DELIAS INC, S-1, 1997-05-20

DELIAS INC
S-1, 1997-05-20
CATALOG & MAIL-ORDER HOUSES

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As filed with the Securities and Exchange Commission on May 20, 1997
Registration No. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
dELiA*s Inc.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Delaware 5961 13-3914035
(STATE OF OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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)
---------------
Copies of Communications to:

Ronald R. Papa, Esq. Larry A. Barden, Esq.
Proskauer Rose Goetz & Mendelsohn LLP Sidley & Austin
1585 Broadway One First National Plaza, Suite 4400
New York, New York 10036-8299 Chicago, Illinois 60603-2279
(212) 969-3000 (312) 853-7000

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. [ ]
---------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
====================================================================================================================
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered (1) per unit (2) offering price registration fee
- ------------------------------ ------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share ............ 2,300,000 shares $21.625 $49,737,500 $15,072
====================================================================================================================
</TABLE>

(1) Includes 300,000 shares of Common Stock, which the Underwriters have the
option to purchase to cover over-allotments, if any.

(2) Based on the average high and low trading price on The Nasdaq Stock
Market on May 13, 1997. Estimated pursuant to Rule 457(c) under the
Securities Act of 1933, as amended, solely for the purpose of calculating
the registration fee.
---------------
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.

================================================================================

<PAGE>

SUBJECT TO COMPLETION, DATED MAY 20, 1997

PROSPECTUS

2,000,000 Shares

[dELiA*s Inc. logo]

Common Stock

Of the 2,000,000 shares of Common Stock offered hereby, 1,000,000 shares
are being sold by the Company and 1,000,000 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."

The Company's Common Stock is traded on The Nasdaq Stock Market under the
symbol DLIA. On May 19, 1997, the last reported sale price of the Common Stock
was $22.25 per share. See "Price Range of Common Stock."

-------

The shares offered hereby involve a high degree of risk.
See "Risk Factors" commencing on page 5.

-------

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>
<CAPTION>
=======================================================================================
Price to Underwriting Proceeds to Proceeds to Selling
Public Discount (1) Company (2) Stockholders
<S> <C> <C> <C> <C>
Per Share ...... $ $ $ $
Total (3) ...... $ $ $ $
=======================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $300,000.

(3) Certain Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to 300,000 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 and Proceeds to Selling Stockholders will
be $ , $ , and $ , respectively. See "Underwriting."

-------

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 , 1997 at the office of the agent of Hambrecht
& Quist LLC in New York, New York.

HAMBRECHT & QUIST

OPPENHEIMER & CO., INC.
MONTGOMERY SECURITIES
, 1997

[red herring]

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.

[end red herring]

<PAGE>

[PHOTOGRAPHS FROM, AND DESCRIPTIONS OF MERCHANDISE CONTAINED IN,
THE dELiA*S SUMMER '97 CATALOG]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

"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>

PROSPECTUS SUMMARY

The following 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 12% to approximately 62 million by 2005. According to
data from one independent research firm, teens spent approximately $109 billion
in 1995. Another independent research firm estimated that apparel accounted for
over one-third of teen spending on certain major categories of goods and
services. 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 and creative "catch 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 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 primarily because it consists mostly of
names of persons who specifically requested the dELiA*s catalog and which may
not be available through purchased or rented lists. The Company's database
currently includes approximately 1.8 million names, including approximately
456,000 customers (as of April 30, 1997) who had made purchases from the Company
within the preceding 36 months. The Company has customers in all 50 states,
Japan and Canada.

dELiA*s plans to increase distribution of its catalog from 8 million in
fiscal 1996 to in excess of 20 million in fiscal 1997, and to increase the
number of catalog editions from six in fiscal 1996 to eight 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 April
30, 1997, the Company employed approximately 225 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 and its proprietary database to develop new channels of
distribution, products and services aimed at the Generation Y market.

Notwithstanding the significant direct marketing opportunities the Company
believes exist for apparel, accessories and other related products targeted at
the Generation Y market, the Company expects to face increased competition and
has a limited operating history that makes it difficult to predict the Company's
results of operations. In view of those risks and those more fully described
under "Risk Factors," there can be no assurance the Company will achieve its
goal of becoming the leading direct marketer of casual apparel, accessories and
other related products to Generation Y girls and young women.

The Company was incorporated in Delaware in October 1996 and is a successor
to a business founded in September 1993. The Company completed an initial public
offering of 2,702,500 shares at an offering price of $11.00 per share in
December 1996 (the "IPO"). The Company's executive offices are located at
435 Hudson Street, New York, New York 10014, and its telephone number is (212)
807-9060.

<PAGE>

The Offering

<TABLE>
<S> <C>
Common Stock offered by the Company ..................... 1,000,000 shares
Common Stock offered by the Selling Stockholders ...... 1,000,000 shares
Common Stock to be outstanding after the offering ...... 13,002,977 shares (1)
Use of proceeds ....................................... For working capital and other general corporate
purposes. See "Use of Proceeds."
Nasdaq Stock Market symbol .............................. DLIA
</TABLE>

Summary Financial Information
(in thousands, except per share data)

<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 April 30,
Ended Ended Ended --------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- ------------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ........................... $ 139 $ 5,652 $30,225 $ 3,709 $12,928
Gross profit ........................ 50 2,574 15,601 1,984 6,536
Net income (loss) ..................... $ (332) $ 27 $ 4,255 $ 497 $ 928
Pro forma net income (loss) (2) ...... $ (202) $ 18 $ 2,307 $ 297 $ 928
Pro forma net income (loss)
per share (3) ........................ $ (0.02) $ 0.00 $ 0.23 $ 0.03 $ 0.08
Shares used in the calculation of
pro forma net income (loss)
per share (3) ........................ 10,000 10,000 10,214 10,000 12,014
Selected Operating Data:
Number of catalogs distributed ...... 26 1,700 8,000 1,059 4,800
House names (4) ..................... 17 290 1,335 420 1,732
Buyers (5) ........................... 1 82 373 88 456
</TABLE>

<TABLE>
<CAPTION>
April 30, 1997
------------------------------
Actual As Adjusted (6)
---------- -----------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ...... $15,269 $35,995
Working capital .................. 15,893 36,619
Total assets ..................... 29,822 50,548
Total stockholders' equity ...... 22,081 42,807
</TABLE>

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

(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 331,750 shares of Common Stock were outstanding as of May 19,
1997 at a weighted average exercise price of $15.07 per share) 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--Options/SAR Grants and Exercises."

(2) Computed for all periods prior to the three months ended April 30, 1997 on
the basis described in Note 6 of Notes to Financial Statements and assuming
the pro forma tax provisions described therein. Prior to the IPO, the
Company effected the Reorganization, defined under "Certain
Transactions," in which the Company converted from a limited liability
company to a C corporation. Pro forma net income for the three months ended
April 30, 1997 represents actual reported net income. See "Certain
Transactions" and Note 1 of Notes to Financial Statements.

(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) 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 36
months, determined at the end of the applicable fiscal period. The number of
house names as of May 19, 1997 is approximately 1.8 million.

(5) Buyers represents the number of customers who have made at least one
purchase from the Company in the preceding 36 months, determined at the end
of the applicable first period.

(6) As adjusted to reflect the sale of 1,000,000 shares of Common Stock by the
Company at an assumed offering price of $22.25 per share and the application
of the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."

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

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. 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).

4
<PAGE>

RISK FACTORS

The following principal 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, fiscal 1996 and the first three months of
fiscal 1997, 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."

Operational, Management and Inventory Risks of Growth Strategy. 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. The Company distributed approximately 1.7 million catalogs in
fiscal 1995, 8 million catalogs in fiscal 1996 and 4.8 million catalogs in the
first three months of fiscal 1997. 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 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. Investments in infrastructure will increase
the Company's operating expenses, which could have a material adverse effect on
the Company if anticipated sales do not materialize. 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 retail stores, publishing additional catalogs targeted at other markets,
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

<PAGE>

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.

Changes in 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 merchandise 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 Develop and Maintain Proprietary Customer Lists. 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 37% of the names of persons to whom the Company mailed its spring
1997 catalog were derived from purchased and 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.

Transition to New Warehouse and Performance of Fulfillment Services.
Currently, all the Company's orders for merchandise are being handled by a
third-party fulfillment company at a facility near Lancaster, Pennsylvania.
However, the Company anticipates performing all of its fulfillment services
itself as of July 1997 through a leased facility in Hanover, Pennsylvania. The
Company expects that, beginning in the second quarter of fiscal 1997, it will
incur additional expenses as a result of moving to and operating the new
facility, and will make substantial investments in plant and equipment to
improve the new facility. If these expenses exceed the Company's expectations,
it could have a material adverse effect on the Company. The Company has never
managed fulfillment operations on the scale necessary to accommodate the
Company's current order volume. Any delay in effecting the transition,
disruption in fulfillment operations or delays in shipping 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--Distribution
and Fulfillment."

6
<PAGE>

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. Eleven vendors have
accounted for approximately 51% of the net sales generated by the Company's
spring 1997 catalogs. Apparel produced by Urban Outfitters accounted for
approximately 11% of gross sales for the first three months of fiscal 1997. 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 direct marketing and apparel experience of a 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, some of which may specifically target
the Company's customers. Many of the Company's competitors are larger and have
substantially greater financial, distribution and marketing resources than the
Company.

There are few barriers to entry in the teen apparel and accessories market
and the Company believes that its recent success in this market has attracted
the attention of other catalogers, as well as store-based retailers and apparel
manufacturers, some of which are likely 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,
increased 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, equaled approximately 10% of the Company's net sales in fiscal
1996 and 9% of the Company's net sales in the first three months of fiscal 1997.
The Company 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. A significant
disruption in its telephone and management information systems could adversely
affect the Company's relations with its customers and vendors and its ability to
manage its operations. Furthermore, there can be no assurance that extended or
repeated

<PAGE>

reliance on the Company's back-up computer and telephone systems would not have
a material adverse effect on the Company.

Catalog Delivery Risks. 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 the occurrence of postal delays or disruptions
in the mailing of catalogs, could affect the demand for the Company's products
or the timing of the Company's sales 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 Canada and intends to increase distribution there and to
explore distribution opportunities in other international markets. Approximately
1% of the Company's net sales for fiscal 1996, and 2% of the Company's net sales
for the first three months of fiscal 1997, 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
(approximately 35% of the Company's net sales in the first three months of
fiscal 1997 were of products the Company believes were manufactured outside the
United States), and the Company has begun to 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 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. There can be no assurance that the
actions taken by the Company to establish and protect its trademarks and other
proprietary rights (including the dELiA*s name, the dELiA*s logo and the daisy
("*") symbol) 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."

Risk that the Company May Be Required to Collect Sales Tax. 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.

Unspecified Use of Proceeds. The principal purposes of this offering are to
obtain additional capital to support anticipated growth, expand the public
market for the Common Stock, facilitate future access for the Company to public
equity markets and enhance the Company's ability to use its Common Stock as
consideration for potential acquisitions and as a means of attracting and
retaining key employees. The Company expects to use the net proceeds from this
offering primarily for working capital and general corporate purposes. A portion
of such net proceeds may also be used to fund future acquisitions, if any. The
Company has no current specific plan for the proceeds of this offering, and, as
a consequence, management will have discretion over the use of the proceeds.

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 57.0% (approximately 54.9%, if the
Underwriters' over-allotment option is exercised in full) of the outstanding
shares of Common Stock, including 3,321,436 shares he will own directly and an
additional 4,085,815 shares in the aggregate subject to a stockholders agreement
among certain of the Company's existing stockholders (the "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

<PAGE>

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."

Possibility of Adverse Effect on the Market Price of the Common Stock by
Virtue of Certain 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."

Limited Trading History; Possible Volatility of Stock Price. The Company's
stock price has fluctuated substantially since the IPO. There can be no
assurance the market price of the Common Stock will not decline below the public
offering price set forth on the cover page of this Prospectus. 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 90-day lock-up period
referred to in "Possibility of Adverse Effect on the Market Price of the
Common Stock by Virtue of Public Sales of Common Stock Following This
Offering" below could have an adverse effect on the market price of the Common
Stock. See "--Possibility of Adverse Effect on the Market Price of the Common
Stock by Virtue of Public Sales of Common Stock Following This Offering,"
"Shares Eligible for Future Sale" and "Underwriting."

