<PAGE>

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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, 2000

                                       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.
                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, 2000
was $5,386,000.

The aggregate market value of the voting and non-voting common stock held by
non-affiliates at March 23, 2001 was $5,307,000.

The number of shares of common stock outstanding as of March 23, 2001 was
7,334,400.

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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 of Financial Condition and Results from Operations" and
"Description of Business" identify 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.

         fashionmall.com,Inc. operates multiple Internet properties within the
fashion lifestyle segment and generates revenues from these properties by
charging fees for the placement of either a store, links, advertising, content
or other materials on the sites.

         Our properties include www.fashionmall.com, our original property,
which is a general fashion mall, www.outletmall.com, our online outlet mall, and
www.boo.com, a global style guide for the web. Our clients include traditional
and on-line retailers and catalogs' as well as manufacturers, magazines, and
advertisers who desire to tap into our consumer traffic.

         Clients typically pay a fixed or variable fee for site placements tied
to the location and or amount of traffic they are exposed to.

        In connection with our initial public offering ("IPO") completed on May
21, 1999, Internet Fashion Mall, LLC ("IFM"), a limited liability corporation,
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. On May 21, 1999, we completed our IPO of 3.0
million shares of our 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

         Our web sites, www.fashionmall.com, www.outletmall.com, www.boo.com,
are vertical portals for the category of "fashion". We define fashion as
apparel, accessories, footwear, beauty products, eyewear, jewelry, watches, home
furnishings and related lifestyle products and accessories.

         Our fashionmall.com site combines the concept, directed to the
consumer, of an online shopping mall with fashion content merchandized from our
multiple clients to provide a centralized site for manufacturers, retailers,
catalogs, e-commerce sites and magazines to advertise, display and sell their
products on the web. boo.com, a site we acquired in the second quarter of 2000
and re-launched in the fourth quarter of 2000, acts as a style guide and virtual
"cool hunter" where our staff and various off site "style scouts" search for
cutting edge merchandise around the world that is available on-line and profile
it with commentary and direct links to the merchant's offering the products. The
site is in its early stages of development, and we intend to pursue revenue from
advertising, sponsorship and slotting fees.

         Outletmall.com, which was initially launched as a direct e-commerce
site, has been migrated to a portal model in line with our other properties and
is positioned as a vertical portal for deals and bargains on the web with an
initial focus on fashion. We sell advertising and sponsorship placements on the
site as well as


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offering locations within the site based on slotting fees and affiliate fees for
the sale of merchandise to visitors we deliver to partner merchants.

         In the beginning of June, 2000, we acquired all of the intellectual
property assets of Boo.com including the domain names, trademarks in process,
artwork, content, web site designs, customer lists, and assorted brand
collateral. We re-designed and re-launched the site on October 30, 2000. During
the fourth quarter 2000, and in early first quarter of 2001, we also acquired
the intellectual property assets of mxgonline.com, itsybits.com and
Beautyjungle.com The four acquisitions were done with cash and the total
combined capitalized cost of the acquisitions was less than $1,000,000.

Business objectives and strategies

         Our objective is to manage focused web properties which act as vertical
portals for fashion on the Internet so that we can:

         - convert traffic into tenant fees;

         - convert traffic into advertising and sponsorship revenues.

Tenants

        We intend to continue to target tenants' properties through our
dedicated sales force, which has grown from two individuals immediately
following our IPO to ten at the end of 2000.

        We drive traffic to tenants representing a variety of types of
businesses, including: (i) manufacturers/brands, (ii) retailers, (iii) catalogs,
(iv) e-commerce sites and (v) magazines.

        Manufacturers/brands. These are the manufacturers, suppliers and/or
retailers of brands of apparel, accessories, footwear and beauty merchandise.
Tenants lease space on our web sites to drive traffic to their free-standing web
sites where they market, advertise and sell merchandise to the consumer.

        Catalogs. Catalog companies with freestanding web sites lease space on
the Company's web sites to drive targeted traffic to their web sites.

        Retailers. Retailers are the traditional brick and mortar retailers who,
as with the other categories of tenants, buy space on the Company's web sites to
drive traffic to their own dedicated web sites.

        E-Commerce sites. These are web only retailers. On-line retailers have
suffered considerably in recent times and have become an ever shrinking portion
of our client base.

        Magazines. Fashion trade, consumer and consumer lifestyle magazines use
our web sites to promote their own publications, 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 on the Company's web sites to induce the
consumer to subscribe to their magazine and/or advertising.

Conversion of traffic into tenant fees

        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. The Company's 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 make a purchase during that specific visit.

        We also offer traditional banner and sponsorship advertising sales.
Traditional site advertising is offered on an industry standard CPM (cost per
thousand impressions) model based on the amount of exposure delivered to the
various advertisements.

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          In some cases, we have sought to rapidly deploy site content, as in
the case of Boo.com. We have entered into arrangements based on an affiliate
model whereby we deliver traffic in exchange for a percentage of the sales
generated by that traffic.

Customer loyalty and retention

          Pricing, and advertising models in general on the Internet, have come
under severe pressure, particularly in recent times, and we are evaluating
various pricing models to serve our clients while protecting the viability of
our advertising based business model. There can be no assurances that we will be
successful in this effort (see "Risk Factors") and we believe it is a critical
issue facing our business and the web advertising based business models in
general.

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. We also, through our offerings of
traditional advertising and sponsorship based placements, compete with other
sellers of on-line advertising ranging from dedicated sites, to portals, to ad
networks and others.

        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.

         Many of our competitors have recently announced reductions in their CPM
and other rate card prices for on-line advertising, and others have begun to
accept advertising on a CPA (cost per acquisition / cost per action) basis.
Advertising rates have eroded considerably as a result, and the market for
on-line advertising, fueled by significant supply without adequate offsetting
demand, has become increasingly competitive (see "Risk Factors"). There can be
no assurance that we can continue to recruit advertising on our sites, or, if we
can, that we can do so at rates considered beneficial to us.

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"
"outletmall.com", "boo.com" and various others. 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 Company's domain names. 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", "outletmall.com" or "boo.com", thereby
impeding our ability to

<PAGE>


build brand identity and possibly leading to customer confusion. Our inability
to protect our domain names 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, a number of laws and regulations have been 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.

