast accurately and therefore we may be unable to
adjust spending quickly enough to offset any unexpected shortfall. If a greater
than expected shortfall occurs in revenues in relation to our expenses, then the
business, results of operations and financial condition would be materially and
adversely affected. This could affect the market price of our common stock.

     Traffic levels on web sites may fluctuate on a seasonal basis, which could
result in a decrease in user traffic on fashionmall.com during certain periods.
Seasonal or other patterns may develop in the industry which can effect our
quarterly revenue within a year. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

We expect to incur significant costs developing our brand.

     To be successful, we must continue to build brand identity of
fashionmall.com. To build brand identity, which may be particularly critical for
Internet companies, we must succeed in marketing efforts, provide high-quality
services and increase traffic to fashionmall.com. If marketing efforts are
unsuccessful or if we cannot increase brand awareness, the business, financial
condition and results of operations would have an adverse material effect. We
have significantly increased spending on advertising and marketing since the IPO
and these expenses are currently the single largest cash expense. It may be
necessary to further increase the financial commitment to creating and
maintaining a strong brand name among consumers. If excessive expenses are
incurred in the attempt to promote and maintain fashionmall.com, the business,
results of operations and financial condition could be materially adversely
affected. Please see "Description of Business--Business Strategy."

If Internet usage decreases as a result of declines in user confidence in the
integrity of the Internet, our business could be materially adversely affected.

     Our future success is substantially dependent on the continued growth in
the use of the Internet. The Internet is relatively new and is rapidly evolving.
Our business would be adversely affected if Internet usage does not continue to
grow. Internet usage may be inhibited for a number of reasons, such as:

     - the Internet infrastructure may not be able to support the demands placed
       on it, or its performance and reliability may decline as usage grows;

     - security and authentication concerns with respect to transmission over
       the Internet of confidential information, such as credit card numbers,
       and attempts by unauthorized computer users, commonly referred to as
       hackers, to penetrate online security systems; and

     - privacy concerns, such as those related to the placement by web sites of
       certain information to gather user information, known as "cookies," on a
       user's hard drive without the user's knowledge or consent.

<PAGE>

We may not be able to adapt to rapidly changing technologies, or we may incur
significant costs in doing so.

     Our market is characterized by rapidly changing technologies, evolving
industry standards, frequent new service introductions and changing customer
demands. To be successful, we must adapt to a rapidly evolving market by
continually enhancing our web site and introducing new services to address our
customers' changing demands. We may use new technologies ineffectively or we may
fail to adapt our web site, transaction-processing systems and network
infrastructure to customer requirements, competitive pressures or emerging
industry standards. We could incur substantial costs if we need to modify our
services or infrastructure in order to adapt to these or other changes affecting
providers of Internet services. The business, results of operations and
financial condition could be an adverse material affected if we incurred
significant costs to adapt, or cannot adapt, to these changes. Due to the
rapidly changing nature of the Internet business, we may be subject to risks,
now and in the future, of which we are not currently aware.

Decreased use of the Internet as an advertising medium may have a material
adverse effect on our results of operations.

     The Internet advertising market is new and rapidly evolving, and will be
difficult to gauge its effectiveness as compared to traditional advertising
media. We are increasingly relying on online to attract users to
fashionmall.com's web site. We currently expect for the foreseeable future to
generate a significant portion of revenues from advertising in the form of
tenant fees. Tenant fees are fees paid by vendors for inclusion on
fashionmall.com. Results of operations may be adversely affected if the market
for Internet advertising fails to develop or develops more slowly than expected.
Most of our current or potential advertising and e-commerce partners have little
or no experience using the Internet for advertising purposes, and they have
allocated only a limited portion of their advertising budgets to Internet
advertising. The adoption of Internet advertising, particularly by those
entities that have historically relied upon traditional media for advertising,
requires the acceptance of a new way of conducting business, exchanging
information and advertising products and services. Advertisers that have
traditionally relied upon other advertising media may be reluctant to advertise
on the Internet. Such customers may find Internet advertising to be less
effective than traditional advertising media for promoting their products and
services. No standards have been widely accepted to measure the effectiveness of
Internet advertising or to measure the demographics of a company's user base. If
such standards do not develop, advertisers may not advertise on the Internet. We
are currently implementing additional systems designed to track and mine usage
patterns of visitors to fashionmall.com's web site. The ability to implement
these systems may be affected, among other matters, by concerns about Internet
privacy. If these systems are not implemented successfully, it may be difficult
to accurately evaluate these usage patterns. Advertisers and e-commerce
marketers may choose not to advertise on fashionmall.com or may pay less for
advertising on fashionmall.com if they do not perceive our measurements to be
reliable, which could have a material adverse effect on our business, results of
operations and financial condition.

Barter transactions, which currently account for a significant portion of our
revenues, result in no income.

         We currently derive a significant portion of revenues from barter
transactions. For the year ended December 31, 1999, we derived revenues of
$1,282,000 from barter transactions, constituting 35% of total revenues for the
year. We barter or trade web site creation services and inclusion on
fashionmall.com in exchange for advertising in consumer and trade publications
as well as, to a lesser extent, for online banner advertising and for marketing
and public relations consulting services. While we recognize barter revenue at
the fair market value of the advertising or service received, the revenues are
offset with a corresponding fair market expense for the services or advertising
we provide in the exchange, as a result of which we do not

<PAGE>

recognize income. We also cannot be certain that barter will continue to be
accepted as a form of payment for our services.

We depend on relationships with third parties, and the loss, or change in terms,
of any relationship could adversely affect us.

         Our business could be adversely affected if we do not maintain our
existing commercial relationships. We have entered into commercial relationships
with various third parties, some of which require us to feature them prominently
in certain sections of fashionmall.com's web site. For example, we have entered
into an agreement with VISA pursuant to which we have integrated the VISA logo
and payment option into our web site in exchange for a fee and promotion of
fashionmall.com. Existing and future arrangements may prevent us from entering
into other content agreements, advertising or sponsorship arrangements or other
commercial relationships. Many companies that we may pursue for a commercial
relationship may also offer competing services. As a result, these competitors
may be reluctant to enter into commercial relationships with fashionmall.com.

         We also depend on establishing and maintaining a number of commercial
relationships with various web sites and networks to increase traffic on
fashionmall.com. There may be intense competition for placements on these sites
and networks, and in the future we may not be able to enter into distribution
relationships for such placement on commercially reasonable terms or at all.
Even if we enter into distribution relationships with these web sites and
networks, they may not attract significant numbers of consumers. Therefore,
fashionmall.com's web site may receive less than the number of additional
consumers expected from these relationships. Moreover, significant fees may have
to be paid to establish or renew these or comparable relationships.

         We also depend on establishing and maintaining a number of commercial
relationships with apparel manufacturing, retailing, catalog and magazine
companies. Current relationships include tenants on our web site from which we
receive tenant fees and, depending on the arrangement with the tenant, fees from
online sales. It cannot be assured that we will be able to establish new
agreements or maintain existing agreements on commercially acceptable terms or
at all.

We may be unable to continually develop our content and service offerings.

         If we fail to develop and introduce new features, functions or services
effectively, it could have a material adverse effect on the business, results of
operations and financial condition. To remain competitive, we must continue to
enhance and improve our content offerings, the ease of use, responsiveness,
functionality and features of the fashionmall.com site and develop new services
in addition to continuing to improve the consumer purchasing experience on our
site. These efforts may require the development or licensing of increasingly
complex technologies. We may not be successful in developing or introducing new
features, functions and services, and these features, functions and services may
not achieve market acceptance or enhance our brand loyalty. Please see
"Description of Business-- Customer Loyalty and Retention."

We may be unable to retain our internal direct sales force which is necessary to
support our anticipated growth.

         We rely on sales personnel to lease space on fashionmall.com's site to
brand name tenants. To support our growth, we need to substantially maintain,
and may need to increase, our internal sales force over time. The ability to do
this involves a number of risks, including:

         - the competition we face in hiring sales personnel;

<PAGE>

         - the ability to integrate, motivate and retain the sales personnel;
           and

         - the length of time it takes new sales personnel to become productive.

         The business, results of operations and financial condition will be
adversely affected if we do not develop, retain and grow an effective internal
sales force.

If the number of retail Internet competitors continues to increase we may not be
able to compete successfully against competitors.

         Increased competition could result in less traffic to fashionmall.com's
web site, price reductions for our tenant fees and reduced margins or loss of
market share, any of which would have a material adverse effect on the business,
results of operations and financial condition. We compete with other web sites,
including, in particular, apparel shopping areas of Internet portals, for
Internet advertisers' and e-commerce marketers' dollars. The number of these web
sites has increased significantly, and such competition is expected to continue
to increase because there are no substantial barriers to entry into our market.
Competition may also increase as a result of ongoing industry consolidation.

         We believe that the ability to compete depends on many factors, many of
which are beyond our control. We believe that the principal competitive factors
in attracting consumers to our web site are:

         - brand awareness and loyalty;

         -  the ability to attract high quality manufacturers, retailers,
            catalogs and magazines as tenants on fashionmall.com's web site;

         - strategic relationships with high-traffic web sites and networks;

         - a positive shopping and purchasing experience for the consumer in
           our clients sites;

         - breadth and depth of selection of merchants and merchandise within
           merchant sites;

         - price of products offered for sale by our clients;

         - ease of use;

         - quality of content, other service offerings, and speed of our site:

         - quality of content, fulfillment and customer service by our clients ;
           and

         - web site functionality, responsiveness, reliability, and speed.

         Many of our existing competitors, as well as a number of potential new
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to devote greater resources than we
can to the development and promotion of customer services. Such competitors may
also engage in more extensive research and development, undertake more
far-reaching marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to existing and potential employees, manufacturers,
retailers, distribution partners, and advertisers and e-commerce partners.
Competitors may develop services that are

<PAGE>

equal or superior to those of fashionmall.com or that achieve greater market
acceptance than fashionmall.com. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their services to address the
needs of advertisers and e-commerce marketers. As a result, it is possible that
new competitors may emerge and rapidly acquire significant market share. We may
not be able to compete successfully or competitive pressures may have a material
adverse effect on the business, results of operations and financial condition.

         We also compete with television, radio, cable and print media for a
share of advertisers' total advertising budgets. If advertisers perceive the
Internet or fashionmall.com to be a limited or ineffective advertising medium,
advertisers may be reluctant to devote a significant portion of their
advertising budget to Internet advertising or to advertise on fashionmall.com.
Please see "Description of Business--Competition."

If the Internet does not grow as a medium for commerce, our business could be
materially adversely affected.

         Our future success and revenue growth will depend upon the adoption of
the Internet by consumers and manufacturers and retailers as a mainstream medium
for commerce. While the we believe that our services offer significant
advantages to consumers and manufacturers and retailers, we cannot be certain
that widespread acceptance of Internet commerce in general, or of our services
in particular, will occur. Our success assumes that consumers who have
historically relied upon traditional means of commerce to purchase apparel or
related products, including touching fabrics and trying on merchandise, will
accept new methods of conducting business and exchanging information. Moreover,
critical issues concerning remote purchases on the Internet, including clarity
of picture, and the commercial use of the Internet, including ease of access,
security, reliability, cost, and quality of service, remain unresolved and may
impact the growth of Internet use. If the market for Internet-based apparel
sales fails to develop, develops more slowly than expected or becomes saturated
with competitors, or if our services do not achieve market acceptance, the
business, results of operations and financial condition could be materially
adversely affected.