Possibility of Adverse Effect on the Market Price of the Common Stock by
Virtue Of Public Sales of Common Stock Following This Offering. 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, 13,002,977 shares of Common Stock will be
outstanding. The shares of Common Stock sold in this offering, together with the
2,702,500 shares sold in the IPO, 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 of
Common Stock are subject to lock-up commitments, pursuant to which such shares
may not be sold or otherwise disposed of for a period of 90 days after the date
of this Prospectus (the "Lock-Up Period") without the prior written consent
of Hambrecht & Quist LLC, or are "restricted securities" within the meaning
of Rule 144 under the Securities Act. Such shares consist of an aggregate of
8,227,000 shares that are subject to lock-up agreements (the "Lock-Up
Agreements") with Hambrecht & Quist

<PAGE>

LLC, an aggregate of 4,085,815 shares that, after this offering, will be 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), and an aggregate of 9,300,477 shares
which are "restricted securities" under Rule 144. 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 "Principal and Selling Stockholders" and "Shares Eligible for
Future Sale."

Forward-Looking Statements. This Prospectus contains certain
forward-looking statements, including, without limitation, statements concerning
the Company's operations, economic performance and financial condition,
including in particular statements relating to the Company's growth strategy.
These forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The words
"believe," "expect," "anticipate" and other similar expressions
generally identify forward-looking statements. Investors are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties,
including, without limitation, those identified under "Risk Factors" and
elsewhere in this Prospectus and other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission. Actual results could differ materially from these forward-looking
statements. In addition, important factors to consider in evaluating such
forward-looking statements include changes in external market factors, changes
in the Company's business or growth strategy or an inability to execute its
strategy due to changes in its industry or the economy generally, the emergence
of new or growing competitors and various other competitive factors. In light of
these risks and uncertainties, there can be no assurance that the matters
referred to in the forward-looking statements contained in this Prospectus will
in fact occur.

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered by the Company at an assumed public offering price of
$22.25 per share are estimated to be $20,726,250. The Company intends to use the
net proceeds primarily for working capital and general corporate purposes. A
portion of such net proceeds may also be used to fund future acquisitions, if
any. 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 "Risk
Factors-Unspecified Use of Proceeds" and "Principal and Selling
Stockholders."

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company commenced trading publicly on The Nasdaq
Stock Market on December 19, 1996 and is traded under the symbol DLIA. The
following table sets forth the high and low sales prices for the Common Stock as
reported by The Nasdaq Stock Market. Such quotations reflect interdealer prices
without adjustment for retail markups, markdowns or commissions and may not
necessarily represent actual transactions.

High Low
---------- ---------
Fiscal year ended January 31, 1997:
4th Quarter (from December 19, 1996) ...... $20.250 $12.500
Fiscal year ending January 31, 1998:
1st Quarter .............................. 19.750 13.750
2nd Quarter (through May 19, 1997) ......... 25.750 16.250

On May 19, 1997, the last reported sales price of the Common Stock on The
Nasdaq Stock Market was $22.25 per share. As of April 22, 1997, there were
approximately 50 holders of record of the Common Stock and approximately 1,625
beneficial owners of the Common Stock.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends (other than the
LLC Distribution described under "Certain Transactions"). The Company
currently intends to retain its earnings for future growth and, therefore, does
not anticipate paying any cash dividends in the foreseeable future.

11
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
April 30, 1997 (i) on an actual basis and (ii) as adjusted to give effect to the
sale of 1,000,000 shares of Common Stock offered by the Company at an assumed
offering price of $22.25 per share and the application of the estimated net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and Notes thereto included in this
Prospectus.

<TABLE>
<CAPTION>
April 30, 1997
-------------------------
Actual As Adjusted
--------- -------------
(in thousands)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized;
none issued and outstanding ............................... $ - $ -
Common Stock, $0.01 par value, 50,000,000 shares authorized;
12,002,977 shares issued and outstanding actual; 13,002,977
shares issued and outstanding as adjusted (1) ............... 120 130
Note receivable from stockholder (2) ........................ (50) (50)
Deferred compensation (3) .................................... (121) (121)
Additional paid-in capital .................................... 20,870 41,586
Retained earnings ............................................. 1,262 1,262
-------- --------
Total stockholders' equity ................................. 22,081 42,807
-------- --------
Total capitalization ....................................... $ 22,081 $ 42,807
======== ========
</TABLE>

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

(2) See Note 8 of Notes to Financial Statements.

(3) See Note 7 of Notes to Financial Statements.

<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. The 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 January 31, 1997
and for the fiscal year ended January 31, 1997 which have been audited by
Deloitte & Touche LLP, independent auditors. The data at January 31, 1996 and
for each of the two fiscal years ended January 31, 1996 and January 31, 1995 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 April 30, 1997 and for the
three-month periods ended April 30, 1996 and 1997 are derived from the Company's
unaudited financial statements for such periods, 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 three months ended April 30, 1997 are not
necessarily indicative of the Company's results that may be achieved for the
fiscal year ending January 31, 1998 or any future period.

<TABLE>
<CAPTION>
September 9, 1993 Fiscal Year 1994
(inception) to Ended
January 31, 1994 January 31, 1995
----------------- ----------------
(in thousands, except per share data)
<S> <C> <C>
Statements of Operations Data:
Net sales ........................... $ - $ 139
Cost of sales ........................ - 89
------- ---------
Gross profit ........................ - 50
Selling, general and administrative
expenses ........................... 34 384
Interest income, net .................. 1 2
------- ---------
Income (loss) before provision for
income taxes ........................ (33) (332)
Provision for income taxes ............ - -
------- ---------
Net income (loss) ..................... $ (33) $ (332)
======= =========
Pro forma net income (loss) (1) ...... $ (19) $ (202)
======= =========
Pro forma net income (loss) per
share (2) ........................... $ 0.00 $ (0.02)
======= =========
Shares used in the calculation of
pro forma net income (loss) per
share (2) ........................... 10,000 10,000

Selected Operating Data:
Number of catalogs distributed ...... - 115
House names (3) ..................... - 17
Buyers (4) ........................... - 1\
<CAPTION>

Three Months Ended
Fiscal Year 1995 Fiscal Year 1996 April 30,
Ended Ended --------------------
January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ........................... $ 5,652 $ 30,225 $ 3,709 $12,928
Cost of sales ........................ 3,078 14,624 1,725 6,392
--------- --------- -------- --------
Gross profit ........................ 2,574 15,601 1,984 6,536
Selling, general and administrative
expenses ........................... 2,569 11,850 1,489 5,222
Interest income, net .................. 25 176 9 237
--------- --------- -------- --------
Income (loss) before provision for
income taxes ........................ 30 3,927 504 1,551
Provision for income taxes ............ 3 (328) 7 623
--------- --------- -------- --------
Net income (loss) ..................... $ 27 $ 4,255 $ 497 $ 928
========= ========= ======== ========
Pro forma net income (loss) (1) ...... $ 18 $ 2,307 $ 297 $ 928
========= ========= ======== ========
Pro forma net income (loss) per
share (2) ........................... $ 0.00 $ 0.23 $ 0.03 $ 0.08
========= ========= ======== ========
Shares used in the calculation of
pro forma net income (loss) per
share (2) ........................... 10,000 10,214 10,000 12,014

Selected Operating Data:
Number of catalogs distributed ...... 1,700 8,000 1,059 4,800
House names (3) ..................... 290 1,335 420 1,732
Buyers (4) ........................... 82 373 88 456

<CAPTION>
January 31,
-----------------------------------------
1995 1996 1997 April 30, 1997
------- -------- ------- ------------------
Balance Sheet Data:
Cash and cash equivalents ............ $ 704 $ 675 $ 21,31$ 15,269
Working capital ..................... 826 720 20,027 15,893
Total assets ........................ 870 1,266 27,414 29,822
Total stockholders' equity ............ 835 962 21,132 22,081
</TABLE>

- ----------
(1) Computed for all periods prior to the three months ended April 30, 1997 on
the basis described in Note 6 of Notes to Financial Statements and assuming
the pro forma tax provisions described therein. Prior to the IPO, the
Company effected the Reorganization, in which the Company converted from a
limited liability company to a C corporation. Pro forma net income for the
three months ended April 30, 1997 represents actual reported net income. See
"Certain Transactions" and Note 1 of Notes to Financial Statements.

(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 36
months, determined at the end of the applicable fiscal period. The number of
house names as of May 19, 1997 is approximately 1.8 million.

(4) Buyers represents the number of customers who have made at least one
purchase from the Company in the preceding 36 months, determined at the end
of the applicable fiscal period.

<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 late 1994 and 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 36 months), which
currently contains approximately 1.8 million names, primarily through referrals,
word-of-mouth, returns of catalog request cards and targeted classified
advertising in selected magazines. A significant portion of the Company's
catalogs are mailed to house names, supplemented by purchased and rented lists.
The response rates generated from its house list are typically higher than those
the Company realizes from purchased or rented lists.

The Company plans to increase the number of catalogs it distributes from 8
million in fiscal 1996 to in excess of 20 million in fiscal 1997. The Company
distributed four editions of its catalog in fiscal 1995, six editions in fiscal
1996 and anticipates distributing eight editions in fiscal 1997. As the Company
continues to increase its prospecting efforts and the number of catalogs it
distributes, the Company intends to increase its aggregate marketing
expenditures, which may result in a decrease in operating margin. With increased
catalog distribution, there can be no assurance that response rates will not
decline in the future. Response rates have typically fluctuated on a
year-to-year and catalog-to-catalog basis. Response rates are influenced by a
number of factors including the timing of catalog mailings, market acceptance of
the Company's merchandise and the mix and presentation of products and actions
of competitors. 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, including its first sale
circular and its first targeted supplemental catalog. In part to facilitate its
targeted publishing strategy, the Company has developed its 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 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 helped to improve its overall profitability in fiscal 1996 and the
first three months of fiscal 1997.

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 percentage annual growth in net sales and growth in operating

<PAGE>

income experienced in fiscal 1995 and fiscal 1996. Additionally, legislation
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
could adversely affect the Company's use of purchased and rented lists, as well
as the Company's ability to generate new names for its proprietary database.
Although the Company is not a list broker, it does mail catalogs to persons
whose names are derived from purchased and rented lists. Approximately 37% of
the names of persons to whom the Company mailed its spring 1997 catalog were
derived from purchased and rented lists. However, the Company's use of purchased
and rented lists has been declining relative to the use of its house list. The
Company is exploring new methods for developing its house list and believes it
will be able to continue to develop this list through advertising and new
channels for the distribution of its catalogs, including bulk drops on college
campuses. There can be no assurance, however, that the Company will be able to
develop its house list.

The Company currently uses an unaffiliated third-party fulfillment
contractor to process and fulfill orders. However, the Company has given notice
to the third-party contractor of its intention to terminate its agreement with
the contractor as of June 30, 1997. At that time, the Company anticipates that
it will begin to operate its own warehouse and fulfillment operations. For that
purpose, the Company has entered into a lease agreement for a warehouse and
fulfillment facility in Hanover, Pennsylvania. The Company expects that,
beginning in the second quarter of fiscal 1997, it will incur additional
expenses as a result of moving to and operating the new facility, and will make
substantial investments in plant and equipment to improve the new facility. See
"Risk Factors-Transition to New Warehouse and Performance of Fulfillment
Services," "-Liquidity and Capital Resources" and
"Business-Operations-Distribution and Fulfillment."

On December 24, 1996, the Company sold 2,052,500 shares of Common Stock in
the IPO. The Company has invested the net proceeds it received from the IPO,
consisting of $19.8 million, in short-term, interest-
bearing, investment-grade securities.