         We have become more active conducting our business globally since the
acquisition of Boo.com, and will likely be subject to the growing body of
international laws and regulations applicable to access to or commerce on the
Internet, as well as other international laws and regulations. These
international legal requirements may vary widely from country to country and may
differ substantially from current or future U. S. regulations. Compliance with
international laws and regulations may impose additional burdens on us, and may
affect our ability to conduct business internationally. In addition, governments
in foreign jurisdictions may increase regulation of the Internet or other online
services in such areas as content, privacy, network security, encryption or
distribution. Any such new legislation or regulation, 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
could materially increase our costs of doing business or harm our business. No
assurance can be given that changes in current or future regulations adopted by
foreign regulators will not materially increase our costs of doing business or
otherwise materially harm our business.

Employees

         At March 23, 2001, we employed 23 employees. The personnel, includes
management, sales, merchandising, technical and business development personnel.
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 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 6,800 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, which expired in
May 2000. We currently lease such space on a month to month basis, an
arrangement which extends through June 2001. Monthly lease payments are
approximately $32,000 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 opinion 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.

         fashionmall.com is party to a dispute, which is in arbitration, against
Teknowledge Corp (NASDAQ: TEKC) which arose out of an agreement for goods
between Teknowledge Corp. and us, by which Teknowledge was to have created new
web sites for fashionmall.com and Outletmall.com by October 1999. We have taken
the position that the product which Teknowledge delivered was late, did not meet
core requirements of the agreement, and repeatedly failed to function. We
considered the agreement to


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have been totally breached by Teknowledge Corp. and refused to pay. On March 28,
2000 Teknowledge Corp. sent a letter to us demanding arbitration before the
American Arbitration Association pursuant to the agreement, and claiming
$452,204 in damages. We responded to the demand, denying that any amounts were
owed to Teknowledge due to its breach of the agreement, and asserting
counterclaims for consequential damage to us due to the inability of the
software to function as required.

           In August 2000, we were sued by Boo Inc., a Minneapolis based
clothing vendor in Federal court in Minnesota. The suit arises from the use of
intellectual property acquired by our wholly-owned subsidiary from Boo.com Group
Limited. Plaintiff Boo, Inc. alleges that our use of certain "Boo" trademarks,
including "Boo" and "Boo.com," infringes upon and dilutes its own "Boo" mark in
violation of the Lanham Act and analogous state law. Accordingly, Boo, Inc. is
seeking an injunction and an unspecified amount of monetary damages from us
which we believe will not have a material effect on our results of operations,
cash flows or financial condition. We intend to vigorously defend ourselves in
this action.

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 year ended December 31, 2000.

                                     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, the date of our IPO, 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, the date of our IPO. 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 2000
         Quarter ended March 31, 2000.........................   $ 5.75   $ 3.19
         Quarter ended June 30, 2000..........................   $ 3.75   $ 2.00
         Quarter ended September 30, 2000.....................   $ 2.63   $ 1.75
         Quarter ended December 31, 2000......................   $ 5.00   $ 1.25

Fiscal Year 1999
         Quarter ended June 30, 1999 (from May 21, 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 23, 2001, there were approximately 87 holders of record of
our Common Stock. On March 23, 2001, the last reported sales price of our stock
as reported by Nasdaq was $1.531.

    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 our earnings, capital requirements,
financial position, general economic condition, 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 our current business strategy and our 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.


<PAGE>


         Generally, the words "anticipates," "believes," "estimates," "expects"
and similar expressions as they relate to the us and our 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

         fashionmall.com, Inc. operates multiple Internet properties within the
fashion and lifestyle segments and generates revenues from these properties by
charging fees for the placement of either store, links, advertising, content or
other materials on the sites.

         Our properties include www.fashionmall.com, our original property,
which is a general fashion mall, www.outletmall.com, our online outlet mall, and
www.boo.com, a global style guide for the web. Our clients include traditional
and on-line retailers and catalogs as well as manufacturers, magazines and
advertisers who desire to tap into our consumer traffic.

         Our web sites are vertical portals for the category of "fashion". The
Company defines fashion to include apparel, accessories, footwear, beauty
products, eyewear, jewelry, watches, home furnishings and related lifestyle
products and accessories.

         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 $893,000 and $1,282,000 for the years ended December 31, 2000 and
1999, respectively. On a pro forma basis revenue from barter transactions would
have been $852,000 had the pronouncement been in effect during the year ended
December 31, 1999.

Results of Operations

Year Ended December 31, 2000 vs. Year Ended December 31, 1999

         Site Revenues. Total revenues increased by $1,696,000 or 46% to
$5,386,000 for the year ended December 31, 2000 as compared to $3,690,000 for
the year ended December 31, 1999. Barter revenue decreased by $389,000 or 30% to
$893,000 for the year ended December 31, 2000 from $1,282,000 for the year ended
December 31, 1999. Barter revenue represented 17% and 35% of total revenues for
the years ended December 31, 2000 and 1999, respectively. The revenue increase
was due to increased industry acceptance of our model resulting in additional
new clients, increased traffic and increased rates for space.

         Costs and expenses. Total costs and expenses of the business increased
by $2,376,000 or 22% to $13,044,000 for the year ended December 31, 2000 from
$10,668,000 for the year ended December 31, 1999. During the year ended December
31, 2000, we incurred certain non-cash charges relating to the Chazen options
totaling $444,000. 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 amount of
$1,662,000, and other expenses for financing and interest costs of $737,000 in
connection with the Chazen financing. The total amount of these non-cash charges
for the year ended December 31, 1999 was $3,690,000. We will incur additional
future non-cash compensation charges in connection with the Chazen options of
approximately $110,000 over each of the first two (2) quarters of fiscal 2001.
The remaining increase was due to increased expenditures for technical staff,
advertising, equipment and infrastructure development to support the growth of
our business. Subsequent to year end, we reduced the size of our staff by eleven
people to reduce the ongoing administrative expense in line with a tightened
focus on our core business.

<PAGE>


         Site Development, Merchandise and Content Expenses. Site development,
merchandise and content expenses increased by $110,000 or 18% to $722,000 for
the year ended December 31, 2000 from $612,000 for the year ended December 31,
1999. The increase was primarily due to increased payroll costs for site
development particularly related to the re-launch of Boo.com, increased costs of
content creation and the write-off of merchandise related to our discontinuation
of supplying merchandise for outletmall.com.

         Advertising and Marketing Expenses. Advertising and marketing expenses
increased by $923,000 or 24% to $4,728,000 for the year ended December 31, 2000
from $3,805,000 for the year ended December 31, 1999. The increase is primarily
due to increased print, outdoor and other advertising on behalf of the Company's
brands, as well as online banner advertising programs.

