DELIA S INC, S-1/A, 1996-11-20

DELIA S INC
S-1/A, 1996-11-20
CATALOG & MAIL-ORDER HOUSES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1996

REGISTRATION NO. 333-15153
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

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LOGO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 5961 13-3914035
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

435 HUDSON STREET
NEW YORK, NEW YORK 10014
(212) 807-9060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

STEPHEN I. KAHN
435 HUDSON STREET
NEW YORK, NEW YORK 10014
(212) 807-9060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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COPIES OF COMMUNICATIONS TO:

JEFFREY A. HORWITZ, ESQ. LARRY A. BARDEN, ESQ.
EDWARD W. KERSON, ESQ. SIDLEY & AUSTIN
PROSKAUER ROSE GOETZ & MENDELSOHN ONE FIRST NATIONAL PLAZA, SUITE 4400
LLP CHICAGO, ILLINOIS 60603-2279
1585 BROADWAY (312) 853-7000
NEW YORK, NEW YORK 10036-8299

(212) 969-3000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED NOVEMBER 20, 1996

PROSPECTUS

2,350,000 SHARES

LOGO

COMMON STOCK

Of the 2,350,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by the Company and 350,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol DLIA.

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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 5.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
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<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
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Total (3).................. $ $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $600,000.

(3) The Company and certain Selling Stockholders have granted the Underwriters
a 30-day option to purchase up to 352,500 additional shares of Common
Stock, solely to cover over-allotments, if any. If all such shares are
purchased, the total Price to Public, Underwriting Discount, Proceeds to
Company and Pro- ceeds to Selling Stockholders will be $ , $ , $ and
$ , respectively.See "Underwriting."

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The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of the agent of Hambrecht &
Quist LLC in New York, New York.

HAMBRECHT & QUIST OPPENHEIMER & CO., INC.

, 1996
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[PHOTOGRAPHS AND ART FROM DELIA*S CATALOGS.]

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent public accountants
and will make available copies of quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.

"dELiA*s" is a registered trademark of the Company in the United States.
Trade names and trademarks of other companies appearing in this Prospectus are
the property of their respective holders.

2
<PAGE>

[PHOTOGRAPHS AND ART FROM DELIA*S CATALOGS.]
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. The Common Stock offered hereby involves a high degree of
risk. See "Risk Factors."

THE COMPANY

dELiA*s is a direct marketer of casual apparel and related accessories to
girls and young women primarily between the ages of 10 and 24 (an age group
known as "Generation Y"). The Company believes that it is one of a limited
number of direct marketers distributing an apparel-based catalog exclusively
for this market. The Company offers a carefully edited assortment of recognized
and emerging brands of teen apparel and accessories, complemented by dELiA*s
own branded products. Merchandise ranges from basics, such as jeans, shorts and
t-shirts, to more fashion-oriented apparel and accessories, such as woven and
knit junior dresses, swimwear, sunglasses, watches, costume jewelry and
cosmetics. The Company believes that its selection and presentation of
merchandise have contributed to a growing recognition of dELiA*s as a teen
fashion resource.

With the large "baby boom" generation maturing and having children, the
younger segments of the U.S. population are increasing in size. According to
the U.S. Census Bureau, the population of 10 to 24 year-olds is currently 55
million and is expected to grow by 13% to more than 62 million by 2005.
According to data from independent research firms, teens spent approximately
$109 billion in 1995, of which apparel accounted for over one-third. As a
result of the growing population and spending patterns of Generation Y and the
limited number of national apparel retailers and catalogers exclusively
targeting this age group, the Company believes that this large and underserved
market represents a significant direct marketing opportunity.

dELiA*s catalogs are designed to create a distinctive and entertaining
shopping experience by combining the feel and editorial flair of a teen-focused
fashion magazine with the convenience of direct mail shopping. The catalogs
include colorful layouts with creative, high-impact phrases and feature teen
models who convey a culture and attitude unique to dELiA*s. Merchandise items
are styled and arranged to encourage customers to create their own outfits,
which typically can be purchased for under $100.

The Company believes that its proprietary customer database is one of its key
competitive advantages. This database has been developed primarily through
referrals, word-of-mouth, returns of catalog request cards and targeted
advertising. The Company believes that this database yields response rates that
exceed average response rates for the consumer catalog industry and that this
database would be difficult to replicate. As of October 31, 1996, the Company's
database included over one million names, including approximately 200,000
customers who had made purchases from the Company within the preceding 24
months. The Company has customers in all 50 states and Japan.

dELiA*s plans to increase catalog mailings from an anticipated 7 million in
fiscal 1996 to approximately 18 million in fiscal 1997, and to increase the
number of catalog editions from five in fiscal 1996 to seven in fiscal 1997.
The Company's operations are supported by its integrated, state-of-the-art
telephone and management information systems, which allow teleservice
representatives to provide real-time product availability and order status
information. As of October 31, 1996, the Company employed approximately 240
teleservice representatives to provide 24-hour, seven-day-a-week customer
service.

dELiA*s goal is to be the leading direct marketer of casual apparel,
accessories and other related products to Generation Y girls and young women.
The Company plans to build on its core catalog business and to leverage the
dELiA*s brand identity to develop new channels of distribution and products
aimed at the Generation Y market.

The Company was incorporated in Delaware in October 1996 and is a successor
to a business founded in September 1993. The Company's executive offices are
located at 435 Hudson Street, New York, New York 10014, and its telephone
number is (212) 807-9060.

3
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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................. 2,000,000 shares
Common Stock offered by the Selling Stockholders.... 350,000 shares
Common Stock to be outstanding after the offering... 12,000,000 shares (1)
Use of proceeds..................................... For working capital and general
corporate purposes and the repayment
of notes held by certain
stockholders
Proposed Nasdaq National Market symbol.............. DLIA
</TABLE>

SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OCTOBER 31, 1996
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ACTUAL AS ADJUSTED (6)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................. $1,140 $19,599
Working capital........................................ 1,946 20,405
Total assets........................................... 6,901 25,360
Total stockholders' equity............................. 2,749 21,208
</TABLE>
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(1) Excludes 1,250,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Incentive Plan (under which options to purchase an
aggregate of 80,000 shares of Common Stock will be outstanding immediately
after the completion of this offering) and 250,000 shares of Common Stock
reserved for issuance pursuant to an outstanding non-plan stock option the
Company has granted to an executive. See "Management--1996 Stock Incentive
Plan" and "Management--Stock Option Agreement."
(2) Computed on the basis described in Note 6 of Notes to Financial Statements
and assuming the pro forma tax provisions described therein. Prior to this
offering, the Company will effect the Reorganization described under "The
Reorganization," in which the Company will convert from a limited liability
company to a C corporation.
(3) See Note 2 of Notes to Financial Statements for an explanation of the
determination of shares used in computing pro forma net income per share.

(4) Does not include 750,000 copies of the Company's winter 1996 catalog mailed
in October 1996. The Company did not mail any copies of its winter 1995
catalog in the nine months ended October 31, 1995.

(5) House names represents the number of customers who have made at least one
purchase or have requested a catalog from the Company in the preceding 24
months, determined at the end of the applicable fiscal period.

(6) As adjusted gives effect to: (i) the portion of the LLC Distribution
described in "Dividend Policy" that depended on the Company's results of
operations from inception through October 31, 1996 and (ii) the sale of
2,000,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $11.00 per share and the
application of the estimated proceeds therefrom, including a portion
thereof used to repay the Investor Notes to be distributed in connection
with the LLC Distribution. See "Capitalization," "Dividend Policy" and "Use
of Proceeds."

--------------------
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Description of
Capital Stock," "Underwriting" and Notes to Financial Statements. In addition,
unless otherwise indicated, all information in this Prospectus gives effect to
the Reorganization (as defined under "The Reorganization") that is to be
effected prior to the completion of this offering. As used in this Prospectus,
references to "dELiA*s" or the "Company" prior to the Reorganization mean
dELiA*s LLC and its predecessor, and, thereafter, dELiA*s Inc. All references
in this Prospectus to a particular fiscal year refer to the year ended January
31 following the particular year (e.g., "fiscal 1996" refers to the fiscal year
ending January 31, 1997).

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RISK FACTORS

The following risk factors should be considered carefully in addition to the
other information contained in this Prospectus before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" as well as those discussed elsewhere in this
Prospectus.

Limited Operating History. The Company has a limited operating history, and
therefore it is difficult to predict the Company's future catalog response
rates (the rates at which catalog recipients respond to catalog mailings by
ordering products), merchandise return rates, success in identifying fashion
trends and other elements that affect the Company's results of operations.
Although the Company had net income in fiscal 1995 and the first nine months
of fiscal 1996, the Company incurred losses of $33,000 from September 9, 1993
(inception) to January 31, 1994 and $332,000 in fiscal 1994. There can be no
assurance the Company will achieve or sustain growth in revenues or maintain
profitability in future periods.

Seasonal and Quarterly Fluctuations. The Company is subject to seasonal
fluctuations in its merchandise sales and results of operations. The Company
expects its sales and operating results generally to be lower in the first and
second quarters than in the third and fourth quarters of each fiscal year
(which include the back-to-school and holiday seasons). The Company's
quarterly results may fluctuate as a result of numerous factors, including the
timing, quantity and cost of catalog mailings (including sale circulars), the
response rates to such mailings, the timing of merchandise deliveries, market
acceptance of the Company's merchandise (including new merchandise categories
or products introduced), the mix, pricing and presentation of products offered
and sold, the hiring and training of additional personnel, the timing of
inventory writedowns, the incurrence of other operating costs and factors
beyond the Company's control, such as general economic conditions and actions
of competitors. Accordingly, the results of operations in any quarter will not
necessarily be indicative of the results that may be achieved for a full
fiscal year or any future quarter. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Fashion Trends and Industry Risks. The Company's success depends, in part,
on management's ability to anticipate the fashion tastes of its customers and
to offer merchandise that appeals to their preferences on a timely and
affordable basis. The fashion tastes of the Company's customers are expected
to change frequently and the failure of the Company successfully to
anticipate, identify or react to changes in styles, trends or brand
preferences of its customers could lead to, among other things, excess
inventories and price markdowns, which could have a material adverse effect on
the Company. In addition, misjudgments in apparel selection could adversely
affect the Company's image with its customers, which could have a material
adverse effect on the Company.

The apparel and accessories industries are cyclical. Purchases of apparel
and accessories tend to decline during recessionary periods and may decline at
other times. There can be no assurance the Company will be able to maintain
its historical rate of growth, particularly if the retail environment
declines. A recession in the national or regional economies or uncertainties
regarding future economic prospects, among other things, could affect consumer
spending habits and have a material adverse effect on the Company. The
Company's business is sensitive to consumer spending patterns and preferences.
Shifts in consumer discretionary spending away from casual apparel and
accessories to other consumer goods also could have a material adverse effect
on the Company.

Ability to Manage Growth. The recent growth in the Company's operating
income has resulted largely from increases in the number of catalogs the
Company mails and the number of products included in its catalogs, as well as
increases in response rates. This growth has placed significant demands on the
Company's management, administrative, operational and financial resources. The
Company intends to continue to pursue an aggressive growth strategy for the
foreseeable future and its future operating results will largely depend on

5
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its ability to manage a larger business. Managing its growth will require the
Company to continue to implement and improve its operations and financial and
management information systems and to continue to expand, motivate and
effectively manage its workforce. The Company plans to continue to increase
the number of catalogs it mails and the frequency of such mailings and intends
to broaden the range of products offered in its catalogs (including additional
dELiA*s-branded products). These actions could result in lower response rates
and operating margins. Furthermore, as the Company's sales increase, the
Company anticipates maintaining higher inventory levels in an effort to
continue to maintain satisfactory fulfillment rates for its catalog customers.
This anticipated increase in inventory levels may expose the Company to
greater risk of excess inventories and inventory obsolescence, which could
have a material adverse effect on the Company.

The Company is exploring a number of new business opportunities, including
opening a retail store, developing traditional or electronic publishing
ventures ancillary to its existing business and expanding its use of
electronic interactive media for promotional and customer development
purposes. There can be no assurance the Company will pursue or successfully
implement any or all of these plans. Failure to implement successfully any of
these plans, if pursued, could have a material adverse effect on the Company.
See "Business--Growth Strategy."

The Company expects from time to time to consider acquisitions or
investments within and outside the direct mail, retail and apparel industries.
The Company has never made an acquisition, and if it does make an acquisition,
there can be no assurance it will do so on favorable terms or that it will be
able successfully to integrate any acquired business with its existing
operations.

Dependence on Key Vendors. The Company's business depends, in part, on the
Company's ability to purchase current-season brand-name apparel at competitive
prices, in sufficient quantities and of acceptable quality. Although the
Company attempts to maintain relationships with a large number of vendors, six
vendors accounted for approximately 50% of the net sales generated by the
Company's spring 1996 catalog, and five vendors accounted for approximately
53% of the net sales generated by the Company's summer 1996 catalog. Apparel
produced by Urban Outfitters accounted for approximately 24% of net sales for
each of the spring 1996 and summer 1996 catalogs. While the Company believes
its relationship with Urban Outfitters is good, the Company does not have a
long-term contract with Urban Outfitters or any other supplier. In addition,
many of the Company's smaller vendors have limited resources, production
capacities and operating histories. The failure of key vendors to expand with
the Company, the loss of one or more key vendors, a material change in the
Company's current purchase terms or a limitation on the Company's ability to
procure products could have a material adverse effect on the Company.

Dependence on Key Personnel. The success of the Company has largely depended
upon the efforts and abilities of its senior management, including the
Company's co-founders, Stephen I. Kahn, Chairman of the Board, President and
Chief Executive Officer, and Christopher C. Edgar, Executive Vice President
and Chief Operating Officer. The loss of one or more of its key employees
could have a material adverse effect on the Company. The Company will enter
into employment agreements with Messrs. Kahn and Edgar and intends to purchase
$2,000,000 in key-man life insurance on each. See "Management."

The direct marketing and apparel experience of a significant number of the
Company's senior management personnel is limited to their experience with the
Company. The Company's future success will depend on the ability of the
Company's management to retain key managers and employ additional qualified
senior operating management. There can be no assurance that the Company will
be successful in attracting or retaining additional qualified personnel.

Competition. The apparel and accessories industries are highly competitive,
and the Company expects competition in these markets to increase. The Company
competes with traditional department-store retailers, as well as specialty
apparel and accessory retailers for teen and young-adult customers. The
Company also competes with other direct marketers. Many of the Company's
competitors are larger and have substantially greater financial, distribution
and marketing resources than the Company.

6
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There are few barriers to entry in the teen apparel and accessories market
and the Company expects other catalogers, as well as additional store-based
retailers and apparel manufacturers, to enter this market. The Company also
could face competition from manufacturers of apparel and accessories
(including the Company's current vendors), who could market their products
directly to retail customers or make their products more readily available in
retail stores or through other catalogs. In addition, competitors could enter
into exclusive distribution arrangements with the Company's vendors and deny
the Company access to their products. Increased competition could result in
pricing pressures, marketing expenditures and loss of market share, and could
have a material adverse effect on the Company.

The Company expects that the direct marketing industry will be affected by
technological changes in distribution and marketing methods, such as on-line
catalogs, retail kiosks and Internet shopping. The Company believes its
success will depend, in part, on its ability to adapt to new technologies and
to respond to competitors' actions in these areas. Adapting to new
technologies could require significant capital expenditures by the Company.
There can be no assurance that the Company will remain competitive in response
to technological changes.

Fluctuations in Postage and Paper Expenses. Postage and paper expenses, in
the aggregate, equalled approximately 12% of the Company's net sales in fiscal
1995 and 11% of the Company's net sales in the first nine months of fiscal
1996. While the Company passes on to customers the costs of overnight and
ground delivery of merchandise, it has not passed on, and has no future plans
to pass on, the costs of catalog mailings and paper to its customers. Material
increases in paper or catalog delivery costs could have a material adverse
effect on the Company.

Reliance on Information Systems. The Company's success depends, in part, on
its ability to provide prompt, accurate and complete service to its customers
on a competitive basis, and to purchase and promote products, manage
inventory, ship products, manage sales and marketing and maintain efficient
operations through its telephone and management information systems. The
Company anticipates upgrading its management information systems in the fourth
quarter of fiscal 1996 and plans to continue to update its management
information systems in the future to support its growth. A significant
disruption in its management information systems could adversely affect the
Company's relations with its customers and vendors and its ability to manage
its operations. While the Company has arranged for back-up computer and
telephone systems, there can be no assurance that extended or repeated
reliance on these back-up systems would not have a material adverse effect on
the Company.

Reliance on Third-Party Fulfillment and Parcel Services. All the Company's
orders for merchandise are currently being handled by a single third-party
fulfillment company at a single facility near Lancaster, Pennsylvania. In the
future, the Company may consider managing its own fulfillment operations. Any
disruption in fulfillment operations could have a material adverse effect on
the Company and its reputation with customers. In addition, strikes or other
service interruptions by the Company's shippers or parcel services could have
a material adverse effect on the Company's ability to deliver merchandise on a
timely basis. See "Business--Operations."

The Company attempts to deliver its catalogs to its customers at timely
seasonal intervals. The failure of the Company to deliver catalogs at
appropriate times or postal delays or disruptions in the mailing of catalogs,
could affect the demand for the Company's products and could have a material
adverse effect on the Company. See "Business--Operations--Distribution and
Fulfillment."

International Business Risks. The Company recently began to distribute its
catalog in Japan and intends to increase distribution there and to explore
distribution opportunities in other international markets. Approximately 1% of
the Company's net sales for the first nine months of fiscal 1996 were from
sales to customers outside the United States, substantially all of whom were
located in Japan. In addition, certain of the Company's vendors procure
products from outside the United States, and the Company may in the future
purchase merchandise for its dELiA*s-branded apparel directly from non-U.S.
manufacturers. The Company's international business is subject to a number of
risks generally associated with doing business

7
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abroad, including the opening and management of foreign offices and
distribution centers, maintenance of uniform quality of merchandise,
development of customer lists and marketing channels, disruptions or delays in
shipping, fluctuations in the value of foreign currencies, exposure to
potentially adverse tax consequences, imposition of import/export duties and
quotas, and unexpected regulatory, economic and political changes in foreign
markets. There can be no assurance these factors will not have a material
adverse effect on the Company. Furthermore, expansion into new international
markets may present competitive and merchandising challenges different from
those the Company currently faces. There can be no assurance the Company will
expand internationally or that any such expansion will result in profitable
operations. See "Business--Growth Strategy."

Dependence on Intellectual Property. The Company has taken steps to protect
its intellectual property rights (including the dELiA*s name, the dELiA*s logo
and the daisy (" LOGO ") symbol). There can be no assurance that the actions
taken by the Company to establish and protect its trademarks and other
proprietary rights will prevent imitation of its products and services or
infringement of its intellectual property rights by others. In addition, there
can be no assurance others will not resist or seek to block sales of the
Company's products as violative of their trademark and proprietary rights. See
"Business--Intellectual Property."

List Development and Maintenance. The Company mails catalogs to names in its
proprietary database (which are primarily derived from word-of-mouth inquiries
and responses to the Company's advertising) and to potential customers whose
names are obtained from purchased and rented lists. Approximately 40% of the
names of persons to whom the Company mailed its most recent catalog were
derived from purchased or rented lists, and the Company anticipates continuing
its use of such lists. Names derived from purchased or rented lists may
generate lower response rates than names derived from word-of-mouth requests.
Accordingly, the Company anticipates that overall response rates would decline
if it increased its use of purchased and rented lists relative to its use of
names in its database. In addition, the Company's database primarily contains
names of teen girls and young women. As these individuals age beyond their
teens, they may no longer purchase products aimed at younger individuals.
Accordingly, the Company must constantly update its mailing lists to identify
new, prospective teen customers. Failure to do so could have a material
adverse effect on the Company.