         The market for Internet-based purchasing services has only recently
begun to develop and is rapidly evolving. While many Internet commerce companies
have grown in terms of revenue, few are profitable. It cannot be assured that we
will be profitable, and losses are anticipated for the foreseeable future. As is
typical for a new and rapidly evolving industry, demand and market acceptance
for recently introduced services and products over the Internet are subject to a
high level of uncertainty and there are few proven services and products.
Moreover, as the market for selling apparel online is relatively new and
evolving, it is difficult to predict the future growth rate, if any, and size of
this market.

If our system's or the Internet's infrastructure do not improve with increasing
consumer demands, the growth of our business may be adversely affected.

         Our ability to retain and attract consumers, manufacturers, retailers
and advertisers, and to achieve market acceptance of our services and our brand,
depends significantly upon the performance of our systems and network
infrastructure. Revenues depend on the number of visitors to our web site and
the traffic and activity created by those visitors. Any system or network
failure that causes interruption or slower response time of our services could
result in less traffic to our web site and, if sustained or repeated, could
reduce the attractiveness of our services to consumers, manufacturers, retailers
and advertisers. We have experienced periodic system interruptions, which we
believe may continue to occur from time to time. An increase in the volume of
our web site traffic could strain the capacity of our technical infrastructure,
which could lead to slower response times or system failures. This would cause
the number of advertising impressions, click throughs to our clients and our
information offerings to decline, any of which could hurt our revenue growth and
our brand loyalty. In addition, if traffic increases, we cannot assure that the
technical infrastructure, such

<PAGE>

as a reliable network backbone with the necessary speed and data capacity and
the development of complementary products such as high-speed modems, will be
able to increase accordingly, and we face risks related to our ability to scale
up to expected consumer levels while maintaining performance. Further, security
and authentication concerns regarding the transmission of confidential
information over the Internet, such as credit card numbers, may continue. Any
failure of our server and networking systems to handle current or higher volumes
of traffic could have a material adverse effect on our business, results of
operations and financial condition.

         The recent growth in Internet traffic has caused frequent periods of
decreased performance requiring Internet service providers and users of the
Internet to upgrade their infrastructures. If Internet usage continues to
increase rapidly, the Internet infrastructure may not be able to support the
demands placed on it by this growth and its performance and reliability may
decline. If these outages or delays on the Internet occur frequently, overall
Internet usage or usage of our web site could increase more slowly or decline.
Our ability to increase the speed with which we provide services to consumers
and to increase the scope of such services is limited by and dependent upon the
speed and reliability of the Internet. Consequently, the emergence and growth of
the market for our services is dependent on future improvements to the entire
Internet.

         In addition, our operations depend upon the ability to maintain and
protect our computer systems, most of which are hosted and maintained by a third
party in California. Our third party provider maintains, within their own
control and to their own specifications, the only backup disaster recovery
program. The system therefore is vulnerable to damage from a disastrous event,
such as fire, flood, earthquake, power loss, telecommunications failures,
hackers and similar occurrences which cannot be controlled or corrected by the
third party as well as being vulnerable to any failure by the third party to
adequately maintain or protect our equipment or their own facilities. The
occurrence of a disastrous event could have a material adverse effect on our
business, results of operations and financial condition.

We may be subject to liability for the Internet content we publish.

         We could be exposed to liability for third-party information that may
be accessible through our web site. Such claims might assert, among other
things, that, by directly or indirectly providing links to web sites operated by
third parties, we should be liable for copyright or trademark infringement or
other wrongful actions by such third parties through such web sites. It is also
possible that, if any third-party content information provided on our web site
contains errors, consumers might make claims against us for losses incurred in
reliance on such information.

         At times, we also enters into agreements with other companies under
which any revenue that results from the purchase of services through direct
links to or from our web site is shared. Such arrangements may expose us to
additional legal risks and uncertainties, including local, state, federal and
foreign government regulation and potential liabilities to consumers of these
services, even if we do not provide the services ourselves. We cannot assure you
that any indemnification provided to us in our agreements with these parties, if
available, will be adequate.

         Even to the extent any of the claims referred to above do not result in
liability to us, we could incur significant costs in investigating and defending
against such claims. The imposition on us of potential liability for information
carried on or disseminated through our system could require us to implement
measures to reduce our exposure to such liability, which might require the
expenditure of substantial resources or limit the attractiveness of our services
to consumers, manufacturers, retailers and others.

         We may not be able to obtain and maintain adequate insurance. Our
general liability insurance may not cover all potential claims to which we are
exposed and may not be adequate to indemnify us for all liability

<PAGE>

that may be imposed. Any imposition of liability that is not covered by
insurance or is in excess of insurance coverage could have a material adverse
effect on our business, results of operations and financial condition.

If our online security measures fail, our business would be adversely affected.

         Our network is vulnerable to computer viruses, physical or electronic
break-ins and similar disruption. We expect that these problems will occur from
time to time. The inadvertent transmission of computer viruses could expose us
to litigation or to a material risk of loss. Such security breaches and
inadvertent transmissions could have a material adverse effect on our business,
results of operations and financial condition.

         In our prior offerings of certain online payment services, we relied on
technology licensed from third parties to provide the security and
authentication necessary to affect secure transmission of confidential
information, such as consumer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the algorithms that we use
to protect our consumers, transaction data or our software vendors and products.
Any well-publicized compromise of security could deter use of the Internet in
general or use of the Internet to conduct transactions that involve transmitting
confidential information or downloading sensitive materials. Someone who is able
to circumvent our security measures could misappropriate proprietary information
or cause interruptions in our operations. We may be required to expend
significant capital and other resources to protect against such security
breaches or alleviate problems caused by such breaches. Such expenditures could
have a material adverse effect on the business, results of operations and
financial condition.

We may be unsuccessful entering new business areas.

         We may choose to expand operations by developing new web sites,
promoting new or complementary products or formats, expanding the breadth and
depth of products and services offered or expanding our market presence through
relationships with third parties. In addition, we may pursue the acquisition of
new or complementary businesses, products or technologies, although we have no
present plans or commitments with respect to any material acquisition or
investment. If we acquire a company we could face difficulties in assimilating
that company's personnel and operations. In addition, key personnel of the
acquired company might decide not to work for us. Furthermore, any new business
or web site launched by us not favorably received by consumers could damage the
reputation of the fashionmall.com brand. The lack of market acceptance of such
efforts or our inability to generate satisfactory revenues from such expanded
services or products to offset their cost could have a material adverse effect
on the business, results of operations and financial condition.

If government regulation increases, we may need to change the manner in which we
conduct our business.

         The adoption of new legislation or regulation which impacts Internet
businesses, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and other online services could have a material
adverse effect on our business. We are not currently subject to direct
regulation by any domestic or foreign governmental agency, other than
regulations applicable to businesses generally, and laws or regulations directly
applicable to access to online commerce. However, due to the increasing
popularity and use of the Internet and other online services, it is possible
that laws and regulations may be adopted with respect to the Internet or other
online services covering issues such as user privacy, pricing, content,
copyrights, distribution, and characteristics and quality of products and
services. Furthermore, the growth and development of the market for online
commerce may prompt more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. The adoption
of any additional laws or regulations may decrease the growth of the

<PAGE>

Internet or other online services, which could, in turn, decrease the demand for
our products and services and increase our cost of doing business. Moreover, the
applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes and personal privacy is uncertain and may take years to resolve. In
addition, as our web site is available over the Internet in many states and
foreign countries, and as we sell to numerous consumers residing in such states
and foreign countries, such jurisdictions may claim that we are required to
qualify to do business as a foreign corporation in each such state and foreign
country. We are qualified to do business in only two states, and our failure to
qualify as a foreign corporation in a jurisdiction where such qualification is
required could subject us to taxes and penalties for the failure to qualify.

If the protection of our intellectual property rights is inadequate, our
business may be adversely affected.

     Although our ability to compete depends, to some extent, upon copyright law
and confidentiality agreements, we believe that the technical and creative
skills of our personnel, continued development of our proprietary systems and
technology, brand name recognition and reliable web site maintenance are more
essential in establishing and strengthening our brand. Despite efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our services or to obtain and use information that we regard as proprietary.
Policing unauthorized use of our proprietary rights is difficult. Other than our
registration of certain domain names, we do not have any other protection for
the "fashionmall.com" or "Outletmall.com" names. We do not believe that we or
anyone else can obtain protection for such names in the United States. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our products and services are made available
online. In addition, litigation may be necessary in the future to enforce or
protect our intellectual property rights or to defend against claims or
infringement. As part of our confidentiality procedures, we generally enter into
agreements with our employees and consultants. We cannot assure that the steps
taken by us will prevent misappropriation of technology or that the agreements
entered into for that purpose will be enforceable. Misappropriation of our
intellectual property or the costs associated with litigation related thereto
could have a material adverse effect on the business, results of operations and
financial condition.

We may be unable to acquire or maintain necessary web domain names.

         We currently hold various web domain names relating to our brand,
including the "fashionmall.com" and "Outletmall.com" domain names. The
acquisition and maintenance of domain names generally is regulated by
governmental agencies and their designees. For example, in the United States,
the National Science Foundation has appointed Network Solutions, Inc. as one of
the exclusive registrar for the ".com," ".net" and ".org" generic top-level
domains. The regulation of domain names in the United States and in foreign
countries is subject to change in the near future. Such changes in the United
States are expected to include a transition from the current system to a system
which is controlled by a non-profit corporation and the creation of additional
top-level domains. Governing bodies may establish additional top-level domains,
appoint additional domain name registrars or modify the requirements for holding
domain names. As a result, we may be unable to acquire or maintain relevant
domain names in all countries in which we conduct business. Furthermore, the
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Therefore, we may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or otherwise decrease the value of our proprietary rights.

Our common stock price may be volatile, which could result in substantial losses
for individual stockholders.

         The price of our Common Stock has fluctuated substantially since the
IPO. The trading price of our

<PAGE>

Common Stock may continue to be volatile in response to factors such as:

         - actual or anticipated variations in our quarterly operating results;

         - announcements of new product or service offerings;

         - technological innovations;

         - competitive developments;

         - changes in financial estimates by securities analysts;

         - conditions and trends in the Internet and electronic commerce
           industries;

         - changes in the economic performance and/or market valuations of other
            Internet, online commerce or retail companies; and

         - general market conditions and other general factors.

     Further, the stock markets, and in particular the Nasdaq National Market,
have experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies and
have often been unrelated or disproportionate to the operating performance of
such companies. Additionally, the market price of the our common stock could be
adversely affected by losses or other negative news regarding one or more other
companies, despite the fact that such information is not related specifically to
us and may even be contradictory to information that is specifically applicable
to us. These broad market factors may adversely affect the market price of our
common stock. In addition, general economic, political and market conditions
such as recessions, interest rates or international currency fluctuations, may
adversely affect the market price of the common stock. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation has often been instituted against such a company. Such
litigation, if instituted, could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on our business, results of operations and financial condition.

Existing stockholders will be able to exercise significant control over us.

         Approximately 46.4% of the outstanding common stock is beneficially
owned by Benjamin Narasin, our President and Chief Executive Officer.
Accordingly, Mr. Narasin will have substantial influence over the outcome of any
matter submitted to a vote of stockholders, including the election of directors
and the approval of significant corporate transactions (such as acquisitions of
us or our assets). Such influence could delay or prevent a change of control of
our Company.

It may be difficult to acquire us.

         Certain provisions of our Certificate of Incorporation, our Bylaws and
Delaware law, could make it difficult for a third party to acquire us, even if
doing so might be beneficial to our stockholders.

We do not anticipate paying dividends.