         Selling Expenses. Selling expenses increased by $997,000 or 256% to
$1,386,000 for the year ended December 31, 2000 from $389,000 for the year ended
December 31, 1999. The selling expense increase was primarily due to the
increase in our sales force.

         General and Administrative Expenses. General and administrative
expenses increased by $346,000 or 6% to $6,208,000 for the year ended December
31, 2000 from $5,862,000 for the year ended December 31, 1999. During the year
ended December 31, 2000, we incurred certain non-cash charges relating to the
Chazen options totaling $444,000. 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 amount of $1,662,000. The total amount of
these non-cash charges 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 two (2) 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 and the re-launch of Boo.com.

         Other Income and Expense. Net interest and dividend income increased by
$1,137,000 or 79% to $2,570,000 for the year ended December 31, 2000 from
$1,433,000 for the year ended December 31, 1999. The increase primarily reflects
the cash and cash equivalent balances available to us for a full year as
compared to approximately seven months in the prior year following the initial
public offering of the Company's common stock ("IPO") and, in general, a higher
average interest rate in fiscal 2000 as compared to fiscal 1999. 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 investment by Taubman Realty Group, Inc. and approximately $1,000,000, net
of the promissory note repayment, as a result of the FM/CCP investment. During
the year ended December 31, 1999, we 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.

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.

         As of December 31, 2000, we had cash, cash equivalents, marketable
securities and investments on hand of $35,333,000. Of this amount, the cash and
cash equivalents portion was $26,512,000 and the marketable securities and
investments portion was $8,821,000. As of December 31, 1999, cash, cash
equivalents and marketable securities were $41,566,000. The decrease in funds
can be attributed to the funding of operating losses generated in 2000 and
investments in software and certain acquisitions. 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 $4,992,000 for the year ended


<PAGE>


December 31, 2000 as compared to net cash used by operating activities of
$644,000 for the year ended December 31, 1999. The increase of $4,348,000 in net
cash used in operating activities for the year ended December 31, 2000 was
primarily due to (i) a decrease in the net loss of $1,194,000 (see "Results of
Operations), (ii) a decrease of $2,496,000 primarily related to non-cash
compensation and interest expense and other financing costs expensed in the
prior year in conjunction with the IPO offset by increases in: depreciation and
amortization due to the acquisition of Boo.com, inventory reserve related to the
discontinuation of the direct sale of merchandise by Outletmall.com and bad debt
expense related to general collections, (iii) a decrease in accounts payable of
$4,041,000, and (iv) an increase in accounts receivable of $235,000 and in
deferred financing costs of $397,000 offset by increases in accrued expenses of
$645,000 and customer deposits of $133,000 and a decrease in inventory of
$480,000 due to the discontinuation of Outletmall.com's direct selling of
merchandise.

         Net cash used in investing activities was $2,115,000 for the year ended
December 31, 2000 as compared to net cash used in investing activities of
$7,903,000 for the year ended December 31, 1999. The decrease of net cash used
in investing activities of $5,788,000 was due to the decrease in the net
purchases of marketable securities and investments of $5,992,000 and, in the
purchase of software, property and equipment of $416,000 offset by the Company's
acquisition of intangible and other assets for $620,000 in 2000.

         Net cash used in financing activities was $495,000 for the year ended
December 31, 2000 as compared to net cash provided by financing activities of
$42,579,000 for the year ended December 31, 1999. The decrease of $43,074,000 in
net cash provided by investing activities was primarily due to the purchase of
treasury stock of $286,000 and a loan to the Company's CEO of $209,000 in 2000
as compared to proceeds of $43,068,000 from the Company's IPO and the Taubman
Investment offset by the repayment of loans of $489,000 in 1999.

         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, which expired unexercised in July 2000. 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 was $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, which was allocated to additional paid-in capital and accreted
to the book value of the Preferred Stock. The accretion period was one year,
which began on May 26, 1999. For the years ended December 31, 2000 and 1999,
respectively, we accreted $1,939,000 and $3,101,000 to the book value of the
Preferred Stock. Over the one-year accretion period, earnings per share was
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.

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


<PAGE>


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," "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 the Company's 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 brand awareness and loyalty;

     - attract a larger audience to, and increase frequency of use of,
       the Company's web sites;

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

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

     - generate 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 sites 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 we currently anticipate that our revenues will decrease for
fiscal 2001. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<PAGE>


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

        Our ability to generate significant revenue is uncertain, we expect
revenues to decrease in fiscal 2001, and we have incurred substantial costs to
create, launch and enhance our web sites, to build brand awareness and to grow
our business. As of December 31, 2000, our accumulated deficit was $16,129,000.
We incurred a loss from operations in fiscal 2000 of $7,658,000 and had a loss
from operations in fiscal 1999 of $6,978,000. Although we are in a cost cutting
mode, 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
Company's brands, hire more management, sales and other personnel, expand our
infrastructure and data collection capabilities and we seek to acquire
complementary businesses and technologies. Moreover, there is substantial
uncertainty that an advertising and tenant fee based business model on the
Internet can generate revenues in excess of its expenses, and therefore, there
is no assurance that profitability can be obtained. 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."

         The current economic environment is not favorable for Internet
companies. The market valuations of virtually all of such companies have
decreased by at least 50% and a number of such companies have gone out of
business. Many of those that have remained in business have scaled back their
operations considerably and are finding it increasingly difficult to obtain
financing. In large measure this has been the result of skepticism that the
e-commerce or e-advertising business models will ever result in profitable
operations. All of these pressures are decreasing our customer base, either by
forcing them out of business or imposing pressure on them to preserve cash. In
addition, doubt as to the viability of the Internet model has caused other
customers, in healthier financial situations, to decrease their Internet
activities. This is having an adverse effect on our revenues. Based on sales to
date, we currently expect first quarter revenue to be down approximately 25%
from the fourth quarter of 2000. There is no assurance that such trend will not
continue, or worsen, over the balance of the year.

We are experiencing increased customer turnover and derive a substantial
percentage of our business from a few customers.

         We have experienced a significant loss of customers recently due to
non-renewal of contracts. In the current environment, with access to capital
limited, and with a number of questions being asked about the viability of
e-tailing and e-advertising, a number of customers are cutting down on
expenditures or are insisting on new agreements which are uneconomic for us. In
addition to general economic conditions, customers cited the viability of
tracking the conversion of advertisements on our sites to sales as a reason for
not renewing contracts. The loss of customers is expected to lead to a reduction
in revenues. Additionally, as of December 31, 2000, one customer accounted for
25% of accounts receivable, and for the years ended December 31, 2000 and 1999,
one customer accounted for 11% and 12% of total revenues, respectively. If this
customer is unable to pay our fees in the future, or chooses to stop or
significantly decrease doing business with us, this could have a material
adverse effect on our business, Results of Operations and financial condition.