Recently, there has been increasing public concern regarding the
compilation, use and distribution of information about teens and children.
Federal legislation has been introduced in the U.S. Congress that proposes
restrictions on persons, principally list brokers, that sell, purchase or
otherwise use for commercial purposes personal information about teens (under
the age of 16) and children. The Company is not a list broker but it does mail
catalogs to persons whose names were derived from purchased or rented lists.
The Company may increase its use of purchased and rented lists or, in the
future, decide to sell lists containing information about teens.
Consequently,the proposed legislation, or other similar laws or regulations
that may be enacted, could impair the Company's ability to collect customer
names or profit from future plans to sell demographic information relating to
the teen population. Furthermore, additional legislation or regulations could
limit the Company's ability to continue to compile personal information on
teens or to use that information in the course of its business, which could
have a material adverse effect on the Company.

Sales Tax Collection. At present, the Company does not collect sales or
other similar taxes in respect of shipments of goods into most states.
However, various states have sought to impose state sales tax collection
obligations on out-of-state mail-order companies, such as the Company. A
successful assertion by one or more states that the Company should have
collected or be collecting sales taxes on the sale of products could have a
material adverse effect on the Company.

Control by Principal Stockholder. At the completion of this offering,
Stephen I. Kahn, the Chairman, Chief Executive Officer and President of the
Company, will beneficially own approximately 71.9% (approximately 69.2%, if
the Underwriters' over-allotment option is exercised in full) of the
outstanding shares of Common Stock, including 3,905,163 shares he will own
directly and an additional 4,718,243 shares in the aggregate subject to a
stockholders agreement among certain of the Company's existing stockholders
(the

8
<PAGE>

"Family Stockholders Agreement") and agreements with holders of restricted
stock. Under the Family Stockholders Agreement, Mr. Kahn is entitled, among
other things, to vote and restrict the transfer of all the shares subject to
the Family Stockholders Agreement, and, under the agreements with holders of
restricted stock, Mr. Kahn is entitled to vote such holders' shares.
Therefore, Mr. Kahn can control the election of directors of the Company and
the outcome of all issues submitted to a vote of stockholders of the Company.
The foregoing, together with certain provisions in the Company's certificate
of incorporation, may make it more difficult for a third party to acquire, and
may discourage acquisition bids for, the Company and could limit the price
that certain investors might be willing to pay for shares of Common Stock. In
addition, stockholders may take any action by written consent in accordance
with the General Corporation Law of the State of Delaware and the Company's
bylaws, which may allow Mr. Kahn to direct corporate action without advance
notice to other stockholders. See "Principal and Selling Stockholders" and
"Description of Capital Stock."

Anti-Takeover Provisions. Certain provisions of the Company's certificate of
incorporation and bylaws may make it more difficult for a third party to
acquire, or may discourage acquisition bids for, the Company and could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. These provisions, among other things, (a) divide the
board of directors into three classes, (b) require the affirmative vote of the
holders of at least 66 2/3% of the shares to approve a sale, lease, transfer
or exchange of all or substantially all the assets of the Company, (c) require
the affirmative vote of the holders of at least 66 2/3% of the shares to
remove a director or to fill a vacancy on the board of directors, (d) require
the affirmative vote of the holders of at least 66 2/3% of the shares to amend
or repeal certain provisions of the certificate of incorporation and (e)
require the affirmative vote of the holders of at least 66 2/3% of the shares
or two-thirds of the members of the board of directors to amend or repeal the
bylaws of the Company. In addition, the rights of holders of Common Stock will
be subject to, and may be adversely affected by, the rights of any holders of
Preferred Stock that may be issued in the future and that may be senior to the
rights of the holders of Common Stock. Under certain conditions, section 203
of the General Corporation Law of the State of Delaware would prohibit the
Company from engaging in a "business combination" with an "interested
stockholder" (in general, a stockholder owning 15% or more of the Company's
outstanding voting stock) for a period of three years. See "Description of
Capital Stock."

Absence of Dividends. Following the completion of this offering, the Company
intends to retain any future earnings for use in its business and, therefore,
does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. See "Dividend Policy."

Absence of Prior Public Market; Possible Volatility of Stock Price. There
has been no public market for the Common Stock prior to this offering, and
there can be no assurance an active public market for the Common Stock will
develop or continue after this offering. The initial public offering price for
the Common Stock will be determined by negotiations among the Company, the
Selling Stockholders and the representatives of the Underwriters (the
"Representatives"). See "Underwriting." There can be no assurance the market
price of the Common Stock will not decline below the initial public offering
price. The Company believes factors such as actions of competitors and
quarterly variations in operating results, as well as changes in market
conditions, analysts' estimates and the stock market may cause the market
price of the Common Stock to fluctuate significantly. Further, the stock
market has historically experienced volatility that sometimes has been
unrelated to operating performance. In addition, future sales of Common Stock
by the Company's existing stockholders following the completion of this
offering and the expiration of the 180-day lock-up period referred to in
"Shares Eligible for Future Sale" below could have an adverse effect on the
market price of the Common Stock. See "--Shares Eligible for Future Sale"
below, "Shares Eligible for Future Sale" and "Underwriting."

Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market following this offering (including shares issued
upon the exercise of stock options) by current holders of the Company's Common
Stock and stock options, or the perception that such sales might occur, could
adversely affect the market price of the Common Stock and the Company's
ability to raise additional equity capital. Upon the completion of this
offering, 12,000,000 shares of Common Stock will be outstanding. The shares of

9
<PAGE>

Common Stock sold in this offering will be freely tradeable by persons other
than "affiliates" of the Company without restriction under the Securities Act
of 1933, as amended (the "Securities Act"). All other outstanding shares are
subject to lock-up commitments, pursuant to which such shares may not be sold
or otherwise disposed of for a period of 180 days after the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of
Hambrecht & Quist LLC. Such shares consist of an aggregate of 7,258,563 shares
that are subject to lock-up agreements (the "Lock-Up Agreements") with
Hambrecht & Quist LLC and an aggregate of 4,718,243 shares that are subject to
restrictions on transfer contained in the Family Stockholders Agreement or the
Restricted Stock Plan, which restrictions the Company has agreed with
Hambrecht & Quist LLC not to waive during the Lock-Up Period (without the
prior written consent of Hambrecht & Quist LLC). Hambrecht & Quist LLC may
release all or any portion of the shares subject to the Lock-Up Agreements.
After termination of the Lock-Up Period, all such shares will become eligible
for sale in the public market only in compliance with the registration
requirements of the Securities Act or pursuant to a valid exemption from
registration. See "Management--Restricted Stock Plan," "Principal and Selling
Stockholders" and "Shares Eligible for Future Sale."

Dilution. Investors in this offering will incur an immediate dilution in net
tangible book value per share of Common Stock of $9.26 (based on an initial
public offering price of $11.00). See "Dilution."

10
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company at an assumed initial public offering
price of $11.00 per share are estimated to be $19,860,000 ($20,397,075, if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds for working capital and general corporate purposes.
The Company also is evaluating a future investment in its fulfillment
operations. In addition, the Company intends to use a portion of the net
proceeds to repay the Investor Notes issued as part of the LLC Distribution
(each as defined in "Dividend Policy"). Pending such uses, the net proceeds
will be invested in investment-grade, interest-bearing securities. The Company
will not receive any proceeds from the sale of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."

DIVIDEND POLICY

To date, the Company has neither declared nor paid any cash dividends (other
than the LLC Distribution). The Company currently intends to retain its
earnings for future growth and, therefore, does not anticipate paying any cash
dividends in the foreseeable future.

In connection with the Reorganization described below under "The
Reorganization," prior to the completion of this offering, dELiA*s LLC will
make a distribution (currently assumed to be $3.0 million) to certain of its
members, a portion of which is intended to be used for the payment by such
members of taxes attributable to them by virtue of their respective ownership
interests in dELiA*s LLC. The distribution (the "LLC Distribution") will be
paid in cash, to the extent of cash on hand at the date of distribution, less
$100,000, and the balance (currently assumed to be $1.0 million) will be paid
in the form of non-interest-bearing promissory notes issued by dELiA*s LLC to
such members (the "Investor Notes"). The actual amount of the LLC Distribution
will vary depending on the Company's results of operations prior to such
distribution. The Company, which will assume the obligations of dELiA*s LLC
under the Investor Notes as part of the Reorganization, will apply a portion
of the net proceeds of this offering to repay the Investor Notes upon the
completion of this offering. See "Use of Proceeds."

THE REORGANIZATION

The Company is a successor to a business originally founded in September
1993. In 1995, the successor business began to operate as a New York limited
liability company under the name "dELiA*s LLC." As a limited liability
company, dELiA*s LLC was treated for income tax purposes as a partnership with
taxes on the income generated by dELiA*s paid by its members. In October 1996,
dELiA*s Inc. was incorporated in Delaware. Prior to the completion of this
offering, dELiA*s LLC and dELiA*s Inc. will engage in a reorganization
transaction (the "Reorganization"), pursuant to which dELiA*s LLC will
contribute its assets to dELiA*s Inc. and dELiA*s Inc. will assume, and agree
to pay, perform and discharge, all liabilities of dELiA*s LLC (except for
income tax liabilities). In connection with the Reorganization, dELiA*s Inc.
will issue 10,000,000 shares of Common Stock to dELiA*s LLC, of which 698,568
shares will be restricted under the Company's Restricted Stock Plan. See
"Management--Restricted Stock Plan." The LLC Distribution and the distribution
of the 10,000,000 shares of Common Stock of dELiA*s Inc. will be effected in
accordance with the dELiA*s LLC operating agreement. As a result of the
distribution of Common Stock, the members of dELiA*s LLC will become
stockholders of the Company and, as soon as practicable after the completion
of this offering, the separate existence of dELiA*s LLC will cease.

11
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
October 31, 1996 (i) on an actual basis, reflecting the completion of the
Reorganization without giving effect to the LLC Distribution and (ii) on an
adjusted basis, to give effect to the portion of the LLC Distribution that
depended on the Company's results of operations from inception through October
31, 1996, the sale of 2,000,000 shares of Common Stock offered by the Company
at an assumed initial offering price of $11.00 per share and the application
of the estimated net proceeds therefrom. See "Dividend Policy,"
"Reorganization" and "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and Notes thereto included in this
Prospectus.

<TABLE>
<CAPTION>
OCTOBER 31, 1996
-------------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' Equity:
Preferred Stock, par value $.01 per share;
Authorized--1,000,000 shares;
Shares issued and outstanding--none................... $ -- $ --
Common Stock, par value $.01 per share;
Authorized--50,000,000 shares
Issued and outstanding--10,000,000 and 12,000,000
shares, respectively (1).............................. 100 120
Note receivable from stockholder (2)................... (50) (50)
Deferred compensation (3).............................. (169) (169)
Additional paid-in capital............................. 1,467 21,307
Retained earnings (4).................................. 1,401 --
------ -------
Total stockholders' equity............................ 2,749 21,208
------ =======
Total capitalization................................. $2,749 $21,208
====== =======
</TABLE>
- ---------------------

(4) No adjustment has been made to give effect to the portion of the LLC
Distribution that depends on the Company's results of operations from
November 1, 1996 through the date of the distribution.

12
<PAGE>

DILUTION

As of October 31, 1996, the Company's pro forma net tangible book value,
after giving effect to the Reorganization and the portion of the LLC
Distribution that depended on the Company's results of operations from
inception through October 31, 1996, was $1,036,000, or approximately $0.10 per
share of Common Stock based on 10,000,000 shares of Common Stock outstanding.
Pro forma net tangible book value per share represents the amount of total
stockholders' equity less intangible assets divided by the number of
outstanding shares of Common Stock. The net proceeds to the Company from the
sale of 2,000,000 shares in this offering at an assumed initial public
offering price of $11.00 per share will increase the pro forma net tangible
book value of the Company at October 31, 1996 to $20,896,000, or approximately
$1.74 per share of Common Stock. This would result in an increase in the
Company's pro forma net tangible book value of $19,860,000, or $1.64 per share
of Common Stock, to existing stockholders and an immediate dilution in pro
forma net tangible book value of $9.26 per share to investors purchasing
shares in this offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (1)............ $11.00
Pro forma net tangible book value per share before offering.. $0.10
Increase per share attributable to new investors............. 1.64
-----
Pro forma net tangible book value per share after offering..... 1.74
------
Dilution per share to new investors............................ $ 9.26
======
</TABLE>

The following table sets forth, on a pro forma basis as of October 31, 1996
after giving effect to the Reorganization, the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company
and the average price per share paid to the Company by existing stockholders
and to be paid by the investors in this offering (at an assumed initial public
offering price of $11.00 per share and before deducting estimated offering
expenses and underwriting discounts and commissions):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
--------------------- ---------------------- PER
NUMBER (1) PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders (1)....... 10,000,000 83.3% $ 1,567,000 6.6% $ 0.16
New investors (1)....... 2,000,000 16.7 22,000,000 93.4 11.00
---------- ----- ----------- -----
Total................. 12,000,000 100.0% $23,567,000 100.0%
========== ===== =========== =====
</TABLE>
- ---------------------

(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 9,650,000, or approximately 80.4%
(9,350,000 shares, or approximately 77.5%, if the Underwriters' over-
allotment option is exercised in full), of the number of shares of Common
Stock outstanding after this offering. See "Principal and Selling
Stockholders."

13
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below have been derived from the
financial statements of the Company set forth elsewhere in this Prospectus,
which have been prepared in accordance with generally accepted accounting
principles. This following selected data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes appearing elsewhere in this
Prospectus, including the Company's financial statements as of July 31, 1996
and for the six-month period ended July 31, 1996 which have been audited by
Deloitte & Touche LLP, independent auditors. The data at January 31, 1996 and
January 31, 1995 and for each of the two fiscal years ended January 31, 1996
and January 31, 1995 and for the period from September 9, 1993 (inception) to
January 31, 1994 are derived from the Company's financial statements which
have been audited by Richard A. Eisner & Company, LLP, independent auditors,
which financial statements are included elsewhere herein. The data at October
31, 1996 and for the nine-month periods ended October 31, 1995 and 1996 are
derived from the Company's unaudited financial statements for such period,
and, in the opinion of the Company's management, contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
results of operations for such interim periods. All financial data has been
restated to give effect to the Reorganization. Results for the nine months
ended October 31, 1996 are not necessarily indicative of the Company's results
that may be achieved for the fiscal year ending January 31, 1997 or any future
period.

<TABLE>
<CAPTION>
SEPTEMBER 9,
1993 NINE MONTHS
(INCEPTION) TO FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED OCTOBER 31,
JANUARY 31, ENDED ENDED -------------------
1994 JANUARY 31, 1995 JANUARY 31, 1996 1995 1996
-------------- ---------------- ---------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net sales............. $ -- $ 139 $5,652 $ 2,844 $ 15,482
Cost of sales......... -- 89 3,078 1,453 7,421
----- ----- ------ -------- ---------
Gross profit.......... -- 50 2,574 1,391 8,061
Selling, general and
administrative
expenses............. 34 384 2,569 1,482 6,331
Interest income, net.. 1 2 25 18 24
----- ----- ------ -------- ---------
Income (loss) before
provision for income
taxes................ (33) (332) 30 (73) 1,754
Provision for income
taxes................ -- -- 3 -- 15
----- ===== ------ -------- ---------
Net income (loss)..... $ (33) $(332) $ 27 $ (73) $ 1,739
===== ===== ====== ======== =========
Pro forma net income
(loss) (1)........... $ (19) $(202) $ 18 $ (44) $ 1,035
===== ===== ====== ======== =========
Pro forma net income
per share (2)........ $ 0.00 $ 0.10
====== =========
Shares used in the
calculation of
pro forma net income
per share (2)........ 10,098 10,098
====== =========
SELECTED OPERATING DATA:
Number of catalogs
mailed............... -- 26 1,700 1,050 4,950(4)
House names (3)....... -- 17 290 196 1,080
<CAPTION>
JANUARY 31, 1995 JANUARY 31, 1996 OCTOBER 31, 1996
---------------- ---------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.......... $ 704 $ 675 $1,140
Working capital....... 826 720 1,946
Total assets.......... 870 1,266 6,901
Total stockholders'
equity............... 835 962 2,749
</TABLE>
- ---------------------

(1) Computed on the basis described in Note 6 of Notes to Financial Statements
and assuming the pro forma tax provisions described therein. Prior to this
offering, the Company will effect the Reorganization, in which the Company
will convert from a limited liability company to a C corporation. See "The
Reorganization."
(2) See Note 2 of Notes to Financial Statements for an explanation of the
determination of shares used in computing pro forma net income per share.

(3) House names represents the number of customers who have made at least one
purchase or have requested a catalog from the Company in the preceding 24
months, determined at the end of the applicable fiscal period.

(4) Does not include 750,000 copies of the Company's winter 1996 catalog
mailed in October 1996. The Company did not mail any copies of its winter
1995 catalog in the nine months ended October 31, 1995.

14
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussion in this Prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions.
The cautionary statements made in this Prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in the
section entitled "Risk Factors" as well as those discussed elsewhere in this
Prospectus.

OVERVIEW

The Company was founded in 1993 and distributed its first catalog in 1994
through a network of on-campus college representatives. In early 1995, in an
effort to broaden the reach of its catalogs, the Company changed its primary
channel of distribution from college representatives to direct mail. This
change has resulted in a substantial increase in the Company's sales. In order
to support its direct marketing operations, the Company has made significant
capital expenditures for telephone and management information systems and has
hired and maintained an in-house workforce of teleservice representatives.

The Company initially mailed catalogs to persons responding to
advertisements and to names on rented lists. The Company has built a
proprietary list of "house names" (customers who have made at least one
purchase or have requested a catalog from the Company in the preceding 24
months), which contained over one million names as of October 31, 1996. A
significant portion of the Company's catalogs are mailed to house names,
supplemented by purchased and rented lists. The Company believes that the
response rates generated from its house list are typically higher than can be
realized from purchased or rented lists.

The Company plans to increase catalog mailings from an anticipated 7 million
in fiscal 1996 to approximately 18 million in fiscal 1997. The Company mailed
four editions of its catalog in fiscal 1995, and anticipates mailing at least
five editions in fiscal 1996 and seven editions in fiscal 1997. Response rates
in fiscal 1996 have increased for each season's catalog compared to the
corresponding seasonal catalog in fiscal 1995. The Company believes such
increases are due, in part, to an increase in the proportion of house names
used in the Company's catalog mailings and, in part, to more effective
merchandising and catalog design. While the Company has achieved response rate
increases on a year-to-year basis, the Company has from time to time
(including fiscal 1996) experienced decreases in response rates from catalog
to catalog within a fiscal year. Response rates are influenced by a number of
factors including the timing of catalog mailings, market acceptance of the
Company's merchandise, the mix and presentation of products and actions of
competitors, and there can be no assurance that the Company will achieve
response rate increases in the future. Average order size has also fluctuated
seasonally. Generally, the average size of orders from the Company's fall and
winter catalogs is larger than the average size of orders from its spring and
summer catalogs.

The Company is currently attempting to increase the flexibility of its
catalog publishing schedule and reduce the lead time for inventory purchases
to take better advantage of early indicators of customer purchasing patterns
and reduce its exposure to the risk of inventory obsolescence. In the third
quarter of fiscal 1996, the Company began mailing catalogs to selected
portions of its house list that typically respond at higher rates. The Company
mailed its first sale circular in August 1996 and its first targeted
supplemental catalog in October 1996. In part to facilitate its targeted
publishing strategy, the Company has developed an in-house art department to
allow for shorter and more flexible publishing schedules. In addition,
recently, at the Company's request, certain of the Company's vendors have
agreed to purchase raw materials in advance and in excess of the Company's
initial purchase orders. This allows the Company to place orders later in a
season in response to early indicators of customer demand while reducing the
Company's inventory risk. Although

15
<PAGE>

the Company sometimes shares the risk of these raw material orders with such
vendors, these advance purchases limit its exposure to the greater risk of
unsold finished goods. The Company believes these actions have helped to
improve its overall profitability in fiscal 1996.