         We have never paid cash or other dividends on our common stock. Payment
of dividends on our common stock is within the discretion of the Board of
Directors and will depend upon our earnings, our capital

<PAGE>

requirements and financial condition, and other factors deemed relevant by the
Board. For the foreseeable future, the Board intends to retain future earnings,
if any, to finance our business operations and does not anticipate paying any
cash dividends with respect to the common stock. Please see "Management's
Discussion and Analysis and Results of Operations--Liquidity and Capital
Resources".

We may be unable to meet our future capital requirements.

         We may need to raise additional funds in the future in order to fund
more aggressive brand promotion or more rapid expansion, to develop new or
enhanced services, to respond to competitive pressures or to acquire
complementary businesses, technologies or services. It cannot be assured that
any required additional financing will be available on terms favorable to us, or
at all. If additional funds are raised by our issuing equity securities,
stockholders may experience dilution of their ownership interest and such
securities may have rights senior to those of the holders of our common stock.
If additional funds are raised by our issuing debt, we may be subject to certain
limitations on our operations, including limitations on the payment of
dividends. If adequate funds are not available or not available on acceptable
terms, we may be unable to fund our expansion, successfully promote our brand
name, take advantage of acquisition opportunities, develop or enhance services
or respond to competitive or business pressures, which could have a material
adverse effect on our business, results of operations and financial condition.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Item 7.  Financial Statements.

         The Financial Statements and Notes thereto can be found beginning on
page F-1, "Index to Financial Statements," following Part III of this Annual
Report on Form 10-KSB.

Item 8.  Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure.

         Not applicable.

<PAGE>

                                    PART III

Item 9.  Directors and Executive Officers of the Registrant.

         Our current executive officers and directors are set forth below:

Name                                          Age           Position
----                                          ---           --------

Benjamin Narasin..........................     34   Chief Executive Officer and
                                                    President and Chairman of
                                                    the Board of Directors

Barry Scheckner...........................     51   Acting Chief Financial
                                                    Officer

Stephen P. Burke..........................     33   Controller

Richard C. Marcus(1)......................     60   Director

Jerome A. Chazen(1).......................     73   Director and Senior
                                                    Consultant

Robert S. Taubman(1)......................     46   Director

Ronald Forehand...........................     53   Chief of Operations

Anne-Marie Forehand.......................     37   Vice President


(1)      Member of the Audit Committee

         Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Mr. Taubman serves as the director designee of the preferred stockholder. Other
than stock options, non-employee directors do not currently receive remuneration
for their services as such, but may be reimbursed for expenses incurred in
connection therewith, such as the cost of travel to Board meetings. Officers
serve at the pleasure of the Board of Directors until their successors have been
elected and have qualified. The Audit Committee has the authority to recommend
annually to the Board of Directors the engagement of our independent auditors
and to review the scope and results of the audits, our internal accounting
controls, our audit practices and the professional services furnished by the
independent auditors.

          Benjamin Narasin has served as our Chairman of the Board, Chief
Executive Officer and President of fashionmall.com and our predecessor since our
inception in 1994. Prior to joining us, from 1986 to 1994, Mr. Narasin served as
President for Boston Prepatory Co., an apparel company which he still owns and
at which he developed the concept of fashionmall.com.

          Barry Scheckner has served as our Financial Consultant since
September, 1999. Mr. Scheckner is a Certified Public Accountant who served as
the Chief Financial Officer of Finlay Enterprises, Inc., for twelve years. Mr.
Scheckner also serves on the Board of Directors of Michael Anthony Jewelers,
Inc.

         Stephen P. Burke has served as our Controller since January 2000. Prior
to joining us, from October 1996 to December 1999, Mr. Burke served as
Controller of CopyTele, Inc, a publicly traded telecommunications company. Prior
to October 1996, Mr. Burke was with Arthur Andersen LLP in an Audit and Business
Advisory capacity.

         Richard C. Marcus has served as our consultant since February 1997 and
has served as one of our directors since March 1999. Since January 1997, Mr.
Marcus has served as a Senior Advisor to Peter J. Solomon Company, a New York
investment banking firm. Mr. Marcus was principal of InterSolve Group Inc., a
management services firm, from its inception in 1991 until January 1997. From
December 1994 until December 1995, Mr. Marcus served as Chief Executive Officer
of the Plaid Clothing Group and as a director of that company from December 1994
through December 1996. In July 1995, Plaid Clothing Group filed a petition of
reorganization under Chapter 11 of the U.S. Bankruptcy Code and was subsequently
sold to Hartmarx in December 1996. From January 1989 to January 1992, Mr. Marcus
was a principal of RCM Consulting, a provider of consulting services to the
retail industry. From 1979 to 1988, he served as Chairman

<PAGE>

and Chief Executive Officer of Neiman-Marcus, a department store retailer. Mr.
Marcus is currently a director of Zale Corporation, a public jewelry retail
company.

         Jerome A. Chazen has served as a senior consultant and one of our
directors since March 1999. Since 1996, Mr. Chazen has been Chairman of Chazen
Capital Partners, LLC. Mr. Chazen was a founder of Liz Claiborne, Inc., an
apparel company, where he served in various senior executive positions until his
retirement in 1996 and as a director until 1997. Mr. Chazen also serves as a
director of Taubman Centers, Inc. and The Gymboree Corporation, as Chairman of
the American Craft Museum, as a Trustee of Columbia University, as Chairman of
the Board of Overseers of the Columbia University Business School, and as
Vice-Chairman of the Greater New York Council of the Boy Scouts of America. Mr.
Chazen has various relationships with FM/CCP Investment Partners, LLC.

         Robert S. Taubman has served as one of our directors since April 1999.
Mr. Taubman has been a director and the President and Chief Executive Officer of
Taubman Centers, Inc., a real estate investment trust which is a leading
developer of malls since 1992. He is also a member of the Board of Governors of
the National Association of Real Estate Investment Trusts, a director of
Comerica Bank, a director of the Real Estate Roundtable and a Trustee of the
International Council of Shopping Centers and of the Urban Land Institute.

         Ronald Forehand has served as our Vice President of Operations since
October 1998. Prior to joining us, from April 1990 to September 1998, Mr.
Forehand was President of J.P. Callaghan's Outfitters, a men's sportswear
company which he co-founded but which terminated operations when Mr. Forehand
joined us. Mr. Forehand is Anne-Marie Forehand's husband.

         Anne-Marie Forehand has served as our employee since February 1998 and
became Vice President in March 1999. Prior to joining us, from April 1990 to
September 1998, Ms. Forehand managed J.P. Callaghan Outfitters, a men's
sportswear company which she co-founded but which has terminated operations. Ms.
Forehand is Ronald Forehand's wife.

          Barry Scheckner has served as our Financial Consultant since
September, 1999. Mr. Scheckner is a Certified Public Accountant who served as
the Chief Financial Officer of Finlay Enterprises, Inc., for twelve years. Mr.
Scheckner also serves on the Board of Directors of Michael Anthony Jewelers,
Inc.

         During fiscal 1999, our Vice-President of Finance and Vice-President of
fashionmall.com resigned from their positions with us. At this time, we have not
replaced the Vice-President of Finance position but have hired a Financial
Consultant, Mr. Barry Scheckner and a Controller. The Vice-President of
fashionmall.com position was a senior sales position and we have since hired two
co-directors of sales to fill this role, and we also hired additional sales
personnel since the resignation to fill the void.

Item 10. Executive Compensation.

         The following tables sets forth the annual and long-term compensation
for services in all capacities for the fiscal year ended December 31, 1999 paid
to Benjamin Narasin, our President, Chief Executive Officer and Chairman. No
other executive officer received compensation exceeding $100,000 during the
fiscal year ended December 31, 1999.

<PAGE>

                            SUMMARY COMPENSATION TABLE


                               Annual Compensation




                                                              Securities
                                                              Underlying
       Name and         Fiscal                                 Options/
Principal Position       Year        Salary        Bonus       SARs (#)
---------------------------------------------------------------------------

Benjamin Narasin,        1999      $180,000      $40,000       100,000
President/CEO and        1998      $180,000(1)         -          -
Chairman of the          1997      $120,000(2)         -          -
Board of Directors

(1)      $85,000 of such salary was deferred and was paid in March 1999.

(2)      $82,500 of such salary was  deferred and $3,500 was paid in  March
         1999.  The  remaining  $79,000 was paid upon completion of the
         offering.

         The following table sets forth information regarding stock options
granted to Mr. Narasin pursuant to the fashionmall.com, Inc. 1999 Stock Option
Plan during the year ended December 31, 1999:

                       OPTIONS GRANTED IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                  Individual grants                                        Potential realizable value at
                                  -----------------                                     assumed annual rates of stock price
                                                                                                  appreciation for
                                                                                                    option term
                                                                                      -----------------------------------------

                           Number of         Percent of
                           securities      total options
                           underlying        granted to     Exercise
                            options         employees in     price      Expiration
Name                        granted         fiscal year     ( $/Sh )       date            5% ($)              10% ($)
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>             <C>          <C>                <C>                 <C>

Benjamin Narasin
President/CEO and
Chairman of the Board
Directors                   100,000             25%           $7.00      6/15/09           $558,000            $1,116,000

</TABLE>

         The following table sets forth information regarding stock option
exercises during the year ended December 31, 1999 by Mr. Narasin and the values
of his options as of December 31, 1999:

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION/VALUES
<TABLE>
<CAPTION>

                                                          Number of securities              Value of unexercised in-the
                                                           Underlying options               money options at fiscal year
                                                        at fiscal year-end (#)                       end ($)
                                                    ---------------------------------------------------------------------------

                           Shares         Value
                          acquired      Realized
         Name           on exercise        ($)       Exercisable     Unexercisable       Exercisable        Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>          <C>             <C>                 <C>                <C>

Benjamin Narasin
President/CEO and
Chairman of the Board
of Directors                 -              $  -       100,000             -                 $ -                 $ -
</TABLE>

<PAGE>

Director Compensation

         The directors did not receive monetary compensation for serving on the
Board of Directors during the fiscal year ended December 31, 1999.

Employment and Consulting Agreements

          We entered into a three-year employment agreement with Benjamin
Narasin, effective as of May 26, 1999, pursuant to which Mr. Narasin shall serve
as our Chief Executive Officer, President and Chairman of the Board and has
received an annual base salary of $180,000 during 1999 and for 2000 will receive
$238,225. Such base salary will be subject to additional increases and bonuses
within the discretion of the Board of Directors which will take into account,
among other things, our performance and the performance, duties and
responsibilities of Mr. Narasin. We also agreed to pay for certain life
insurance policies for the benefit of Mr. Narasin's family which is still due
and to indemnify him and his minor son, Grant Narasin, for tax liabilities
arising from our reorganization into a C corporation. Mr. Narasin's agreement
also permits him to devote up to 10% of his time to Boston Prepatory Co., an
apparel company owned by him, provided that the Board of Directors makes a
determination that such company is not directly competitive to us. In the event
of a change of control as defined in the agreement, Mr. Narasin may terminate
the agreement and receive three times his compensation, including bonuses earned
during the previous 12 months, and his compensation for the balance of the term.

     On March 2, 1999, we entered into a consulting agreement (the "Consulting
Agreement") with Jerome Chazen, the sole owner of FM/CCP, Inc., which is the
manager of FM/CCP Investment Partners, LLC. The Consulting Agreement, which
expires on May 26, 2001, stipulates that Mr. Chazen shall provide consulting
services to us aggregating at least 30 hours per month. In addition, Mr. Chazen
agreed to become a director. Mr. Chazen will receive an aggregate of $150,000
over the term of the Consulting Agreement plus five-year options to purchase
135,000 shares of common stock at an exercise price of $1.11 per share and
options to purchase 107,500 shares of common stock at an exercise price of $3.25
per share. Of such options, 50% became exercisable upon the closing of our IPO,
an additional 16% becomes exercisable on March 1, 2000, and the balance becomes
exercisable in equal monthly installments over the one year period commencing
March 2, 2000.