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

     The viability and utility of web based advertising is now being routinely
questioned. The Internet advertising market is relatively new and rapidly
evolving, and it will be difficult to gauge its effectiveness as compared to
traditional advertising media. We are increasingly relying on online advertising
to attract users to our web sites. 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 our
web sites. Results of operations may be adversely affected if the market for
Internet advertising fails to develop or


<PAGE>


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. Advertisers and e-commerce marketers may choose not
to advertise on our web sites or may pay less for advertising on our web sites
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.

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 growth, should general economic conditions improve. 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.

     Over the past several months, we laid off a total of sixteen employees to
reduce expenses and focus on our core business. These layoffs were primarily
accountable to the reduction of staffing upon the completion of the work
required for the Boo.com re-launch. Such layoffs may substantially impair the
morale of our remaining employees and make it difficult to retain or attract new
ones. 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 could
have a material adverse effect on our business, results of operations and
financial condition. Except for Mr. Narasin, none of our officers or key
employees are 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
       our sites in particular;

     - traffic levels on our web sites and on other web sites that refer
       consumers to our web sites;

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

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

     - 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 our web sites;

     - 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
       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 our web sites and by the acceptance
of our model by advertisers and tenants and their willingness to pay the fees we
require, and such acceptance is not assured. 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 our internal sales
and merchandising force since the IPO. In addition, in order to build brand
awareness, 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,


<PAGE>


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 our web sites may fluctuate on a seasonal basis, which
could result in a decrease in user traffic 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 brands.

     To be successful, we must continue to build our brand identity. 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 our web sites. If marketing efforts are unsuccessful or if we cannot
increase brand awareness, the business, financial condition and results of
operations could have an material adverse effect on our business. 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 the business, results of
operations and financial condition could be materially adversely affected.
Please see "Description of Business--Business Objectives and Strategies."

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.

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. Our 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.

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 years ended December 31, 2000 and 1999, we derived


<PAGE>


revenues of $893,000 and $1,282,000 from barter transactions, constituting 17%
and 35%, respectively of total revenues for the year. We barter or trade web
site creation services and inclusion on our web sites 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 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 our web sites. 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 our web
sites. 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 us.

         We also depend on establishing and maintaining a number of commercial
relationships with various web sites and networks to increase traffic on our web
sites. 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, our
web sites 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 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 our web sites 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 our sites 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;

         - 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



<PAGE>


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 our web sites, 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 the Company's web sites;

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

         - a positive shopping and purchasing experience for the consumer in
           our client's 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 equal or superior to ours or that
achieve greater market acceptance than our web sites. 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 our 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 the Company's web sites to be a limited or ineffective advertising
medium, advertisers may be reluctant to devote a significant portion of their
advertising budgets to Internet advertising or to advertise on the Company's web
sites. Please see "Description of Business--Competition."


<PAGE>


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
brands, depends significantly upon the performance of our systems and network
infrastructure. Revenues depend on the number of visitors to our web sites 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 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.



<PAGE>


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 New Jersey. Our third party provider maintains, within their control
and to their 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 enter 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
risk 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
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,


<PAGE>


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 complimentary 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. 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 Company's
brands. 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.

         Furthermore, the re-launch and integration of acquisitions may require
capital expenditures in advance of any revenue, and revenue from these
acquisitions cannot be assured. As an example, we spent approximately $1 million
on the Boo re-launch in the fourth quarter of 2000 and have not yet generated
any revenue of substance from the Boo.com web site, nor is there any assurance
that we will be able to generate revenue or recoup our investment in this site.

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 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.



<PAGE>


       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 the "Outletmall.com" or the "Boo.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 also own and have applied for
a number of trademarks related to Boo.com and related words and phrases. In this
connection, there is certain pending litigation described under the heading
"Description of Business - Legal Proceedings" as to our use of the Boo name.
Loss of the Boo name would adversely affect that portion of our business related
to Boo.com.

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", "Outletmall.com" and "Boo.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 are 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 are 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 has been 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 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;

<PAGE>


         - 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 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 48.1% 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.

It may be difficult to acquire us.

         Certain provisions of our Certificate of Incorporation, our Bylaws,
Delaware law and Mr. Narasin's ownership of approximately 48.1% of the
outstanding common stock, 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 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, particularly in the current investment environment in which dot-com's,
particularly in the business to consumer area, are out of favor. 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


<PAGE>


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.

         The Company filed a report on Form 8-K dated August 14, 2000 under Item
4 reporting that the Company's accountants, Arthur Andersen LLP, were
terminated. During the Company's two fiscal years ended December 31, 1998 and
1999 and through August 4, 2000, there have been no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Arthur Andersen LLP would have caused it to make
reference to the subject matter of the disagreements in connection with its
report.

         The Company also filed a report on Form 8-K dated August 14, 2000 under
Item 4 reporting that the Company engaged BDO Seidman, LLP as its new
independent public accountants to audit the Company's financial statements for
its fiscal year ended December 31, 2000.

                                    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..........................     35  Chief Executive Officer and
                                                    President and Chairman of
                                                    the Board of Directors

Barry Scheckner...........................     52   Acting Chief Financial
                                                    Officer

Richard C. Marcus(1)......................     61   Director

Jerome A. Chazen(1).......................     74   Director and Senior
                                                    Consultant

Robert S. Taubman(1)......................     47   Director

Ronald Forehand...........................     54   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

<PAGE>


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 and the predecessor since the 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 a Financial Consultant in the capacity of
Acting Chief Financial Officer to us 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.

         Richard C. Marcus has served as consultant to us since February 1997
and has served as a director 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 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 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 a director since April 1999. He 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. Mr. Taubman is also a director of Comerica Bank and of
Sotheby's Holdings, Inc., the international art auction house, a member of the
Board of Governors of the National Association of Real Estate Investment Trusts,
a director of the Real Estate Roundtable, a trustee of the Urban Land Institute
and a former trustee of the International Council of Shopping Centers.

         Ronald Forehand has served as our Chief 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. Mr. Forehand is Anne-Marie
Forehand's husband.

         Anne-Marie Forehand has been an 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.

Item 10. Executive Compensation.