The Company believes that as its revenue base grows and it further
penetrates its target market, the Company may not be able to sustain the
levels of growth in net sales and growth in operating income experienced in
fiscal 1995 and the first nine months of fiscal 1996.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to
net sales. Any trends reflected by the following table may not be indicative
of future results.

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------------------------------------
NINE MONTHS
FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED OCTOBER 31,
ENDED ENDED -------------------
JANUARY 31, 1995 JANUARY 31, 1996 1995 1996
---------------- ---------------- -------- --------
<S> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 64.0% 54.5% 51.1% 47.9%
------ ----- -------- --------
Gross profit............ 36.0% 45.5% 48.9% 52.1%
Selling, general and
administrative
expenses............... 276.3% 45.4% 52.1% 41.0%
Interest income, net.... 1.4% 0.4% 0.6% 0.2%
------ ----- -------- --------
Income (loss) before
provision for income
taxes.................. (238.9%) 0.5% (2.6%) 11.3%
Provision for income
taxes.................. -- -- -- 0.1%
------ ----- -------- --------
Net income (loss)....... (238.9%) 0.5% (2.6%) 11.2%
====== ===== ======== ========
Pro forma net income
(loss) (1)............. (145.3%) 0.3% 1.5% 6.7%
====== ===== ======== ========
</TABLE>
- ---------------------

COMPARISON OF NINE MONTHS ENDED OCTOBER 31, 1995 AND 1996

Net sales. Net sales increased approximately $12.7 million, from $2.8
million in the first nine months of fiscal 1995 to $15.5 million in the first
nine months of fiscal 1996. The increase in net sales was primarily due to an
increase in the number of catalogs mailed, as well as an increase in response
rates and average order size. The Company increased the number of catalogs it
mailed from over one million in the first nine months of fiscal 1995 to over
4.9 million in the first nine months of fiscal 1996. Sales per catalog from
catalogs mailed in the first nine months of fiscal 1996 (excluding the late
fall 1996 catalog) increased by 16% over sales per catalog from catalogs
mailed in the first nine months of fiscal 1995. The increase in sales per
catalog was primarily caused by the increase in response rates over the same
period, and to a lesser extent by a slight increase in average order size. The
slight increase in average order size resulted from a combination of factors,
including increased prices on certain existing items, and the addition of
certain more expensive items in the Company's catalogs.

Gross margin. Gross margin increased from 48.9% in the first nine months of
fiscal 1995 to 52.1% in the first nine months of fiscal 1996. The increase in
gross margin was due to improved sourcing of merchandise, including larger
volume discounts from suppliers, as well as changes in product mix and higher
selling prices. To a lesser degree, gross margin increased as certain related
fixed costs of merchandising were spread over increased sales. These
improvements were partially offset by an increased reserve for returns
consistent with the Company's recent growth and an increased inventory reserve
for obsolescence based upon management's evaluation of merchandise inventories
as of October 31, 1996 and anticipated inventory dispositions.

16
<PAGE>

Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $4.8 million, from $1.5
million in the first nine months of fiscal 1995 to $6.3 million in the first
nine months of fiscal 1996. Selling, general and administrative expenses
decreased as a percentage of net sales from 52.1% in the first nine months of
fiscal 1995 to 41.0% in the first nine months of fiscal 1996. The reduction in
selling, general and administrative expenses as a percentage of net sales was
due primarily to the leveraging of certain fixed costs over a larger revenue
base. The reduction was partially offset by a charge of approximately $270,000
in the first nine months of fiscal 1996 related to the processing of names of
catalog requesters through a third party service. The Company currently
processes the majority of the names of its catalog requesters in-house and
anticipates doing so in the future. In addition, the reduction was partially
offset by the Company's higher expenditures on corporate salaries and
additional information systems in anticipation of future sales growth.

COMPARISON OF FISCAL YEARS 1994 AND 1995

Net sales. Net sales increased approximately $5.6 million, from $139,000 in
fiscal 1994 to $5.7 million in fiscal 1995. The increase in net sales was due
primarily to the change in the Company's primary channel of distribution from
on-campus college representatives to direct mail and the corresponding
increase in the number of catalogs distributed. The Company increased catalog
mailings from approximately 25,500 catalogs in fiscal 1994 to approximately
1.7 million catalogs in fiscal 1995.

Gross margin. Gross margin increased from 36.0% in fiscal 1994 to 45.5% in
fiscal 1995. The increase in gross margin was due to the leveraging of certain
fixed costs over a larger revenue base, improved sourcing of merchandise,
including sourcing in larger quantities from a broader range of vendors, as
well as a change in merchandise mix to higher margin apparel and accessories.
The increase in gross margin in fiscal 1995 was partially offset by the
Company's decision to liquidate excess inventory through charitable donations
in the fourth quarter of fiscal 1995.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $2.2 million, from $384,000 in
fiscal 1994 to $2.6 million in fiscal 1995. Selling, general and
administrative expenses decreased as a percentage of net sales from 276.3% in
fiscal 1994 to 45.4% in fiscal 1995. This reduction in selling, general and
administrative expenses as a percentage of net sales was due primarily to the
fact that revenues increased faster than expenses. The reduction in expenses
as a percentage of net sales was partially offset by a higher corporate
payroll and higher expenditures for management information systems and
telephone systems related to the Company's infrastructure growth.

INCEPTION THROUGH JANUARY 31, 1994

The Company was founded in September 1993 and distributed its first catalog
in March 1994. Accordingly, the Company had no net sales and an operating loss
of $33,000 in the interim period ended January 31, 1994.

17
<PAGE>

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited statements of operations
data for the seven quarters ended October 31, 1996, as well as such data
expressed as a percentage of the Company's total net sales for the periods
indicated. This data has been derived from unaudited financial statements
that, in the opinion of management, include all adjustments (consisting only
of normal recurring adjustments) necessary for fair presentation of such
information when read in conjunction with the Company's annual audited
financial statements and notes thereto.

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------
FISCAL 1995 FISCAL 1996
------------------------------------- -----------------------------
APR. 30, JULY 31, OCT. 31, JAN. 31, APR. 30, JULY 31, OCTOBER 31,
1995 1995 1995 1996 1996 1996 1996
-------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 557 $ 744 $1,543 $2,808 $3,709 $4,663 $7,110
Cost of sales........... 278 398 777 1,625 1,725 2,233 3,463
----- ----- ------ ------ ------ ------ ------
Gross profit............ 279 346 766 1,183 1,984 2,430 3,647
Selling, general and
administrative
expenses............... 337 471 674 1,087 1,489 2,149 2,693
Interest income, net.... 7 6 5 7 9 11 4
----- ----- ------ ------ ------ ------ ------
Income (loss) before
provision for income
taxes.................. (51) (119) 97 103 504 292 958
Provision for income
taxes.................. -- -- -- 3 7 4 4
----- ----- ------ ------ ------ ------ ------
Net income (loss)....... $ (51) $(119) $ 97 $ 100 $ 497 $ 288 $ 954
===== ===== ====== ====== ====== ====== ======
Pro forma net income
(loss) (1)............. $ (30) $ (70) $ 58 $ 60 $ 297 $ 171 $ 567
===== ===== ====== ====== ====== ====== ======
<CAPTION>
PERCENTAGE OF TOTAL NET SALES
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 49.9% 53.5% 50.4% 57.9% 46.5% 47.9% 48.7%
----- ----- ------ ------ ------ ------ ------
Gross profit............ 50.1% 46.5% 49.6% 42.1% 53.5% 52.1% 51.3%
Selling, general and
administrative
expenses............... 60.5% 63.3% 43.7% 38.7% 40.1% 46.0% 37.9%
Interest income, net.... 1.3% 0.8% 0.3% 0.2% 0.2% 0.2% 0.1%
----- ----- ------ ------ ------ ------ ------
Income (loss) before
provision for income
taxes.................. (9.1%) (16.0%) 6.2% 3.6% 13.6% 6.3% 13.5%
Provision for income
taxes.................. -- -- -- 0.1% 0.2% 0.1% 0.1%
----- ----- ------ ------ ------ ------ ------
Net income (loss)....... (9.1%) (16.0%) 6.2% 3.5% 13.4% 6.2% 13.4%
===== ===== ====== ====== ====== ====== ======
Pro forma net income
(loss) (1)............. (5.4%) (9.4%) 3.8% 2.1% 8.0% 3.7% 8.0%
===== ===== ====== ====== ====== ====== ======
</TABLE>
- --------

The Company is subject to seasonal fluctuations in its merchandise sales and
results of operations. The Company expects its net sales and results of
operations generally to be lower in the first and second quarters than in the
third and fourth quarters of each fiscal year (which include the back-to-
school and holiday seasons). The Company's quarterly results may fluctuate as
a result of numerous factors, including the timing, quantity and cost of
catalog mailings, the timing of sale circulars and liquidations, the timing of
merchandise deliveries, market acceptance of the Company's merchandise
(including new merchandise categories or products introduced), the mix of
products sold, the hiring and training of additional personnel, the timing of
inventory

18
<PAGE>

writedowns, the incurrence of other operating costs and factors beyond the
Company's control, such as general economic conditions and actions of
competitors. Accordingly, the results of operations in any quarter will not
necessarily be indicative of the results that may be achieved for a full
fiscal year or any future quarter. See "Risk Factors--Seasonal and Quarterly
Fluctuations."

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has met its operating and cash requirements
through funds generated from operations and the private sales of equity
securities. All of the Company's working capital needs have been satisfied by
cash provided by operations since the third quarter of fiscal 1995. Cash
provided by operations in the first nine months of fiscal 1996 was $831,000
while cash used in operations was $367,000 during the first nine months of
fiscal 1995. This was primarily due to lower selling, general and
administrative expenses as a percentage of net sales and higher gross margins.
Cash provided by operations was $40,000 in fiscal 1995, as compared to cash
used in operations of $422,000 in fiscal 1994.

Cash used in investing in the first nine months of fiscal 1996 was $366,000
and $67,000 in the first nine months of fiscal 1995. Cash used in investing in
fiscal 1995 was $169,000 and $7,000 in fiscal 1994. The Company expects to
make capital expenditures of approximately $1.0 million to upgrade its
management information systems in the fourth quarter of fiscal 1996 and the
first quarter of fiscal 1997. The Company expects to make additional capital
expenditures of $750,000 for additional technology upgrades in the last three
quarters of fiscal 1997. The Company also anticipates capital expenditures of
at least $250,000 in property, plant and equipment, including leasehold
improvements and office equipment.

Cash and cash equivalents increased by approximately $465,000 from January
31, 1996 to October 31, 1996 primarily due to increased cash provided by
operations relative to cash used by operations and decreased by $29,000 from
January 31, 1995 to January 31, 1996. During the fiscal year prior to this
offering, the Company has operated as a limited liability company with taxes
paid by its members. In anticipation of its conversion to a Delaware
corporation, the Company, as part of the Reorganization, intends to make a
cash distribution to certain members of the limited liability company.
Following the Reorganization, the Company will not be a flow-through entity
and will be liable for applicable income taxes. See "Dividend Policy" and "The
Reorganization."

The Company has a revolving line of credit for seasonal working capital,
collateralized by all of the Company's assets other than inventory. The
maximum amount available under the line of credit is $1.5 million. The
interest rate on the line of credit is the lending bank's prime rate (8.25% at
October 31, 1996) plus 2%. The Company has not drawn on this line.

The Company believes that its cash on hand, together with cash generated by
operations and the proceeds of this offering, will be sufficient to meet its
capital and operating requirements through fiscal 1997. The Company's future
capital requirements, however, depend on numerous factors, including, without
limitation, the success of its marketing, sales and distribution efforts.
There can be no assurance that additional funds, if required, will be
available to the Company on favorable terms or at all.

INFLATION

The Company does not believe that inflation has had a material adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs related to inflation through increases in its
prices to customers.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." SFAS

19
<PAGE>

No. 121 requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, and is effective for fiscal years beginning after December 15,
1995. The adoption of SFAS No. 121 did not have an effect on the Company's
financial position or results of operations.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is effective for the Company beginning February 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
expense to be measured based on the fair value of the equity instrument
awarded. Companies are permitted, however, to continue to apply Accounting
Principles Board Opinion No. 25 ("APB No. 25"), which recognizes compensation
costs based on the intrinsic value of the equity instrument awarded. The
Company will continue to apply APB No. 25 to its stock-based compensation
awards to employees. The required disclosures of pro forma effects on net
income and earnings per share did not apply during the nine-month period ended
October 31, 1996 or prior years.

20
<PAGE>

BUSINESS

dELiA*s is a direct marketer of casual apparel and related accessories to
girls and young women, primarily between the ages of 10 and 24 (an age group
known as "Generation Y"). The Company believes that it is one of a limited
number of direct marketers distributing an apparel-based catalog exclusively
for this market and that its selection and presentation of merchandise have
contributed to a growing recognition of dELiA*s as a Generation Y fashion
resource. The Company's broad assortment of merchandise includes recognized
and emerging brands complemented by dELiA*s own branded products. Merchandise
ranges from basics, such as jeans, shorts and t-shirts to more fashion-
oriented apparel and accessories, such as woven and knit junior dresses,
swimwear, sunglasses, watches, costume jewelry and cosmetics. The Company's
distinctive catalogs, with their eye-catching layouts accented by creative,
high-impact editorial, are designed to express a culture and attitude unique
to dELiA*s. Each catalog carries a broad array of merchandise typically
presented in coordinated outfits that can be purchased for under $100.

dELiA*s mailed its first catalog in March 1994 and mailed approximately 1.7
million in fiscal 1995. The Company plans to increase catalog mailings from an
anticipated 7 million in fiscal 1996 to approximately 18 million in fiscal
1997. As of October 31, 1996, the Company's proprietary database had grown to
over one million house names, including approximately 200,000 customers who
had made at least one purchase from the Company within the preceding 24
months. The Company's customers are located in all 50 states, as well as
Japan, with sales to customers in any single state comprising not more than
12% of total sales in the first nine months of fiscal 1996.

THE GENERATION Y MARKET

With the large "baby boom" generation maturing and having children, the
younger segments of the U.S. population have been increasing in recent years.
This increase follows a period of decline in the teen population, which the
Company believes contributed to a less favorable market for teen-focused
retailers. According to the U.S. Census Bureau, Generation Y (ages 10 to 24
years) currently numbers more than 55 million people and is expected to grow
by 13% to more than 62 million by 2005. These children of the "baby boom"
generation are larger in number and growing more rapidly as a group than the
generation ahead of them.

HISTORICAL AND PROJECTED U.S. POPULATION OF 10 TO 24 YEAR-OLDS

LOGO

21
<PAGE>

The teen population (ages 12 to 19) represents the core of Generation Y. The
increase in the U.S. teen population has been accompanied by an increase in
the amount of money teens spend. According to one independent consumer
research firm, total teen spending in 1995 was $109 billion, an increase of
10% from 1994. Another independent research firm estimated that apparel
accounted for 34% of teen spending in 1995 and was the largest single category
of teen spending.

The Company believes that the members of Generation Y are influenced by new
media and information sources and that new consumer brands have emerged that
have become the choice of Generation Y. Although a variety of retailers and
catalogers offer teen merchandise, the Company believes that a limited number
of national retailers or catalogers cater exclusively to the Generation Y
market. The Company believes that in addition to creating a cultural
environment that caters to teen purchasers, retailers and catalogers must be
accessible to this population, many of whom are too young to drive, have
working parents with limited time to take them shopping or do not have
convenient access to teen-focused retailers. Based on these factors, the
Company believes that Generation Y is a large and underserved market that
represents a significant direct marketing opportunity.

GROWTH STRATEGY

The Company's goal is to be the leading direct marketer of casual fashion
apparel, related accessories and other products to Generation Y girls and
young women and to build on its recognition as a fashion resource. Key
elements of the Company's strategy to accomplish its goal include the
following:

Grow Core Catalog Business. dELiA*s believes that significant opportunities
exist to penetrate further its target market through the increased use of
catalogs. The Company's proprietary database consists of approximately one
million house names, compared to a total estimated Generation Y female
population of over 25 million. The Company intends to increase the number of
catalogs mailed from an anticipated 7 million in fiscal 1996 to approximately
18 million in fiscal 1997, and to expand the number of editions of its
catalogs. The Company believes it can use its proprietary database to develop
targeted mailings to specific customer segments. It also may broaden the range
of products offered in its catalogs (including additional dELiA*s-branded
products). In addition, the Company recently began to distribute catalogs in
Japan and plans to increase its distribution of catalogs in Japan in fiscal
1997. The Company is also exploring distribution opportunities in other
international markets.

Focus on Brand Name Merchandise. The Company believes teens are very brand-
conscious, and wear branded apparel to project an image to their peers. The
Company monitors leading young women's magazines (including Sassy, Seventeen
and YM), television channels (such as MTV) and other trend-setting media to
identify brands and styles that it believes are attracting the attention of
the teen market. A typical dELiA*s catalog features merchandise from a diverse
group of more than 50 vendors. Brands currently offered through dELiA*s
catalogs include nationally recognized names, such as Dickie's, Kenneth Cole
and Vans, as well as brands recognized within the teen market, including Free
People (Urban Outfitters) and Roxy (Quiksilver). dELiA*s also strives to
obtain merchandise from emerging designers, a strategy the Company believes
differentiates dELiA*s from other retailers and helps to establish dELiA*s as
a fashion resource for girls and young women. Emerging brands currently
featured in dELiA*s catalogs include Dollhouse, Lip Service, Little Earth
Products, Madhouse, Yak Pak and 26 Red Sugar.

Develop and Leverage the dELiA*s Brand Identity. The Company believes the
dELiA*s brand stands for fresh, progressive teen style and that the Company
has become a fashion resource for Generation Y girls and young women. The
dELiA*s brand identity is comprised of several components, including up-to-
date merchandise offerings, dELiA*s-branded products, the promotion of
emerging brands and dELiA*s distinctive catalog design. dELiA*s reaches out to
its target audience through its colorful, high-impact catalogs, which are
designed to resemble a youthful fashion digest and to enhance the dELiA*s
brand identity. The Company believes that successfully establishing strong
relationships with its target customers through its catalogs will enable
dELiA*s to leverage its name and database to develop additional distribution
channels

22
<PAGE>

and complementary product offerings in the future. These opportunities may
include developing a non-traditional, youth-oriented magazine (or 'zine),
developing other traditional or electronic publishing ventures and opening a
retail store.

Build Proprietary Customer Database. The Company believes the dELiA*s
customer database, which includes demographic data as well as purchasing
patterns and preferences, would be difficult for competitors to replicate and
offers opportunities for cross-marketing, sales of new products and the
development of additional distribution channels. The Company's proprietary
database of over one million house names includes approximately 200,000
customers who have made at least one purchase in the preceding 24 months.
During the first nine months of fiscal 1996, approximately 800,000 new names
were added to the Company's database. The database has been developed
primarily through referrals, word-of-mouth, returns of catalog request cards
and targeted classified advertising in selected magazines, including Sassy,
Seventeen and YM. The Company believes over 90% of the names in the database
have been derived from these sources. The Company believes that its database
yields response rates that exceed average response rates for the consumer
catalog industry.