     We currently do not have written employment agreements with any of our
other officers or directors.

1999 Stock option plan

     We adopted the 1999 Stock Option Plan in May 1999.

     The 1999 Plan provides for the grant of options to purchase up to, but not
in excess of, 1,125,000 shares of common stock to our officers, directors,
agents, consultants and independent contractors. Options may be either
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code, or non-qualified options. Incentive stock options may be granted
only to our employees or employees of our subsidiaries, while non-qualified
options may be issued to non-employee directors and consultants, as well as to
our employees or employees of our subsidiaries.

     The 1999 Plan is administered by a committee selected by the Board of
Directors or by the Board of Directors (the "Administrator"), which determines,
among other things, those individuals who receive options, the time period
during which the options may be exercised, the number of shares of common stock
issuable

<PAGE>

upon the exercise of each option and the option exercise price. Pursuant to the
1999 Plan, the Administrator determines, among other things, those individuals
who receive options, the time period during which the grants will be made, the
number of shares of common stock to be granted and the price (if any) to be paid
by such key employees thereafter.

     The exercise price per share of common stock subject to an incentive stock
option may not be less than the fair market value per share of common stock on
the date the option is granted. The per share exercise price of the common stock
subject to a non-qualified option may be established by the Administrator. If
the aggregate fair market value, as determined as of the date the option is
granted, of common stock for which any person may be granted incentive stock
options which first become exercisable in any calendar year exceeds $100,000,
such stock option shall be treated, to the extent of such excess, as an option
which does not qualify as an incentive stock option. No person who owns,
directly or indirectly, at the time of the granting of an incentive stock option
to such person, 10% or more of the total combined voting power of all classes of
stock of the company (a "10% Shareholder") shall be eligible to receive any
incentive stock options under the 1999 Plan unless the exercise price is at
least 110% of the fair market value of the shares of common stock subject to the
option, determined on the date of grant. Non-qualified options are not subject
to such limitation.

     No stock option may be transferred by an optionee other than by will or the
laws of descent and distribution, and, during the lifetime of an optionee, the
option will be exercisable only by the optionee. In the event of termination of
employment other than by death, retirement, permanent and total disability,
unless extended by the Administrator on or before such employee's date of
termination of employment, the optionee will have no more than three months
after such termination during which the optionee shall be entitled to exercise
all or any part of such employee's option, unless otherwise determined by the
Administrator. Upon termination of employment of an optionee by reason of death,
retirement, permanent and total disability, such optionee's options remain
exercisable for one year thereafter to the extent such options were exercisable
on the date of such termination.

     Options under the 1999 Plan must be issued within ten years from the
effective date of the Plan. Incentive stock options granted under the 1999 Plan
cannot be exercised more than ten years from the date of grant. Incentive stock
options issued to a 10% Shareholder are limited to five-year terms. All options
granted under the 1999 Plan will provide for the payment of the exercise price
in cash or check or by delivery to us of shares of common stock having a fair
market value equal to the exercise price of the options being exercised, or by a
combination of such methods, or by such other methods approved by the
Administrator pursuant to the 1999 Plan. Therefore, an optionee may be able to
tender shares of common stock to purchase additional shares of common stock and
may theoretically exercise all of such optionee's stock options with no monetary
investment.

     Each director holds office until our annual meeting of stockholders and
until his successor is duly elected and qualified. Officers are elected by the
Board of Directors and hold office at the discretion of the Board of Directors.
There are no family relationships between any of the directors or executive
officers of the Company. See footnote No. 9 in the financial statements for a
breakout of the stock option activity for the year ended 1999.

Section 16(a) Beneficial Ownership Reporting Compliance.

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission (the "Commission") initial

<PAGE>

reports of ownership and reports of changes in ownership of Common Stock and the
other equity securities of the Company. Officers, directors, and persons who
beneficially own more than ten percent of a registered class of our equities are
required by the regulations of the Commission to furnish the Company with copies
of such reports furnished to us, during the fiscal year ended December 31, 1999,
all Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten percent of a registered class of equity securities.

Item 11. Security Ownership of Certain Beneficial Owners
          and Management.

         The following table sets forth information known to the Company, as of
March 20, 2000, regarding the beneficial ownership of the Company's voting
securities by (i) each person who is known by the Company to beneficially own
more than 5% of the outstanding Common Stock, (ii) each of the Company's
directors and each of the executive officers named in the compensation table
under Item 10, "Executive Compensation", and (iii) all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
stockholders listed in the table below has sole voting and dispositive power
with respect to shares beneficially owned by such stockholder.

<TABLE>
<CAPTION>

                                                               Amount and nature       Percentage of
             Name of beneficial owner (1)                       of beneficial         outstanding stock
             -------------------------                            ownership               owned
                                                                  ---------              ------
<S>                                                            <C>                     <C>

Benjamin Narasin(2).................................           3,528,100 shares            46.4%
TRC Net Investors LLC (3)                                        824,084 shares             9.9%
Robert S. Taubman (4)                                            834,084 shares            10.0%
FM/CCP Investment Partners, LLC(5)..................             320,000 shares             4.3%
Jerome Chazen (5)...................................             486,174 shares             6.3%
Richard Marcus (6)..................................              20,000 shares              --
Executive Officers and Directors (7)
   as a group (four persons)........................           4,044,274 shares            51.2%

</TABLE>

-----------
(1)      Except as otherwise indicated, the address for the referenced
         stockholders is c/o fashionmall.com, Inc., 575 Madison Avenue, New
         York, New York 10022.

(2)      Includes 427,500 shares owned by Grant Narasin, the minor son of Mr.
         Narasin. Mr. Narasin has voting power over Grant Narasin's shares until
         April 9, 2018. Also includes 100,000 shares of common stock underlying
         options that were granted to Mr. Narasin upon the consummation of the
         offering.

(3)      Includes 824,084 shares of common stock underlying convertible
         preferred stock owned by TRG Net Investors LLC that is not convertible
         until one year after the offering. Does not include 924,898 shares of
         common stock underlying a warrant which is not exercisable until one
         year after this offering. TRG Net Investors LLC is owned (i) 75% by The
         Taubman Realty Group Limited Partnership ("TRG LP") and (ii) 25% by
         Taubman Net LLC, which is the Managing Member of TRG Net Investors LLC
         and which is owned 100% by The Taubman Company Limited Partnership, a
         shopping mall property manager which is 99% directly and indirectly
         owned by TRG LP. Consequently, TRG LP owns directly or indirectly over
         99% of TRG Net Investors LLC. In turn, Taubman Centers, Inc., a public
         real estate investment trust, is the Managing General Partner of and
         owns 62.8% of TRG LP.

(4)      Includes 10,000 shares of common stock underlying options, which were
         granted to Mr. Taubman upon the consummation of the offering. Robert S.
         Taubman is the President and Chief Executive Officer of TRG Net
         Investors LLC. Mr. Taubman disclaims any beneficial ownership interest
         in the shares owned or which may be acquired by TRG Net Investors LLC
         beyond his indirect interest therein through his pecuniary interest in
         TRG LP, which directly or indirectly owns substantially all of TRG Net
         Investors LLC. The address of Robert S. Taubman and TRG Net Investors
         LLC is 200 East Long Lake Road, Suite 300, Bloomfield Hills, Michigan
         48303-0200.

<PAGE>

(5)      FM/CCP, Inc., the Manager of FM/CCP Investment Partners, LLC, is
         wholly-owned by Mr. Chazen, and certain affiliates of Mr. Chazen are
         members of FM/CCP Investment Partners, LLC. FM/CCP, Inc. and/or Mr.
         Chazen may be deemed the beneficial owner of securities owned by FM/CCP
         Investment Partners, LLC. Mr. Chazen disclaims such beneficial
         ownership. FM/CCP Investment Partners, LLC's ownership includes 95,000
         shares underlying warrants which became exercisable upon completion of
         the offering and does not include up to 12,500 shares issuable pursuant
         to certain anti-dilution provisions upon exercise of such warrants and
         the options owned by Mr. Chazen referred to below. The amount shown as
         owned by Mr. Chazen includes common stock beneficially owned by FM/CCP
         and 121,250 shares underlying options which became exercisable by Mr.
         Chazen upon consummation of the offering, 19,400 shares underlying
         options that became exercisable by Mr. Chazen on March 1, 2000 and an
         additional 25,524 shares underlying options that become exercisable in
         monthly installments over a one year period commencing March 2, 2000.
         The address of FM/CCP Investment Partners, LLC and Jerome Chazen is 767
         Fifth Avenue, New York, New York 10153.

(6)      Includes  20,000  shares of common stock  underlying  options that were
         granted upon consummation of the offering.

(7)      See footnotes (2), (4), (5) and (6) above

Item 12. Certain Relationships and Related Party Transactions.

     Our predecessor, the Internet Design Group, Ltd. commenced operations on
December 22, 1994, and continued operations though August 19, 1995, when it
became Internet Fashion Mall, L.P. We were reorganized as a Delaware limited
liability company, Internet Fashion Mall, LLC, pursuant to a limited liability
company agreement, dated June 26, 1996, by and between Benjamin Narasin, our
Chief Executive Officer, President and Chairman of the Board, and Richard A.
Eisner & Company, LLP ("RAE"). Pursuant to such agreement, Narasin contributed
the Company's business, including fashionmall.com, related intellectual property
and $250,000, for an 80% membership interest, and RAE contributed $100,000 for a
20% membership interest. Narasin and RAE entered into an Amended and Restated
Limited Liability Company Agreement, dated March 1, 1999, which restated the
terms of the original limited liability company agreement and recognized Mr.
Narasin's prior transfer of a 10% membership interest to his minor son, Grant
Narasin.

     During the year ended December 31,1998, RAE incurred various costs and
expenses, including, but not limited to, salaries and other general and
administrative expenses, on our behalf, in addition to providing a non-interest
bearing cash loan to us. No additional loans were incurred during the year ended
December 31, 1999. At December 31, 1998 and 1999, the amounts due to RAE in
respect of these loans totaled $118,000 and $0, respectively.

     We sublease approximately 7,500 square feet from RAE in New York for our
executive and administrative offices at an annual rental of approximately
$360,000. In addition, prior to our IPO, RAE provided administrative services
such as phone services, accounting and maintenance of books and records at cost.
Such administrative services terminated upon the consummation of the offering.

     On March 2, 1999, we sold to FM/CCP Investment Partners, LLC ("FM/CCP")
225,000 shares of our common stock for $1,000,000 ($4.44 per share). In
addition, FM/CCP loaned us $1,000,000 evidenced by a promissory note in the
principal amount of $1,000,000, bearing interest at 6% per annum and due on the
earlier of the closing of the offering or March 2, 2002. In connection with the
foregoing promissory note, FM/CCP received a warrant, expiring March 2, 2004, to
purchase up to 95,000 shares of common stock at an exercise price of $13.65 per
share. With a portion of the proceeds from the IPO, the Company repaid the $1
million promissory note plus accrued interest. Interest expense related to the
note was approximately $15,000. In addition, the Company recorded a $55,000
charge to interest expense representing the unamortized discount relating to the
note. Mr. Chazen, one of our directors and a senior consultant, and certain
affiliates of Mr. Chazen are investors in FM/CCP Investment Partners, LLC.
Pursuant to certain anti-dilution provisions, we will issue up to an additional
12,500 shares of common stock to FM/CCP upon the exercise of such warrants and
certain options granted to Jerome Chazen.