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
--------------------------------------------------------------------------------------
Three Months
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 Ended April 30,
Ended Ended Ended --------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- ------------------- --------- --------
<S> <C> <C> <C> <C> <C>
Net sales ........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................ 64.0 54.5 48.4 46.5 49.4
---------- -------- -------- -------- -----
Gross profit ........................ 36.0 45.5 51.6 53.5 50.6
Selling, general and
administrative expenses ............ 276.3 45.4 39.2 40.1 40.4
Interest income, net .................. 1.4 0.4 0.6 0.2 1.8
---------- -------- -------- -------- ------
Income (loss) before provision for
income taxes ........................ (238.9) 0.5 13.0 13.6 12.0
Provision (benefit) for income
taxes .............................. - - (1.1) 0.2 4.8
---------- -------- -------- -------- ------
Net income (loss) ..................... (238.9)% 0.5% 14.0% 13.4% 7.2%
========== ======== ======== ======== ========
Pro forma net income (loss) (1) ...... (145.3)% 0.3% 7.6% 8.0% 7.2%
========== ======== ======== ======== =======
</TABLE>

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

(1) Computed for all periods prior to the three months ended April 30, 1997 on
the basis described in Note 6 of Notes to Financial Statements and assuming
the pro forma tax provisions described therein. Prior to the IPO, the
Company effected the Reorganization, in which the Company converted from a
limited liability company to a C corporation. Pro forma net income for the
three months ended April 30, 1997 represents actual reported net income. See
"Certain Transactions" and Note 1 of Notes to Financial Statements.

15
<PAGE>

Comparison of Three Months Ended April 30, 1996 and 1997

Net Sales. Net sales increased approximately $9.2 million, from $3.7
million in the first three months of fiscal 1996 to $12.9 million in the first
three months of fiscal 1997. The increase in net sales was primarily due to an
increase in the number of catalogs mailed. The Company increased the number of
catalogs it distributed to 4.8 million in the first three months of fiscal 1997
from 1.1 million in the first three months of fiscal 1996. Aggregate response
rates from catalogs distributed in the first three months of fiscal 1997
declined relative to catalogs distributed in the first three months of fiscal
1996, as the Company mailed an additional catalog edition during the 1997 period
to a large number of persons who had received a prior edition of the catalog
earlier in the period. The Company believes aggregate response rates will
usually decline when it mails additional catalog editions within the same fiscal
quarter.

Gross Margin. Gross margin decreased from 53.5% in the first three months
of fiscal 1996 to 50.6% in the first three months of fiscal 1997. The decrease
in gross margin was due primarily to an increased reserve for returns consistent
with the Company's recent growth, an increased inventory reserve for
obsolescence based upon management's evaluation of merchandise inventories as of
April 30, 1997 and the sale of merchandise at a discount in a sales circular. In
contrast, in the first three months of fiscal 1996, the Company had negligible
carryover inventory, and thus no discounted sales, as a result of a one-time
liquidation of over-stocked merchandise in the fourth quarter of fiscal 1995.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately $3.7 million, from $1.5 million
in the first three months of fiscal 1996 to $5.2 million in the first three
months of fiscal 1997. Selling, general and administrative expenses increased as
a percentage of net sales from 40.1% in the first three months of fiscal 1996 to
40.4% in the first three months of fiscal 1997. The increase was due to higher
expenditures on corporate salaries, telemarketing staff and additional
information systems in anticipation of future sales growth, as well as
additional marketing expenditures as the Company increased the number of
catalogs it mailed.

Interest income, net. Interest income, net, increased approximately
$228,000, from $9,000 in the first three months of fiscal 1996 to $237,000 in
the first three months of fiscal 1997. The increase in interest income, net, was
primarily due to the Company's investment of the net proceeds from the IPO,
which proceeds were received in the fourth quarter of fiscal 1996.

Provision (benefit) for income taxes. Provision (benefit) for income taxes
increased approximately $616,000, from $7,000 in the first three months of
fiscal 1996 to $623,000 in the first three months of fiscal 1997. This increase
was almost entirely due to the Reorganization, which was effected in the fourth
quarter of fiscal 1996, in which the Company converted from a limited liability
company to a C corporation. See Note 6 of Notes to Financial Statements.

Comparison of Fiscal Years 1995 and 1996

Net sales. Net sales increased approximately $24.5 million, from $5.7
million in fiscal 1995 to $30.2 million in 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 distributed from 1.7 million in fiscal 1995 to 8
million in fiscal 1996. The 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 catalog.

Gross margin. Gross margin increased from 45.5% in fiscal 1995 to 51.6% in
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 January 31, 1997 and anticipated inventory
dispositions.

<PAGE>

Selling, general and administrative expenses. Selling, general and
administrative expenses increased approximately $9.3 million, from $2.6 million
in fiscal 1995 to $11.9 million in fiscal 1996. Selling, general and
administrative expenses decreased as a percentage of net sales from 45.4% in
fiscal 1995 to 39.2% in fiscal 1996. The reduction in selling, general and
administrative expenses as a percentage of net sales was due to economies
implemented in catalog production as well as the leveraging of certain fixed
costs over a larger revenue base. The reduction was partially offset by a charge
of approximately $280,000 in 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.

Interest income, net. Interest income, net, increased approximately
$151,000, from $25,000 in fiscal 1995 to $176,000 in fiscal 1996. The increase
in interest income, net, was primarily due to the Company's investment of the
net proceeds from the IPO, which proceeds were received in the fourth quarter of
fiscal 1996.

Provision (benefit) for income taxes. Provision (benefit) for income taxes
decreased approximately $331,000, from a provision of $3,000 in fiscal 1995 to a
benefit of $328,000 in fiscal 1996. This decrease was almost entirely due to the
Reorganization, which was effected in the fourth quarter of fiscal 1996, in
which the Company converted from a limited liability company to a C corporation.
See Note 6 of Notes to Financial Statements.

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
distribution from approximately 115,000 catalogs (26,000 mailed, 89,000 dropped
on college campuses) 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.

Selected Quarterly Results of Operations

The following table sets forth certain unaudited statements of operations
data for the five quarters ended April 30, 1997, 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.

<PAGE>

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
Fiscal 1996 Fiscal 1997
----------------------------------------------------- -------------
Apr. 30, July 31, Oct. 31, Jan. 31, Apr. 30,
1996 1996 1996 1997 1997
----------- ----------- ----------- ----------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales ........................... $ 3,709 $4,663 $ 7,110 $ 14,743 $ 12,928
Cost of sales ........................ 1,725 2,233 3,463 7,203 6,392
-------- ------- -------- -------- --------
Gross profit ........................ 1,984 2,430 3,647 7,540 6,536
Selling, general and
administrative expenses ............ 1,489 2,149 2,693 5,519 5,222
Interest income, net .................. 9 11 4 152 237
-------- ------- -------- -------- --------
Income (loss) before provision for
income taxes ........................ 504 292 958 2,173 1,551
Provision (benefit) for income
taxes .............................. 7 4 4 (343) 623
-------- ------- -------- -------- --------
Net income (loss) ..................... $ 497 $ 288 $ 954 $ 2,516 $ 928
======== ======= ======== ======== ========
Pro forma net income (loss) (1) ...... $ 297 $ 171 $ 567 $ 1,272 $ 928
======== ======= ======== ======== ========

Percentage of Total Net Sales
------------------------------------------------------------------
Net sales ........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................ 46.5 47.9 48.7 48.9 49.4
-------- ------- -------- -------- --------
Gross profit ........................ 53.5 52.1 51.3 51.1 50.6
Selling, general and
administrative expenses ............ 40.1 46.0 37.9 37.4 40.4
Interest income, net .................. 0.2 0.2 0.1 1.0 1.8
-------- ------- -------- -------- --------
Income (loss) before provision for
income taxes ........................ 13.6 6.3 13.5 14.7 12.0
Provision (benefit) for income
taxes .............................. 0.2 0.1 0.1 (2.3) 4.8
-------- ------- -------- -------- --------
Net income (loss) ..................... 13.4% 6.2% 13.4% 17.1% 7.2%
======== ======= ======== ======== ========
Pro forma net income (loss) (1) ...... 8.0% 3.7% 8.0% 8.6% 7.2%
======== ======= ======== ======== ========
</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 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, the private sales of
equity securities and, most recently, the IPO. All of the Company's working
capital needs have been satisfied by cash provided by operations since the third
quarter of fiscal 1995. Cash

<PAGE>

provided by operations in the first three months of fiscal 1997 was $64,000,
$5.7 million in fiscal 1996 and $40,000 in fiscal 1995, while cash used in
operations was $422,000 in fiscal 1994.

Cash used in investing was $6.1 million in the first three months of fiscal
1997, $940,000 (not including $21.0 million invested in short-term securities)
in fiscal 1996, $169,000 in fiscal 1995 and $7,000 in fiscal 1994. The Company
expects to make capital expenditures of approximately $1.5 million to upgrade
its management information systems in fiscal 1997. The Company also anticipates
capital expenditures of at least $1.5 million in property, plant and equipment,
including leasehold improvements, office equipment and expenditures relating to
the Company's new warehouse and distribution operations. See
"Business--Operations--Distribution and Fulfillment."

Cash and cash equivalents increased by approximately $20.6 million from
January 31, 1996 to January 31, 1997, primarily due to the receipt of the net
proceeds to the Company from the IPO and, to a lesser extent, due to increased
cash generated by operations, but offset by a distribution of $4.0 million to
members of dELiA*s LLC prior to the Reorganization. Cash and cash equivalents
decreased by approximately $6.0 million to $15.3 million at April 30, 1997 as
the Company shifted a portion of its investments to securities with maturities
of greater than 90 days and increased its inventory position during the three
months ended April 30, 1997.

During the fiscal year prior to the IPO, the Company operated as a limited
liability company with taxes paid by its members. Following the Reorganization
in which the Company's business was transferred to a Delaware corporation, the
Company ceased to be a flow-through entity and is now liable for applicable
income taxes. See Note 6 of Notes to Financial Statements.

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 $3.0 million. The interest rate on
the line of credit is the lending bank's prime rate (8.5% at April 30, 1997)
plus 2%. The line expires on July 31, 1997. The Company has not drawn on this
line.

The Company believes that its cash on hand, together with cash generated by
operations and the net 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 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 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 ("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
are described in Note 12 of Notes to Financial Statements.

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share"
("EPS"), which is effective for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 supersedes APB No. 15 and specifies the
computation, presentation and disclosure requirement for basic and diluted EPS.
The Company has determined that the adoption of this new standard would not have
had a material effect on EPS for all periods presented.

<PAGE>

BUSINESS

Overview

dELiA*s Inc. (with its predecessors, "dELiA*s" or the "Company") 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 "catch phrases," 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 distributed its first catalog in March 1994, distributed
approximately 1.7 million catalogs in fiscal 1995, 8 million catalogs in fiscal
1996 and 4.8 million catalogs in the first three months of fiscal 1997. The
Company plans to increase catalog distribution to in excess of 20 million
catalogs in all of fiscal 1997. The Company's proprietary database currently
includes approximately 1.8 million house names, including approximately 456,000
customers (as of April 30, 1997) who had made at least one purchase from the
Company within the preceding 36 months. The Company's customers are located in
all 50 states, as well as Japan and Canada, with sales to customers in any
single state comprising not more than 11% of net sales in the first three months
of fiscal 1997.

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.
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 12% to
approximately 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.

[Graph titled HISTORICAL AND PROJECTED U.S. POPULATION OF 10 TO 24 YEAR-OLDS
with the following data points:

Years Population (in
millions)

1985 56,653
1986 55,586
1987 54,726
1988 54,249
1989 53,683
1990 54,286
1991 54,070
1992 54,253
1993 54,517
1994 54,656
1995 54,865
1996 55,037
1997 55,505
1998 56,248
1999 57,158
2000 58,134
2001 59,170
2002 60,027
2003 60,770
2004 61,358
2005 61,766
2006 62,133
2007 62,403
2008 62,658
2009 62,964
2010 63,147

Source: U.S. Census Bureau]

<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
over one-third of teen spending on certain major categories of goods and
services.

The Company believes that the members of Generation Y are influenced by new
media and information sources. Although a variety of retailers and catalogers
offer teen merchandise, the Company believes that the number of national
retailers or catalogers catering exclusively to the Generation Y market is
limited. The Company believes that creating a cultural environment that caters
to teen purchasers is essential to effectively marketing to this group.
Accessibility is also important, as many of these purchasers 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. As a result, 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 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 currently includes approximately
1.8 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 distributed from 8 million in fiscal 1996 to in excess of 20 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 Canada and is
increasing its distribution of catalogs in these markets in fiscal 1997. The
Company is also exploring distribution opportunities in other international
markets, and may consider developing or acquiring additional catalogs.