Invest in Customer Service Infrastructure. During fiscal 1996, the Company
has made significant investments in integrated, state-of-the-art telephone and
management information systems. These systems allow teleservice
representatives to provide real-time product availability and order status
information to customers and to monitor sales patterns and inventory levels
more closely. In addition, the Company has expanded its customer service
operations, including an increase in the number of its teleservice
representatives from approximately 50 on February 1, 1996 to approximately 240
on October 31, 1996. The Company focuses on hiring and training energetic,
service-oriented teleservice representatives who can understand and relate to
dELiA*s customers, with the goals of providing a convenient shopping
experience, offering useful product information and promoting customer
loyalty.

MERCHANDISING AND MARKETING

dELiA*s offers a carefully edited assortment of recognized and emerging
brands of teen apparel and accessories, complemented by dELiA*s-branded
merchandise. The Company believes teens are very brand-conscious, particularly
in their apparel choices, and rely on their favorite brands to help them
project an image to their peers. The Company monitors leading young women's
magazines (including Sassy, Seventeen and YM), television channels (such as
MTV) and other trend-setting media to identify brands and styles that it
believes are attracting the attention of the teen market. The Company's buyers
regularly attend apparel shows and meet with vendors and, in some cases, the
editorial staffs of young women's magazines, to stay abreast of popular
brands, fashions and styles.

The Company's catalogs feature a broad assortment of merchandise, ranging
from basics, such as jeans, shorts and t-shirts to more fashion-oriented
apparel and accessories, such as woven and knit junior dresses, swimwear,
sunglasses, watches, costume jewelry and cosmetics to enable its customers to
fulfill many of their fashion needs. The Company presents coordinated outfits
in its catalogs that reflect dELiA*s style. Merchandise is presented in a
manner designed to encourage customers to create their own outfits. The
Company believes the presentation of coordinated outfits increases average
order size and enhances sales.

The following table sets forth the principal product categories offered by
dELiA*s and the percentage of the Company's net sales (through October 31,
1996) from its 1996 catalogs represented by each category.
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
FROM 1996 CATALOGS
PRODUCT CATEGORY (THROUGH OCTOBER 31, 1996)
---------------- --------------------------
<S> <C>
Apparel......................................... 71.3%
Footwear........................................ 16.1%
Accessories..................................... 7.2%
Cosmetics....................................... 5.4%
-----
100.0%
</TABLE>

23
<PAGE>

In the fall of 1995, the Company began to market products under the dELiA*s
brand name. Currently dELiA*s-branded products consist primarily of cosmetics,
t-shirts and footwear. Approximately 14% of the Company's net sales (through
October 31, 1996) from its 1996 catalogs was attributable to dELiA*s-branded
products.

The Company seeks to develop strong relationships with numerous vendors and
designers in order to maintain ongoing access to recognized and emerging
brands. A typical dELiA*s catalog features merchandise from a diverse group of
more than 50 vendors. The Company believes the strong customer acceptance of
its catalog helps make the Company a preferred outlet for certain of its
vendors, some of whom occasionally provide the Company with merchandise on an
exclusive basis. Brands currently offered through dELiA*s catalogs include
nationally recognized names, such as Dickie's, Kenneth Cole and Vans, as well
as brands recognized within the teen market, including Free People (Urban
Outfitters) and Roxy (Quiksilver). dELiA*s also strives to obtain merchandise
from emerging designers, a strategy the Company believes differentiates
dELiA*s from other retailers and helps to establish dELiA*s as a fashion
resource for girls and young women. Emerging brands in the Company's catalog
currently include Dollhouse, Lip Service, Little Earth Products, Madhouse, Yak
Pak and 26 Red Sugar. Apparel produced by Urban Outfitters accounted for
approximately 24% of net sales in each of the spring 1996 and summer 1996
catalogs. The Company believes that a limitation on its ability to obtain
products from Urban Outfitters could have a material adverse effect on the
Company. No other supplier's products accounted for more than 8% of net sales
from the spring 1996 and summer 1996 catalogs. Six vendors accounted for
approximately 50% of the net sales generated by the Company's spring 1996
catalog, and five vendors accounted for approximately 53% of the net sales
generated by the Company's summer 1996 catalog.

The Company believes its exposure to fashion risk is mitigated in part by
relatively short lead times associated with the purchasing of its merchandise
and by its ongoing monitoring of sales patterns. On average, approximately
three-quarters of stock-keeping units ("SKUs") in the Company's spring and
fall catalogs are carried over to the summer and winter catalogs,
respectively; approximately one-sixth of SKUs in the summer and winter
catalogs is carried over to the fall and spring catalogs, respectively. The
Company believes its close working relationships with vendors also enhance its
ability to identify fashion trends.

CATALOGS

dELiA*s catalogs are designed to create a distinctive and entertaining
shopping experience and to offer customers more than the typical apparel
catalog by combining the feel and editorial flair of a teen-focused fashion
magazine with the convenience of direct mail shopping. The catalogs are filled
with colorful, eye-catching layouts and creative, high-impact phrases. The
catalogs feature teen models whose expressions and poses convey the dELiA*s
attitude. For example, on a typical page, coordinated outfits featuring plaids
and stripes appear beside the editorial soundbite, "oPPositeS AtTract &
-------------------
AbsTrAcT & DeTrAcT & SuBtRaCt & inTeRaCt. oK." Similarly, the headline on a
- ---------------------------------------------
page featuring dELiA*s neon and metallic-colored makeup reads, "MakIn' uP Is
------------
nOt hARd tO Do."
- ---------------
dELiA*s catalogs are created and produced in-house by the Company's
designers, with the assistance of free-lance photographers and production
artists. These in-house capabilities allow the Company to control its catalog
production schedule, decreasing the lead times necessary to produce catalogs
and reducing the costs of preparing pages for printing. These capabilities
also provide the Company with greater flexibility and creativity in catalog
production and merchandise selection.

In fiscal 1996, the Company intends to publish at least five seasonal
catalogs (spring, summer, fall, late fall and winter). A typical catalog,
which follows a magazine-type format, contains approximately 50 pages and 500
SKUs. The Company's four principal seasonal catalogs are mailed to persons
listed in the Company's proprietary database, as well as to persons from
rented lists. The Company mailed its late fall 1996 catalog and intends to
mail future supplemental catalogs to prior purchasers and selected catalog
requesters. In addition, the Company arranges for bulk distribution of its
catalogs on college campuses. In August 1996, the Company mailed its first
sale circular. This four-page circular featured over 200 SKUs. The Company may
from time to time in the future mail additional sale circulars. The Company
anticipates mailing seven catalog editions in fiscal 1997.

24
<PAGE>

In fiscal 1996, the Company anticipates distributing approximately 7 million
catalogs in all 50 states. The Company intends to increase the number of
catalogs mailed to approximately 18 million in fiscal 1997. The Company
believes it can leverage its proprietary database to develop targeted mailings
to specific customer segments, and intends to begin more frequent mailings of
supplemental catalogs to repeat customers.

The Company recently began to distribute catalogs in Japan and intends to
increase its distribution of catalogs in Japan in fiscal 1997. These catalogs
are mailed directly to Japanese customers and are also being distributed
through an arrangement with a direct marketing division of Sony Corporation.

OPERATIONS

The primary components of the Company's operations, as described below,
include its proprietary database, teleservices and order entry, customer
service and returns and distribution and fulfillment.

Proprietary Database Development. The Company has developed its proprietary
customer database primarily through referrals, word-of-mouth, returns of
catalog request cards and targeted classified advertising in selected
magazines, including Sassy, Seventeen and YM. The Company believes over 90% of
the names in the database have been derived from these sources, which the
Company believes generate higher response rates than purchased or rented
lists. During the first nine months of fiscal 1996, approximately 800,000 new
names were added to the Company's database. As of October 31, 1996, the
Company's proprietary database had grown to over one million names, including
approximately 200,000 customers who had made at least one purchase from the
Company within the preceding 24 months. The Company's database contains a
person's name, gender, residence, age, family status and historical
transaction data (including, among other things, referral source, history of
orders, payment method, average order size and product purchase information).

Teleservices and Order Entry. The Company provides its customers with 24-
hour, seven-day-a-week, toll-free telephone access. Approximately 70% of the
Company's orders are received by phone and 30% by mail, facsimile and
electronic mail. Teleservice representatives process orders directly into the
Company's management information system, which provides customer order history
and information, product specifications, available substitutes and
accessories, expected ship date and order number. The teleservice
representatives are provided with a sales script, are versed in product sizes,
colors and features and are trained to cross-sell accessories and related
products and provide information about promotional items. Teleservice
representatives are trained to transfer calls to customer service personnel as
appropriate.

The Company believes its customers are particularly sensitive to the way
merchants and salespeople communicate with them. The Company strives to hire
energetic, service-oriented teleservice representatives who can understand and
relate to customers. Teleservice representatives, many of whom are college
students, participate in a training program, which includes a mentor system
for working with more experienced personnel. After training, teleservice
representatives are monitored to review performance and are re-trained
periodically. As teleservice representatives gain experience, they may be
trained and promoted in other areas, such as customer service.

The Company currently has 120 in-house phone stations and recently installed
a new state-of-the-art telephone system. The Company anticipates upgrading its
management information systems in the fourth quarter of fiscal 1996 and plans
to continue to update the system in the future to support its growth. The
Company's approximately 240 (as of October 31, 1996) full- and part-time
teleservice representatives have the capacity to handle approximately 2,000
calls per hour. The Company also uses an outside teleservices provider for
overflow orders and orders placed between 3 a.m. and 7 a.m., Eastern Standard
Time. The Company processes telephone orders in an average of two to four
minutes, depending upon the nature of the order and whether the customer is a
first-time or repeat customer.

25
<PAGE>

Customer Service and Returns. dELiA*s maintains a separate customer service
department. Customer service inquiries are principally concerned with order
and refund status. Customer service representatives are carefully screened,
specially trained and often promoted from within based on level of product
knowledge, service ability and order accuracy. The Company has a 45-day
unconditional return policy for its products. For each of fiscal 1995 and the
nine-month period ended October 31, 1996, customer returns were less than 17%
of net sales, which the Company believes is below the catalog industry
average. Return experience is closely monitored to identify trends in product
offerings, product defects and quality issues.

Distribution and Fulfillment. A majority of the Company's orders are shipped
within 24 hours of credit approval. In cases in which the order is placed
using another person's credit card and it exceeds a specified threshold, the
order is shipped only after the Company has received oral confirmation from
the cardholder. Customers generally receive orders within three to five
business days after shipping. During the first nine months of fiscal 1996,
approximately 90% of all shipments have been made through United Parcel
Service or the United States Postal Service. A shipping and handling fee is
charged on each customer order, based on the total price of the order. The
Company's fulfillment systems automatically determine the most cost effective
method of shipping each order.

dELiA*s currently uses an unaffiliated, third-party fulfillment contractor
to process and fulfill orders. The Company manages this process through two
on-site employees. The third-party contractor uses an integrated picking,
packing and shipping system via an on-line connection to the Company's in-
house server. The system monitors the in-stock status of each item ordered,
processes the order and generates warehouse selection tickets and packing
slips for order fulfillment operations. dELiA*s, through this contractor, is
currently making an average of 2,000 shipments a day (and the Company believes
that the contractor has the capacity to ship up to 10,000 orders a day).
During the first nine months of fiscal 1996, the Company shipped over 400,000
packages. The Company's agreement with the third-party contractor has a one-
year term and expires on April 30, 1997. The Company may consider performing
its own order processing and fulfillment operations in the future.

Because the Company generally purchases its merchandise prior to the receipt
of customer orders, inventory management is an increasingly important
component of the Company's operations. From time to time, the Company
purchases large quantities of merchandise to ensure availability or realize
volume savings. When the Company believes it has excessive inventory, the
Company often runs promotional sales of the excess items through programs
targeted at phone-in customers. In addition, in August 1996, the Company
mailed its first sale circular and may from time to time mail additional sale
circulars in the future. The Company also has used third-party liquidators,
tent sales and charitable donations to dispose of excess inventory and may
consider other liquidation options, including outlet stores, in the future.

INTELLECTUAL PROPERTY

The dELiA*s name and logo have been registered by the Company with the U.S.
Patent and Trademark Office. Other applications for registration of the
Company's trademarks, including the daisy (" LOGO ") symbol, are currently
pending. The Company also uses the trademarks, trade names, logos and
endorsements of its suppliers with their permission. The Company is not aware
of any pending conflicts concerning its marks or its use of others'
intellectual property rights.

COMPETITION

The teen apparel and accessories industries are highly competitive, and the
Company expects competition in these markets to increase. The Company competes
for teen and young adult customers with traditional department store
retailers, alternative and vintage clothing stores located primarily in
metropolitan areas and mall-based teen-focused retailers, such as Gadzooks,
Hot Topic, Pacific Sunwear of California, Urban Outfitters and The Wet Seal.
To a lesser degree, the Company competes with other direct marketers, such as
Tweeds and J. Crew. Many of the Company's competitors are larger and have
substantially greater financial, distribution and marketing resources than the
Company. The Company believes the principal competitive factors in its
business are merchandise selection, customer service, brand image and price.

26
<PAGE>

There are few barriers to entry in the teen apparel and accessories market
and the Company expects other catalogers, as well as additional store-based
retailers and apparel manufacturers, to enter this market. The Company also
could face competition from manufacturers of apparel and accessories
(including the Company's current vendors), who could market their products
directly to retail customers or make their products more readily available in
retail stores or through catalogs. In addition, competitors could enter into
exclusive distribution arrangements with the Company's vendors and deny the
Company access to their products.

EMPLOYEES

As of October 31, 1996, the Company had approximately 280 employees, of
which six held executive and administrative positions, six were employed in
finance and development, 15 were employed in supervisory sales and customer
service, 12 were employed in product acquisition and planning, 240 were
employed in teleservice operations and two were employed in catalog
production. None of the Company's employees is represented by a collective
bargaining unit. The Company considers its relations with its employees to be
good.

PROPERTIES

The Company leases its New York offices at 435 Hudson Street, New York, New
York, which occupy approximately 14,000 square feet. The lease expires in
2003. The Company believes its facilities are well-maintained and in good
operating condition. The Company expects to expand its New York offices to
accommodate anticipated growth. The Company's third-party fulfillment
contractor provides warehouse space near Lancaster, Pennsylvania to the
Company for inventory storage.

LEGAL PROCEEDINGS

The Company is not involved in any legal proceedings that management
believes would have a material adverse effect on the Company's financial
position or results of operations.

27
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Executive officers and directors of the Company and their ages as of
November 20, 1996 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen I. Kahn................ 31 Chairman of the Board, Chief Executive
Officer, President and Director
Christopher C. Edgar........... 31 Executive Vice President, Chief Operating
Officer and Director
Evan Guillemin................. 31 Chief Financial Officer, Treasurer and
Secretary
S. Roger Horchow............... 68 Director
Sidney S. Kahn................. 59 Director
Geraldine Karetsky............. 55 Director
Joseph J. Pinto................ 63 Director
</TABLE>

Stephen I. Kahn has served as President and Chief Executive Officer of
dELiA*s and as a member of the board of managers of dELiA*s LLC since co-
founding the Company in 1993 and has served as Chairman of the board of
directors since October 1996. Prior to that, he worked at PaineWebber Group,
Inc., first as a management associate (from 1988 to 1989) and then as an
associate in the merchant banking group (from 1989 to 1993). In the merchant
banking group, he was involved in the acquisition, marketing and restructuring
of the firm's portfolio investments, including apparel and retailing
properties. He also served as a director of Hawthorne Broadcasting Corp., a
PaineWebber portfolio company engaged in the ownership and operation of radio
stations. Mr. Kahn holds a B.A. from Yale College, an M.A. from Oxford
University and an M.B.A. from Columbia Business School.

Christopher C. Edgar has served as Executive Vice President of dELiA*s and
as a member of the board of managers of dELiA*s LLC since co-founding the
Company in 1993, presently serves as dELiA*s Chief Operating Officer and
joined the board of directors of the Company in October 1996. Mr. Edgar
oversees catalog publishing, marketing, merchandising and inventory
management. From 1992 to 1993, Mr. Edgar was a Nicholson Fellow and student in
the doctoral program in comparative literature at Columbia University. From
1989 to 1992, he worked as an analyst for SNL Securities, a financial industry
information service, and as a journalist for the Charlottesville Observer.
Mr. Edgar received a B.A. from Yale College and an M.A. from Columbia
University.

Evan Guillemin has served as Chief Financial Officer of dELiA*s since July
1996. Prior to joining the Company, he served briefly as an associate with,
and later a director of acquisitions for, K-III Communications Corporation, a
media investment company. From 1992 to 1994, he was executive vice president
of The New York Observer Co., with responsibility for the sales, marketing and
finance for that company's regional newspaper group. Prior to that, he helped
start SDC Publishing Co., a financial publishing unit of Thomson Corporation,
where he served as an editor and managed new product development and
acquisitions from 1989 to 1992. Mr. Guillemin received a B.A. from Yale
College and an M.B.A. from Harvard Business School.

S. Roger Horchow joined the board of directors of the Company in October
1996. He was the founder and chairman of the Horchow Collection, a direct
marketer of specialty home and fashion products, from 1971 until 1990. Mr.
Horchow was vice president of mail order for Neiman Marcus Group, Inc. from
1969 to 1971. Mr. Horchow has been a director of Fieldcrest Cannon, Inc., a
manufacturer of home-furnishing textile products, since 1994. He is also a
director of Public Radio International, White House Endowment Fund,
Smithsonian Institution and serves on the Board of Governors of the Yale
University Art Gallery. He has been chairman of R. Horchow Productions, Inc.,
a theatrical production company, since 1990. Mr. Horchow received a B.A. from
Yale College.

Sidney S. Kahn has served as a member of the board of managers of dELiA*s
LLC since its founding and joined the Company's board of directors in October
1996. He has been a private investor specializing in venture capital
investments since 1987. From 1977 to 1987 he was a senior officer of E.F.
Hutton & Co., Inc., a wholly-owned subsidiary of the E.F. Hutton Group, Inc.,
and from 1966 to 1977 he was a managing

28
<PAGE>

director and partner of Lehman Brothers. He has been a director of Orion
Network Systems, Inc., an operator of satellite-based communications systems
services, since 1990 and a number of privately held corporations, including
Telogy Networks, Inc., a communications software developer. He received a B.A.
from Yale College and is a member of the Board of Governors of the Yale
University Art Gallery.

Geraldine Karetsky has served as a member of the board of managers of
dELiA*s LLC since 1994 and joined the Company's board of directors in October
1996. She is a private investor and venture capitalist. She received a B.A.
from Smith College.

Joseph J. Pinto joined the board of directors of the Company in November
1996. He is a private investor. Since 1981, Mr. Pinto has been a director and
officer of Sefinco Ltd. (and a predecessor), the U.S.-based private investment
affiliate of Entrecanales Y Tavora SA, a Spanish conglomerate with interests
in construction and merchant banking. Sefinco's investments have included
Loehmann's, Inc., a specialty retailer of women's fashion apparel, on whose
board Mr. Pinto served from 1988 to 1992. From 1973 to 1981, Mr. Pinto was
chairman of the finance committee of Sea Containers Ltd., a container lessor
of which Mr. Pinto was a founder and a director from 1967 to 1987. From 1961
to 1973, he was engaged in merchant banking in France and Spain with Pinto &
Co., a family-owned investment firm. Mr. Pinto received a B.A. from Yale
College.

Sidney S. Kahn is Stephen I. Kahn's father. Ms. Karetsky is Stephen I.
Kahn's aunt and Sidney S. Kahn's sister. There are no other family
relationships among the directors and executive officers of the Company.