     On March 2, 1999, we entered into a consulting agreement (the "Consulting
Agreement") with Jerome M.

<PAGE>

Chazen. The Consulting Agreement, which expires on May 26, 2001, stipulates that
Mr. Chazen shall provide consulting services to us aggregating at least 30 hours
per month. Mr. Chazen will receive an aggregate of $150,000 over the term of the
Consulting Agreement plus five-year options to purchase 135,000 shares of common
stock at an exercise price of $1.11 per share and options to purchase 107,500
shares of common stock at an exercise price of $3.25 per share. Of such options,
50% of them have vested, an additional 16% shall vest March 1, 2000 and the
balance shall vest monthly over the one year period commencing March 2, 2000. In
addition, Mr. Chazen is one of our directors.

     FM/CCP and Mr. Chazen have agreed not to sell or dispose of the securities
acquired by them without our consent, except to certain partners or family
members, until May 27, 2000. In addition, we have agreed to grant FM/CCP and Mr.
Chazen certain demand and "piggyback" registration rights, commencing May 27,
2000 and terminating on March 2, 2004, as to the common stock acquired by them
and underlying their warrants and options.

         On April 22, 1999, the Company entered into an agreement with TRG Net
Investors LLC ("TRG Net"), an affiliate of Taubman Centers, Inc., a real estate
investment trust and one of the leading mall developers in the U.S., whereby TRG
Net purchased, for $7,417,000, a 9.9% membership interest in the Company (the
"Series B Interest") and warrants (the "Warrants") to purchase an additional 10%
membership interest. Upon closing of the IPO, the Series B Interest was
contributed for 824,084 shares of convertible preferred stock (the "Preferred
Stock"), which in turn are convertible into an aggregate of 824,084 common
shares and the Warrants can be exercised to purchase 924,898 common shares. The
Preferred Stock is convertible for one year beginning on the first anniversary
of the closing of the IPO by the Company and, based on the $13.00 per share
initial public offering price, the effective conversion price of the Preferred
Stock was $9.00 per share and the exercise price of the Warrants was $13.00 per
share. Upon closing of Taubman's investment, the Company allocated $2,377,000 of
the $7,417,000 to represent the fair value of the Warrants. The remaining
portion of the net proceeds of $5,040,000 represents the beneficial conversion
feature of the Preferred Stock, and was allocated to additional paid-in capital
upon closing of the IPO and will be accreted to the book value of the Preferred
Stock. The accretion period will be one year, beginning on the date of closing
of the IPO. As of December 31, 1999, the Company accreted $3,101,000 to the book
value of the Preferred Stock. In connection with this transaction, Robert S.
Taubman, the Chief Executive Officer and the President of Taubman Centers, Inc.,
joined the Company's Board of Directors.

Item 13.   Exhibits and Reports on Form 8-K.

Exhibit No.                         Description

3.1      Certificate of Incorporation of the Company (1)
3.2      By-laws of the Company (1)
3.3      Certificate of Designations, Preferences, and Rights of Series A
         Preferred Stock (2)
4.5      Warrant issued to TRG net Investors LLC (2)
4.1      Form of Representative's Warrant (2)
4.2      Form of Stock Certificate (2)
4.3      Warrant executed in connection with the FM/CCP Financing (1)
4.4      Promissory Note of the Company dated March 2, 1999, in principal amount
         of $1,000,000 (1)
10.1     Employment Agreement effective as of May 26, 1999 by and between the
         Company and Benjamin Narasin (2)
10.2     Consulting Agreement dated March 2, 1999 by and between the Company and
         Jerome Chazen(1)
10.3     Subscription Agreement dated March 2, 1999, by and between FM/CCP
         Investment Partners, LLC and the Company(1)
10.4     Subscription Agreement dated March 2, 1999, by and between Jerome
         Chazen and the Company(1)

<PAGE>

10.5     1999 Stock Option Plan (3)
10.6     Unit Purchase Agreement, dated April 22, 1999, among Internet Fashion
         Mall LLC, fashionmall.com, Inc. and TRG Net Investors LLC (1)
21.1     Subsidiaries of the registrant
23.1     Consent of Arthur Andersen LLP
27.1     Financial Data Schedule (1)
--------------------------------------------------------------------------------

(1)      Incorporated by reference from the Company's Registration Statement on
         Form SB-2, filed March 9, 1999.
(2)      Incorporated by reference from the Company's Amendment No. 1 to the
         Form SB-2, filed April 23, 1999.
(3)      Incorporated by reference from the Company's Registration Statement on
         Form S-8 filed on November 1, 1999.

<PAGE>

         Exhibit 21.1 -- Subsidiaries of fashionmall.com, Inc.

         E-com, Inc.

         Outletmall.com, Inc.

         Styleexperts, LLC owned by E-com, Inc.

         Exhibit 27.1 -- Financial Data Schedule


<PAGE>

Index to Financial Statements

<TABLE>
<CAPTION>

                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
Report of Independent Public Accountants....................................................    F-2
Consolidated Balance Sheet as of December 31, 1999 .........................................    F-3
Consolidated Statements of Operations for the years ended December 31, 1999 and 1998........    F-4
Consolidated Statements of Changes in Stockholder's Equity and Members' Equity (Deficit)....    F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998........    F-7
Notes to Consolidated Financial Statements..................................................    F-8

</TABLE>


<PAGE>


                                       Report of Independent Public Accountants

To the Stockholders and Board of Directors of fashionmall.com, Inc.:

         We have audited the accompanying consolidated balance sheet of
fashionmall.com, Inc. (a Delaware corporation) as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
fashionmall.com, Inc. as of December 31, 1999, and the results of its operations
and its cash flows for the years ended December 31, 1999 and 1998, in conformity
with accounting principles generally accepted in the United States.


                                              ARTHUR ANDERSEN LLP


New York, New York
March 23, 2000


<PAGE>

                              fashionmall.com, Inc.

                           Consolidated Balance Sheet
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                        1999
                                                                                  ------------------
<S>                                                                               <C>
                                   Assets
                                   ------
CURRENT ASSETS
    Cash and cash equivalents                                                     $   34,114,000
    Marketable securities                                                              7,452,000
    Accounts receivable, net of an allowance of approximately $232,000                   797,000
    Inventories, net of a reserve of approximately $100,000                              191,000
    Prepaid expenses and other current assets                                            434,000
                                                                                  ------------------
                Total current assets                                                  42,988,000
                                                                                  ------------------

PROPERTY AND EQUIPMENT - net of accumulated depreciation of $36,000                      223,000
CAPITALIZED SOFTWARE COSTS- net of accumulated amortization of $52,000                   310,000
OTHER ASSETS                                                                              20,000
                                                                                  ------------------

                Total assets                                                      $   43,541,000
                                                                                  ==================

                 Liabilities and Stockholders' Equity
                 ------------------------------------
CURRENT LIABILITIES
   Accounts payable                                                               $    2,784,000
   Accrued expenses                                                                      295,000
   Customer deposits                                                                      14,000
   Deferred revenue                                                                       25,000
                                                                                  ------------------
                Total liabilities                                                      3,118,000
                                                                                  ------------------

COMMITMENTS AND CONTINGENCIES  (Note 10)

STOCKHOLDERS' EQUITY
   Convertible preferred stock - $.01 par value; 3,000,000 shares
        authorized; 824,084 shares issued and outstanding                                  8,000
   Common stock - $.01 par value; 35,000,000 shares authorized;
         7,500,000 shares issued and outstanding                                          75,000
   Additional paid-in capital                                                         49,396,000
   Unrealized gain on marketable securities available for sale, Net of tax                46,000
   Accumulated deficit                                                                (9,102,000)
                                                                                  ------------------
                Total stockholders' equity                                            40,423,000
                                                                                  ------------------

                Total liabilities and stockholders' equity                        $   43,541,000
                                                                                  ==================

       The accompanying notes are an integral part of this balance sheet.

</TABLE>

                                      F-3
<PAGE>


                              fashionmall.com, Inc.

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                              For the Years Ended
                                                                               Ended December 31,
                                                                  ---------------------------------------------
                                                                          1999                 1998
                                                                  ---------------------   ---------------------

<S>                                                               <C>                     <C>
SITE REVENUES                                                     $     3,690,000         $         2,055,000

COSTS AND EXPENSES:
   Site development, merchandise and content                              612,000                     270,000
   Advertising and marketing                                            3,805,000                   1,104,000
   Selling expense                                                        389,000                     257,000
   General and administrative                                           5,862,000                     413,000
                                                                  ---------------------   ---------------------
   Total costs and expenses                                            10,668,000                   2,044,000
                                                                  ---------------------   ---------------------

(Loss) income from operations                                          (6,978,000)                     11,000
                                                                  ---------------------   ---------------------

OTHER INCOME (EXPENSE):
   Interest and dividend income                                         1,433,000                       3,000
   Interest expense and other financing costs                            (737,000)                     -
                                                                  ---------------------   ---------------------
Total other income and (expense)                                          696,000                       3,000
                                                                  ---------------------   ---------------------

Net (loss) income                                                 $    (6,282,000)        $            14,000
                                                                  =====================   =====================
PRO FORMA NET INCOME DATA (Unaudited):

Net (loss) Income before provision for income taxes               $    (6,282,000)        $            14,000
                                                                  =====================   =====================

Pro forma income tax provision                                    $            -          $             6,000
                                                                  ---------------------   ---------------------

Pro forma net (loss) Income                                            (6,282,000)        $             8,000

PRO FORMA PER SHARE INFORMATION
(Unaudited):

 Basic and diluted earnings per share                             $         (1.01)        $            -
                                                                  =====================   =====================
 Basic and diluted weighted average common shares outstanding
                                                                        6,250,000                   4,500,000
                                                                  =====================   =====================
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-4

<PAGE>


                              fashionmall.com, Inc.

     Consolidated Statement of Changes in Stockholders' and Members' Deficit


<TABLE>
<CAPTION>
                                       Convertible
                                     Preferred Stock               Common Stock
                                     ---------------               ------------
                                                                                          Additional     Members'
                                                 Par                           Par          Paid-in    Contributed    Comprehensive
                                    Shares      Value           Shares        Value         Capital      Capital         Income

                               -----------------------------------------------------------------------------------------------------

<S>                                   <C>      <C>                <C>        <C>            <C>         <C>             <C>
Balance, December 31, 1997            --       $     --           --         $   --         $   --      $ 350,000       $   --

Conversion of related party
    loan to contributed               --             --           --             --             --         61,000           --

Net income                            --             --           --             --             --            --            --

                               -----------------------------------------------------------------------------------------------------

Balance at December 31, 1998          --             --           --             --             --        411,000           --

Contribution of capital, net
   of related issuance costs          --             --           --             --             --        876,000           --

Incremental difference
   between issue price and
   fair value of capital              --             --           --             --             --        576,000           --
   contribution

Issuance of warrants to
   purchase 127,000 shares
   of common stock, at fair           --             --           --             --             --        130,000           --

Issuance of preferred stock
   in connection with
   capital contribution               --             --           --             --             --      5,040,000           --




<CAPTION>

                                                                  Total
                                  Members'    Accumulated      Stockholder
                                  Deficit       Deficit          Equity

                               --------------------------------------------

<S>                             <C>             <C>            <C>
Balance, December 31, 1997      $  (567,000)    $    --        $ (217,000)

Conversion of related party
    loan to contributed                 --           --            61,000

Net income                           14,000          --            14,000

                               --------------------------------------------

Balance at December 31, 1998       (553,000)         --          (142,000)

Contribution of capital, net
   of related issuance costs           --            --           876,000