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 Teen, 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 75 vendors. Brands currently offered through dELiA*s catalogs
include nationally recognized names, such as Carter's 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, Dawls, Greed Girl, 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 and complementary
product offerings in the future. These opportunities may include licensing the
dELiA*s brand, publishing spin-off catalogs, developing a non-traditional,
youth-oriented magazine (or 'zine), developing other traditional or electronic
publishing ventures and opening retail stores.

Build Proprietary Customer Database. The Company believes the dELiA*s
proprietary customer database, which includes demographic data as well as
purchasing patterns and preferences, would be difficult

<PAGE>

for competitors to replicate, primarily because it consists mostly of names of
persons who specifically requested the dELiA*s catalog and which may not be
available through purchased or rented lists. The Company also believes this
proprietary database offers opportunities for cross-marketing, sales of new
products and the development of additional distribution channels. The Company\'s
proprietary database currently includes approximately 1.8 million house names,
including approximately 456,000 customers (as of April 30, 1997) who had made at
least one purchase from the Company within the preceding 36 months. During the
first three months of fiscal 1997, approximately 397,000 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 Seventeen and YM. 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 and the first
three months of fiscal 1997, the Company 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 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 225 on April 30, 1997. 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 Teen, 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 in the first three months
of fiscal 1997 from its 1997 catalogs represented by each category.

Percentage of Net Sales
from 1997 Catalogs
Product Category (through April 30, 1997)
- ------------------- --------------------------
Apparel ......... 71.7%
Footwear ......... 16.2%
Accessories ...... 8.4%
Cosmetics ......... 3.7%
-------
100.0%

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 26% of the Company's net sales (through
April 30, 1997) from its 1997 catalogs was attributable to dELiA*s-branded
products.

<PAGE>

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
75 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
which occasionally provide the Company with merchandise on an exclusive basis.
Brands currently offered through dELiA*s catalogs include nationally recognized
names, such as Carter's 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, Dawls, Greed Girl,
Yak Pak and 26 Red Sugar. Eleven vendors have accounted for approximately 51% of
the net sales generated by the Company's spring 1997 catalogs. Apparel produced
by Urban Outfitters accounted for approximately 11% of gross sales for the first
three months of fiscal 1997. No other supplier's products accounted for more
than 10% of net sales in that period. However, the Company believes that a
limitation on its ability to obtain products from significant suppliers could
have a material adverse effect on the Company. Approximately 35% of the
Company's net sales in the first three months of fiscal 1997 were of products
the Company believes were manufactured outside the United States.

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 feature teen models
whose expressions and poses convey the dELiA*s attitude. The catalogs are filled
with colorful, eye-catching layouts and creative "catch phrases." 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 for printing. These capabilities also provide
the Company with greater flexibility and creativity in catalog production and
merchandise selection.

In fiscal 1996, the Company published six catalog editions. The Company
anticipates publishing eight catalog editions in fiscal 1997. A typical catalog,
which follows a magazine-type format, contains approximately 50 pages and 650
stock-keeping units ("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, and the Company also mails supplemental catalog
editions to a more select group. In addition, the Company arranges for bulk
distribution of its catalogs on college campuses. In fiscal 1996, the Company
mailed two sale circulars. These four-page circulars featured over 200 SKUs. The
Company may from time to time in the future mail additional sale circulars.

In fiscal 1996, the Company distributed approximately 8 million catalogs in
all 50 states. The Company distributed approximately 4.8 million catalogs in the
first three months of fiscal 1997 and intends to distribute in excess of 20
million in fiscal 1997. The Company believes it can leverage its proprietary
database to develop additional targeted mailings to specific customer segments,
and intends to begin more frequent mailings of supplemental catalogs to repeat
customers.

The Company began to distribute catalogs in Japan in fiscal 1996 and has
increased 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. The Company
began to distribute its catalogs in Canada in fiscal 1997.

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.

<PAGE>

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 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
three months of fiscal 1997, approximately 397,000 new names were added to the
Company's database. The Company's proprietary database currently includes
approximately 1.8 million names, including approximately 456,000 customers (as
of April 30, 1997) who had made at least one purchase from the Company within
the preceding 36 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 75% of the
Company's orders are received by phone and 25% 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 approximately 225 in-house phone stations and
recently installed a new state-of- the-art telephone system. The Company's
approximately 225 (as of April 30, 1997) full- and part-time teleservice
representatives have the capacity to handle approximately 3,000 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.

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 the first three months of
fiscal 1997, customer returns were approximately 19.8% of gross sales (before
exchanges). 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 48 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 fiscal 1996, approximately 95% of all shipments were
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

<PAGE>

average of 2,500 shipments a day. The Company has given notice to the
third-party contractor of its intention to terminate its agreement with the
contractor as of June 30, 1997. At that time, the Company intends to begin
performing its own order processing and fulfillment operations. For that
purpose, the Company has entered into a lease agreement for a warehouse and
fulfillment facility in Hanover, Pennsylvania. The Company believes it will have
the physical capacity to make 20,000 shipments per shift from its new facility.
See "Risk Factors--Transition to New Warehouse and Performance of Fulfillment
Services" and "--Properties."

The Company has excess inventory in varying degrees over the course of the
year. Excess inventory is typically greater at the end of the sales life of the
Company's summer catalogs (which typically carry over a substantial number of
SKUs from the spring catalogs) and its winter catalogs (which carry over a
substantial number of SKUs from the fall catalogs). The Company regularly runs
promotional sales of the excess items through sale circulars and through
programs targeted at phone-in customers. Products sold through promotional sales
to phone-in customers and through the Company's sales circular are typically
discounted by 30% to 50% from their standard retail prices. The Company also has
used third-party liquidators, tent sales and charitable donations to dispose of
excess inventory and may consider other liquidation options in the future. The
Company's net sales from excess inventory sold at a discount to retail price in
the first three months of fiscal 1997 were approximately $788,000, or
approximately 6% of the Company's net sales for that period; the cost of those
goods sold at a discount to retail price was approximately $504,000. In
addition, the Company maintains a reserve against anticipated losses due to
liquidation of additional unsold inventory. 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.

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 ("*") symbol, are currently pending in
the United States and Japan, and the Company intends to protect its trademarks
in other international territories. 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 material conflicts concerning its marks or
its use of others' intellectual property rights.

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, some of which may specifically target the
Company's customers. Many of the Company's competitors are larger and have
substantially greater financial, distribution and marketing resources than the
Company.

<PAGE>

Employees

As of April 30, 1997, the Company had approximately 294 employees, of which
13 held executive and administrative positions, seven were employed in finance
and development, 32 were employed in supervisory sales and customer service, 12
were employed in product acquisition and planning, approximately 225 were
employed in teleservice operations and five 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 30,000 square feet. The lease expires in 2007.

The Company has entered into a lease agreement for 117,200 square feet of
warehouse and distribution space in Hanover, Pennsylvania. The term of the lease
commences on June 1, 1997 and expires on June 30, 2000. The Company has two
three-year renewal options. See "Business--Operations--Distribution and
Fulfillment."

The Company's current third-party fulfillment contractor provides warehouse
space near Lancaster, Pennsylvania to the Company for inventory storage. The
Company neither owns nor leases such warehouse space; the cost of the warehouse
space is included in the total fee paid by the Company to the third-party
fulfillment contractor. The Company has given notice to the third-party
fulfillment contractor of its intention to terminate its agreement with the
contractor in summer 1997.

The Company believes its facilities are well-maintained and in good
operating condition and are adequate for its present level of operations.

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.

<PAGE>

MANAGEMENT

Executive Officers and Directors

Executive officers and directors of the Company and their ages as of May
15, 1997 are as follows:

<TABLE>
<CAPTION>
Name Age Position
- --------------------------------- ------ ----------------------------------------------------
<S> <C> <C>
Stephen I. Kahn (1)(2) ......... 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 .................. 32 Chief Financial Officer
S. Roger Horchow (1)(3) ......... 68 Director
Sidney S. Kahn (2) ............ 60 Director
Geraldine Karetsky ............ 56 Director
Joseph J. Pinto (1)(2)(3) ...... 64 Director
</TABLE>

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

(1) Member of Audit Committee.

(2) Member of Compensation Committee.

(3) Member of 1996 Stock Incentive Plan Committee.

Stephen I. Kahn has served as President and Chief Executive Officer of
dELiA*s since co-founding the Company in 1993 and has served as Chairman of the
Board of Directors since October 1996. Prior to the Reorganization, he served as
a member of the board of managers of dELiA*s LLC (a predecessor of the Company).
Prior to that, he worked at PaineWebber Group, Inc., an investment banking and
brokerage firm, 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 dELiA*s Chief Operating Officer since co-founding the Company in 1993 and
joined the Board of Directors of the Company in October 1996. Prior to the
Reorganization, he served as a member of the board of managers of dELiA*s LLC.
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 and Treasurer of
dELiA*s since July 1996. Prior to joining the Company, he served briefly, first
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 helped manage 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

<PAGE>

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, 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 and served as a merchandise consultant to Sotheby's, an auctioneer of art
and collectibles, from September 1996 to March 1997. Mr. Horchow received a B.A.
from Yale College.

Sidney S. Kahn 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 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 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 1986. 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 from
1991 to 1994. 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 with the firm of Certilman Balin Adler & Hyman in 1994. From 1993
to 1994, she was a director of international sales at Masten-Wright
Incorporated, an international marketing firm. From 1990 to 1993, she attended
law school.

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. From 1992 to 1994, Ms. Higgins was an officer and director of a
non-profit institution in Colorado.

David Lerner has been Vice President of Marketing of dELiA*s since December
1996. Prior to joining the Company, Mr. Lerner was the director of marketing for
Brownstone Studio, a women's catalog company, and held marketing positions with
Hanover Direct, another catalog company, from 1993 to 1994 and with the catalog
division of The Walt Disney Company from 1991 to 1993.

Kate Mortell has been Director of Print Manufacturing of dELiA*s since
March 1997. Prior to joining the Company, Ms. Mortell worked for Lord & Taylor
from 1992 to 1997 as a production/quality control manager for its direct mail
and advertising programs.

<PAGE>

Alex S. Navarro has been Senior Vice President-Development and Legal
Affairs, General Counsel and Secretary of dELiA*s since April 1997. Prior to
joining the Company, Mr. Navarro was associated with the law firm of Proskauer
Rose Goetz & Mendelsohn LLP from 1994 until 1997. From 1993 to 1994, Mr. Navarro
was a law clerk to the Hon. Robert J. Wilentz, Chief Justice of the Supreme
Court of New Jersey. From 1990 to 1993, he attended law school.

Mary Obert has been Apparel 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.

Julie Scott has been Vice President of International Marketing of dELiA*s
since September 1996. Between 1990 and 1996, 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. From 1994 to 1995, Mr. Trowbridge was a market
strategist at Josephthal, Lyon and Ross. From 1993 to 1994, he was a research
analyst and money manager at Sherwood Securities. From 1992 to 1993, he was an
independent financial consultant.

Seth Walter has been Senior Vice President of Inventory Management
(formerly Vice President) 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.

Board Meetings

During fiscal 1996, the board of directors held one meeting. Each member of
the board was present, and each member of the board who sits on a committee of
the board was present at each meeting of that committee during such period.

Board Committees

Audit Committee. The Audit Committee, a majority of whose members are
directors who are neither members of the Company's management nor members of the
Kahn family, makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the plans
and results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls.

Compensation Committee. The Compensation Committee approves the salaries
and other benefits of the executive officers of the Company and administers
certain compensation plans of the Company. In addition, the Compensation
Committee is authorized to consult with the Company's management regarding
pension and other benefit plans and compensation policies and practices of the
Company.

1996 Stock Incentive Plan Committee. The 1996 Stock Incentive Plan
Committee, consisting solely of directors who, to the extent legally required,
qualify as "outside directors" under Section 162(m) of the Internal Revenue
Code of 1986, as amended, and as "non-employee directors" under Rule
16b-3(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), administers the Company's 1996 Stock Incentive Plan (the "Incentive
Plan").