KEY EMPLOYEES

Charlene Benson has been Creative Director of dELiA*s since the fall of
1994. Prior to joining the Company, she was art director of Mademoiselle. She
has received awards from the Society of Publications for her work in US
magazine, GQ and The Sunday New York Times.

Karen Christensen has been a Senior Vice President and Controller of the
Company since January 1995. Prior to joining the Company, Ms. Christensen
practiced law for two years.

Ilka Eberly has been Buying Manager of dELiA*s since July 1996. Prior to
joining the Company, Ms. Eberly was a divisional merchandise manager of Urban
Outfitters, where she worked from 1990 to 1996.

Lisa Higgins joined dELiA*s in 1994 as one of the original buyers and is
currently Senior Vice President of Merchandising of the Company. Prior to
joining the Company, Ms. Higgins worked in the retailing division of Esprit
from 1990 until 1992.

Robert Karetsky has been a Senior Vice President of dELIA*s since October
1994. Prior to joining the Company, he worked in a variety of capacities in
education. Mr. Karetsky is the son of Geraldine Karetsky, a nephew of Sidney
S. Kahn and a cousin of Stephen I. Kahn.

Mary Obert has been Merchandise Production Manager of dELiA*s since August
1996. Prior to joining the Company, she was a production designer at Planet
Claire from 1995 to 1996 and a production manager and assistant designer at
Living Doll from 1992 to 1995. Prior to 1992, Ms. Obert was an assistant
designer at Urban Outfitters and Betsey Johnson.

Julie Scott has been Vice President of International Marketing of dELiA*s
since September 1996. Prior to joining the Company, she worked in client
acquisitions at Abacus Direct Corp., a database marketing company, as well as
in licensing and sales in Japan at a variety of companies including Marvel
Comics, Calvin Klein, Hermes and Dentsu.

Kent Trowbridge has been Senior Vice President and Director of Operations of
dELiA*s since February 1995. Prior to joining the Company, Mr. Trowbridge was
a research analyst and money manager at Sherwood Securities from 1994 to 1995.

Seth Walter has served as Vice President of Inventory Management of dELiA*s
since November 1995. Prior to joining the Company, Mr. Walter was an inventory
manager at Williams-Sonoma, where he worked from 1990 to 1995.

29
<PAGE>

BOARD COMMITTEES

Audit Committee. Upon the completion of this offering, the board of
directors will establish an audit committee, a majority of whose members will
be directors who are neither members of the Company's management nor members
of the Kahn family. The audit committee will make recommendations concerning
the engagement of independent public accountants, review with the independent
public accountants the plans and results of the audit engagement, approve
professional services provided by the independent public accountants, review
the independence of the independent public accountants, consider the range of
audit and non-audit fees and review the adequacy of the Company's internal
accounting controls.

Compensation Committee. Upon the completion of this offering, the board of
directors will establish a compensation committee. The compensation committee
will approve the salaries and other benefits of the executive officers of the
Company and administer certain compensation plans of the Company. In addition,
the compensation committee will consult with the Company's management
regarding pension and other benefit plans and compensation policies and
practices of the Company.

BOARD ELECTIONS

The Company's board of directors is divided into three classes. Directors of
each class are elected at the annual meeting of stockholders held in the year
in which the term for the class expires and will serve thereafter for three
years. See "Description of Capital Stock--Anti-Takeover Effect of Provisions
of the Certificate of Incorporation and Bylaws." The terms of each of the
current directors of the Company are as follows: term expiring in 1997--S.
Roger Horchow; term expiring in 1998--Sidney S. Kahn and Geraldine Karetsky;
and term expiring in 1999--Christopher C. Edgar and Stephen I. Kahn.

DIRECTOR COMPENSATION

The Company intends to pay its directors who are not employees of the
Company $1,500 for each directors' meeting and each committee meeting attended
(plus reimbursement for out-of-pocket expenses). Under the Company's 1996
Stock Incentive Plan (the "Incentive Plan"), each non-employee director who is
not a member of the Kahn family will be granted, effective at the completion
of this offering, an option to purchase 40,000 shares of Common Stock at an
exercise price per share equal to the initial public offering price. All
options granted to non-employee directors will become exercisable at the rate
of 20% on each of the first five anniversaries of the date of grant, assuming
the non-employee director is a director on those dates, and all such options
generally will cease to be exercisable ten years from the date of grant. Upon
a Change of Control (as defined in the Incentive Plan) and, in the case of
directors elected prior to November 15, 1996 who are neither members of the
Company's management nor members of the Kahn family, upon a termination of
directorship other than for cause or as a result of a refusal to stand for re-
election, all options (which have not yet expired) will automatically become
exercisable. Directors who are employees of the Company will not be
compensated for services as directors. See "Management--1996 Stock Incentive
Plan."

EXECUTIVE COMPENSATION

Stephen I. Kahn, the Company's Chairman of the Board, President and Chief
Executive Officer received $20,000 in salary in fiscal 1995. He did not
receive any other compensation from the Company in fiscal 1995, and did not
receive any compensation in fiscal 1994 or the period from September 9, 1993
(inception) to January 31, 1994. The aggregate dollar value of all perquisites
and other personal benefits, securities or property awarded to, earned by or
paid to Mr. Kahn did not exceed the lesser of $50,000 or 10% of his total
annual salary during any fiscal year. No officer of the Company received
$100,000 or more in salary and bonus in fiscal 1995. In fiscal 1996, the
annual salary rate of the Company's executive officers has been as follows:
Mr. Kahn $35,000, Mr. Edgar $50,000 and Mr. Guillemin $50,000. No bonuses have
been paid in fiscal 1996.

EMPLOYMENT AGREEMENTS

Prior to the completion of this offering, Messrs. Kahn and Edgar (the
"Executives") will enter into three-year agreements with the Company providing
for the continuation of their employment as Chairman of the Board and
President and as Chief Operating Officer and Executive Vice President,
respectively, at minimum

30
<PAGE>

salaries of $100,000 a year for each Executive, subject to annual upward
adjustment in proportion to the increase in the consumer price index plus such
increases in salary and such bonuses as the board of directors may from time
to time approve. If an Executive dies, or, as a result of disability, is
unable to perform substantially all his duties for a period of nine
consecutive months, the Company may terminate his employment (not earlier than
30 days and not later than 90 days after the expiration of the nine-month
period), in which event the Executive (or his heirs or estate) will be
entitled to his salary for the remainder of the term of the agreement. Evan
Guillemin will enter into an employment agreement with the Company providing
for the continuation of his employment as Chief Financial Officer, at a salary
of $100,000 a year, on substantially the same terms and conditions as Messrs.
Kahn and Edgar, except that the term of Mr. Guillemin's agreement will expire
on July 31, 2001.

RESTRICTED STOCK PLAN

Under the Company's Restricted Stock Plan, the Company has outstanding
restricted stock awards to 12 employees covering an aggregate of 698,568
shares of Common Stock. Each such employee will be entitled to retain his
shares, without consideration, if he continues to be employed after the 30th
month following the date of grant; if such employment terminates earlier for
any reason, the employee will forfeit all his rights to the restricted stock.
Until the employee is entitled to retain his shares, Stephen I. Kahn is
entitled to vote all such shares and the employee has no rights as a
stockholder in respect of those shares. The Company will not make any
additional awards under the Restricted Stock Plan.

STOCK OPTION AGREEMENT

Mr. Guillemin and the Company have entered into a stock option agreement,
pursuant to which the Company has granted Mr. Guillemin an option to purchase
up to an aggregate of 250,000 shares of Common Stock at the price per share to
the public in this offering (the "Exercise Price"). The option becomes
exercisable as to 50,000 shares on each of July 21, 1997, 1998, 1999, 2000 and
2001. If Mr. Guillemin's employment terminates before July 21, 2001 as a
result of his death or disability, or if the Company terminates his employment
other than for cause or if the Company effects a Constructive Discharge (as
defined in Mr. Guillemin's employment agreement) of Mr. Guillemin, the option
will become exercisable as to all 250,000 shares; if Mr. Guillemin's
employment terminates other than as set forth above, the portion of the option
that is not exercisable at the date of termination will not thereafter become
exercisable. During the 30-day period beginning on the fourth anniversary of
the termination of Mr. Guillemin's employment for any reason, the Company may
purchase all the shares previously purchased by Mr. Guillemin pursuant to the
option and terminate all further rights under the option in exchange for an
amount equal to (i) the product of (A) the Average Price of a Share (as
defined in the stock option agreement) and (B) the sum of (1) the number of
shares being purchased plus (2) the number of shares subject to the option
being terminated, reduced by (ii) the product of the Exercise Price and the
number of shares subject to the option being terminated. Upon a merger,
consolidation or sale of substantially all the assets of the Company, the
option will become immediately exercisable as to 50% of the shares as to which
the option has not yet become exercisable, with the balance of the option not
then exercisable becoming exercisable in equal amounts on each July 21
thereafter through July 21, 2001. Finally, if Mr. Guillemin's employment
terminates before July 22, 1997, Stephen I. Kahn will have the option to
purchase from Mr. Guillemin 100,000 shares of Common Stock for $50,000.

1996 STOCK INCENTIVE PLAN

A maximum of 1,250,000 shares of Common Stock may be issued or used for
reference purposes pursuant to the Incentive Plan. No awards will have been
made under the Incentive Plan prior to this offering. At the time of this
offering, an option to purchase 40,000 shares of Common Stock at an exercise
price equal to the initial public offering price will be granted to each non-
employee director of the Company who is not a member of the Kahn family. See
"--Director Compensation." The maximum number of shares of Common Stock
subject to each of stock options or stock appreciation rights that may be
granted to any individual under the Incentive Plan is 100,000 for each fiscal
year of the Company during the term of the Incentive Plan. If a stock
appreciation right is granted in tandem with a stock option, it shall apply
against the individual limits for both stock options and stock appreciation
rights, but only once against the maximum number of shares available under the
Incentive Plan.

31
<PAGE>

The Incentive Plan provides for the following types of awards to eligible
employees: (i) stock options, including incentive stock options and non-
qualified stock options; (ii) stock appreciation rights, in tandem with stock
options or freestanding; and (iii) restricted stock. In addition, the
Incentive Plan provides for the non-discretionary award of stock options to
non-employee directors of the Company. Awards may be granted singly, in
combination or in tandem, as determined by a committee of the board of
directors.

Under the Incentive Plan, the committee may grant awards in the form of
incentive stock options or non-qualified stock options. The committee will
determine the number of shares subject to the option, the term of the option
(which may not exceed ten years, or, in the case of an incentive stock option
granted to a ten percent stockholder of the Company, five years), the exercise
price per share of stock subject to the option, the vesting schedule (if any)
and the other material terms of the option. Generally, no option may have an
exercise price less than the fair market value of the Common Stock at the time
of grant (or, in the case of an incentive stock option granted to a ten
percent stockholder of the Company, 110% of fair market value).

The option price upon exercise may, to the extent determined by the
committee at or after the time of grant, be paid in cash, in shares of Common
Stock, in shares of restricted stock valued at fair market value on the
payment date as determined by the committee (without regard to any forfeiture
restrictions applicable to restricted stock), by a reduction in the number of
shares of Common Stock issuable upon exercise of the option or by such other
method as is approved by the committee. If an option is exercised by delivery
of shares of restricted stock, the shares of Common Stock acquired pursuant to
the exercise of the option will generally be subject to the same restrictions
as were applicable to such restricted stock. All options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the committee. The committee may at any time offer to buy an
option previously granted on such terms and conditions as the committee shall
establish. The committee may in its discretion reprice options or substitute
options with lower exercise prices in exchange for outstanding options that
are not incentive stock options, provided that the exercise price of
substitute options or repriced options may not be less than the fair market
value at the time of such repricing or substitution. Options may also, at the
discretion of the committee, provide for "reloads," whereby a new option is
granted for the same number of shares as the number of shares of Common Stock
or restricted stock used to pay the option price upon exercise.

The Incentive Plan also authorizes the committee to award shares of
restricted stock. Upon the award of restricted stock, the recipient has all
rights of a stockholder with respect to the shares, including the right to
receive dividends currently, unless otherwise specified by the committee at
the time of grant. Unless otherwise determined by the committee at grant,
payment of dividends, if any, will be deferred until the date the relevant
share of restricted stock vests.

Recipients of restricted stock are required to enter into a restricted stock
award agreement with the Company which states the restrictions to which the
shares are subject and the date or dates or criteria on which such
restrictions will lapse. Within the limits of the Incentive Plan, the
committee may provide for the lapse of such restrictions in installments in
whole or in part or may accelerate or waive such restrictions at any time.

The Incentive Plan also authorizes the committee to grant stock appreciation
rights ("SARs") either with a stock option ("Tandem SARS") or independent of a
stock option ("Non-Tandem SARs"). A SAR is a right to receive a payment either
in cash or Common Stock as the committee may determine, equal in value to the
excess of the fair market value of a share of Common Stock on the date of
exercise over the reference price per share of Common Stock established in
connection with the grant of the SAR. The reference price per share covered by
an SAR will be the per share exercise price of the related option in the case
of a Tandem SAR and will be not less than the per share fair market value of
the Common Stock on the date of grant (or any other date chosen by the
committee) in the case of a Non-Tandem SAR subject to any exception that
applies to stock options.

A Tandem SAR may be granted at the time of the grant of the related stock
option or, if the related stock option is a non-qualified stock option, at any
time thereafter during the term of the stock option. A

32
<PAGE>

Tandem SAR generally may be exercised only at the times and to the extent the
related stock option is exercisable. A Tandem SAR is exercised by surrendering
the same portion of the related option. A Tandem SAR expires upon the
termination of the related stock option.

A Non-Tandem SAR will be exercisable as provided by the committee and will
have such other terms and conditions as the committee may determine. A Non-
Tandem SAR may have a term no longer than ten years from its date of grant. A
Non-Tandem SAR is subject to acceleration of vesting or immediate termination
upon termination of employment in certain circumstances.

The committee also is authorized to grant "limited SARS," either as Tandem
SARs or Non-Tandem SARS. Limited SARs would become exercisable only upon the
occurrence of a Change of Control (as defined in the Incentive Plan) or such
other event as the committee may designate at the time of grant or thereafter.

Unless determined otherwise by the committee at the time of grant, upon a
Change of Control, all vesting and forfeiture conditions, restrictions and
limitations in effect with respect to any outstanding award will immediately
lapse and any unvested awards will automatically become 100% vested. However,
unless otherwise determined by the committee at the time of grant, no
acceleration of exercisability will occur with regard to certain options the
committee reasonably determines in good faith prior to a Change of Control
will be honored or assumed or new rights substituted therefor by a successor
immediately following the Change of Control.

The Incentive Plan provides for nondiscretionary awards of options to
purchase Common Stock to each non-employee director. See "--Director
Compensation."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Compensation policies and decisions, including those relating to salary,
bonuses and benefits of executive officers, have been set or made by the board
of directors since the formation of the Company. Upon completion of this
offering, the board of directors will create a compensation committee, which
will recommend to the board the compensation to be paid to the Company's
executive officers. See "--Board Committees" above.

33
<PAGE>

CERTAIN TRANSACTIONS

From March 8, 1995 until immediately prior to the Reorganization, the
Company has been a limited liability company, the members of which, rather
than the Company itself, have been responsible for payment of taxes on the
Company's income. Upon the Reorganization, the Company is becoming a C
corporation, which will be responsible for the payment of taxes. The Company
has made non-interest-bearing loans to Stephen I. Kahn and Christopher C.
Edgar, each of whom is a director and officer of the Company, in amounts
estimated to equal the taxes on the portion of the income of the Company that
was attributed to them by virtue of their respective ownership interests in
the Company during its existence as a limited liability company. Those loans,
each of which was for an amount less than $60,000, will be repaid by Mr. Kahn
and Mr. Edgar upon the completion of this offering. In addition, the Company
has made a non-interest-bearing loan in the amount of $50,000 to Evan
Guillemin to finance Mr. Guillemin's acquisition of an equity interest in the
Company.

In connection with the Reorganization, certain existing members of dELiA*s
LLC will receive a portion of the LLC Distribution, which may include certain
cash distributions and/or the receipt of an Investor Note. See "The
Reorganization."

34
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information, with respect to the Company's
Common Stock beneficially owned by (i) each person known by the Company to be
the beneficial owner of more than 5% of the shares of Common Stock, (ii) each
director individually, (iii) each executive officer individually and (iv) all
executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING (1) THE OFFERING (1)
----------------------- SHARES -----------------------
NAME AND ADDRESS NUMBER PERCENT OFFERED (2) NUMBER PERCENT
- ---------------- ------------ ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS
- ---------------
Stephen I. Kahn (3)..... 8,898,406 89.0% 200,000 8,623,406 71.9%
435 Hudson Street
New York, New York
10014
Geraldine Karetsky (4).. 1,423,955 14.2 15,000 1,408,955 11.7
1660 Silverking Drive
Aspen, Colorado 81611
Sidney S. Kahn (4)...... 1,192,118 11.9 40,000 1,152,118 9.6
14 East 60th Street
New York, New York
10022
Christopher C. Edgar 768,915 7.7 75,000 693,915 5.8
(5)....................
435 Hudson Street
New York, New York
10014
Robert Karetsky......... 663,157 6.6 20,000 643,157 5.4
435 Hudson Street
New York, New York
10014
OTHER EXECUTIVE OFFICERS
AND DIRECTORS
- ------------------------
Evan Guillemin (6)...... 102,682 1.0 -- 102,682 0.9
435 Hudson Street
New York, New York
10014
S. Roger Horchow (7).... * * -- * *
5722 Chatham Hill Road
Dallas, Texas 75225
Joseph J. Pinto (7)..... * * -- * *
767 Fifth Avenue
New York, New York
10153
Directors and executive
officers as a group
(7 individuals)........ 9,770,003 97.7 350,000 9,420,003 78.5
</TABLE>
- --------
* Less than 1%.
(1) Based on the estimated amount of the LLC Distribution and the related
stock distribution that will be made by dELiA*s LLC prior to this
offering, which amount will be determined prior to the date of this
Prospectus. See "Dividend Policy" and "The Reorganization."

(2) In the event that the Underwriters exercise the over-allotment option, up
to an additional 352,500 shares of Common Stock may be sold as follows:
the Company, 52,500 shares; Stephen I. Kahn, 175,000 shares; Sidney S.
Kahn, 50,000 shares; Geraldine Karetsky, 25,000 shares; Christopher C.
Edgar, 25,000 shares; and Robert Karetsky, 25,000 shares.

(3) Includes 4,105,163 shares of Common Stock (3,905,163 shares after this
offering) directly owned by Mr. Kahn and 4,793,243 shares (4,718,243 after
this offering) that Mr. Kahn has the sole power to vote pursuant to the
Family Stockholders Agreement and agreements with certain employee holders
of restricted stock, of which Mr. Kahn also has the shared power to
restrict the disposition of 1,626,076 of those shares (1,571,076 after
this offering). See "-- Family Stockholders Agreement" and "Management--
Restricted Stock Plan."

(4) Includes 147,174 shares of stock owned as trustees for The Ruth Kahn Trust
f/b/o Sidney S. Kahn, which Sidney S. Kahn and Geraldine Karetsky have the
shared power to dispose of.
(5) Does not include 60,682 shares of Common Stock owned by Mr. Edgar subject
to the Restricted Stock Plan, which Mr. Edgar does not have the power to
vote or to dispose of.

35
<PAGE>

(6) Does not include 250,000 shares of Common Stock issuable pursuant to a
stock option agreement between Mr. Guillemin and the Company. Pursuant to
that agreement, Mr. Guillemin's option does not begin to become
exercisable until July 21, 1997. See "Management--Stock Option Agreement."
(7) Does not include 40,000 shares of Common Stock issuable pursuant to an
option that will be granted upon the completion of this offering. See
"Management--Director Compensation."