Incremental difference
   between issue price and
   fair value of capital               --            --           576,000
   contribution

Issuance of warrants to
   purchase 127,000 shares
   of common stock, at fair            --            --           130,000

Issuance of preferred stock
   in connection with
   capital contribution                --            --         5,040,000

</TABLE>

                                      F-5

<PAGE>



<TABLE>
<CAPTION>
                              fashionmall.com, Inc.
     Consolidated Statement of Changes in Stockholders' and Members' Deficit

                                       Convertible
                                     Preferred Stock               Common Stock
                                     ---------------               ------------
                                                                                          Additional     Members'
                                                 Par                           Par          Paid-in    Contributed    Comprehensive
                                    Shares      Value           Shares        Value         Capital      Capital         Income
                                ----------------------------------------------------------------------------------------------------

<S>                              <C>          <C>            <C>             <C>         <C>            <C>           <C>
Issuance of warrants to
   purchase 924,898 shares
   of common stock, at fair           --           --              --            --              --       2,377,000         --
   value

Issuance of common stock in
   connection with IPO, net
   of expenses                        --           --        7,500,000        75,000      34,700,000            --          --

Reorganization from
Limited Liability
Company to C
corporation                           --           --              --            --        8,725,000     (9,559,000)        --

Non-cash compensation
expense subsequent to IPO             --           --              --            --        2,878,000        149,000         --

Accretion of preferred
stock beneficial conversion
feature                           824,000        8,000             --            --        3,093,000            --          --

Unrealized gains on
marketable
securities
available for sale, net of tax         --          --              --            --              --             --       46,000


Net loss                               --          --              --            --              --             --          --
                              ------------------------------------------------------------------------------------------------------

Balance at December 31, 1999      824,000       $8,000       7,500,000      $75,000     $49,396,000    $       --       $46,000
                              ======================================================================================================



<CAPTION>
                                                                   Total
                                   Members'    Accumulated      Stockholder
                                   Deficit       Deficit          Equity

                                ---------------------------------------------

<S>                              <C>             <C>            <C>
Issuance of warrants to
   purchase 924,898 shares
   of common stock, at fair           --              --         2,377,000
   value

Issuance of common stock in
   connection with IPO, net
   of expenses                        --              --        34,775,000

Reorganization from
Limited Liability
Company to C
corporation                       834,000             --               --

Non-cash compensation
expense subsequent to IPO             --              --         3,027,000

Accretion of preferred
stock beneficial conversion
feature                               --         (3,101,000)           --

Unrealized gains on
marketable
securities
available for sale, net of            --              --            46,000
tax

Net loss                         (281,000)       (6,001,000)    (6,282,000)
                              ---------------------------------------------

Balance at December 31, 1999    $     --        $(9,102,000)  $ 40,423,000
                              =============================================
</TABLE>




   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>



                              fashionmall.com, Inc.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                             For the Years Ended
                                                              Ended December 31
                                                      -----------------------------------
                                                           1999               1998
                                                      ----------------   ----------------
<S>                                                   <C>                <C>
Operating Activities
Net (loss) income                                        $(6,282,000)         $  14,000
Adjustments to reconcile net (loss) income to net
cash (used for) provided by operating activities:
Depreciation and amortization                                65,000              14,000
Non-cash interest expense and other
   financing costs                                          668,000                  --
 Non-cash compensation expense                            3,027,000                  --
 Inventory reserve                                          100,000                  --
 Bad debt expense                                           263,000              80,000
Changes in operating assets and liabilities:
   Accounts receivable                                     (655,000)           (259,000)
   Inventory                                               (289,000)             (2,000)
   Prepaid expenses and other assets                       (737,000)            (41,000)
   Deferred financing costs                                 397,000                  --
   Accounts payable                                       2,572,000             193,000
   Accrued expenses                                         251,000
Customer Deposits                                            (4,000)            (10,000)
       Deferred revenue                                     (20,000)             13,000
                                                     -----------------   ----------------
   Net cash (used in) provided by operating
      activities                                           (644,000)              2,000
                                                     -----------------   ----------------

Investing Activities

Purchases of marketable securities                        (7,371,000)               --
Purchase of property and equipment                          (216,000)           (1,000)
Software development costs                                  (316,000)          (60,000)
                                                     -----------------   ----------------
    Net cash used in investing activities                 (7,903,000)          (61,000)
                                                     -----------------   ----------------

Financing Activities
(Repayment ) proceeds of loans                              (489,000)            75,000
Initial public offering proceeds                          34,775,000                 --
Capital contributions                                      8,293,000                 --
                                                     -----------------   ----------------
    Net cash provided by financing activities             42,579,000             75,000
                                                     -----------------   ----------------

Increase in cash and cash equivalents                     34,032,000              16,000
Cash and cash equivalents - beginning of period               82,000              66,000
                                                     -----------------   ----------------

Cash and cash equivalents- end of period                 $34,114,000         $    82,000
                                                     =================   ================
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-7

<PAGE>


                              fashionmall.com, Inc.
                          Notes to Financial Statements

                           December 31, 1999 and 1998

1. Description of Business

         Internet Design Group, Ltd. commenced operations on December 22, 1994
and continued operations until August 19, 1995 when it became Internet Fashion
Mall, L.P. ("IFM LP"). Effective June 26, 1996, IFM LP was reorganized as a
Delaware limited liability company, Internet Fashion Mall LLC ("IFM").

         Pursuant to its initial public offering ("IPO") completed on May 21,
1999, IFM changed its name to fashionmall.com, Inc. ("fashionmall.com" or the
"Company"). In connection with the IPO and immediately prior thereto, the
existing members of IFM contributed all of their membership interests in IFM in
exchange for 4.5 million shares of common stock of the Company. On May 21, 1999,
the Company completed its IPO of 3.0 million shares of its common stock. The IPO
resulted in net proceeds, after related expenses, of approximately $35 million.

         fashionmall was incorporated in Delaware as a C corporation on February
26, 1999.

         The Company engages in the business of marketing, promoting,
advertising and selling fashion apparel and related accessories or products to
the public on the Internet, via the fashionmall.com web site. The Company
combines an online shopping mall with fashion content to provide a centralized
site for manufacturers, retailers, magazines and catalogs to advertise, display
and sell their product lines.

         Activities from the date of inception to December 31, 1999 have been
directed primarily to developing the fashionmall.com brand through a marketing
strategy that includes the exchange of the Company's services for advertising
space in various magazines, journals and web sites or consulting services.

2. Summary of Significant Accounting Policies

Principles of Consolidation

         The accompanying consolidated financial statements include the
accounts of the Company and subsidiaries, all significant intercompany balances
and transactions have been eliminated.

 Revenue Recognition

         The Company's primary source of revenue is from tenant fees.
Manufacturers, retailers, magazines and others pay fees to the Company to lease
space on the fashionmall.com web site. Revenues are recognized as services are
rendered. The Company recognizes revenue earned from tenant fees in accordance
with its customer contracts which specify either a fixed fee or a fee based on
performance.

 Barter Arrangements

         The Company enters into barter arrangements with certain of its
customers, whereby the Company's services are exchanged for either advertising
space in various magazines and journals or on web sites, or for consulting
services. The fair value of the online web site advertising is determined based
upon the online providers' "cost per thousand impressions" and the number of
impressions delivered. The consulting services received by the Company are
primarily marketing and public relations. Expenses for consulting services are
recorded as incurred, based upon the consulting firms' established rates.

         Barter revenue and the related advertising expense is recognized in
accordance with the established advertising rate card, of the advertiser
customer, which represents the rates charged to cash buyers based on their level
of advertising. Barter revenue is recognized over the term of the customer
contract, which

                                      F-8

<PAGE>

commences upon the placement of the customer's advertisement on the Company's
fashionmall.com web site. Generally, barter revenues equal barter expenses;
however, due to timing, barter accounts receivable and barter accounts payable
may result. Barter expenses are included in advertising and marketing expenses
in the accompanying statements of operations for the years ended December 31,
1999 and 1998. The Company had revenue from barter transactions of $1,282,000
and $1,055,000 for the years ended December 31, 1999 and 1998, respectively.

 Cash and Cash Equivalents

         Cash equivalents consist of money market funds or other highly-liquid
investments with original maturities of three months or less to be cash
equivalents.

Marketable Securities

         The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities."

         Management determines the appropriate classification of debt securities
at the time of purchase and re-evaluates such designation as of each balance
sheet date. Debt securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity, Debt
securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are stated at fair value with
the unrealized gains and losses, net of tax effect, reported as a separate
component of stockholders' equity.

         The amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion of
discounts to maturity, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization is included in interest income
or interest expense and other financing costs from investments. Realized gains
and losses, and declines in value judged to be other-than-temporary are included
in interest and dividend income. The cost of securities sold is based on the
specific identification method.

Inventories

         Inventories, which consist of purchased apparel and accessories, are
stated at the lower of cost (first-in, first-out) or market value. At December
31, 1999, the Company has recorded an inventory valuation allowance of
approximately $100,000.

Property and Equipment

         Property and equipment are stated at cost net of accumulated
depreciated and amortization on a straight-line basis over estimated useful
lives of three to five years. Depreciation expense for the years ended December
31, 1999 and 1998, was $27,000 and $9,000, respectively, and is included in
general and administrative expenses in the accompanying statements of
operations.

         In accordance with Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use, the Company
capitalizes costs incurred in the application development stage of new projects
created for its web site. The capitalized costs include third party costs as
well as payroll and payroll-related costs for the employees who are directly
associated with and who devote time to the internal-use computer software
project, to the extent of the time spent directly on the project. Capitalized
software costs are amortized on a straight-line basis over an estimated useful
life of two years. Capitalized software costs for the years ended December 31,
1999 and 1998, was approximately $362,000 and $67,000, respectively.
Amortization expense for the years ended December 31, 1999 and 1998 was $52,000
and $9,000

                                      F-9

<PAGE>

and is included in general and administrative expenses in the accompanying
statements of operations.

Accounting for Long-Lived Assets

          The Company accounts for long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("SFAS No. 121"). SFAS No. 121 establishes financial accounting and reporting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Management has determined that no impairment of the respective carrying value of
its long-lived assets exists as of December 31, 1999.

Income Taxes

         Effective upon the consummation of the Company's initial public
offering, the Company's income tax status was converted from a limited liability
company to a C corporation. Accordingly, the provision for income taxes was
calculated in accordance with Statement of Financial Accounting Standards No.
109, ("SFAS"), "Accounting for Income Taxes." Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are recognized for
the difference between the financial statement carrying amounts and tax bases of
assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets or liabilities of a change in tax rates is recognized in
the period that the tax change occurs.

Advertising Expense

         A significant source of advertising expense is generated from the
Company's barter activities. The expense is recognized based on the fair value
of the services received as determined by each magazine's or journal's printed
advertising rate card with pricing provided to cash buyers based on frequency of
advertisement placement or by a web site provider's "cost per thousand
impressions" and the number of impressions delivered. In accordance with
Statement of Position 93-7, Reporting On Advertising Costs, the Company expenses
its advertising costs as incurred.

Use of Estimates

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

Stock-Based Compensation

         The Company accounts for stock-based compensation under the intrinsic
value based method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
discloses the effect of the difference which would result had the Company
applied the fair value based method of accounting on a pro forma basis, as
required by Statement of Financial Accounting Standards No. 123, ("SFAS"),
"Accounting for Stock-Based Compensation."