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
and Joseph J. Pinto; term expiring in 1998--Sidney S. Kahn and Geraldine
Karetsky; and term expiring in 1999--Christopher C. Edgar and Stephen I. Kahn.

<PAGE>

Director Compensation

The Company pays its directors who are neither employees of the Company nor
members of the Kahn family $1,500 for each directors' meeting and each committee
meeting attended (plus reimbursement for out-of-pocket expenses). Under the
Incentive Plan, each non-employee director who is not a member of the Kahn
family was granted an option to purchase 40,000 shares of Common Stock at an
exercise price per share equal to the IPO 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 or members of the Kahn family are not compensated for
services as directors. See "--Options/SAR Grants and Exercises."

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 and $37,773 in
salary and a bonus of $35,000 in fiscal 1996. He did not receive any other
compensation from the Company in fiscal 1995 or fiscal 1996, and did not receive
any compensation during fiscal 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 1996.

Options/SAR Grants and Exercises

During fiscal 1996, the Company granted Evan Guillemin, Chief Financial
Officer of the Company, an option to purchase 250,000 shares of Common Stock at
an exercise price of $11.00 per share, the fair market value on the date of
grant. The option constitutes 82.3% of the total number of options and stock
appreciation rights ("SARs") granted to the Company's employees during such
period. The option expires on July 21, 2007. The potential realizable values of
the option, assuming the market value of the Common Stock appreciates from the
date of grant at a 5% annualized rate, and at a 10% annualized rate, are
$1,729,000 and $4,383,000, respectively. The value of the option, based on a
closing price of $25.00 per share of Common Stock on May 15, 1997, was
$3,500,000.

No other executive officer of the Company held any options or SARs, and no
executive officer exercised any option or SAR, during fiscal 1996.

Concurrent with the Reorganization, the Company approved and adopted 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.

Under the Incentive Plan, two independent non-employee directors were
granted, at the time of the IPO, an option to purchase 40,000 shares each of
Common Stock at an exercise price per share equal to the IPO 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.

In addition, options to purchase an aggregate of 53,750 shares of Common
Stock were granted to sixteen employees of the Company at the time of the IPO.
These options will become exercisable over a period of one to three years after
the date of the IPO and expire after 10 years. The exercise price per share of
the options that were granted at the time of the IPO is equal to the IPO price.

<PAGE>

one to five years from the date of grant. The exercise price per share of each
such option is equal to the fair market value of the Common Stock on the date of
grant.

Employment Agreements

Messrs. Kahn and Edgar (the "Executives") have entered 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 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 has entered 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 the Executives, except that the term of Mr. Guillemin's agreement
will expire on July 31, 2001.

Compensation Committee Interlocks and Insider Participation

Prior to the completion of the IPO in December 1996, compensation policies
and decisions, including those relating to salary, bonuses and benefits of
executive officers, had been set or made by the board of directors. Upon
completion of the IPO, the board of directors created a Compensation Committee,
which recommends to the board the compensation to be paid to the Company's
executive officers. Awards made under the Incentive Plan are approved by the
1996 Stock Incentive Plan Committee of the board of directors. See "-Board
Committees."

The Compensation Committee currently consists of Sidney S. Kahn, Stephen I.
Kahn and Joseph J. Pinto. Stephen I. Kahn is the Chief Executive Officer and
President of the Company. Sidney S. Kahn is Stephen I. Kahn's father. The 1996
Stock Incentive Plan Committee currently consists of S. Roger Horchow and Mr.
Pinto. Other than the foregoing, there were no compensation committee interlocks
or insider participation during fiscal 1996.

<PAGE>

CERTAIN TRANSACTIONS

Immediately prior to the IPO, the Company and dELiA*s LLC, a predecessor,
engaged in a reorganization transaction (the "Reorganization"), pursuant to
which dELiA*s LLC contributed its assets to dELiA*s Inc. and dELiA*s Inc.
assumed, and agreed to pay, perform and discharge, all liabilities of dELiA*s
LLC (except for income tax liabilities). From March 8, 1995 until the
Reorganization, the dELiA*s business had been operated within a limited
liability company, the members of which, rather than the entity itself, were
responsible for payment of taxes on the business's income. Since the
Reorganization, the business has been operated within the Company, a C
corporation, which is responsible for the payment of taxes. dELiA*s LLC 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 dELiA*s LLC that was attributed to them by
virtue of their respective ownership interests in dELiA*s LLC. Those loans, each
of which was for less than $60,000, were repaid by Mr. Kahn and Mr. Edgar after
the completion of the IPO. In addition, the Company made a non-interest-bearing
loan of $50,000 to Evan Guillemin to finance Mr. Guillemin's acquisition of an
equity interest in dELiA*s LLC.

In connection with the Reorganization, certain members of dELiA*s LLC
received payment of a distribution in an aggregate amount of $4.0 million (the
"LLC Distribution").

<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information as of May 15, 1997 with respect
to the 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 Selling Stockholder, (iii) each director individually, (iv) each executive
officer individually and (v) all executive officers and directors as a group.

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Owned
Name and Address Prior To the Offering After the Offering
- ------------------------------------------------ ------------------------ Shares -----------------------
5% Stockholders Number Percent Offered (1) Number Percent
- ------------------------------------------------ ------------ ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Stephen I. Kahn (2) ........................... 8,298,219 69.1% 405,438 7,413,852 57.0%
435 Hudson Street
New York, New York 10014
Geraldine Karetsky (3) ........................ 1,382,814 11.5 134,402 1,198,412 9.2
1660 Silverking Drive
Aspen, Colorado 81611
Sidney S. Kahn (3) ........................... 1,101,164 9.2 69,792 981,732 7.6
14 East 60th Street
New York, 10022
Christopher C. Edgar (4)(5) .................. 668,855 5.6 79,364 596,092 4.6
435 Hudson Street
New York, New York 10014
Robert Karetsky (6) ........................... 617,626 5.1 67,190 550,436 4.2
435 Hudson Street
New York, New York 10014

Other Executive Officers and Directors
- -----------------------------------------------
Evan Guillemin (7) ........................... 103,591 * 11,269 92,322 *
S. Roger Horchow (8) ........................... - * - - *
Joseph J. Pinto (8) ........................... 10,000 * - 10,000 *
Directors and executive officers as a group
(7 individuals) .............................. 9,080,665 75.7 494,737 8,105,665 62.3

Other Selling Stockholders
- -----------------------------------------------
Robin Kahn .................................... 168,529 1.4 18,334 150,195 1.2
Jeffrey Kahn ................................. 168,529 1.4 18,334 150,195 1.2
Anne Kahn .................................... 168,529 1.4 18,334 150,195 1.2
Andrew Karetsky .............................. 168,529 1.4 18,334 150,195 1.2
Jennifer Karetsky .............................. 168,529 1.4 18,334 150,195 1.2
The Ruth Kahn Trust f/b/o Sidney S. Kahn ...... 147,356 1.2 50,000 97,356 *
Andrew Block, Jr. .............................. 114,906 1.0 12,500 102,406 *
Bear Partners ................................. 114,906 1.0 12,500 102,406 *
Maxine Kahn .................................... 68,944 * 7,500 61,440 *
Elizabeth May ................................. 22,981 * 2,500 20,481 *
Arlene Epstein ................................. 9,192 * 1,000 8,192 *
Joanna Bober ................................. 9,192 * 1,000 8,192 *
Karen Christensen (5) ........................ - * 10,775 - *
Kent Trowbridge (5) ........................... - * 21,550 - *
Elizabeth Higgins (5) ........................ - * 18,856 - *
Seth Walter (5) .............................. - * 2,694 - *
</TABLE>

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

* Less than 1%.

(1) In the event that the Underwriters exercise the over-allotment option, up to
an additional 300,000 shares of Common Stock may be sold as follows: Stephen
I. Kahn--121,611 shares; Geraldine Karetsky--40,314 shares; Sidney S.
Kahn--35,932 shares; Christopher C. Edgar--23,805 shares; Robert
Karetsky--20,154 shares; Evan Guillemin--3,380 shares; Robin Kahn--5,499
shares; Jeffrey Kahn--5,499 shares; Anne

<PAGE>

Kahn--5,499 shares; Andrew Karetsky--5,499 shares; Jennifer Karetsky--5,499
shares; Andrew Block, Jr.--3,750 shares; Bear Partners--3,750 shares; Maxine
Kahn--2,250 shares; Elizabeth May--750 shares; Arlene Epstein--300 shares;
Joanna Bober--300 shares; Karen Christensen--3,232 shares; Kent
Trowbridge--6,464 shares; Elizabeth Higgins--5,656 shares; Seth Walter--857
shares.

(2) Includes 3,726,874 shares of Common Stock (3,321,436 after this offering)
directly owned by Mr. Kahn and 4,571,345 shares of Common Stock (4,085,815
after this offering) that Mr. Kahn has the sole power to vote pursuant to a
stockholders agreement and agreements with certain employees who are holders
of restricted stock, over which Mr. Kahn also has the shared power to
restrict the disposition of 3,916,394 of those shares (3,491,340 after this
offering).

(3) Includes 147,356 shares of Common Stock (97,356 shares after this offering)
owned by Mr. Kahn and Ms. Karetsky as trustees for The Ruth Kahn Trust f/b/o
Sidney Kahn, as to which shares Mr. Kahn and Ms. Karetsky have the shared
power to dispose of.

(4) Does not include 60,677 shares of Common Stock (54,076 shares after this
offering) owned by Mr. Edgar subject to the Company's Restricted Stock Plan,
which Mr. Edgar does not have the power to vote or dispose of.

(5) Each of Mr. Edgar, Ms. Christensen, Mr. Trowbridge, Ms. Higgins and Mr.
Walter is an employee of the Company. See "Management." Each is the
record holder of a certain number of shares of Common Stock pursuant to the
Company's Restricted Stock Plan, but, pursuant to the terms of the
Restricted Stock Plan, did not, as of May 15, 1997, have the right to vote
or dispose of such Common Stock, and thus does not beneficially own such
shares. Concurrently with the closing of this offering, the Company will
accelerate the vesting of the number of shares set forth beside each such
employee's name under the Shares Offered column (except in the case of Mr.
Edgar, for whom the Company will accelerate the vesting of 6,601 shares) for
the purpose of allowing each such employee to sell such shares in this
offering.

(6) Robert Karetsky formerly served as a Senior Vice President of the Company.

(7) 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.

(8) Does not include 40,000 shares of Common Stock issuable pursuant to options
granted pursuant to the Company's 1996 Stock Incentive Plan which do not
begin to become exercisable until December 18, 1997. 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"), Stephen I. Kahn and the Company have
entered into the Family Stockholders Agreement which, subject to certain
exceptions, prohibits the Family Holders from transferring the shares of Common
Stock they own until December 18, 1999. 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. In addition, the
Family Stockholders Agreement gives 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 Company believes the Family Holders,
collectively, owned 32.6% of the outstanding Common Stock as of May 15, 1997 and
will own 26.9% of the outstanding Common Stock upon the completion of this
offering. The Family Stockholders Agreement will expire on December 18, 2007.

<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 13,002,977 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.

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

<PAGE>

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.

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 is The Bank of New
York.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 13,002,977 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. Of
these shares, a total of 4,702,500 shares, including all of the 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 8,300,477 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).

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 Restricted Securities will be eligible for resale in the public
market pursuant to Rule 144 immediately after this offering. Moreover, all of
the shares of the Restricted Securities (except for 9,192 shares) 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 8,227,000 shares that are subject
to Lock-Up Agreements with Hambrecht & Quist LLC and an aggregate of 4,085,815
shares that, after this offering, will be 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 Restricted Securities 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 December 18, 1998.

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 one year 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 (130,030 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 two 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
3,491,430 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."

<PAGE>

UNDERWRITING

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

Number of
Name Shares
- -------------------------------- -----------
Hambrecht & Quist LLC .........
Oppenheimer & Co., Inc. ......
Montgomery Securities .........
-----------
Total ........................ 2,000,000
===========

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 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
public offering of the shares, the offering price and other selling terms may be
changed by the Underwriters.

Certain 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 300,000 additional shares of Common Stock at the 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 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 8,227,000
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 90-day period following the effective
date of this Prospectus. The Company has agreed that it 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 exchangeable for or convertible into shares of Common Stock
during the 90-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."