FAMILY STOCKHOLDERS AGREEMENT

Certain members of Stephen I. Kahn's family and trusts for the benefit of
such persons (the "Family Holders") and Stephen I. Kahn will enter into a
stockholders agreement with the Company (the "Family Stockholders Agreement")
which, subject to certain exceptions, prohibits the Family Holders from
transferring the shares of Common Stock they will own upon the completion of
the Reorganization for a period of two years from the date of the
Reorganization. Thereafter, the Family Holders will be able to transfer such
shares in accordance with the limitations imposed on "affiliates" under Rule
144 under the Securities Act. The Family Stockholders Agreement will permit
each of the Family Holders to cause the Company to register shares of Common
Stock concurrently with offerings of Common Stock by Stephen I. Kahn. The
Company will generally be required to bear the expenses of all such
registrations, except underwriting discounts and commissions. In addition, the
Family Stockholders Agreement will give Stephen I. Kahn the right to vote all
the shares of Common Stock owned by the Family Holders on all matters that
come before the stockholders of the Company. The Family Holders (not including
Stephen I. Kahn), collectively, will own 33.5% of the outstanding Common Stock
upon the completion of this offering. The Family Stockholders Agreement will
expire on the tenth anniversary of the completion of the Reorganization.

36
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock having a par value of $.01 per share and 1,000,000 shares of
Preferred Stock having a par value of $.01 per share.

The following description of the Company's capital stock and certain
provisions of the Company's certificate of incorporation and bylaws is
qualified in its entirety by the provisions of the certificate of
incorporation and bylaws (which are included as exhibits to the Registration
Statement of which this Prospectus is a part) and the General Corporation Law
of the State of Delaware.

COMMON STOCK

There will be 12,000,000 shares of Common Stock outstanding after the
completion of this offering. In addition, an aggregate of 1,500,000 shares of
Common Stock are reserved for issuance under the Incentive Plan and a non-plan
stock option agreement between the Company and an executive.

All outstanding shares of Common Stock are, and the shares offered hereby
will be, fully paid and nonassessable. The holders of Common Stock are
entitled to one vote for each share held of record on all matters voted upon
by stockholders and may not cumulate votes. Thus, the owners of a majority of
the Common Stock outstanding may elect all of the directors if they choose to
do so, and the owners of the balance of such shares would not be able to elect
any directors. Subject to the rights of holders of any future series of
undesignated Preferred Stock that may be designated, each share of outstanding
Common Stock is entitled to participate equally in any distribution of net
assets made to the stockholders in liquidation, dissolution or winding up of
the Company and is entitled to participate equally in dividends as and when
declared by the board of directors. There are no redemption, sinking fund,
conversion or preemptive rights with respect to the shares of Common Stock.
All shares of Common Stock have equal rights and preferences.

PREFERRED STOCK

The board of directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 1,000,000 shares of Preferred Stock in one or more
series with such designations and such powers, preferences and rights, and
such qualifications, limitations or restrictions (which may differ with
respect to each series) as the board may fix by resolution.

The board of directors is empowered to set the terms of such shares
(including terms with respect to redemption, sinking fund, dividend,
liquidation, preemptive, conversion and voting rights and preferences).
Accordingly, the board of directors, without stockholder approval, may issue
shares of Preferred Stock with terms (including terms with respect to
redemption, sinking fund, dividend, liquidation, preemptive, conversion and
voting rights and preferences) that could adversely affect the voting power
and other rights of holders of the Common Stock.

At present, no shares of Preferred Stock are outstanding and the Company has
no present plans to issue any shares of Preferred Stock.

The undesignated Preferred Stock may have the effect of discouraging an
attempt, through the acquisition of a substantial number of shares of Common
Stock, to acquire control of the Company with a view to effecting a merger,
sale or exchange of assets or a similar transaction. For example, the board of
directors could issue such shares as a dividend to holders of Common Stock or
place such shares privately with purchasers who may side with the board of
directors in opposing a takeover bid. The anti-takeover effects of the
undesignated Preferred Stock may deny stockholders the receipt of a premium on
their Common Stock and may also have a depressive effect on the market price
of the Common Stock.

37
<PAGE>

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is subject to the provisions of section 203 of the General
Corporation Law of the State of Delaware. Subject to certain exceptions,
section 203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the interested stockholder attained such status
with the approval of the board of directors or unless the business combination
is approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns,
or within three years did own, 15% or more of the corporation's voting stock.

ANTI-TAKEOVER EFFECT OF PROVISIONS OF THE CERTIFICATION OF INCORPORATION AND
BYLAWS

Certain provisions of the certificate of incorporation and bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of the Company, such as an unsolicited
acquisition proposal. Because these provisions could have the effect of
discouraging a third party from acquiring control of the Company, they may
inhibit fluctuations in the market price of shares of Common Stock that could
otherwise result from actual or rumored takeover attempts and, therefore could
deprive stockholders of an opportunity to realize a takeover premium. These
provisions also may have the effect of limiting the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock and of preventing changes in the management of the Company.

Restrictions on Certain Business Combinations. The Company's certificate of
incorporation provides that if stockholder approval is required for the
adoption of any agreement for the merger or consolidation of the Company with
another corporation or for the sale, lease, transfer or exchange of all or
substantially all the assets of the Company, then the affirmative vote of the
holders of at least 66 2/3% of the shares entitled to vote on the matter will
required to approve such action.

Election and Removal of Directors. The Company's board of directors is
divided into three classes of directors serving staggered terms. One class of
directors will be elected at each annual meeting of stockholders for a three-
year term. See "Management--Board Elections." At least two annual meetings of
stockholders, instead of one, generally will be required to change the
majority of the Company's board of directors. Any director may be removed with
or without cause at any time by the affirmative vote of the holders of at
least 66 2/3% of the shares entitled to vote at a special meeting of
stockholders called for that purpose and the vacancies thus created may be
filled at that same meeting by the affirmative vote of the holders of at least
66 2/3% of the shares entitled to vote at such meeting. Ordinary vacancies in
the board of directors may also be filled by the affirmative vote of the
holders of at least 66 2/3% of the shares entitled to vote in the election of
directors.

Vote Required to Amend or Repeal Certain Provisions of the Certificate of
Incorporation and Bylaws. The General Corporation Law of the State of Delaware
provides generally that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage.
The Company's certificate of incorporation requires the affirmative vote of
the holders of at least 66 2/3% of the shares entitled to vote in the
election of directors to amend or repeal certain of its provisions. A vote of
not fewer than 66 2/3% of the holders of shares entitled to vote in the
election of directors is required to amend or repeal the Company's bylaws. The
bylaws may also be amended or repealed by a vote of not fewer than 66 2/3% of
the board of directors, provided that the board of directors may not amend or
repeal any bylaw adopted by the stockholders of the Company. Any such vote
would be in addition to any separate class vote that might in the future be
required pursuant to the terms of any Preferred Stock that might be
outstanding at the time any such amendments are submitted to stockholders.

38
<PAGE>

Stockholder Meetings. Only a majority of the Company's board of directors
(excluding those directors affiliated with or elected by an interested
stockholder), the chairman of the board, the vice chairman of the board or the
president of the Company will be able to call an annual or special meeting of
stockholders. In addition, stockholders may take any action by written
consent.

Requirements for Advance Notification of Stockholder Nomination and
Proposals. The Company's certificate of incorporation establishes advance
notice procedures with regard to stockholder proposals and the nomination,
other than by or at the direction of the board of directors or a committee
thereof, of candidates for election as directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be The Bank of
New York.

39
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 12,000,000 shares of Common Stock will be
outstanding and 1,500,000 shares of Common Stock will be reserved for issuance
upon the exercise of outstanding stock options pursuant to the Incentive Plan
and a non-plan stock option agreement between the Company and an executive.
The 2,350,000 shares of Common Stock sold in this offering will be freely
tradeable without restriction under the Securities Act, except for any shares
purchased by an "affiliate" of the Company (as that term is defined under the
rules and regulations of the Securities Act), which will be subject to the
resale limitations of Rule 144 under the Securities Act. The remaining
9,650,000 outstanding shares of Common Stock are "restricted securities" for
purposes of Rule 144 (the "Restricted Securities") and may not be resold in a
public distribution, except in compliance with the registration requirements
of the Securities Act or pursuant to a valid exemption from registration
(including pursuant to Rule 144).

There has been no public market for the Common Stock prior to this offering.
The Company cannot predict the effect, if any, sales of shares of Common Stock
or the availability of shares for sale will have on the market price from time
to time. Nevertheless, sales of substantial amounts of Common Stock in the
public market following completion of this offering could adversely affect the
market price of the Common Stock and the Company's ability to raise additional
equity capital.

SALES OF RESTRICTED SHARES

None of the outstanding shares held by the Company's existing stockholders
will be eligible for resale in the public market pursuant to Rule 144
immediately after this offering. Moreover, all of the Restricted Securities
are subject to lock-up commitments, pursuant to which these shares may not be
sold publicly during the Lock-Up Period without the prior written consent of
Hambrecht & Quist LLC. These shares consist of an aggregate of 7,258,563
shares that are subject to Lock-Up Agreements with Hambrecht & Quist LLC and
an aggregate of 4,718,243 shares that are subject to restrictions on transfer
contained in the Restricted Stock Plan or the Family Stockholders Agreement,
which the Company has agreed with Hambrecht & Quist LLC not to waive during
the Lock-Up Period (without the prior written consent of Hambrecht & Quist
LLC). Thus, none of the outstanding shares held by the Company's existing
stockholders will be eligible for sale prior to the expiration or waiver of
the Lock-Up Period. Thereafter, all the Restricted Securities may be resold in
the public market only in compliance with the registration requirements of the
Securities Act or pursuant to a valid exemption from registration, including
pursuant to Rule 144. The Restricted Securities will begin to be eligible for
sale under Rule 144 after the second anniversary of the Reorganization.

In general, under Rule 144(e), as currently in effect, a stockholder (or
stockholders whose shares are aggregated), including an affiliate, who has
beneficially owned for at least two years shares of Common Stock that are
treated as "restricted securities" would be entitled to sell publicly, within
any three-month period, up to the greater of 1% of the then outstanding shares
of Common Stock (120,000 shares, immediately after the completion of this
offering) or the average weekly reported trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of sale is
given, provided certain requirements are satisfied. In addition, affiliates of
the Company must comply with additional requirements of Rule 144 in order to
sell shares of Common Stock (including shares acquired by affiliates in this
offering). Under Rule 144, a stockholder deemed not to have been an affiliate
of the Company at any time during the 90 days preceding a sale by him, and who
has beneficially owned for at least three years shares of Common Stock that
are treated as "restricted securities," would be entitled to sell those
shares, without regard to the foregoing requirements.

See "Principal and Selling Stockholders."

REGISTRATION RIGHTS

Pursuant to the Family Stockholders Agreement, stockholders holding
4,019,675 shares of Common Stock after this offering have certain rights to
have such shares registered for resale under the Securities Act. See
"Principal and Selling Stockholders--Family Stockholders Agreement."

40
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their representatives, Hambrecht & Quist LLC
and Oppenheimer & Co., Inc. (collectively, the "Representatives"), have
severally agreed to purchase from the Company and the Selling Stockholders the
following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Hambrecht & Quist LLC............................................
Oppenheimer & Co., Inc...........................................
---------
Total........................................................ 2,350,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $. per share. The Underwriters may allow and such dealers may re-
allow a concession not in excess of $. per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives.

The Company and the Selling Stockholders have granted to the Underwriters an
option, exercisable no later than 30 days after the date of this Prospectus,
to purchase up to 352,500 additional shares of Common Stock at the initial
public offering price, less the underwriting discount, set forth on the cover
page of this Prospectus. To the extent that the Underwriters exercise this
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the above table bears to the total number
of shares of Common Stock offered hereby. The Company and the Selling
Stockholders will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.

The Selling Stockholders and other stockholders of the Company, including
the executive officers and directors, who will own in the aggregate 9,650,000
shares of Common Stock after this offering, have agreed that they will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to
acquire shares of Common Stock or securities exercisable for or convertible
into shares of Common Stock owned by them during the 180-day period following
the effective date of this Prospectus. The Company has agreed that it will
not, without prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to
acquire shares of Common Stock or securities exchangeable for or convertible
into shares of

41
<PAGE>

Common Stock during the 180-day period following the effective date of this
Prospectus, except that the Company may grant options under its stock plans
and issue securities under, or pursuant to the exercise of options granted
under, its stock plans. Hambrecht & Quist LLC in its sole discretion may
release any of the shares subject to the lock-up at any time without notice.
See "Shares Eligible for Future Sale."

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they have discretionary authority.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock was determined by
negotiation among the Company, the representatives of the Selling Stockholders
and the Representatives. Among the factors considered in determining the
initial public offering price were prevailing market and economic conditions,
revenues and earnings of the Company, market valuations of other companies
engaged in activities similar to the Company, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, the Company's management and other factors deemed
relevant. The estimated initial public offering price range set forth on the
cover of this Prospectus is subject to change as a result of market conditions
and other factors.

LEGAL MATTERS

Certain matters with respect to the legality of the shares of the Common
Stock offered hereby will be passed upon for the Company by Proskauer Rose
Goetz & Mendelsohn LLP, New York, New York. Certain legal matters relating to
this offering will be passed upon for the Underwriters by Sidley & Austin,
Chicago, Illinois.

EXPERTS

The financial statements as of July 31, 1996 and for the six months in the
period ended July 31, 1996 included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.

The financial statements as of January 31, 1996 and 1995 and for each of the
two fiscal years in the period ended January 31, 1996 and for the period
September 9, 1993 (inception) to January 31, 1994 included in this Prospectus
have been audited by Richard A. Eisner & Company, LLP, independent auditors,
as stated in their reports appearing herein, and have been so included in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.

On August 30, 1996, the Company engaged Deloitte & Touche LLP as its
independent public accountant to audit the Company's financial statements. The
decision to change accountants was approved by the managers of dELiA*s LLC.
Richard A. Eisner & Company, LLP's report on the financial statements for the
Company's two most recent fiscal years did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's two most recent
fiscal years and all subsequent interim periods preceding the engagement of
Deloitte & Touche LLP, there were no disagreements with Richard A. Eisner &
Company, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Richard A. Eisner & Company, LLP, would have caused it to
make a reference to the subject matter of the disagreement in connection with
its report. During the Company's two most recent fiscal years and all
subsequent interim periods prior to engaging Deloitte & Touche LLP, the
Company did not consult with Deloitte & Touche LLP regarding the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
financial statements.

42
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to such
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as
an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the
principal office of the Commission, 450 Fifth Street, N.W., Washington, DC
20549, the New York Regional Office located at 7 World Trade Center, Suite
1300, New York, New York 10048, and the Chicago Regional Office located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or
any part thereof may be obtained at prescribed rates from the Commission's
Public Reference Section at its principal office. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.

43
<PAGE>

DELIA*S INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................................ F-2
FINANCIAL STATEMENTS:
Balance Sheets as of January 31, 1995 and 1996, July 31, 1996, and
October 31, 1996 (Unaudited)............................................ F-4
Statements of Operations for the period September 9, 1993 (inception) to
January 31, 1994,
fiscal years ended January 31, 1995 and 1996, six months ended July 31,
1995 (Unaudited) and 1996, and nine months ended October 31, 1995 and
1996 (Unaudited)........................................................ F-5
Statements of Stockholders' Equity for the period September 9, 1993
(inception) to January 31, 1994, fiscal years ended January 31, 1995 and
1996, six months ended July 31, 1996, and three months ended October 31,
1996 (Unaudited)........................................................ F-6
Statements of Cash Flows for the period September 9, 1993 (inception) to
January 31, 1994,
fiscal years ended January 31, 1995 and 1996, six months ended July 31,
1995 (Unaudited) and 1996, and nine months ended October 31, 1995 and
1996 (Unaudited)........................................................ F-7
Notes to Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE>

The accompanying financial statements of dELiA*s Inc. give effect to the
completion of the Reorganization described in Note 13 of Notes to Financial
Statements which will be completed prior to the consummation of the public
offering contemplated by the Registration Statement of which this Prospectus
is a part. The following report is in the form which will be furnished by
Deloitte & Touche LLP upon completion of the Reorganization and assuming that
from October 4, 1996 to the date of such completion no other material events
have occurred that would affect the accompanying financial statements or
required disclosure therein.

INDEPENDENT AUDITORS' REPORT

"To the Board of Directors and Stockholders ofdELiA*s Inc.
New York, New York

We have audited the accompanying balance sheet of dELiA*s Inc. (the
"Company") as of July 31, 1996, and the related statements of operations,
stockholders' equity, and cash flows for the six months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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, such financial statements present fairly, in all material
respects, the financial position of the Company at July 31, 1996, and the
results of its operations and its cash flows for the six months then ended in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP
October 4, 1996
New York, New York"

Deloitte & Touche LLP
October 30, 1996
New York, New York

F-2
<PAGE>

The following report is in the form that we expect to sign upon the
effectiveness of the transactions described in Note 13 of Notes to Financial
Statements.

Richard A. Eisner & Company, LLP
New York, New York
August 14, 1996

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
dELiA*s Inc.
New York, New York

"We have audited the accompanying balance sheets of dELiA*s Inc. as at
January 31, 1995 and January 31, 1996 and the related statements of
operations, stockholders' equity and cash flows for the years then ended and
for the period from September 9, 1993 (inception) to January 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits."

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

"In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of dELiA*s Inc. at January
31, 1995 and January 31, 1996, and results of its operations and its cash
flows for the years then ended and for the period from September 9, 1993
(inception) to January 31, 1994 in conformity with generally accepted
accounting principles."