Comprehensive Income

                                      F-10

<PAGE>

         During 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," which requires companies to report all changes in equity during a
period except those resulting from investments by owners and distributions to
owners, for the period in which they are recognized. Comprehensive income is the
total of net income and all other non-owner changes in equity (or other
comprehensive income) such as unrealized gains/losses on securities classified
as available-for-sale, foreign currency translation adjustments and minimum
pension liability adjustments. Comprehensive income and other comprehensive
income must be reported on the face of annual financial statements. The
components of comprehensive income are as follows:

                                               For the Years Ended December 31,
                                                     1999            1998
                                                 -----------     -----------

Net (loss) income                                $(6,282,000)    $     8,000

Unrealized gains on investments in
   marketable securities available-for-sale,
   net of tax                                         46,000               -
                                                 -----------     -----------

Comprehensive net (loss) income                  $(6,236,000)    $     8,000
                                                 ===========     ===========

Fair Value of Financial Instruments

         The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value due to the
short-term maturity of these instruments.

Business Concentrations and Credit Risks

         Financial instruments consist primarily of cash and cash equivalents
and trade accounts receivable. Substantially all of the Company's cash and cash
equivalents as of December 31, 1999 are on deposit with two major financial
institutions. Deposits at any point in time may exceed the federally insured
limits. The Company performs periodic evaluations of the relative credit
standing of these institutions. As of December 31, 1999, two customers accounted
for 25% of trade receivables.

         For the years ended December 31, 1999 and 1998, one customer accounted
for 12% and 20% of total revenues, respectively.

New Accounting Pronouncements

         In January 2000, the Emerging issues Task Force (the "EITF") reached a
consensus on EITF Issue 99-17, "Accounting for Advertising Barter
Transactions."The EITF agreed that advertising barter transactions entered into
after January 20, 2000 should be accounted for at fair value on a one-for-one
basis with revenue from similar advertising sold in a cash transaction that
occurred in the preceding six months with comparable terms, such as length of
program, cost and type of advertisement. A cash transaction may be used only
once as the basis for providing fair value evidence for a barter transaction. As
a result, revenue from barter is effectively limited to no more than 50% of
total revenue per year.

         EITF 99-17 is applicable only to transactions entered into after
January 20, 2000. We have adopted EITF 99-17 effective January 1, 2000. As a
result, we also anticipate that our future reported barter revenue will decrease
as a percentage of total revenue.

                                      F-11

<PAGE>


         On a pro forma basis, the Company's barter revenue would have been
$852,000 for the year ended December 31, 1999 had EITF 99-17 been applicable for
the periods presented.

         In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures About Segment of an Enterprise and Related
Information ("SFAS No. 131"). SFAS No. 131 establishes standards for public
business enterprises to report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about the operating segments in interim financial reports issued to
shareholders. This statement is effective for financial statements for periods
beginning after December 15, 1997 and need not be applied to interim periods in
the initial year of application. Comparative information for earlier years
presented is to be restated. The adoption of this statement has had no impact on
the Company's results of operations, financial position or cash flows.

         In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS No. 133"). SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
at their fair value. SFAS No. 133 was subsequently amended by SFAS No. 137,
which deferred the effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000. The Company currently does not use derivatives and
therefore this new pronouncement is not applicable.

         In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, Reporting the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 requires that all non-governmental entities
expense the costs of start-up activities, including organization costs, as those
costs are incurred. SOP 98-5 is effective for financial statements for fiscal
years beginning after December 15, 1998. The Company's adoption of the
provisions of SOP 98-5 have not had a material effect on the Company's results
of operations, financial position or cash flows.

3. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                                   For the Years Ended
                                                                                      December 31,
                                                                             --------------------------------
                                                                                 1999                1998
                                                                             --------------------------------
<S>                                                                          <C>                 <C>
Cash paid during the period for:
    Interest                                                                 $     15,000        $         --
    Taxes                                                                    $         --        $         --
Non-cash investing and financing activities:
    Conversion of related party loan to contributed capital                  $        --         $     61,000
    Fair value of warrants issued in connection with loan to related party   $     56,000        $         --
    Incremental difference between issue price and fair value of capital
       contribution                                                          $    576,000        $         --
    Fair value of warrants issued in connection with convertible
       preferred stock                                                       $  3,540,000        $         --
    Revenue generated from barter contracts                                  $  1,282,000        $  1,055,000
    Advertising and consulting expenses incurred related to barter
       contracts                                                             $  1,234,000        $  1,038,000
</TABLE>

                                      F-12
<PAGE>

4. Marketable Securities

         Marketable securities available for sale at December 31, 1999 were as
follows:

                                                                Market
                                             Cost               value
                                             ----               -----

Commercial paper                          $2,911,000         $2,965,000
Corporate bonds (maturity: 1-5 yrs)        2,460,000          2,497,000
Certificate of deposits                    2,000,000          1,990,000
                                          ----------         ----------

Total Investments                         $7,371,000         $7,452,000
                                          ==========         ==========

5. Stockholders' Equity

         Effective February 26, 1999, the Company received a $1 million equity
investment from FM/CCP Investment Partners, LLC, ("FM/CCP"), a third party, and
issued a $1 million promissory note and warrants in exchange for an additional
$1 million (the "FM/CCP Private Placement"). FM/CCP purchased a 5% ownership
interest in the Company, reducing Benjamin Narasin's ("Narasin") and Richard A.
Eisner & Company LLP's ("Eisner") (two of the Company's original Members)
ownership interests to 76% and 19%, respectively. The promissory note accrued
interest at 6% and was due on the earlier of February 25, 2002, or the closing
date of the Company's IPO. The warrants, which expire March 2, 2004, became
exercisable upon the closing date of the Company's IPO to purchase up to 95,000
shares of common stock at an exercise price of $13.65 per share. With a portion
of the proceeds from the IPO, the Company repaid the $1 million promissory note
plus accrued interest. Interest expense related to the note was approximately
$15,000. In addition, the Company recorded a $55,000 charge to interest expense
representing the unamortized discount relating to the note.

         The difference between the per share fair value granted to FM/CCP of
$4.44 and the per share fair value based on the originally estimated IPO price
of $7.00 per share has been recognized as deferred financing cost. Upon
repayment of the note, the Company recognized the remaining deferred financing
amount as interest expense.

         A principal of FM/CCP, Jerome A. Chazen ("Chazen"), agreed to provide
consulting services to the Company for the period ending on the earlier of the
three year anniversary date of the equity investment or on the two year
anniversary date of the closing of the Company's IPO. The Company is obligated
to pay Chazen an aggregate of $150,000, payable on or before the expiration of
the consulting term. Pursuant to this agreement, the Company recognized
consulting expense of $110,000 for the twelve months ended December 31, 1999.

         Additionally, Chazen received options to purchase up to 5% ownership
interest in the Company in consideration for his consulting services. These
options vest over three years and expire on the fifth anniversary of the grant
date. The vesting period accelerated upon the closing of the Company's IPO, such
that 50% became exercisable upon consummation of the IPO, an additional 16%
becomes exercisable on March 1, 2000, and the balance becomes exercisable in
equal monthly installments over the one year period commencing March 2, 2000.
Chazen received 135,000 options at an exercise price of $1.11 per share and
107,500 options at an exercise price of $3.25 per share. All grants of options
to individuals other than those

                                      F-13

<PAGE>

considered employees must be accounted for under SFAS No. 123. Under SFAS No.
123, the fair value of these options as of the date of grant, using the
Black-Scholes pricing model, was $1,987,000. The fair value will be recognized
as consulting expense over the term of the consulting agreement. The future
exercising of 135,000 of these options and the warrants referred to above will
not dilute the original 5% ownership interest purchased by FM/CCP and Chazen. As
a result, if these options and warrants are exercised in full, FM/CCP and Chazen
will receive an additional 5,000 and 7,500 shares of common stock, respectively.
The Company recognized $106,000 and $1,284,000 of non-cash consulting expense in
connection with these options and warrants for the year ended December 31, 1999,
respectively. In connection with this transaction, Chazen joined the Company's
Board of Directors.

         The Company paid to its placement agent $85,000, and issued a warrant
to purchase 22,500 shares of Common Stock at an exercise price of $4.44 per
share and a warrant to purchase 9,500 shares of Common Stock at an exercise
price of $13.65 per share, as a finders fee in connection with the consummation
of the FM/CCP Private Placement. The warrants are exercisable for five years
from the date of grant and the shares underlying such warrants shall be
registered at the same time as the Company registers the shares underlying the
warrants issued to FM/CCP. The fair value of the warrants as of the date of
grant was $74,000, calculated using the Black-Scholes pricing model. One-half of
the cash payment and one-half of the fair value of the warrants has been offset
against the proceeds of the $1 million equity investment as offering costs. The
remaining amount has been recognized as deferred financing costs, to be
amortized over the period commencing on the date of issuance of the promissory
note through the maturity date, using the effective interest method. Upon
repayment of the Chazen promissory note, this amount was recognized as interest
expense.

         On April 22, 1999, the Company entered into an agreement with TRG Net
Investors LLC ("TRG Net"), an affiliate of Taubman Centers, Inc., a real estate
investment trust and one of the leading mall developers in the U.S., whereby TRG
Net purchased, for $7,417,000, a 9.9% membership interest in the Company (the
"Series B Interest") and warrants (the "Warrants") to purchase an additional 10%
membership interest. Upon closing of the IPO, the Series B Interest was
contributed for 824,084 shares of convertible preferred stock (the "Preferred
Stock"), which in turn are convertible into an aggregate of 824,084 common
shares and the Warrants can be exercised to purchase 924,898 common shares. The
Preferred Stock is convertible for one year beginning on the first anniversary
of the closing of the IPO by the Company and, based on the $13.00 per share
initial public offering price, the effective conversion price of the Preferred
Stock was $9.00 per share and the exercise price of the Warrants was $13.00 per
share. Upon closing of Taubman's investment, the Company allocated $2,377,000 of
the $7,417,000 to represent the fair value of the Warrants. The remaining
portion of the net proceeds of $5,040,000 represents the beneficial conversion
feature of the Preferred Stock, and was allocated to additional paid-in capital
upon closing of the IPO and will be accreted to the book value of the Preferred
Stock. The accretion period will be one year, beginning on the date of closing
of the IPO. For the twelve months ended December 31, 1999, the Company accreted
$3,101,000 to the book value of the Preferred Stock. In connection with this
transaction, Robert S. Taubman, the Chief Executive Officer and the President of
Taubman Centers, Inc., joined the Company's Board of Directors.

                                      F-14

<PAGE>

6. Unaudited Pro Forma Information

Income Taxes

         The accompanying financial statements reflect a provision for income
taxes on a pro forma basis as if the Company was liable for Federal, state and
local income taxes as an accrual basis taxable corporate entity throughout the
years presented.

         The following summarizes the pro forma income tax provision for the
years ended December 31,:

                                                        1999             1998
                                                     ----------       ----------
Current
    Federal                                          $       --       $    3,000
    State and local                                          --            1,000
                                                     ----------       ----------

       Total income tax provision                    $       --       $    4,000
                                                     ==========       ==========

Deferred
    Federal                                          $1,674,000       $    1,000
    State and local                                   1,383,000            1,000
                                                     ----------       ----------

                                                     $3,057,000       $    2,000
                                                     ==========       ==========

         The net deferred tax asset at December 31, 1999 and 1998 consists of
the following:

                                                     1999                1998
                                                 -----------          ---------

Net operating loss carryforwards                 $ 1,674,000          $      --
Deferred compensation                              1,386,000                 --
Other                                                 (3,000)             2,000
                                                 -----------          ---------


Total deferred tax assets                          3,057,000              2,000
Less: valuation allowance                         (3,057,000)            (2,000)
                                                 -----------          ---------

Deferred tax assets, net                         $        --          $      --
                                                 ===========          =========

         The Company has a net operating loss carryforward of approximately
$3,000,000 for income tax purposes expiring through 2020. The net deferred tax
asset has been fully offset by a valuation allowance due to uncertainties
regarding realization of benefits from these future tax deductions. As a result
of the provisions of Internal Revenue Code Section 382, a significant portion of
these net operating loss carryforwards may be subject to limitation on future
utilization.