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail

<PAGE>

in the open market, including by entering stabilizing bids or effecting
syndicate covering transactions. A stabilizing bid means the placing of any bid
or effecting of any purchase for the purpose of pegging, fixing or maintaining
the price of the Common Stock. A syndicate covering transaction means the
placing of any bid on behalf of the underwriting syndicate or the effecting of
any purchase to reduce a short position created in connection with the offering.
Such transactions may be effected on The Nasdaq Stock Market, in the over-the-
counter market or otherwise. Such stabilizing, if commenced, may be discontinued
at any time.

Hambrecht & Quist LLC and Oppenheimer & Co., Inc. served as co-managing
underwriters of the Company's IPO, and received customary discounts and
commissions in connection therewith.

LEGAL MATTERS

Certain matters with respect to the legality of the shares of Common Stock
offered hereby have been 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 January 31, 1997 and for the fiscal year
ended January 31, 1997 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 for each of the two
fiscal years in the period ended January 31, 1996 included in this Prospectus
have been audited by Richard A. Eisner & Company, LLP, independent auditors, as
stated in their report 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. In consideration of the inclusion of such report, the
Company has agreed to indemnify Richard A. Eisner & Company, LLP against any
legal costs incurred by it and any damages assessed against it in the event that
Richard A. Eisner & Company, LLP becomes a party to, or is threatened with, any
litigation resulting from any sale of securities pursuant to the Registration
Statement or any transaction made in reliance upon information contained herein,
provided that such indemnification shall not be effective with regard to any
liability for professional malpractice or payment of settlement or judgment
costs; provided further that the Company will not indemnify Richard A. Eisner &
Company, LLP for the payment of any legal costs or expenses incurred by it
except in a successful defense of a legal action or proceeding that arises as a
result of its consent to the inclusion of such report.

On August 30, 1996, dELiA*s LLC, a predecessor of the Company, engaged
Deloitte & Touche LLP as its independent public accountant to audit its
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 fiscal 1995 of the Company 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 two most recent
fiscal years 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 two most recent
fiscal years prior to engaging Deloitte & Touche LLP, neither the Company nor
its predecessors consulted 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 such entities'
financial statements.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at Seven World Trade Center,
13th Floor, New York, New York 10048, and Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at prescribed rates.
In addition, the Commission maintains a World Wide Web site that contains
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's Web site is
http://www.sec.gov. The Company's Common Stock is quoted for trading on The
Nasdaq Stock Market and reports, proxy statements and other information
concerning the Company may also be inspected at the offices of The Nasdaq Stock
Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement on Form S-1 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
herein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office in Washington, D.C. 20549 or
the Commission's Web site and copies of all or any part of the Registration
Statement may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission.

<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, 1996 and 1997, and April 30, 1997 (unaudited) ......... F-4
Statements of Operations for the fiscal years ended January 31, 1995, 1996 and 1997, and
the three months ended April 30, 1996 and 1997 (unaudited) ............................ F-5
Statements of Stockholders' Equity for the fiscal years ended January 31, 1995, 1996 and
1997, and the three months ended April 30, 1997 (unaudited) ............................ F-6
Statements of Cash Flows for the fiscal years ended January 31, 1995, 1996 and 1997, and
the three months ended April 30, 1996 and 1997 (unaudited) ............................ F-7
Notes to Financial Statements ............................................................ F-8
</TABLE>

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of dELiA*s Inc. (the
"Company") as of January 31, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the fiscal year 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 January 31, 1997, and the
results of its operations and its cash flows for the fiscal year then ended in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
March 12, 1997
New York, New York

F-2

<PAGE>

REPORT OF INDEPENDENT AUDITORS

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

We have audited the accompanying balance sheet of dELiA*s Inc. as at
January 31, 1996 and the related statements of operations, stockholders' equity
and cash flows for each of the years in the two years 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 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,
1996, and results of its operations and its cash flows for each of the years in
the two years then ended in conformity with generally accepted accounting
principles.

Richard A. Eisner & Company, LLP

New York, New York
August 14, 1996

With respect to the share issuance in Note 1
December 18, 1996

F-3

<PAGE>

dELiA*s Inc.

BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
January 31, 1996 January 31, 1997 April 30, 1997
------------------- ------------------- ----------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................... $ 675 $ 21,316 $ 15,269
Short-term investments .............................. -- -- 911
Receivables from related parties ..................... -- 61 --
Merchandise inventories .............................. 221 4,072 5,605
Prepaid expenses and other current assets ............ 128 310 1,289
Deferred taxes ....................................... - 536 499
------- -------- --------
Total current assets .............................. 1,024 26,295 23,573
------- -------- --------
PROPERTY AND EQUIPMENT--Net .......................... 166 1,021 1,835
LONG-TERM INVESTMENTS ................................. -- -- 4,293
OTHER ASSETS .......................................... 76 98 121
------- -------- --------
TOTAL ASSETS .......................................... $ 1,266 $ 27,414 $ 29,822
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable .................................... $ 63 $ 3,148 $ 4,593
Accrued expenses and other current liabilities ...... 137 1,937 1,624
Sales return allowance .............................. 25 372 284
Liabilities due to customers ........................ 76 618 600
Income taxes payable ................................. 3 193 579
------- -------- --------
Total current liabilities ........................ 304 6,268 7,680
------- -------- --------
DEFERRED CREDITS .................................... -- 14 61

COMMITMENTS AND CONTINGENCIES (Note 9)

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--9,191,935, 12,052,500 and
12,002,977 shares, at January 31, 1996 and 1997
and April 30, 1997, respectively ................ 92 121 120
Note receivable from stockholder ..................... -- (50) (50)
Deferred compensation .............................. -- (147) (121)
Additional paid-in capital ........................... 1,208 20,874 20,870
Retained earnings/(deficit) ........................ (338) 334 1,262
------- -------- --------
Total stockholders' equity ........................ 962 21,132 22,081
------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,266 $ 27,414 $ 29,822
======= ======== ========
</TABLE>

See Notes to Financial Statements

F-4

<PAGE>

dELiA*s Inc.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended January 31, Ended April 30,
----------------------------------- ---------------------
1995 1996 1997 1996 1997
--------- --------- ----------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES .................................... $ 139 $ 5,652 $ 30,225 $ 3,709 $12,928
COST OF SALES .............................. 89 3,078 14,624 1,725 6,392
-------- -------- -------- -------- --------
GROSS PROFIT ................................. 50 2,574 15,601 1,984 6,536
-------- -------- -------- -------- --------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ..................... 384 2,569 11,850 1,489 5,222
INTEREST INCOME, NET ........................ 2 25 176 9 237
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES ........................... (332) 30 3,927 504 1,551
PROVISION (BENEFIT) FOR INCOME
TAXES .................................... -- 3 (328) 7 623
-------- -------- -------- -------- --------
NET INCOME (LOSS) ........................... $ (332) $ 27 $ 4,255 $ 497 $ 928
======== ======== ======== ======== ========
NET INCOME PER SHARE ........................ $ 0.08
========
SHARES USED IN THE CALCULATION
OF NET INCOME PER SHARE ..................... 12,014
========
Pro Forma Income Data (Unaudited)
Income (Loss) before provision for income
taxes as reported ........................ $ (332) 30 $ 3,927 $ 504
Pro forma provision (benefit) for income
taxes ....................................... (130) 12 1,620 207
-------- -------- -------- --------
Pro forma net income (loss) ............... $ (202) $ 18 $ 2,307 $ 297
======== ======== ======== ========
Pro forma net income (loss) per share ...... $ (0.02) $ 0.00 $ 0.23 $ 0.03
======== ======== ======== ========
Shares used in the calculation of pro forma
net income (loss) per share ............... 10,000 10,000 10,214 10,000
======== ======== ======== ========
</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
Number of from
Shares Amount Stockholder
-------------- --------- --------------
<S> <C> <C> <C>
BALANCE, JANUARY 31, 1994 .......... 2,821,197 $ 28 $ --
Issuance of common stock ............ 5,372,072 54 --
Net loss ........................... -- -- --
----------- ----- ------
BALANCE, JANUARY 31, 1995 ......... 8,193,269 82 --
Issuance of common stock ............ 998,666 10 --
Net income ........................ -- -- --
----------- ----- ------
BALANCE, JANUARY 31, 1996 ......... 9,191,935 92 --
Issuance of common stock ............ 808,065 8 (50)
LLC Distribution (Note 1) ......... -- -- --
Net proceeds from issuance of
common stock in initial public
offering ........................... 2,052,500 21 --
Deferred compensation expense ...... -- -- --
Net income ........................ -- -- --
----------- ----- ------
BALANCE, JANUARY 31, 1997 ......... 12,052,500 $ 121 $ (50)
Cancellation of common stock ...... (49,523) (1) --
Deferred compensation expense ...... -- -- --
Net income ........................ -- $ -- $ --
----------- ----- ------
BALANCE, APRIL 30, 1997
(UNAUDITED) ........................ 12,002,977 $ 120 $ (50)
=========== ===== ======

<CAPTION>
Additional Retained Total
Deferred Paid-In Earnings' Stockholders'
Compensation Capital (Deficit) Equity
--------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1994 .......... $ -- $ 172 $ (33) $ 167
Issuance of common stock ............ -- 946 -- 1,000
Net loss ........................... -- -- (332) (332)
------- -------- -------- --------
BALANCE, JANUARY 31, 1995 ......... -- 1,118 (365) 835
Issuance of common stock ............ -- 90 -- 100
Net income ........................ -- -- 27 27
------- -------- -------- --------
BALANCE, JANUARY 31, 1996 ......... -- 1,208 (338) 962
Issuance of common stock ............ (217) 259 -- --
LLC Distribution (Note 1) ......... -- (417) (3,583) (4,000)
Net proceeds from issuance of
common stock in initial public
offering ........................... -- 19,824 -- 19,845
Deferred compensation expense ...... 70 -- -- 70
Net income ........................ -- -- 4,255 4,255
------- -------- -------- --------
BALANCE, JANUARY 31, 1997 ......... $ (147) $ 20,874 334 $ 21,132
Cancellation of common stock ...... 5 (4) -- --
Deferred compensation expense ...... 21 -- -- 21
Net income ........................ $ -- $ -- $ 928 $ 928
------- -------- -------- --------
BALANCE, APRIL 30, 1997
(UNAUDITED) ........................ $ (121) $ 20,870 $ 1,262 $ 22,081
======= ======== ======== ========
</TABLE>

See Notes to Financial Statements

F-6

<PAGE>

dELiA*s Inc.