New York, New York
August 14, 1996

With respect to Note 13
, 1996

F-3
<PAGE>

DELIA*S INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
JANUARY 31,
-------------- JULY 31, OCTOBER 31,
1995 1996 1996 1996
------ ------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... $ 704 $ 675 $1,343 $1,140
Receivables............................. -- 27 108 82
Receivables from related parties........ -- -- 50 61
Merchandise inventories................. 90 221 1,515 3,712
Prepaid expenses and other current
assets................................. 67 101 158 1,085
------ ------ ------ ------
Total current assets.................. 861 1,024 3,174 6,080
------ ------ ------ ------
PROPERTY AND EQUIPMENT--Net............... 6 166 381 484
OTHER ASSETS.............................. 3 76 71 337
------ ------ ------ ------
TOTAL ASSETS.............................. $ 870 $1,266 $3,626 $6,901
====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........................ $ -- $ 63 $1,009 $2,391
Accrued expenses and other current
liabilities............................ 35 137 556 1,364
Sales return allowance.................. -- 25 106 153
Liabilities due to customers............ -- 76 161 226
Income taxes payable.................... -- 3 -- --
------ ------ ------ ------
Total current liabilities............. 35 304 1,832 4,134
------ ------ ------ ------
DEFERRED CREDITS.......................... -- -- 21 18
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01 per
share;
Authorized--1,000,000 shares;
Shares issued and outstanding--none.... -- -- -- --
Common Stock, par value $.01 per share;
Authorized--50,000,000 shares
Issued and outstanding--8,968,754,
9,198,750 and 10,000,000 shares,
respectively.......................... 90 92 100 100
Note receivable from stockholder....... -- -- (50) (50)
Deferred compensation.................. -- -- (191) (169)
Additional paid-in capital.............. 1,110 1,208 1,467 1,467
Retained earnings/(deficit)............. (365) (338) 447 1,401
------ ------ ------ ------
Total stockholders' equity............ 835 962 1,773 2,749
------ ------ ------ ------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................... $ 870 $1,266 $3,626 $6,901
====== ====== ====== ======
</TABLE>

See Notes to Financial Statements

F-4
<PAGE>

DELIA*S INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 9, FISCAL YEAR SIX MONTHS
1993 ENDED ENDED NINE MONTHS
(INCEPTION) TO JANUARY 31, JULY 31, ENDED OCTOBER 31,
JANUARY 31, ------------- ------------------ -----------------------
1994 1995 1996 1995 1996 1995 1996
-------------- ----- ------ ----------- ------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES........................ $ -- $ 139 $5,652 $1,301 $8,372 $2,844 $15,482
COST OF SALES.................... -- 89 3,078 676 3,958 1,453 7,421
----- ----- ------ ------ ------ ------ -------
GROSS PROFIT..................... -- 50 2,574 625 4,414 1,391 8,061
----- ----- ------ ------ ------ ------ -------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES......... 34 384 2,569 808 3,638 1,482 6,331
INTEREST INCOME, NET............. 1 2 25 13 20 18 24
----- ----- ------ ------ ------ ------ -------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES................ (33) (332) 30 (170) 796 (73) 1,754
PROVISION FOR INCOME TAXES....... -- -- 3 -- 11 -- 15
----- ----- ------ ------ ------ ------ -------
NET INCOME (LOSS)................ $ (33) $(332) $ 27 $ (170) $ 785 $ (73) $ 1,739
===== ===== ====== ====== ====== ====== =======
Pro Forma Income Data (Unaudited)
Income (Loss) before provision
for income taxes as reported... $ (33) $(332) $ 30 $ (170) $ 796 $ (73) $ 1,754
Pro forma provision (benefit)
for income taxes............... (14) (130) 12 (68) 328 (29) 719
----- ----- ------ ------ ------ ------ -------
Pro forma net income (loss)..... $ (19) $(202) $ 18 $ (102) $ 468 $ (44) $ 1,035
===== ===== ====== ====== ====== ====== =======
Pro forma net income per share.. $ 0.00 $ 0.10
====== =======
Shares used in the calculation
of pro forma net income per
share.......................... 10,098 10,098
====== =======
</TABLE>

See Notes to Financial Statements

F-5
<PAGE>

DELIA*S INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK NOTE
----------------- RECEIVABLE ADDITIONAL RETAINED TOTAL
NUMBER OF FROM DEFERRED PAID-IN EARNINGS/ STOCKHOLDERS'
SHARES AMOUNT STOCKHOLDER COMPENSATION CAPITAL (DEFICIT) EQUITY
---------- ------ ----------- ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 9,
1993 (INCEPTION)....... -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock.................. 4,702,103 47 -- -- 153 -- 200
Net loss................ -- -- -- -- -- (33) (33)
---------- ----- ----- ----- ------ ------ ------
BALANCE, JANUARY 31,
1994................... 4,702,103 47 -- -- 153 (33) 167
Issuance of common
stock.................. 4,266,651 43 -- -- 957 -- 1,000
Net loss................ -- -- -- -- -- (332) (332)
---------- ----- ----- ----- ------ ------ ------
BALANCE, JANUARY 31,
1995................... 8,968,754 90 -- -- 1,110 (365) 835
Issuance of common
stock.................. 229,996 2 -- -- 98 -- 100
Net income.............. -- -- -- -- -- 27 27
---------- ----- ----- ----- ------ ------ ------
BALANCE, JANUARY 31,
1996................... 9,198,750 92 -- -- 1,208 (338) 962
Issuance of common
stock.................. 801,250 8 (50) (217) 259 -- --
Net income.............. -- -- -- -- -- 785 785
Deferred compensation
expense................ -- -- -- 26 -- -- 26
---------- ----- ----- ----- ------ ------ ------
BALANCE, JULY 31, 1996.. 10,000,000 100 (50) (191) 1,467 447 1,773
Net income.............. -- -- -- -- -- 954 954
Deferred compensation
expense................ -- -- -- 22 -- -- 22
---------- ----- ----- ----- ------ ------ ------
BALANCE, OCTOBER 31,
1996 (UNAUDITED)....... 10,000,000 $ 100 $ (50) $(169) $1,467 $1,401 $2,749
========== ===== ===== ===== ====== ====== ======
</TABLE>

See Notes to Financial Statements

F-6
<PAGE>

DELIA*S INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 9,
1993 FISCAL YEAR ENDED SIX MONTHS ENDED NINE MONTHS ENDED
(INCEPTION) TO JANUARY 31, JULY 31, OCTOBER 31,
JANUARY 31, ------------------- ------------------- -----------------------
1994 1995 1996 1995 1996 1995 1996
-------------- --------- -------- ----------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $(33) $ (332) $ 27 $(170) $ 785 $(73) $1,739
Adjustments to
reconcile net income
(loss) to net cash
(used in)
provided by operating
activities
Depreciation and
amortization........ -- 1 14 4 29 10 49
Inventory reserves
for obsolescence.... -- 6 25 -- 207 -- 325
Compensation expense
related
to issuance of
Restricted Stock.... -- -- -- -- 26 -- 48
Changes in operating
assets
and liabilities:
Receivables......... -- -- (27) -- (81) (7) (55)
Receivables from
related parties.... -- -- -- -- (50) -- (61)
Merchandise
inventories........ (16) (80) (156) (223) (1,501) (669) (3,816)
Prepaid expenses and
other current
assets............. (17) (50) (34) (9) (57) (26) (984)
Other assets........ (1) (2) (78) (28) 1 (47) (262)
Accounts payable.... -- 35 63 134 946 453 2,328
Accrued expenses and
other current
liabilities........ -- -- 102 95 419 (23) 1,227
Sales return
allowance.......... -- -- 25 10 81 15 128
Liabilities due to
customers.......... -- -- 76 -- 85 -- 150
Income taxes
payable............ -- -- 3 -- (3) -- (3)
Deferred credits.... -- -- -- -- 21 -- 18
------ --------- -------- ----- ------- ---- ------
Net cash (used in)
provided by
operating activities... (67) (422) 40 (187) 908 (367) 831
------ --------- -------- ----- ------- ---- ------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... -- (7) (169) (50) (240) (67) (366)
------ --------- -------- ----- ------- ---- ------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Issuance of common
stock................. 200 1,000 100 100 -- 100 --
------ --------- -------- ----- ------- ---- ------
INCREASE (DECREASE) IN
CASH
& CASH EQUIVALENTS..... 133 571 (29) (137) 668 (334) 465
CASH & CASH
EQUIVALENTS--
BEGINNING OF PERIOD.... -- 133 704 704 675 704 675
------ --------- -------- ----- ------- ---- ------
CASH & CASH
EQUIVALENTS--
END OF PERIOD.......... $ 133 $ 704 $ 675 $ 567 $ 1,343 $370 $1,140
====== ========= ======== ===== ======= ==== ======
SUPPLEMENTARY CASH FLOW
INFORMATION:
Income taxes paid...... $ -- $ -- $ -- $ -- $ 11 $ -- $ 15
====== ========= ======== ===== ======= ==== ======
Interest paid.......... $ -- $ -- $ -- $ -- $ 6 $ -- $ 20
====== ========= ======== ===== ======= ==== ======
</TABLE>

See Notes to Financial Statements

F-7
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

1. BUSINESS AND BASIS OF PRESENTATION

dELiA*s Inc. (the "Company" or "dInc") is a direct marketer of casual
apparel and related accessories to teen girls and young women primarily
between the ages of 10 and 24. The Company offers a broad selection of
merchandise, presented in distinctively styled catalogs; the first catalog was
mailed in March 1994. The Company maintains a corporate headquarters,
telemarketing and customer service group in New York, New York and utilizes a
third-party fulfillment facility for processing merchandise in Lancaster,
Pennsylvania.

The Company is subject to seasonal fluctuations in its merchandise sales and
results of operations. The Company expects its sales and operating results
generally to be lower in the first and second quarters than in the third and
fourth quarters (which include the back-to-school and holiday seasons) of each
fiscal year.

The Company is a successor to a business originally founded in September
1993. In 1995, the successor business began to operate as a New York limited
liability company under the name dELiA*s LLC ("dLLC"). As a limited liability
company, dLLC was treated for income tax purposes as a partnership with taxes
on the income generated by dLLC paid by its members. In October 1996, dInc was
incorporated in Delaware. Prior to the completion of the initial public
offering described in this Prospectus (the "Offering"), dLLC and dInc will
engage in a reorganization transaction (the "Reorganization") pursuant to
which dLLC will contribute its assets to dInc and dInc will assume, and agree
to pay, perform and discharge, all liabilities of dLLC (except for income tax
liabilities). In connection with the Reorganization, dInc will issue
10,000,000 shares of Common Stock to dLLC, of which 698,568 shares will be
restricted under the Company's Restricted Stock Plan. See Note 10--1996
Restricted Stock Plan. A distribution of cash, notes, and the shares of Common
Stock of dInc will be effected in accordance with the dLLC operating
agreement. The accompanying financial statements and footnotes are presented
to reflect the Reorganization as described in Note 13, which will be accounted
for on a basis similar to a pooling of interests.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Fiscal Year--The Company's fiscal year ends on January 31.

b. Cash Equivalents--The Company considers all highly liquid investments,
with maturities of 90 days or less when purchased, to be cash equivalents.
Cash equivalents are stated at cost, which approximates market value.

c. Merchandise Inventories--Merchandise inventories, which are all finished
goods, are stated at the lower of cost (determined on a first-in, first-out
basis) or market value. At January 31, 1995, January 31, 1996, July 31, 1996
and October 31, 1996 (unaudited) inventory reserves for obsolescence were
$6,000, $31,000, $238,000 and $356,000, respectively.

d. Catalog Costs--The Company accounts for catalog costs in accordance with
the AICPA Statement of Position ("SOP") 93-7, "Reporting on Advertising
Costs." SOP 93-7 requires that the amortization of capitalized advertising
costs should be the amount computed using the ratio that current period
revenues for the catalog cost pool bear to the total of current and estimated
future period revenues for that catalog cost pool. Deferred catalog costs as
of January 31, 1995, January 31, 1996, July 31, 1996 and October 31, 1996
(unaudited) were $56,000, $93,000, $109,000 and $1,049,000, respectively.
Catalog costs, which are reflected in selling, general and administrative
expenses, for the fiscal years ended January 31, 1995 and 1996, for the six
month periods ended July 31, 1995 (unaudited) and 1996 and for the nine month
periods ended October 31, 1995 and 1996 (unaudited) were $162,000, $1,104,000,
$381,000, $1,409,000, $675,000 and $2,398,000, respectively.

F-8
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

e. Property and Equipment--Property and equipment are stated at cost.
Furniture, fixtures and equipment are depreciated by the straight-line method
over the estimated useful lives of the respective assets, ranging from 3 to 5
years. Leasehold improvements are amortized ratably over the lesser of the
remaining lease term or useful life of the improvement. See Note 3--Property
and Equipment.

f. Income Taxes--Prior to the Offering, the Company was a limited liability
company ("LLC") and each member's respective portion of dLLC's taxable income
or loss was reportable on such members own federal and state tax returns. As
an LLC, the Company was subject to the New York City income tax on
unincorporated businesses. As discussed in Note 13--Reorganization, the
Company is preparing to effect a reorganization that will change the income
tax status of the Company to a taxable C corporation. At that time, deferred
income tax assets and liabilities will be recorded in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes".

g. Revenue Recognition--Revenue is recognized when merchandise is shipped to
customers.

h. Pro Forma Net Income Per Share--Pro forma net income per share is based
on the weighted average number of common shares and common share equivalents
outstanding. The common shares give effect to the issuance of 10,000,000
shares of Common Stock to dLLC as described in Note 13--Reorganization. A
total of 97,752 additional shares have been added, representing the number of
shares that would need to be sold, on a pro forma basis, to generate the
assumed $1.0 million of net proceeds from the Offering to be utilized by the
Company to repay certain Investor Notes assumed to be $1.0 million, which
notes will be issued to finance the LLC Distribution described in Note 13. At
January 31, 1996 and October 31, 1996, the number of common shares and common
share equivalents used in the calculation of pro forma net income per share
was 10,097,752.

i. Fair Value of Financial Instruments--The following disclosure about the
fair value of financial instruments is made in accordance with the
requirements of SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments." The carrying amounts reported in the balance sheets for cash and
cash equivalents, receivables and accounts payable approximate fair value
because of the short-term maturity of those financial instruments.

j. Use of Estimates in the Preparation of Financial Statements--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 at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

k. Recent Accounting Pronouncements--In March 1995, the Financial Accounting
Standards Board (the "FASB") issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, and is effective for fiscal years
beginning after December 15, 1995. The adoption of SFAS No. 121 did not have
an effect on the Company's financial position or results of operations.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which is effective for the Company beginning February 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
expense to be measured based on the fair value of the equity instrument
awarded. Companies are permitted,

F-9
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

however, to continue to apply Accounting Principles Board Opinion No. 25 ("APB
No. 25"), which recognizes compensation costs based on the intrinsic value of
the equity instrument awarded. The Company will continue to apply APB No. 25
to its stock-based compensation awards to employees. The required disclosures
of pro forma effects on net income and earnings per share did not apply during
the nine month period ended October 31, 1996 or during prior fiscal years.

l. Unaudited Interim Financial Statements--In the opinion of management, the
unaudited financial statements for the six months ended July 31, 1995 and the
nine months ended October 31, 1995 and 1996 are presented on a basis
consistent with the audited financial statements and reflect all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results thereof. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
entire year.

3. PROPERTY AND EQUIPMENT

Major classes of property and equipment are as follows:

<TABLE>
<CAPTION>
ESTIMATED JANUARY 31, JANUARY 31, JULY 31, OCTOBER 31,
USEFUL LIVES 1995 1996 1996 1996
------------- ----------- ----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Furniture, fixtures and
equipment.............. 3-5 years $7,000 $139,000 $295,000 $367,000
Leasehold improvements.. Term of lease -- 37,000 121,000 175,000
------ -------- -------- --------
Total--at cost.......... 7,000 176,000 416,000 542,000
Less accumulated
depreciation and
amortization........... 1,000 10,000 35,000 58,000
------ -------- -------- --------
Total property and
equipment--net......... $6,000 $166,000 $381,000 $484,000
====== ======== ======== ========
</TABLE>

4. CREDIT AND FINANCING AGREEMENTS

At October 31, 1996, the Company had a line of credit agreement with a bank
providing for short-term loans of up to $1.5 million subject to bank approval.
Borrowings under the agreement are secured by all assets of the Company except
for merchandise inventories and bear interest at the prime rate plus two
percent (10.25 percent at October 31, 1996). The agreement expires on July 31,
1997. The agreement is personally guaranteed by three stockholders of the
Company. There were no funds borrowed under the agreement during the nine
month period ended October 31, 1996 or during the fiscal years ended January
31, 1996 and 1995.

5. INTEREST INCOME--NET

Interest income--net consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 9,
1993 SIX MONTHS NINE MONTHS ENDED
(INCEPTION) TO FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED JULY 31, OCTOBER 31,
JANUARY 31, ENDED ENDED ------------------- -----------------------
1994 JANUARY 31, 1995 JANUARY 31, 1996 1995 1996 1995 1996
-------------- ---------------- ---------------- ----------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $1,000 $2,000 $25,000 $13,000 $26,000 $18,000 $ 44,000
Interest expense........ -- -- -- -- (6,000) -- (20,000)
------ ------ ------- ------- ------- ------- --------
Interest income--net.... $1,000 $2,000 $25,000 $13,000 $20,000 $18,000 $ 24,000
====== ====== ======= ======= ======= ======= ========
</TABLE>

F-10
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

6. INCOME TAXES

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
SEPTEMBER 9, 1993 FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED JULY 31, OCTOBER 31,
(INCEPTION) TO ENDED ENDED ------------------- -----------------------
JANUARY 31, 1994 JANUARY 31, 1995 JANUARY 31, 1996 1995 1996 1995 1996
----------------- ---------------- ---------------- ----------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Federal:
Current............... $ -- $ -- $ -- $-- $ -- $ -- $ --
Deferred.............. -- -- -- -- -- -- --
----- ----- ------ ---- ------- ----- -------
Total federal....... -- -- -- -- -- -- --
----- ----- ------ ---- ------- ----- -------
State and local:
Current............... -- -- 3,000 -- 11,000 -- 15,000
Deferred.............. -- -- -- -- -- -- --
----- ----- ------ ---- ------- ----- -------
Total state and
local.............. -- -- 3,000 -- 11,000 -- 15,000
----- ----- ------ ---- ------- ----- -------
Total provision....... $ -- $ -- $3,000 $-- $11,000 $ -- $15,000
===== ===== ====== ==== ======= ===== =======
</TABLE>

Effective September 9, 1993 (date of inception), the Company's predecessor,
dELiA*s Ltd., elected S corporation status under applicable provisions of the
Internal Revenue Code. In 1995, dELiA*s Ltd. was succeeded by dLLC and was
treated as a partnership for income tax purposes. As such, dELiA*s Ltd. and
dLLC paid no federal or state income taxes as all taxable income was taxed
directly at the shareholder and membership level.

The effective income tax rates differed from the federal statutory income
tax rates as follows:

<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
SEPTEMBER 9, 1993 FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED JULY 31, OCTOBER 31,
(INCEPTION) TO ENDED ENDED --------------------- -----------------------
JANUARY 31, 1994 JANUARY 31, 1995 JANUARY 31, 1996 1995 1996 1995 1996
----------------- ---------------- ---------------- ----------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Federal taxes at
statutory rates....... $(11,000) $(113,000) $ 10,000 $(58,000) $ 271,000 $(25,000) $596,000
State and local taxes
net of federal
benefit............... (2,000) (20,000) 5,000 (10,000) 53,000 (5,000) 117,000
Effect of S corporation
and LLC company
status................ 13,000 133,000 (12,000) 68,000 (313,000) 30,000 (698,000)
-------- --------- -------- -------- --------- -------- --------
$ -- $ -- $ 3,000 $ -- $ 11,000 $ -- $ 15,000
======== ========= ======== ======== ========= ======== ========
</TABLE>

F-11
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

PROFORMA PROVISION FOR INCOME TAXES (UNAUDITED)

The unaudited pro forma provision for income taxes represents estimated
income taxes that would have been reported had the Company filed its tax
returns as a taxable C corporation which reflects the reorganization described
in Note 13 for all periods presented.