         The following tables set forth the annual and long-term compensation
for services in all capacities for the three years ended December 31, 2000 paid
to Benjamin Narasin, President, Chief Executive Officer and Chairman.


<PAGE>


                           SUMMARY COMPENSATION TABLE

                               Annual Compensation

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

Benjamin Narasin,        2000      $238,225          --            --
President/CEO and        1999      $180,000       $40,000       100,000
Chairman of the          1998      $180,000(1)       --            --
Board of Directors

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

         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, 2000:

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                     Number of Securities        Value of unexercised
                                                     Underlying Options at       in the money options
                                                     fiscal year end (#)         at fiscal year 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>

Director Compensation

         The directors did not receive monetary compensation for serving on the
Board of Directors during the fiscal year ended December 31, 2000.

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 fiscal 1999 and for fiscal
2000 received $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 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.

         In April 2000, we loaned to our CEO the principal amount of $185,000.
The note accretes interest monthly at the rate of prime plus 1% per annum and
the entire balance outstanding is payable in April 2001.


<PAGE>


       On March 2, 1999, we entered into a 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% became 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 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.


<PAGE>


     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 our directors or executive
officers. See footnote No. 9 in the financial statements for a breakout of the
stock option activity for the year ended December 31, 2000.

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 our equity securities, to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of Common Stock and our other
equity securities. 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 us with copies of such reports . Based
on our review of such reports furnished to us during the fiscal year ended
December 31, 2000, all Section 16(a) filing requirements applicable to our
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 us, as of March 23,
2001, regarding the beneficial ownership of our voting securities by (i) each
person who is known by us to beneficially own more than 5% of the outstanding
Common Stock, (ii) each of our directors and each of the executive officers
named in the compensation table under Item 10, "Executive Compensation", and
(iii) all of our directors and executive officers 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
                                                             of beneficial         outstanding stock
             Name of beneficial owner (1)                      ownership                owned
             ----------------------------                      ---------                -----

<S>                                                         <C>                    <C>
Benjamin Narasin(2)....................................      3,528,100 shares           48.1%
TRC Net Investors LLC (3)..............................        821,384 shares           11.2%
Robert S. Taubman (3)(4)...............................        831,384 shares           11.3%
FM/CCP Investment Partners, LLC(5).....................        320,000 shares            4.4%
Jerome Chazen (5)......................................        486,174 shares            6.6%
Richard Marcus (6).....................................         20,000 shares             .3%
Executive Officers and Directors (7)
   as a group (seven persons)..........................      4,044,274 shares           55.1%
</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.

(3)      Includes 824,084 shares of common stock underlying convertible
         preferred stock owned by TRG Net Investors LLC. The conversion right
         terminates on May 22, 2001. TRG Net Investors LLC is owned (i) 75% by
         the


<PAGE>


         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, and 2,700
         shares of common stock owned by Mr. Taubman's wife. Excludes 824,084
         shares of common stock underlying convertible preferred stock owned by
         TRG Net Investors LLC reported above. 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
         by his wife and 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.

(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.

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

Item 12. Certain Relationships and Related Party Transactions.

         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. (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.

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

         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


<PAGE>


         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. 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.

         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
warrants expired unexercised in July 2000. 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,
2000, the Company had accreted $5,040,000 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.

         In April 2000, the Company loaned to its CEO the principal amount of
$185,000. The note accretes interest monthly at the rate of prime plus 1% per
annum and the entire balance outstanding is payable in April 2001.

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

(a) Exhibits

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)
4.1      Form of Representative's Warrant (2)


<PAGE>


4.2      Form of Stock Certificate (2)
4.3      Warrant executed in connection with the FM/CCP Financing (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)
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 BDO Seidman, LLP
23.2     Consent of Arthur Andersen LLP

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

(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.
--------------------------------------------------------------------------------
(b)        Current Reports on Form 8-K
                  None.




<PAGE>

                          Index to Financial Statements

                                                                         Page
                                                                         ----

Report of Independent Certified Public Accountants......................  F-2
Report of Independent Public Accountants................................  F-3
Consolidated Balance Sheet as of December 31, 2000......................  F-4
Consolidated Statements of Operations for the years ended
December 31, 2000 and 1999..............................................  F-5
Consolidated Statements of Comprehensive Loss for the years
ended December 31, 2000 and 1999........................................  F-6
Consolidated Statements of Stockholders' Equity and Members'
Deficit.................................................................  F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 2000 and 1999..............................................  F-9
Notes to Consolidated Financial Statements.............................. F-10




<PAGE>



               Report of Independent Certified Public Accountants

The Stockholders and Board of Directors
fashionmall.com, Inc.

         We have audited the accompanying consolidated balance sheet of
fashionmall.com, Inc. as of December 31, 2000, and the related consolidated
statements of operations, comprehensive loss, stockholders' equity and cash
flows for the year then ended. 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 audit.

         We conducted our audit 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 audit provides 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, 2000, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.

                                                /s/   BDO Seidman, LLP
                                                ----------------------

                                                      BDO Seidman, LLP
New York, New York
February 26, 2001


                                      F-2
<PAGE>


                    Report of Independent Public Accountants

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

         We have audited the accompanying consolidated statements of operations,
comprehensive loss, stockholders' equity and cash flows of fashionmall.com, Inc.
(a Delaware corporation) for the year ended December 31, 1999. 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 audit.

         We conducted our audit 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 audit provides a reasonable basis
for our opinion.

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

                                                /s/ Arthur Andersen LLP
                                                -----------------------

                                                    Arthur Andersen LLP

New York, New York
March 23, 2000


                                      F-3
<PAGE>

                              fashionmall.com, Inc.