STATEMENTS OF CASH FLOWS

(in thousands)

<TABLE>
<CAPTION>
Fiscal Year Three Months
Ended January 31, Ended April 30,
------------------------------------ ---------------------
1995 1996 1997 1996 1997
----------- -------- ----------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................... $ (332) $ 27 $ 4,255 $ 497 $ 928
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization ........................... 1 14 95 12 97
Inventory reserves for obsolescence ..................... 6 25 562 65 608
Sales return allowance ................................. -- 25 347 28 (88)
Compensation expense related to issuance of
Restricted Stock ....................................... -- -- 70 9 21
Changes in operating assets and liabilities:
Receivables from related parties ........................ -- -- (61) -- 61
Merchandise inventories ................................. (80) (156) (4,413) (677) (2,142)
Prepaid expenses and other current assets ............... (50) (61) (182) (106) (979)
Deferred taxes .......................................... -- -- (536) -- 37
Other assets ............................................. (2) (78) (32) 6 (26)
Accounts payable ....................................... 35 63 3,085 336 1,445
Accrued expenses and other current liabilities . -- 102 1,800 188 (313)
Liabilities due to customers ........................... -- 76 542 84 (18)
Income taxes payable .................................... -- 3 190 (3) 386
Deferred credits ....................................... -- -- 14 -- 47
-------- ------ -------- ------- --------
Net cash (used in) provided by operating activities ...... (422) 40 5,736 439 64
======== ====== ======== ======= ========
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................... (7) (169) (940) (49) (907)
-------- ------ -------- ------- --------
Purchases of held-to-maturity securities .................. -- -- -- -- (5,204)
Net cash used in investing activities ..................... (7) (169) (940) (49) (6,111)
======== ====== ======== ======= ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock ............... 1,000 100 19,845 -- --
Payments for dividends ................................. -- -- (4,000) -- --
-------- ------ -------- ------- --------
Net cash provided by financing activities ............... 1,000 100 15,845 -- --
======== ====== ======== ======= ========
INCREASE (DECREASE) IN CASH &
CASH EQUIVALENTS ....................................... 571 (29) 20,641 390 (6,047)
CASH & CASH EQUIVALENTS-
BEGINNING OF PERIOD .................................... 133 704 675 675 21,316
-------- ------ -------- ------- --------
CASH & CASH EQUIVALENTS-END OF PERIOD ..................... $ 704 $ 675 $ 21,316 $ 1,065 $ 15,269
======== ====== ======== ======= ========
SUPPLEMENTARY CASH FLOW INFORMATION:
Income taxes paid ....................................... $ -- $ -- $ 15 $ 3 $ 200
======== ====== ======== ======= ========
Interest paid .......................................... $ -- $ -- $ 27 $ -- $ 5
======== ====== ======== ======= ========
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Increase in note receivable from stockholder ............ $ -- $ -- $ 50 $ 50 $ --
Increase in deferred compensation ........................ -- -- 217 83 --
Increase in common stock ................................. -- -- (8) (7) --
Increase in additional paid-in capital .................. -- -- (259) (126) --
-------- ------ -------- ------- --------
$ -- $ -- $ -- $ -- $ --
======== ====== ======== ======= ========
</TABLE>

See Notes to Financial Statements

F-7

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 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
distributed 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 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 Company's
initial public offering of Common Stock of dInc (the "IPO"), dLLC and dInc
engaged in a reorganization transaction (the "Reorganization") pursuant to
which dLLC contributed its assets to dInc and dInc assumed, and agreed to pay,
perform and discharge, all liabilities of dLLC (except for income tax
liabilities). In connection with the Reorganization, dInc issued 10,000,000
shares of Common Stock to dLLC, of which 704,794 shares are restricted under the
Company's Restricted Stock Plan. See Note 11-1996 Restricted Stock Plan. The
Reorganization also resulted in the distribution to existing members of dLLC of
$4,000,000 and the shares of Common Stock of dInc in accordance with the dLLC
operating agreement (the "LLC Distribution"). The accompanying financial
statements and footnotes are presented to reflect the Reorganization as
described above, which was 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. Investments--The Company's short-term and long-term investments consist
of debt securities, principally instruments of the U.S. Government and its
agencies, of municipalities, and of short-term mutual municipal and corporate
bond funds. Investments are categorized as held-to-maturity and carried at book
value.

d. 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.

e. Catalog Costs--Catalogs costs, which primarily consist of catalog
production and mailing costs, are capitalized and amortized over the expected
future revenue stream, which is principally from three to five months from the
date catalogs are mailed. 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, 1996, January 31, 1997 and April 30, 1997 (unaudited)
were $93,000, $272,000 and $1,115,000, respectively. Catalog costs, which are
reflected in selling, general and administrative expenses, for the fiscal years
ended January 31, 1995, 1996 and 1997 and for the three month periods ended
April 30, 1996 and 1997 (unaudited) were $162,000, $1,104,000, $4,549,000,
$707,000 and $2,063,000, respectively.

F-8

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

f. 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 5 to 10
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.

g. 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 income tax in New York State, New
York City and Pennsylvania. As discussed in Note 1, the Company has effected a
Reorganization that changed the income tax status of the Company to a taxable C
corporation. Subsequent to the Reorganization, deferred income tax assets and
liabilities were recorded in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." See Note
6--Income Taxes.

h. Deferred Credits--Deferred credits represent deferred rent that results
from the accounting for rent expense on a straight-line basis over the lease
term for leases with scheduled rent increases.

i. Revenue Recognition--Revenue is recognized when merchandise is shipped
to customers. The Company accrues a sales return allowance in accordance with
its return policy for estimated returns of merchandise subsequent to the balance
sheet date that relate to sales prior to the balance sheet date. At January 31,
1996, January 31, 1997 and April 30, 1997, sales return allowances were $25,000,
$372,000 and $284,000, respectively.

j. 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 1, and 2,052,500 shares in the IPO.
Common stock issued at prices below the initial public offering price during the
twelve month period preceding the Offering has been included as outstanding as
if the stock were outstanding for all periods presented. The effect of stock
options was not material for the year ended January 31, 1997 and the three
months ended April 30, 1997.

k. 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,
short-term investments, receivables and accounts payable approximate fair value
because of the short-term maturity of those financial instruments. The
difference between the fair value and carrying value of the Company's long- term
investments was not material.

l. 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 ane expenses during the reporting period.
Actual results could differ from those estimates.

m. 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.

F-9

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

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 ("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. See Note 12-Stock Options for the required
disclosure of pro forma effects on net income and earnings per share.

n. Unaudited Interim Financial Statements--In the opinion of management,
the unaudited financial statements for the three months ended April 30, 1996 and
1997 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, April 30,
Useful Lives 1996 1997 1997
---------------- -------------- -------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Furniture, fixtures and equipment 5-10 years $ 139,000 $ 936,000 $1,395,000
Leasehold improvements ............ Term of lease 37,000 180,000 627,000
---------- ----------- -----------
Total-at cost .....................
176,000 1,116,000 2,022,000
Less accumulated depreciation and
amortization .....................
10,000 95,000 187,000
---------- ----------- -----------
Total property and equipment-net ...
$ 166,000 $1,021,000 $1,835,000
========== =========== ===========
</TABLE>

4. Credit and Financing Agreements

At April 30, 1997, the Company had a line of credit agreement with a bank
providing for short-term loans of up to $3.0 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 and 10.5 percent at January 31, 1997 and April 30, 1997,
respectively). There were no funds borrowed under the agreement during the
fiscal years ended January 31, 1995, 1996 and 1997 and the three month period
ended April 30, 1997.

F-10

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

5. Interest Income-Net

Interest income-net consists of the following:

Three Months
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 Ended April 30,
Ended Ended Ended ---------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- ------------------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Interest income ......... $2,000 $25,000 $203,000 $9,000 $242,000
Interest expense ......... -- -- 27,000 -- 5,000
------ ------- -------- ------ --------
Interest income-net ...... $2,000 $25,000 $176,000 $9,000 $237,000
====== ======= ======== ====== ========
</TABLE>

6. Income Taxes

The provision for income taxes is comprised of the following:

Three Months
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 Ended April 30,
Ended Ended Ended --------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- ------------------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal:
Current ........................ $ -- $ -- $ -- $ -- $407,000
Deferred ..................... -- -- (445,000) -- 31,000
------- ------- ---------- ------- --------
Total federal ............... -- -- (445,000) -- 438,000
------- ------- ---------- ------- --------
State and local:
Current ........................ -- 3,000 208,000 7,000 179,000
Deferred ..................... -- -- (91,000) -- 6,000
------- ------- ---------- ------- --------
Total state and local ......... -- 3,000 117,000 7,000 185,000
------- ------- ---------- ------- --------
Total provision (benefit) ...... $ -- $ 3,000 $ (328,000) $ 7,000 $623,000
======= ======= ========== ======= ========
</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 income taxes as all taxable income was taxed directly at the
shareholder and membership level. The income tax provision reflects corporate
level taxes due to applicable jurisdictions.

F-11

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

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

Three Months
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 Ended April 30,
Ended Ended Ended --------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997
------------------- ------------------- ------------------- -------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal taxes at statutory
rates ..................... $ (113,000) $ 10,000 $ 1,323,000 $ 171,000 $ 527,000
State and local taxes net
of federal benefit ......... (20,000) 5,000 272,000 35,000 109,000
Effect of S Corporation
and LLC .................. 133,000 (12,000) (1,923,000) (199,000) --
---------- --------- ----------- --------- ---------
Other ..................... -- -- -- -- (13,000)
$ -- $ 3,000 $ (328,000) $ 7,000 $ 623,000
========== ========= =========== ========= =========
</TABLE>

The tax effect of temporary differences and carryforwards which give rise
to deferred tax assets and liabilities are:

<TABLE>
<CAPTION>
January 31, 1996 January 31, 1997 April 30, 1997
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Inventory reserves ..................... $ -- $ 184,000 $ 523,000
Sales return allowance .................. -- 153,000 116,000
Deferred compensation expense ............ -- 33,000 42,000
Uniform capitalization-inventories ...... -- 65,000 120,000
Net operating loss ..................... -- 227,000 170,000
-------- --------- ---------
Total deferred tax assets ............... -- 662,000 971,000
-------- --------- ---------
Deferred tax liabilities:
Catalog costs ........................... -- (111,000) (457,000)
Depreciation ........................... -- (15,000) (15,000)
-------- --------- ---------
Total deferred tax liabilities ............ -- (126,000) (472,000)
-------- --------- ---------
Net deferred tax asset .................. $ -- $ 536,000 $ 499,000
======== ========= =========
</TABLE>

Pro Forma 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 1
for all periods presented.

F-12

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

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

Three Months
Fiscal Year 1994 Fiscal Year 1995 Fiscal Year 1996 Ended April 30,
Ended Ended Ended -------------------
January 31, 1995 January 31, 1996 January 31, 1997 1996 1997(1)
---------------- ---------------- ---------------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Federal
Current ..................... $ -- $ -- $1,304,000 $ 64,000 $407,000
Deferred ..................... (109,000) 10,000 (143,000) 110,000 31,000
--------- -------- ---------- -------- --------
Total federal ............... (109,000) 10,000 1,161,000 174,000 438,000
--------- -------- ---------- -------- --------
State and local: ............
Current ..................... -- -- 489,000 12,000 179,000
Deferred ..................... (21,000) 2,000 (30,000) 21,000 6,000
--------- -------- ---------- -------- --------
Total state and local ...... (21,000) 2,000 459,000 33,000 185,000
--------- -------- ---------- -------- --------
Total provision ............... $(130,000) $ 12,000 $1,620,000 $207,000 $623,000
========= ======== ========== ======== ========
</TABLE>

(1) Amounts for the three month period ended April 30, 1997 represent the
actual reported provision for income taxes.

7. Stockholders' Equity

Effective upon the Reorganization, as described in Note 1, the Company has
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, 9,191,935, 12,052,500 and 12,002,977 shares issued and outstanding at
January 31, 1996, January 31, 1997 and April 30, 1997 (unaudited), respectively.

Prior to January 31, 1996, dLLC issued Class A Membership Interests for
capital contributions of $1,300,000, which upon the Reorganization converted
into 9,191,935 shares of Common Stock. During the fiscal year ended January 31,
1997, the Company issued Class C Membership Interests for capital contributions
of $50,000, which upon the Reorganization converted into 103,591 shares of
Common Stock.

During the fiscal year ended January 31, 1997, 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 fiscal year ended January 31, 1997 and the three month
period ended April 30, 1997 (unaudited) was $70,000 and $21,000, respectively.
Upon the Reorganization, the Class B restricted membership interests converted
into 704,474 shares of restricted common stock. See Note 11-1996 Restricted
Stock Plan and Note 13-Family Stockholders' Agreement.

8. Related Party Transactions

Receivables from related parties as of January 31, 1997 included (i)
non-interest-bearing loans receivable from two stockholder/executives for an
aggregate of $61,000, related to such certain stockholders' personal income
taxes attributable to income of the Company as a limited liability company and
(ii) a non-interest-bearing loan receivable from a third stockholder/executive
of the Company in the amount of $50,000 related to the executive's capital
contribution.

F-13

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

9. Commitments

As of April 30, 1997 the Company was obligated under various long-term
operating leases for warehouse and office space and equipment requiring minimum
annual rentals. These operating leases expire on varying dates to 2003. At April
30, 1997 aggregate minimum rentals in future periods are as follows:

Fiscal Year
Ending
January 31,
- ------------
1998 (remainder) ...... $632,000
1999 .................. 945,000
2000 .................. 793,000
2001 .................. 581,000
2002 .................. 310,000
Thereafter ............ 297,000

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, 1996 and 1997 and
for the three month periods ended April 30, 1996 and 1997 (unaudited) was
$44,000, $88,000, $128,477, $20,000 and $44,000 respectively.