The pro forma provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS ENDED
SEPTEMBER 9, 1993 FISCAL YEAR 1994 FISCAL YEAR 1995 ENDED JULY 31, OCTOBER 31,
(INCEPTION) TO ENDED ENDED -------------------- -----------------------
JANUARY 31, 1994 JANUARY 31, 1995 JANUARY 31, 1996 1995 1996 1995 1996
----------------- ---------------- ---------------- ----------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Federal:
Current................ $ -- $ -- $ -- $ -- $248,000 $ -- $333,000
Deferred............... (12,000) (109,000) 10,000 (58,000) 26,000 (25,000) 268,000
-------- --------- ------- -------- -------- -------- --------
Total federal........ (12,000) (109,000) 10,000 (58,000) 274,000 (25,000) 601,000
-------- --------- ------- -------- -------- -------- --------
State and local:
Current................ -- -- -- -- 49,000 -- 65,000
Deferred............... (2,000) (21,000) 2,000 (10,000) 5,000 (4,000) 53,000
-------- --------- ------- -------- -------- -------- --------
Total state and
local............... (2,000) (130,000) 12,000 (10,000) 54,000 (4,000) 118,000
-------- --------- ------- -------- -------- -------- --------
Total provision......... $(14,000) $(130,000) $12,000 $(68,000) $328,000 $(29,000) $719,000
======== ========= ======= ======== ======== ======== ========
</TABLE>

The tax effects of significant items comprising the Company's pro forma
federal and state net deferred tax asset as of January 31, 1996, July 31, 1996
and October 31, 1996 (unaudited) are as follows:

<TABLE>
<CAPTION>
JANUARY 31, JULY 31, OCTOBER 31,
1996 1996 1996
----------- -------- -----------
(UNAUDITED)
-----------
<S> <C> <C> <C>
Deferred tax assets:
Inventory reserves.................... $ 13,000 $ 97,000 $ 145,000
Sales return allowance................ 10,000 53,000 62,000
Deferred compensation expense......... -- 11,000 20,000
Depreciation.......................... 5,000 7,000 8,000
Net operating loss.................... 146,000 -- --
Other................................. -- 9,000 7,000
-------- -------- ---------
Total deferred tax assets............... 174,000 177,000 242,000
-------- -------- ---------
Deferred tax liabilities:
Catalog costs......................... (38,000) (82,000) (426,000)
-------- -------- ---------
Net deferred tax asset/(liability)...... $136,000 $ 95,000 $(184,000)
======== ======== =========
</TABLE>

F-12
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

7. STOCKHOLDERS' EQUITY

Effective upon the Reorganization, the Company will have authorized
1,000,000 shares of preferred stock, $.01 par value per share, no shares
issued or outstanding; 50,000,000 shares of common stock, $.01 par value per
share, 8,968,754, 9,198,750 and 10,000,000 shares issued and outstanding at
January 31, 1995, January 31, 1996, July 31, 1996 and October 31, 1996
(unaudited), respectively.

Prior to January 31, 1996, the Company issued Class A Membership Interests
for capital contributions of $1,300,000, which upon the Reorganization
described in Note 13 will convert into 9,198,750 shares of Common Stock.
During the six month period ended July 31, 1996, the Company issued Class C
Membership Interests for capital contributions of $50,000, which upon the
Reorganization will convert to 102,682 shares of Common Stock.

During the six month period ended July 31, 1996, Class B restricted
membership interests were granted to certain employees at no cost to these
employees. The cost of restricted membership interests, based upon the
interests' fair market value at the award date in the amount of $217,000, was
credited to stockholders' equity and is being subsequently amortized against
earnings over the vesting period of 30 months. Deferred compensation expense
recognized during the six month period ended July 31, 1996 and nine month
period ended October 31, 1996 (unaudited) was $26,000 and $48,000,
respectively. Upon the Reorganization, the Class B restricted membership
interests will convert to 698,568 shares of restricted common stock. See Note
10--1996 Restricted Stock Plan. Also see Note 14 regarding the Family
Stockholders' Agreement.

8. RELATED PARTY TRANSACTIONS

Receivables from related parties as of July 31, 1996 and October 31, 1996
included (i) non-interest-bearing loans receivable from stockholders of
$50,000 and $61,000, respectively, related to certain stockholders' personal
income taxes attributable to income of the Company as a limited liability
company and (ii) non-interest-bearing loan receivable from a
stockholder/executive of the Company in the amount of $50,000 related to the
executive's capital contribution.

9. STOCK OPTION AGREEMENT AND EMPLOYMENT AGREEMENTS

Prior to the Offering, an executive entered into a stock option agreement
pursuant to which the Company has granted such executive an option to purchase
up to an aggregate of 250,000 shares of Common Stock at the price per share to
the public in this Offering (the "Exercise Price"). The option becomes
exercisable as to 50,000 shares on each of July 21, 1997, 1998, 1999, 2000 and
2001. If the executive's employment terminates before July 21, 2001 as a
result of his death or disability, or if the Company terminates his employment
other than for cause or if the Company effects a Constructive Discharge (as
defined in the executive's employment agreement) of the executive, the option
will become exercisable as to all 250,000 shares; if the executive's
employment terminates other than as set forth above, the portion of the option
that is not exercisable at the date of termination will not thereafter become
exercisable. During the 30-day period beginning on the fourth anniversary of
the termination of the executive's employment for any reason, the Company may
purchase all the shares previously purchased by the executive pursuant to the
option and terminate all further rights under the option in exchange for an
amount equal to (i) the product of (A) the Average Price of a Share (as
defined

F-13
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

in the stock option agreement) and (B) the sum of (1) the number of shares
being purchased plus (2) the number of shares subject to the option being
terminated, reduced by (ii) the product of the Exercise Price and the number
of shares subject to the option being terminated. Upon a merger, consolidation
or sale of substantially all the assets of the Company, the option will become
immediately exercisable as to 50% of the shares as to which the option has not
yet become exercisable, with the balance of the option not then exercisable
becoming exercisable in equal amounts on each July 21 thereafter through July
21, 2001. If the executive's employment terminates before July 22, 1997, a
stockholders/executive of the Company will have the option to purchase from
the executive 100,000 shares of Common Stock for $50,000.

Prior to the completion of the Offering, two executives of the Company will
enter into three-year agreements with the Company providing for the
continuation of their employment at minimum salaries of $100,000 a year for
each executive, subject to annual upward adjustment in proportion to the
increase in the consumer price index plus such increases in salary and bonuses
as approved by the Board of Directors.

In July 1996, an executive of the Company entered into an agreement with the
Company providing for the continuation of his employment at a minimum salary
each year of $50,000 ($100,000 upon completion of the Offering) plus such
increases in salary and bonuses as approved by the Board of Directors. The
agreement terminates in July 2001.

10. 1996 RESTRICTED STOCK PLAN

Concurrent with the Reorganization, the Company will approve and adopt the
1996 Restricted Stock Plan (the "Restricted Stock Plan") pursuant to which
698,568 shares of Common Stock will be exchanged for restricted membership
interests in dLLC held by certain employees of the Company ("Restricted
Interest Holders"). Upon the issuance of such shares, no more shares will be
available for issuance pursuant to the Restricted Stock Plan.

Under the provisions of the restricted stock agreements, between each
Restricted Interest Holder and the Company, the restrictions on the shares
generally lapse 30 months from the grant date of the original restricted
membership interest in dLLC. If a Restricted Interest Holder's employment is
terminated prior to the 30th month for any reason, the Restricted Interest
Holder will forfeit all rights to the restricted stock. Within the limits of
the Restricted Stock Plan, the compensation committee may provide for the
lapse of such restrictions in installments in whole or in part or may
accelerate or waive such restrictions at any time.

In addition, the restricted stock agreements give an executive
officer/stockholder of the Company the right to vote all the shares of common
stock issued to the Restricted Interest Holders pursuant to such agreements on
all matters during the period in which such shares are subject to restrictions
on transfer.

11. 1996 STOCK INCENTIVE PLAN

Concurrent with the Reorganization, the Company will approve and adopt the
1996 Stock Incentive Plan (the "Incentive Plan"), which provides for the
following types of awards to eligible employees: (i) stock options, including
incentive stock options and non-qualified stock options; (ii) stock
appreciation rights, in tandem with stock options or freestanding; and (iii)
restricted stock. Awards may be granted singly, in combination or in tandem,
as determined by a committee of the Company's board of directors.

F-14
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

In addition, under the Incentive Plan, two independent non-employee
directors will be granted, at the time of the Offering, an option to purchase
40,000 shares each of Common Stock at an exercise price per share equal to the
initial public offering price. All options granted to non-employee directors
will become exercisable at the rate of 20% on each of the first five
anniversaries of the date of grant, assuming the non-employee director is a
director on those dates, and all such options generally will cease to be
exercisable ten years from the date of grant. Upon a Change of Control (as
defined in the Incentive Plan), all options (which have not yet expired) will
automatically become exercisable.

The maximum number of shares of common stock that may be issued pursuant to
the Incentive Plan will be 1,250,000, of which no shares will have been issued
or used for reference purposes prior to the Offering. The maximum number of
shares of common stock subject to each of stock options or stock appreciation
rights that may be granted to any individual under the Incentive Plan will be
100,000 for each fiscal year of the Company during the term of the Incentive
Plan. If a stock appreciation right is granted in tandem with a stock option,
it shall apply against the individual limits for both stock options and stock
appreciation rights, but only once against the maximum number of shares
available under the Incentive Plan.

12. COMMITMENTS

As of October 31, 1996 the Company was obligated under various long-term
operating leases for office space and equipment requiring minimum annual
rentals. These operating leases expire on varying dates to 2003. At October
31, 1996 aggregate minimum rentals in future periods are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR
ENDING
JANUARY 31,
-----------
<S> <C>
1997 (remainder).............................................. $ 51,000
1998.......................................................... 225,000
1999.......................................................... 185,000
2000.......................................................... 164,000
2001.......................................................... 151,000
Thereafter..................................................... 187,000
</TABLE>

In addition, the Company is obligated to pay a proportionate share of
increases in real estate taxes and other occupancy costs.

Rent expense for the fiscal years ended January 31, 1995 and 1996, for the
six month periods ended July 31, 1995 (unaudited) and 1996 and for the nine
month periods ended October 31, 1995 and 1996 (unaudited) was $44,000,
$88,000, $17,000, $123,000, $36,000 and $232,000, respectively.

13. REORGANIZATION

As described in this Prospectus, dLLC and dInc will engage in a
reorganization transaction (the "Reorganization") pursuant to which dLLC will
contribute its assets to dInc. dInc will assume, and agree to pay, perform and
discharge, all liabilities of dLLC (except for income tax liabilities). In
connection with the Reorganization, dInc will issue 10,000,000 shares of
Common Stock to dLLC, of which 698,568 shares will be restricted under the
Company's Restricted Stock Plan as described in Note 10--1996 Restricted Stock
Plan.

F-15
<PAGE>

DELIA*S INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SEPTEMBER 9, 1993 (INCEPTION) TO JANUARY 31, 1994, FISCAL YEARS ENDED JANUARY
31, 1995 AND 1996, SIX MONTHS ENDED JULY 31, 1995 AND 1996, AND NINE MONTHS
ENDED OCTOBER 31, 1995 AND 1996

(INFORMATION AS IT RELATES TO THE SIX MONTHS ENDED JULY 31, 1995 AND THE NINE
MONTHS ENDED OCTOBER 31, 1995 AND 1996 IS UNAUDITED)

The Reorganization will also result in the distribution to existing members
of dLLC of the LLC Distribution described below and the shares of Common Stock
of dInc received pursuant to the operating agreement. Prior to the completion
of the Offering, dLLC will make a distribution (the "LLC Distribution") to
certain of its members of an amount related to the Company's results of
operations through the date of the distribution. The LLC Distribution will be
paid in cash, to the extent of cash on hand at the date of distribution, less
$100,000, and the balance will be paid in the form of non-interest-bearing
promissory notes issued by dLLC to such members (the "Investor Notes").
Additionally, dInc will assume the obligations of dLLC under the Investor
Notes as part of the Reorganization. The Company will pay the balance on those
notes upon the completion of the Offering.

14. FAMILY STOCKHOLDERS' AGREEMENT

Concurrent with the Reorganization, certain stockholders (the "Family
Holders") and a stockholder/executive of the Company (the "Executive") will
enter into a stockholders agreement with the Company (the "Family Stockholders
Agreement") which, subject to certain exceptions, prohibits the Family Holders
from transferring the shares of Common Stock they will own upon completion of
the Reorganization for a period of two years from the date of the
Reorganization. Thereafter, the Family Holders will be able to transfer such
shares in accordance with the requirements of Rule 144 under the Securities
Act. The Family Stockholders Agreement also permits each of the Family Holders
to cause the Company to register shares of Common Stock concurrently with
offerings of Common Stock by the Executive. The Company will generally be
required to bear the expenses of all such registrations, except underwriting
discounts and commissions. In addition, the Family Stockholders Agreement will
give the Executive the right to vote all of the shares of Common Stock owned
by the Family Holders on all matters that come before the stockholders of the
Company. The Family Holders collectively, will own 33.5 percent of the
outstanding Common Stock upon completion of the Offering. The Family
Stockholders Agreement will expire on the tenth anniversary of the completion
of the Reorganization.

F-16
<PAGE>

[PHOTOGRAPHS AND ART FROM DELIA*S CATALOGS.]
<PAGE>

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

NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL OR A SOLICI-
TATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY OR THAT THE INFORMA-
TION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.

-----------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................... 3
Risk Factors.......................................................... 5
Use of Proceeds....................................................... 11
Dividend Policy....................................................... 11
The Reorganization.................................................... 11
Capitalization........................................................ 12
Dilution.............................................................. 13
Selected Financial Data............................................... 14
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 15
Business.............................................................. 21
Management............................................................ 28
Certain Transactions.................................................. 34
Principal and Selling Stockholders.................................... 35
Description of Capital Stock.......................................... 37
Shares Eligible for Future Sale....................................... 40
Underwriting.......................................................... 41
Legal Matters......................................................... 42
Experts............................................................... 42
Additional Information................................................ 43
Index to Financial Statements......................................... F-1
</TABLE>

-----------

UNTIL , 1997 (25 DAYS AF-
TER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS
IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRI-
BUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHENACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIRUNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

2,350,000 SHARES

LOGO

COMMON STOCK

---------------
PROSPECTUS
---------------

HAMBRECHT & QUIST

OPPENHEIMER & CO., INC.

, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred by the Company
in connection with the issuance and distribution of the securities being
registered under this registration statement. Except for the SEC, NASD and
Nasdaq fees, all expenses have been estimated and are subject to future
contingencies.

<TABLE>
<S> <C>
SEC registration fee............................................. $ 9,787
NASD fee......................................................... 3,743
Nasdaq Entry Fee................................................. 47,500
Legal fees and expenses*.........................................
Printing and engraving expenses*.................................
Accounting fees and expenses*....................................
Blue sky fees and expenses*......................................
Transfer agent and registrar fees and expenses................... 10,000
Miscellaneous*...................................................
--------
Total........................................................ $600,000
========
</TABLE>
- --------
* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

In addition, Article NINTH of the Company's certificate of incorporation
provides that no director shall be personally liable for any breach of
fiduciary duty. Article NINTH does not eliminate a director's liability (i)
for a breach of his or her duty of loyalty to the Company or its stockholders,
(ii) for acts of intentional misconduct, (iii) under Section 174 of the
General Corporation Law of the State of Delaware for unlawful declarations of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transactions from which the director derived an improper personal benefit.

Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify its directors and officers against expenses
(including attorney's fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection with any action, suit
or proceeding brought by third parties, if such directors or officers acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reason to believe their conduct was unlawful. In a
derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors and officers in connection with the defense or settlement of an
action or suit, and only with respect to a matter as to which they shall have
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable
to the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
officers or directors are reasonably entitled to indemnity for such expenses
despite such adjudication of liability.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for

II-1
<PAGE>

any transaction from which the director derived an improper personal benefit.
No such provision shall eliminate or limit the liability of a director for any
act or omission occurring prior to the date when such provision becomes
effective.

The Underwriting Agreement provides for indemnification of directors and
officers of the Company by the Underwriters against certain liabilities.

Pursuant to Section 145 of the General Corporation Law of the State of
Delaware, the Company maintains directors' and officers' liability insurance
coverage.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

dELiA*s LLC will subscribe for 10,000,000 shares of Common Stock prior to
the effectiveness of this Registration Statement. The issuance of such shares
will be exempt from registration pursuant to Section 4(2) of the Securities
Act.

ITEM 16. EXHIBITS

<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement
2.1* Form of Bill of Sale and Contribution and Assumption Agreement between
dELiA*s LLC and the Company
3.1** Certificate of incorporation of the Company
3.2** Bylaws of the Company
5* Opinion of Proskauer Rose Goetz & Mendelsohn LLP re: validity of
securities
10.1** Form of Employment Agreement between the Company and Stephen I. Kahn
10.2* Form of Employment Agreement between the Company and Christopher C.
Edgar
10.3* Form of Employment Agreement between the Company and Evan Guillemin
10.4** Form of Family Stockholders Agreement among the Company, Stephen I.
Kahn and the persons listed on exhibit A thereto
10.5** Form of 1996 Stock Incentive Plan
10.6** Form of Restricted Stock Plan
10.7* Form of Stock Option Agreement between the Company and Evan Guillemin
10.8** Agreement dated April 11, 1996 between the Company and The Jay Group,
Inc.
10.9** Lease Agreement dated May 3, 1995 between the Company and The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New-York
(the "Lease Agreement"); Modification and Extension of Lease Agreement
dated September 26, 1996
10.10* Form of Restricted Stock Agreements between the Company and holders of
Common Stock subject to the Restricted Stock Plan
16** Letter from Richard A. Eisner & Company, LLP respecting change in
certifying accountant
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Richard A. Eisner & Company, LLP
23.3* Consent of Proskauer Rose Goetz & Mendelsohn LLP (contained in opinion
to be filed as Exhibit 5)
24.3** Power of Attorney
27.1* Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment

** Previously filed

II-2
<PAGE>

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement (a form of which is filed
herewith as Exhibit 1.1) certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE UNDERSIGNED
REGISTRANT CERTIFIES THAT IT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF NEW YORK, STATE OF NEW YORK, ON THE 20TH DAY OF NOVEMBER, 1996.

dELiA*s Inc.

/s/ Stephen I. Kahn
By: _________________________________
STEPHEN I. KAHN CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE OFFICER

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Stephen I. Kahn Chairman of the
- ------------------------------------- Board, Chief November 20,
STEPHEN I. KAHN Executive Officer 1996
and Director
(principal
executive officer)

/s/ Evan Guillemin Chief Financial
- ------------------------------------- Officer, Secretary, November 20,
EVAN GUILLEMIN Treasurer and 1996
Director (principal
financial and
accounting officer)

Executive Vice
* President, Chief November 20,
- ------------------------------------- Operating Officer 1996
CHRISTOPHER C. EDGAR and Director

Director
* November 20,
- ------------------------------------- 1996
S. ROGER HORCHOW

Director
* November 20,
- ------------------------------------- 1996
SIDNEY S. KAHN

Director
* November 20,
- ------------------------------------- 1996
GERALDINE KARETSKY

/s/ Joseph J. Pinto Director November 20,
- ------------------------------------- 1996

JOSEPH J. PINTO

/s/ Evan Guillemin

*By: ___________________________

EVAN GUILLEMIN, Attorney-in-fact

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
2.1* Form of Bill of Sale and Contribution and Assumption Agreement between
dELiA*s LLC and the Company
3.1** Certificate of incorporation of the Company
3.2** Bylaws of the Company
5* Opinion of Proskauer Rose Goetz & Mendelsohn LLP re: validity of
securities
10.1** Form of Employment Agreement between the Company and Stephen I. Kahn
10.2* Form of Employment Agreement between the Company and Christopher C.
Edgar
10.3* Form of Employment Agreement between the Company and Evan Guillemin
10.4** Form of Family Stockholders Agreement among the Company, Stephen I.
Kahn and the persons listed on exhibit A thereto
10.5** Form of 1996 Stock Incentive Plan
10.6** Form of Restricted Stock Plan
10.7* Form of Stock Option Agreement between the Company and Evan Guillemin
10.8** Agreement dated April 11, 1996 between the Company and The Jay Group,
Inc.
10.9** Lease Agreement dated May 3, 1995 between the Company and The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New-York
(the "Lease Agreement"); Modification and Extension of Lease Agreement
dated September 26, 1996
10.10* Form of Restricted Stock Agreements between the Company and holders of
Common Stock subject to the Restricted Stock Plan
16** Letter from Richard A. Eisner & Company, LLP respecting change in
certifying accountant
23.1* Consent of Deloitte & Touche LLP
23.2* Consent of Richard A. Eisner & Company, LLP
23.3* Consent of Proskauer Rose Goetz & Mendelsohn LLP (contained in opinion
to be filed as Exhibit 5)
24.3** Power of Attorney
27.1* Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment

** Previously filed