                           Consolidated Balance Sheet

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                        2000
                                                                                    ------------
                                   Assets
                                   ------
<S>                                                                               <C>
CURRENT ASSETS
    Cash and cash equivalents                                                     $   26,512,000
    Marketable securities                                                              7,503,000
    Accounts receivable, net of an allowance of approximately $471,000                 1,198,000
    Loan to officer                                                                      209,000
    Prepaid expenses and other current assets                                            497,000
                                                                                  --------------
                Total current assets                                                  35,919,000
                                                                                  --------------

INVESTMENTS                                                                            1,318,000
PROPERTY AND EQUIPMENT - net of accumulated depreciation of $140,000                     201,000
CAPITALIZED SOFTWARE COSTS - net of accumulated amortization of $174,000                 222,000
INTANGIBLE AND OTHER ASSETS - net of accumulated amortization of $168,000                472,000
                                                                                  --------------

                Total assets                                                      $   38,132,000
                                                                                  ==============

                 Liabilities and Stockholders' Equity
                 ------------------------------------
CURRENT LIABILITIES
   Accounts payable                                                               $    1,316,000
   Accrued expenses                                                                    1,190,000
   Customer deposits                                                                     143,000
                                                                                  --------------
                Total liabilities                                                      2,649,000
                                                                                  --------------

COMMITMENTS AND CONTINGENCIES

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
   Treasury stock, at cost, 165,600 shares                                              (286,000)
   Additional paid-in capital                                                         51,779,000
   Unrealized gain on marketable securities and investments available for sale            36,000
   Accumulated deficit                                                               (16,129,000)
                                                                                  --------------
                Total stockholders' equity                                            35,483,000
                                                                                  --------------

                Total liabilities and stockholders' equity                        $   38,132,000
                                                                                  ==============
</TABLE>

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


                                      F-4
<PAGE>


                              fashionmall.com, Inc.

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                              For the Years Ended
                                                                                  December 31,
                                                                  ---------------------------------------------
                                                                          2000                    1999
                                                                  ---------------------   ---------------------


<S>                                                               <C>                      <C>
SITE REVENUES                                                     $           5,386,000   $           3,690,000
                                                                  ---------------------   ---------------------
COSTS AND EXPENSES:
   Site development, merchandise and content                                    722,000                 612,000
   Advertising and marketing                                                  4,728,000               3,805,000
   Selling expense                                                            1,386,000                 389,000
   General and administrative                                                 6,208,000               5,862,000
                                                                  ---------------------   ---------------------
   Total costs and expenses                                                  13,044,000              10,668,000
                                                                  ---------------------   ---------------------

Loss from operations                                                         (7,658,000)             (6,978,000)
                                                                  ---------------------   ---------------------

OTHER INCOME (EXPENSE):
   Interest and dividend income                                               2,570,000               1,433,000
   Interest expense and other financing costs                                      -                   (737,000)
                                                                  ---------------------   ---------------------
Total other income (expense)                                                  2,570,000                 696,000
                                                                  ---------------------   ---------------------

Net loss                                                          $          (5,088,000)  $          (6,282,000)
                                                                  =====================   =====================

Basic and diluted loss per share                                  $                (.68)  $               (1.01)
                                                                  =====================   =====================

Basic and diluted weighted average common shares outstanding                  7,490,000               6,250,000
                                                                  =====================   =====================
</TABLE>



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



                                      F-5
<PAGE>

                              fashionmall.com, Inc.

                  Consolidated Statements of Comprehensive Loss

<TABLE>
<CAPTION>
                                                                              For the Years Ended
                                                                                  December 31,
                                                                  ---------------------------------------------
                                                                          2000                    1999
                                                                  ---------------------   ---------------------
<S>                                                               <C>                     <C>
Net loss                                                          $          (5,088,000)  $          (6,282,000)

Unrealized gain (loss) on
marketable securities and investments
available-for-sale                                                              (10,000)                 46,000
                                                                  ---------------------   ---------------------

Comprehensive net loss                                            $          (5,098,000)  $          (6,236,000)
                                                                  =====================   =====================
</TABLE>


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



                                      F-6
<PAGE>


                              fashionmall.com, Inc.

     Consolidated Statements of Stockholders' Equity 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 (Loss)
                                  -------------------------------------------------------------------------------------------------

<S>                               <C>           <C>             <C>           <C>         <C>         <C>           <C>
Balance at January 1, 1999            --             --           --             --             --    $   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 value     --             --           --             --             --        130,000       --

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




<CAPTION>
                                                                      Total
                                      Members'    Accumulated      Stockholders'
                                      Deficit       Deficit           Equity
                                   --------------------------------------------

<S>                                <C>             <C>            <C>
Balance at January 1, 1999          $  (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 value          --            --           130,000

Issuance of preferred stock
   in connection with
   capital contribution                    --            --         5,040,000
</TABLE>





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


                                      F-7
<PAGE>

                              fashionmall.com, Inc.

      Consolidated Statements of Stockholders' Equity and Members' Deficit

<TABLE>
<CAPTION>
                                      Convertible
                                    Preferred Stock              Common Stock                                 Treasury Stock
                                    ---------------              ------------                                 --------------
                                                                                    Additional     Members'
                                                  Par                      Par       Paid-in     Contributed
                                   Shares        Value       Shares       Value      Capital       Capital      Shares      Amount
                                  -------------------------------------------------------------------------------------------------
<S>                               <C>           <C>        <C>          <C>         <C>           <C>          <C>        <C>
Issuance of warrants to
   purchase 924,898 shares of
   common stock, at fair value        --           --           --          --            --      $2,377,000      --           --

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                         824,084        8,000         --          --       3,093,000          --        --           --

Unrealized gain on
   marketable securities
   available for sale                 --           --           --          --            --            --        --           --

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

Balance at December 31, 1999       824,084        8,000    7,500,000      75,000    49,396,000          --        --           --
                                  -------------------------------------------------------------------------------------------------

Purchase of treasury stock            --           --           --          --            --            --    (165,600)   $(286,000)

Non-cash compensation expense         --           --           --          --         444,000          --        --           --

Accretion of preferred stock
   beneficial conversion feature      --           --           --          --       1,939,000          --        --           --

Unrealized loss on marketable
   securities and investments
   available for sale                 --           --           --          --            --            --        --           --

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

Balance at December 31, 2000       824,084     $  8,000    7,500,000   $  75,000   $51,779,000    $     --    (165,600)   $(286,000)
                                  =================================================================================================

<CAPTION>
                                                                                      Total
                                  Comprehensive       Members'    Accumulated      Stockholders'
                                     Income           Deficit      Deficit            Equity
                                 ---------------------------------------------------------------
<S>                              <C>               <C>            <C>            <C>
Issuance of warrants to
   purchase 924,898 shares of
   common stock, at fair value          --                --              --          2,377,000

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 gain on
   marketable securities
   available for sale                 46,000              --              --             46,000

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

Balance at December 31, 1999          46,000              --        (9,102,000)      40,423,000
                                 ---------------------------------------------------------------

Purchase of treasury stock              --                --              --           (286,000)

Non-cash compensation expense           --                --              --            444,000

Accretion of preferred stock
   beneficial conversion feature        --                --        (1,939,000)            --

Unrealized loss on
   marketable securities
   and investments
  available for sale                 (10,000)             --              --            (10,000)