                                      F-15

<PAGE>


7. Net (Loss) Income per Share

         A reconciliation between the numerator and denominator of basic and
diluted net loss per share is as follows:

<TABLE>
<CAPTION>
                                                          For the Years Ended December 31
                                                          -------------------------------
                                                               1999           1998
                                                            -----------    -----------
<S>                                                       <C>              <C>
Numerator:
         Net (loss) income                                  $(6,282,000)   $    14,000

Accretion of beneficial conversion feature of convertible
     preferred stock                                         (3,101,000)             -
                                                            -----------    -----------

Net (loss) income available to common shareholders          $(9,383,000)   $    14,000
                                                            ===========    ===========

</TABLE>

PRO FORMA PER SHARE INFORMATION

         As a result of the Company's reorganization from a limited liability
company to a C corporation, the pro forma per share data has been computed using
the weighted average number of common shares outstanding during the period
assuming the Company was a C corporation since inception. Accordingly, the
Company computes net loss per share in accordance with SFAS No. 128, "Earnings
per Share." Basic and diluted loss per share requires that all equity
instruments issued at normal prices prior to the effective date of an initial
public offering be included in the calculation of basic and diluted loss per
share as if they were outstanding for all periods presented whether or not the
impact is dilutive. Basic net loss per share is computed by dividing the net
loss attributable to common stockholders for the period by the weighted average
number of common shares outstanding during each period. Diluted net loss per
share is computed by dividing the net loss for the period by the weighted
average number of common shares and common share equivalents outstanding during
each period. Common share equivalents, composed of common shares issuable upon
the exercise of stock options and warrants and upon conversion of manditorily
redeemable preferred stock, are included in the net loss per share to the extent
such shares are dilutive.

<TABLE>
<CAPTION>
<S>                                                         <C>            <C>
(Unaudited):
Denominator:
Pro-forma basic and diluted weighted-average shares           6,250,000      4,500,000
                                                            ===========    ===========

Pro-forma basic and diluted earnings per common share       $     (1.50)   $         -
                                                            ===========    ===========

Pro-forma diluted weighted-average shares                     6,250,000      4,500,000
                                                            ===========    ===========

Pro-forma diluted earnings per common share                 $     (1.50)   $         -
                                                            ===========    ===========
</TABLE>

         The effect of the exercise of certain warrants and options issued
during 1999 are not included, as their effect on diluted earnings per share
would be anti-dilutive.

8. Related Party Transactions

         The Company, in accordance with its month-to-month sublease
arrangement, utilizes approximately 7,500 square feet of office space subleased
from Richard A. Eisner and Company, LLP, a limited liability partnership and
founding member of IFM. Rent expense for the years ended December 31, 1999 and
1998 was approximately $211,000 and $34,000, respectively.

          On March 2, 1999, the Company entered into a consulting agreement (the
"Consulting Agreement") with Jerome Chazen, the sole owner of FM/CCP, Inc.,
which is the manager of FM/CCP Investment Partners, LLC. The Consulting
Agreement, which expires on May 26, 2001, provides that Mr. Chazen shall provide
consulting services to the Company aggregating at least 30 hours per month. In
addition, Mr. Chazen agreed to become a director. Mr. Chazen receives an
aggregate of $150,000 over the term of the Consulting Agreement plus five-year
options to purchase 242,500 shares of common stock.

9. Stock Option Plan

         The Company adopted the 1999 Stock Option Plan (the "1999 Plan") in May
1999. The 1999 Plan provides for the grant of options to purchase up to, but not
in excess of, 1,125,000 shares of common stock to the Company's officers,
directors, agents, consultants and independent contractors. Options may be
either "incentive stock options" within the meaning of Section 422 of the United
States Internal Revenue Code, or non-qualified options. Incentive stock options
may be granted only to the Company's employees while non-qualified options may
be granted to non-employee directors and consultants.

                                      F-16

<PAGE>

         The 1999 Plan is administered by a committee selected by the Board of
Directors or by the Board of Directors (the "Administrator"), which determines,
among other things, those individuals who receive options, the time period
during which the options may be exercised, the number of shares of common stock
issuable upon the exercise of each option and the option exercise price.

         The exercise price per share of common stock subject to an incentive
option may not be less than the fair market value per share of common stock on
the date the options are granted. The per share exercise price of the common
stock subject to non-qualified options may be established by the Administrator.
If the aggregate fair market value, as determined as the date the options are
granted, of common stock for which any person may be granted incentive stock
options which first become exercisable in any calendar year exceeds $100,000,
such stock options shall be treated, to the extent of such excess, as an option
which does not qualify as an incentive stock option. No person who owns,
directly or indirectly, at the time of the granting of incentive stock options
to such person, 10% or more of the total combined voting power of all classes of
stock of the company (a "10% Shareholder") shall be eligible to receive any
incentive stock options under the 1999 Plan unless the exercise price is at
least 110% of the fair market value of the shares of common stock subject to the
option, determined on the date of grant. Non-qualified options are not subject
to such limitation.

         No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an optionee,
the option will be exercisable only by the optionee. In the event of termination
of employment other than by death, retirement, permanent and total disability,
unless extended by the Administrator on or before such employee's date of
termination of employment, the optionee will have no more than three months
after such termination during which the optionee shall be entitled to exercise
all or any part of such employee's option, unless otherwise determined by the
Administrator. Upon termination of employment of an optionee by reason of death,
retirement, permanent and total disability, such optionee's options remain
exercisable for one year thereafter to the extent such options were exercisable
on the date of such termination.

         Options under the 1999 Plan must be issued within ten years from the
effective date of the Plan. Incentive stock options granted under the 1999 Plan
cannot be exercised more than ten years from the date of grant. Incentive stock
options issued to a 19% Shareholder are limited to five-year terms. All options
granted under the 1999 Plan will provide for the payment of the exercise price
in cash or check or by delivery to us of shares of common stock having fair
value equal to the exercise price of the options being exercised, or by a
combination of such methods, or by such other methods approved by the
Administrator pursuant to the 1999 Plan. Therefore, an optionee may be able to
tender shares of common stock to purchase additional shares of common stock and
may theoretically exercise all of such optionee's stock options with no
investment.

         Stock option activity for the year ended December 31, 1999 is as
follows:

                                                             Weighted Average
                                                            Exercise Price Per
Activity                                       Shares             Share
--------                                       ------             -----

Shares outstanding at 1/1/99                   -------            ------
Shares granted in 1999                         352,250            $ 8.54
Shares cancelled in 1999                       100,500            $10.53
Shares exercised in 1999                       -------            ------


Shares outstanding at 12/31/99                 251,750            $ 7.74
                                               -------            ------
Shares exercisable at 12/31/99                 192,750            $ 6.45
                                               =======            ======

                                      F-17

<PAGE>


         The following table summarizes information about shares under option at
December 31, 1999:

<TABLE>
<CAPTION>
                             Stock Options Outstanding                           Options Exercisable
                             -------------------------                           -------------------

                                  Weighted average
     Range of                        remaining           Weighted                          Weighted average
     exercise        Number of      contractual           average           Number of          Exercise
      prices          options          life            exercise price     stock options          price
      ------          -------          ----            --------------     -------------          -----
<S>                  <C>          <C>                  <C>                <C>              <C>
   $5.00-$7.00        190,750           10                 $6.77             182,750             $6.09

      $13.00           61,000           10                $13.00              10,000            $13.00

   $5.00-$13.00       251,750           10                 $7.74             192,750             $6.45
</TABLE>


         The Company has elected to follow Accounting Principles Board Option
No. 25, "Accounting for Stock Issued to Employees", and related interpretations
in accounting for its employees stock options. Therefore, no compensation cost
has been recognized.

         The Company has reflected below the 1999 earnings as if compensation
expense relative to the fair value of the options granted had been recorded
under the provisions of SFAS No. 123 "Accounting for Stock-Based Compensation."
The fair value of each option grant was estimated using the Black-Scholes
option-pricing model with the following assumptions used for grants in 1999: a
five year expected life; a volatility rate of 93%; risk-free interest rate of
5.56%; and no dividend payments.

                                            For the year ended
                                            December 31, 1999
                                            -----------------

Net (loss):
As reported                                  $  6,282,000

Pro forma                                       7,029,000
                                             ------------
Basic and diluted earnings
Per share:

As reported                                  $      (1.01)

Pro forma                                    $      (1.12)


10.  Commitments and Contingencies

                                      F-18

<PAGE>

         The Company is not a party to any material legal proceedings, but in
its normal course of business, may be subject to certain litigation. In the
opening of the Company's management, settlements of litigation will not have a
material adverse effect on the Company's results of operations, financial
position or cash flows.

         The Company entered into a three-year employment agreement with
Benjamin Narasin, effective as of May 26, 1999, pursuant to which Mr. Narasin
shall serve as Chief Executive Officer, President and Chairman of the Board and
received a salary of $180,000 during 1999 and for 2000 will receive $238,225.
Such base salary will be subject to additional increases and bonuses within the
discretion of the Board of Directors which will take into account, among other
things, the Company's performance and the performance, duties and
responsibilities of Mr. Narasin. The Company also agreed to pay for certain life
insurance for the benefit of Mr. Narasin's family which is still due and to
indemnify him and his minor son, Grant Narasin, for tax liabilities arising from
our reorganization into a C corporation. Mr. Narasin may terminate the agreement
and receive three times his compensation, including bonuses earned during the
previous twelve months, and his compensation for the balance of the term.

         A principal of FM/CCP, Jerome A. Chazen ("Chazen"), agreed to provide
consulting services to the Company for the period ending on the earlier of the
three year anniversary date of the equity investment or on the two year
anniversary date of the closing of the Company's IPO. The Company is obligated
to pay Chazen an aggregate of $150,000, payable on or before the expiration of
the consulting term. Pursuant to this agreement, the Company recognized
consulting expense of $110,000 for the twelve months ended December 31, 1999.

11. Subsequent Event

         In February 2000, the Company entered into an arrangement with Capital
Factors, a factoring company, whereby the Company has appointed and assigned all
trade accounts receivable to Capital Factors for collection at a factoring
commission equal to eighty-five hundredths (.85%) of the first $5,000,000 of
gross invoices. The Company is required to account for these transactions in
accordance with SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. A transfer of financial assets in
which the transferor surrenders control over those assets is accounted for as a
sale to the extent that consideration other than beneficial interests in the
transferred assets is received in exchange.

                                      F-19

<PAGE>

                                    SIGNATURE

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    fashionmall.com, Inc.


                             By:
                                    Benjamin Narasin
                                    Chief Executive Officer
                                    and President and Chairman
                                    of the Board of Directors

         In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.

     Signature                        Title                    Date
     ---------                        -----                    ----

                               Chief Executive Officer,
     Benjamin Narasin          President and Chairman          April 7, 2000
                               of the Board of Directors

     Barry Scheckner           Acting Chief Financial
                               Officer                         April 7, 2000

     Stephen P. Burke          Controller                      April 7, 2000

     Richard Marcus            Director                        April 7, 2000

     Jerome Chazen             Director                        April 7, 2000

     Robert S. Taubman         Director                        April 7, 2000





Exhibit 27 -   Financial Data Schedule
Item 601(c) of Regulation S-B

                                      F-20