Net loss                                --                --        (5,088,000)      (5,088,000)
                                 ---------------------------------------------------------------
Balance at December 31, 2000         $36,000              --      $(16,129,000)     $35,483,000
                                 ===============================================================
</TABLE>

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


                                      F-8
<PAGE>

                              fashionmall.com, Inc.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                               For the Years Ended
                                                                   December 31,
                                                          ----------------------------
                                                              2000            1999
                                                          ------------    ------------

<S>                                                       <C>             <C>
Operating Activities
Net loss                                                  $ (5,088,000)   $ (6,282,000)
Adjustments to reconcile net loss to net
  cash used in operating activities:
Depreciation and amortization                                  394,000          65,000
Non-cash interest expense and other
  financing costs                                                 --           668,000
Non-cash compensation expense                                  444,000       3,027,000
Inventory reserve                                                 --           100,000
Bad debt expense                                               489,000         263,000
Changes in operating assets and liabilities:
   Accounts receivable                                        (890,000)       (655,000)
   Inventory                                                   191,000        (289,000)
   Prepaid expenses and other current assets                   (63,000)       (737,000)
   Deferred financing costs                                       --           397,000
   Accounts payable                                         (1,469,000)      2,572,000
   Accrued expenses                                            896,000         251,000
   Customer deposits                                           129,000          (4,000)
   Deferred revenue                                            (25,000)        (20,000)
                                                          ------------    ------------
   Net cash used in operating
      activities                                            (4,992,000)       (644,000)
                                                          ------------    ------------

Investing Activities

Purchases of marketable securities and investments, net     (1,379,000)     (7,371,000)
Software development costs                                     (34,000)       (316,000)
Purchase of property and equipment                             (82,000)       (216,000)
Purchase of intangible and other assets                       (620,000)           --
                                                          ------------    ------------
    Net cash used in investing activities                   (2,115,000)     (7,903,000)
                                                          ------------    ------------

Financing Activities
Purchase of treasury stock                                    (286,000)           --
Loan to officer                                               (209,000)           --
(Repayment) proceeds of loans                                     --          (489,000)
Initial public offering proceeds                                  --        34,775,000
Capital contributions                                             --         8,293,000
                                                          ------------    ------------
    Net cash (used in) provided by financing activities       (495,000)     42,579,000
                                                          ------------    ------------

(Decrease) increase in cash and cash equivalents            (7,602,000)     34,032,000
Cash and cash equivalents - beginning of year               34,114,000          82,000
                                                          ------------    ------------

Cash and cash equivalents- end of year                    $ 26,512,000    $ 34,114,000
                                                          ============    ============
</TABLE>


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



                                      F-9
<PAGE>


                              fashionmall.com, Inc.
                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999

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. (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.

         The Company 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 Company's web sites. 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, 2000 have been
to develop the Company's brands 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 Company's web sites. 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.


                                      F-10
<PAGE>


         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, commences upon the placement of the customer's advertisement on the
Company's web sites. 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, 2000
and 1999. The Company had revenue from barter transactions of $893,000 and
$1,282,000 for the years ended December 31, 2000 and 1999, respectively.

        In January 2000, the Emerging Issues Task Force (the "EITF") of the
Financial Standards Accounting Board ("FASB") 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. The Company has adopted EITF 99-17 effective January 1, 2000. The
Company's barter revenue was $893,000 and $1,282,000 for the years ended
December 31, 2000 and 1999, respectively. On a pro forma basis, the Company's
barter revenue was $852,000 for the year ended December 31, 1999 had EITF 99-17
been applicable for that period.

 Cash and Cash Equivalents

         Cash equivalents of $26,367,000 consist of money market funds or other
highly-liquid investments with original maturities of three months or less.

Marketable Securities

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

         Management determines the appropriate classification of securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. Management has determined that all of the Company's marketable securities
are 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.

Property and Equipment

         Property and equipment are stated at cost, net of accumulated
depreciation and amortization on a straight-line basis over estimated useful
lives of three to five years. Depreciation expense for the years ended December
31, 2000 and 1999, was $104,000 and $27,000, respectively, and is included in
general and administrative expenses in the accompanying statements of
operations.

          In accordance with Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" and EITF
Issue No. 00-2 "Website Development Costs", 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 three years. Capitalized
software costs for the years ended December 31, 2000 and 1999, are approximately


                                      F-11
<PAGE>


$34,000 and $362,000, respectively. Amortization expense for the years ended
December 31, 2000 and 1999 was $122,000 and $52,000, respectively, 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 SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". 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, 2000.

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 SFAS No. 109, "Accounting for Income Taxes." Under
the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the 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 SFAS No. 123, "Accounting for Stock-Based Compensation.

Comprehensive Loss

         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)


                                      F-12
<PAGE>


such as unrealized gains/losses on securities classified as available-for-sale,
foreign currency translation adjustments and minimum pension liability
adjustments.

Fair Value of Financial Instruments

         The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable approximate fair value due to the short-term maturity of
these instruments. Marketable securities and investments are stated at fair
value.

Business Concentrations and Credit Risks

         Substantially all of the Company's cash and cash equivalents,
marketable securities and investments as of December 31, 2000 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, 2000, one customer accounted for 25% of trade
receivables. For the years ended December 31, 2000 and 1999, one customer
accounted for 11% and 12% of total revenues, respectively.

Net Loss per Share

         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 mandatory
redeemable preferred stock, are included in the net loss per share to the extent
such shares are dilutive, except in the instance noted above.

New Accounting Pronouncements

         In 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101 "Revenue Recognition in Financial Statements," which
became effective in the fourth quarter of 2000. The adoption of SAB No. 101 did
not have a material effect on the Company's financial statements.

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". 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. Changes in the fair value of derivatives will
be recorded each period in earnings or other comprehensive earnings, depending
on whether a derivative is designated as part of a hedge transaction and, if it
is, the type of hedge transaction. Gains and losses on derivative instruments
reported in other comprehensive earnings will be reclassified as earnings in the
periods in which earnings are affected by the hedged item. 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.


                                      F-13
<PAGE>

3. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                                                   For the Years Ended
                                                                                      December 31,
                                                                             --------------------------------
                                                                                 2000                1999
                                                                             --------------------------------
<S>                                                                          <C>                <C>
Cash paid during the period for:
    Interest                                                                 $        --        $      15,000
    Taxes                                                                    $        --        $        --
Non-cash investing and financing activities:
    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
</TABLE>

4. Marketable Securities

         Marketable securities, including investments, available for sale at
December 31, 2000 were as follows:

                                                               Market
                                             Cost               Value
                                             ----               -----
Government bonds                          $1,003,000         $1,005,000
Corporate bonds (maturity: 1-5 yrs)        3,275,000          3,291,000
Certificate of deposits                    4,000,000          4,016,000
Asset backed securities                      507,000            509,000
                                          ----------         ----------
Total marketable securities               $8,785,000         $8,821,000
                                          ==========         ==========

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 ("FM/CCP Note") and warrants ("FM/CCP
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. In connection with the FM/CCP Warrants, the
Company recognized non-cash consulting expense of $106,000 for the year ended
December 31, 1999. 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 demand by Chazen after the
termination of the agreement in May 2001. Pursuant to this agreement, the
Company recognized consulting


                                      F-14
<PAGE>


expense of $94,000 and $110,000 for the years ended December 31, 2000 and 1999,
respectively.

         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%
became 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 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 exercise of 135,000 of these options and the FM/CCP
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 $444,000 and
$1,284,000 of non-cash consulting expense in connection with these options for
the years ended December 31, 2000 and 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 finder's 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 FM/CCP 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
Warrants expired unexercised in July 2000. 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, 2000 and 1999, the Company accreted $1,939,000 and
$3,101,000, respectively 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-15
<PAGE>


6. Income Taxes

        The net deferred tax asset at December 31, 2000 and 1999 consists of the
following:

                                                     2000               1999
                                                 -----------        -----------

Net operating loss carryforwards                 $ 2,303,000        $ 1,674,000
Deferred compensation                                204,000          1,386,000
Other                                                  8,000             (3,000)
                                                 -----------        -----------


Total deferred tax asset                           2,515,000          3,057,000
Less: valuation allowance                         (2,515,000)        (3,057,000)
                                                 -----------        -----------

Deferred tax asset, net                          $     --           $    --
                                                 ===========        ===========

         The Company has a net operating loss carryforward of approximately
$7,000,000 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.

7. Net Loss 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,
                                                         -------------------------------
                                                             2000                1999
                                                         -----------         -----------

<S>                                                      <C>                 <C>
Numerator:
Net loss                                                 $(5,088,000)        $(6,282,000)

Accretion of beneficial conversion feature of
     convertible preferred stock                          (1,939,000)         (3,101,000)
                                                         -----------         -----------

Net loss available to common shareholders                $(7,027,000)        $(9,383,000)
                                                         ===========         ===========
Basic and diluted loss per share                         $      (.94)        $     (1.50)
                                                         ===========         ===========

Basic and diluted weighted average shares                  7,490,000           6,250,000
                                                         ===========         ===========
</TABLE>

PRO FORMA PER SHARE INFORMATION

         As a result of the Company's reorganization from a limited liability
company to a C corporation in 1999, the per share data for 1999 has been
prepared on a pro forma basis and has been computed using the weighted average
number of common shares outstanding during the period assuming the Company was a
C corporation since inception.


                                      F-16
<PAGE>


                                                            For the Year Ended
                                                            December 31, 1999
                                                            ------------------
(Unaudited):
Denominator:
Pro-forma basic and diluted weighted-average shares             6,250,000
                                                               ==========

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

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

Pro-forma diluted loss per common share                        $    (1.50)
                                                               ==========

         The effect of the exercise of certain warrants and options issued
during 2000 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 6,700 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, 2000 and
1999 was approximately $357,000 and $211,000, respectively.

         In April 2000, the Company loaned to its CEO the amount of $185,000.
The note accretes interest monthly at the rate of prime plus 1% per annum and
the entire balance outstanding is payable in April 2001.

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.

         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.


                                      F-17
<PAGE>


         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
could theoretically exercise all of such optionee's stock options with no
investment.

         Stock option activity for the years ended December 31, 2000 and 1999 is
as follows:

                                                             Weighted Average
                                                            Exercise Price Per
Activity                                       Shares             Share
--------                                       -------            ------
Shares outstanding at 1/1/99                      --                --
Shares granted in 1999                         352,250            $ 8.52
Shares cancelled in 1999                      (100,500)           $10.53
Shares exercised in 1999                          --                 --
                                               -------            ------
Shares outstanding at 12/31/99                 251,750            $ 7.74

Shares granted in 2000                         166,500            $ 3.90
Shares cancelled in 2000                       (60,250)           $ 4.31
Shares exercised in 2000                           --                --
                                               -------            ------
Shares outstanding at 12/31/00                 358,000            $ 7.26
                                               =======            ======
Shares exercisable at 12/31/00                 155,313            $ 5.87
                                               =======            ======

         The following table summarizes information about shares under option at
December 31, 2000:

<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>
   $2.00-$4.99        106,250          9.3                 $3.67              49,063             $2.92

   $5.00-$13.00       251,750          8.4                 $6.69             106,250             $7.24
</TABLE>


         The Company has elected to follow Accounting Principles Board Opinion
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.



                                      F-18
<PAGE>


         The table below sets forth the 2000 and 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 2000 and 1999: an expected life of 9.3 years and 5 years in 2000 and
1999, respectively; a volatility rate of 82% and 93% in 2000 and 1999,
respectively; a risk-free interest rate of 6.5% and 5.56%; and no dividend
payments. The weighted average fair value of options granted in 2000 was $2.83.

                                              For the Years Ended December 31,
                                                 2000                 1999
                                             ------------         ------------
Net loss:
As reported                                  $(5,088,000)         $(6,282,000)
                                             ============         ============

Pro forma                                    $(4,620,000)         $(7,029,000)
                                             ============         ============
Basic and diluted earnings Per share:

As reported                                  $     (0.68)         $     (1.01)

Pro forma                                    $     (0.62)         $     (1.12)

10.  Commitments and Contingencies

         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
opinion 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 received $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.


                                      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:    /s/ Benjamin Narasin
                                    --------------------

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

/s/ Benjamin Narasin        Chief Executive Officer
------------------------    President and Chairman
     Benjamin Narasin       of the Board of Directors
                            (Principal Executive Officer)        April 11, 2001


/s/ Barry Scheckner         Acting Chief Financial Officer
------------------------    (Principal Accounting Officer)       April 11, 2001
     Barry Scheckner

/s/ Richard Marcus
------------------------
     Richard Marcus         Director                             April 11, 2001

/s/ Jerome Chazen
------------------------
     Jerome Chazen          Director                             April 11, 2001

/s/ Robert S. Taubman
------------------------
     Robert S. Taubman      Director                             April 11, 2001










                                      F-20