In April 1997, the Company entered into: (i) a three-year lease agreement
for warehouse and distribution space in Hanover, Pennsylvania. The term of the
lease commences in June 1997 and expires in June 2000. The Company has two three
year renewal options; and (ii) a lease agreement for additional space adjacent
to its principal offices in New York City. The lease agreement for the Company's
principal offices expires in 2007.

The Company has an agreement (the "Fulfillment Agreement") with a
third-party fulfillment contractor to provide warehouse space near Lancaster,
Pennsylvania for inventory storage and processing, including the fulfillment of
customer orders for merchandise. The Company neither owns nor leases such
warehouse space; the cost of the warehouse space is included in the fees paid by
the Company to the third-party fulfillment contractor under the terms of the
Fulfillment Agreement. The Fulfillment Agreement is terminable by either party
at the end of the calendar month following the giving of 60 days' notice. The
Company has given notice to the third party contractor of its intention to
terminate its agreement with the contractor as of June 30, 1997.

10. Employment Agreements

Prior to the IPO, two executives of the Company entered 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 $100,000 plus such increases in salary and bonuses as approved by
the Board of Directors. The agreement terminates in July 2001.

F-14

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

11. 1996 Restricted Stock Plan

Concurrent with the Reorganization, the Company approved and adopted the
1996 Restricted Stock Plan (the "Restricted Stock Plan") pursuant to which
704,474 shares of Common Stock were 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 were
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.

12. Stock Options

An executive is party to a stock option agreement with the Company pursuant
to which the Company granted such executive an option to purchase up to an
aggregate of 250,000 shares of Common Stock at an exercise price of $11.00 per
share, the fair market value on the date of grant (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
22, 1997, a stockholder/executive of the Company will have the option to
purchase from the executive 100,000 shares of Common Stock for $50,000.

Concurrent with the Reorganization, the Company approved and adopted the
1996 Stock Incentive Plan (the "Incentive Plan"), which provides for the
following types of awards of 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.

The maximum number of shares of Common Stock that may be issued pursuant to
the Incentive Plan is 1,250,000. 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.

F-15

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)
to three years after the date of the IPO and expire after 10 years. The exercise
price per share of the options that were granted at the time of the IPO is equal
to the IPO price.

In the three months ended April 30, 1997, options to purchase an aggregate
of 198,000 shares of Common Stock were granted to five employees of the Company.
These options will become exercisable over a period of one to five years from
the date of grant. The exercise price per share of each such option is equal to
the fair market value of the Common Stock on the date of grant.

A summary of the status of all plan and non-plan options to purchase shares
of Common Stock outstanding as of January 31, 1997 and April 30, 1997
(unaudited) follows:

<TABLE>
<CAPTION>
Fiscal Year 1996 Three Months
Ended January 31, 1997 Ended April 30, 1997
--------------------------- --------------------------
Weighted Weighted
Options Exercise Price Options Exercise Price
--------- -------------- ------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period ...... -- $ -- 383,750 $ 11.00
Granted ................................. 383,750 11.00 198,000 17.83
Exercised .............................. -- -- -- --
Cancelled .............................. -- -- -- --
------- ------- -------- -------
Outstanding at end of period ............ 383,750 $ 11.00 581,750 $ 13.32
======= ======= ======== =======
Options exercisable
at end of period ........................ -- -- -- --
======= ======= ======== =======
</TABLE>

The Company applies APB No. 25 and related interpretations in accounting
for its stock option and purchase plans. Accordingly, no compensation expense
has been recognized for those plans in the year ended January 31, 1997 and the
three months ended April 30, 1997. Had compensation expense been determined
based on the fair value of stock option grants on the date of grant consistent
with SFAS No. 123, the effect on the Company's net income and earnings per share
for the year ended January 31, 1997 would not have been material.

The estimated fair market value of options granted during the year ended
January 31, 1997 was $4.08 per share. The fair value of options granted by the
Company during the year ended January 31, 1997 was estimated using the
Black-Scholes option-pricing model with the following weighted average
assumptions used: no dividend yield; expected volatility (based on comparable
stocks) of 45 percent; risk-free interest rate of 6.4 percent; expected lives of
three to five years.

F-16

<PAGE>

dELiA*s Inc.

NOTES TO FINANCIAL STATEMENTS-(Continued)

Fiscal Years Ended January 31, 1995, 1996 and 1997
and Three Months Ended April 30, 1996 and 1997
(Information as it relates to the three months ended April 30, 1996 and 1997 is
unaudited)

13. Family Stockholders' Agreement

Concurrent with the Reorganization, certain stockholders (the "Family
Holders") and a stockholder/executive of the Company (the "Executive") entered
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 owned 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 gives 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, owned 32.5 percent of the outstanding Common Stock upon
completion of the IPO. The Family Stockholders Agreement will expire on the
tenth anniversary of the completion of the Reorganization.

F-17

<PAGE>

[PHOTOGRAPHS FROM, AND DESCRIPTIONS OF MERCHANDISE CONTAINED IN
THE dELiA*S SUMMER '97 CATALOG]

<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 relied upon as having been authorized by the Company, any Selling Stockholder
or the Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation 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 information contained herein is correct as of
any time subsequent to the date hereof.

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

TABLE OF CONTENTS

Page
------
Prospectus Summary ........................ 3
Risk Factors ........................... 5
Use of Proceeds ........................ 11
Price Range of Common Stock ............ 11
Dividend Policy ........................ 11
Capitalization ........................... 12
Selected Financial Data .................. 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ......................... 14
Business ................................. 20
Management .............................. 27
Certain Transactions ..................... 32
Principal and Selling Stockholders ...... 33
Description of Capital Stock ............ 35
Shares Eligible for Future Sale ......... 37
Underwriting ........................... 38
Legal Matters ........................... 39
Experts ................................. 39
Available Information .................. 40
Index to Financial Statements ............ F-1

2,000,000 Shares

Common Stock

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

HAMBRECHT & QUIST

OPPENHEIMER & CO., INC.

MONTGOMERY SECURITIES

, 1997

================================================================================

<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 ................................. $ 15,072
NASD fee ............................................. 5,618
Nasdaq Listing Fee ................................. 17,500
Legal fees and expenses .............................. 100,000
Printing and engraving expenses ..................... 100,000
Accounting fees and expenses ........................ 50,000
Blue sky fees and expenses ........................... 5,000
Transfer agent and registrar fees and expenses ...... 2,000
Miscellaneous ....................................... 4,810
--------
Total ................................................ $300,000
========
</TABLE>

Item 14. Indemnification of Directors and Officers.

The Company's bylaws provide that the Company shall indemnify each person
who was or is a party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigate (a "proceeding"), by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director or officer of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action or
inaction in an official capacity or in any other capacity while serving as
director, officer, employee or agent, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as amended from time to time,
against all costs, charges, expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid to or to be paid in settlement) reasonably incurred or suffered by such
person in connection therewith, and that indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of his heirs, executors and administrators; provided,
however, that, subject to certain exceptions, the corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by that person, only if that proceeding (or part thereof) was
authorized by the board of directors. The right to indemnification conferred in
the bylaws is a contract right and includes the right to be paid by the Company
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the General Corporation Law of the State
of Delaware, as amended from time to time, requires, the payment of such
expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
that person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a proceeding
shall be made only upon delivery to the Company of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced, if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under these by laws or otherwise.

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), judgment, fines and amounts paid in

II-1

<PAGE>

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 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.

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

The Company has agreed to indemnify the Selling Stockholders against
certain liabilities caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and,
if such indemnification is unavailable in respect of any such liabilities, to
contribute to the amount paid or payable by the Selling Stockholders as a result
of such 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.

On December 18, 1996, as part of the Reorganization dELiA*s LLC subscribed
for 10,000,000 shares of Common Stock. The issuance of such shares was exempt
from registration pursuant to Section 4(2) of the Securities Act.

dELiA*s Ltd. and dELiA*s LLC, the predecessors of the Registrant, During
fiscal 1996, dELiA*s LLC, a predecessor of dELiA*s Inc., issued the following
unregistered securities:

1. On September 23, 1993, November 23, 1993, December 30, 1993, July 18,
1994 August 29, 1994 and October 18, 1994, dELiA*s Ltd. issued common stock
equivalent to 5,642,394 shares of Common Stock to Stephen I. Kahn for a total of
$400,000 of cash.

2. On December 5, 1994 and January 10, 1995, dELiA*s Ltd. issued common
stock equivalent to 459,523 shares of Common Stock to The Trust f/b/o Ruth Kahn
u/w/o Herman Kahn for $200,000 of cash.

3. On January 17, 1995, dELiA*s Ltd. issued common stock equivalent to
586,038 shares of Common Stock to Robert Karetsky for $100,000 of cash.

4. On January 17, 1995 and January 31, 1995, dELiA*s Ltd. issued common
stock equivalent to 1,505,313 shares of Common Stock to Geraldine Karetsky for
$500,000 of cash.

5. On March 8, 1995, dELiA*s LLC issued a membership interest equivalent to
769,204 shares of Common Stock to Christopher C. Edgar for no consideration.

6. On May 23, 1995, dELiA*s LLC issued a membership interest equivalent to
114,958 shares of Common Stock to Andrew K. Block for $50,000 of cash.

7. On June 7, 1995, dELiA*s LLC issued a membership interest equivalent to
114,958 shares of Common Stock to Bear Partners for $50,000 of cash.

8. On February 1, 1996, dELiA*s LLC issued membership interests equivalent
to an aggregate of 605,428 shares of Common Stock to a group of six employees
pursuant to the dELiA*s LLC Restricted Interest Plan and individual Restricted
Interest Agreements dated February 1, 1996. The employees did not make any
payment for their interests.

9. On February 1, 1996, dELiA*s LLC issued a membership interest equivalent
to 103,591 shares of Common Stock to a private investor in consideration for a
non-interest-bearing loan in the amount of $50,000.

II-2

<PAGE>

10. On June 1, 1996, dELiA*s LLC issued membership interests equivalent to
an aggregate of 66,856 shares of Common Stock to a group of four employees
pursuant to the dELiA*s LLC Restricted Interest Plan and individual Restricted
Interest Agreements dated June 1, 1996. The employees did not make any payment
for their interests.

11. On August 1, 1996, dELiA*s LLC issued membership interests equivalent
to an aggregate of 32,190 shares of Common Stock to a group of three employees
pursuant to the dELiA*s LLC Restricted Interest Plan and individual Restricted
Interest Agreements dated August 1, 1996. The employees did not make any payment
for their interests.

Each of the issuance of securities in the transactions described in
paragraphs 1 through 11 above were either exempt from registration pursuant to
Section 4(2) of the Securities Act or did not constitute a "sale" within the
meaning of the Securities Act.

Item 16. Exhibits.

<TABLE>
<S> <C>
1.1 * Form of Underwriting Agreement
2.1 Bill of Sale and Contribution and Assumption Agreement between dELiA*s LLC and the
Company (incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-15153))
3.1 Certificate of incorporation of the Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
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 (incorporated
by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.2 Employment Agreement between the Company and Christopher C. Edgar (incorporated by
reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.3 Employment Agreement between the Company and Evan Guillemin (incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.4 Form of Family Stockholders Agreement among the Company, Stephen I. Kahn and the
persons listed on exhibit A thereto (incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
10.5 1996 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
10.6 Restricted Stock Plan (incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
10.7 Stock Option Agreement between the Company and Evan Guillemin (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.8 Agreement dated April 11, 1996 between the Company and The Jay Group, Inc. (the "Jay
Group Agreement") (incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
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
(incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on
Form S-1 (Registration No. 333-15153))
10.10 Form of Restricted Stock Agreements between the Company and holders of Common Stock
subject to the Restricted Stock Plan (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
10.11 Amendment dated March 31, 1996 to the Jay Group Agreement (incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1997).
</TABLE>

II-3

<PAGE>

<TABLE>
<S> <C>
10.12 Lease Agreement dated April 25, 1997 between the Company and Keystone Distribution
Center, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Annual Report
on Form 10-K for the fiscal year ended April 30, 1997).
10.13 (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1997).
16 Letter from Richard A. Eisner & Company, LLP respecting change in certifying accountant
(incorporated by reference to Exhibit 16 to the Company's Registration Statement on
Form S-1 (Registration No. 333-15153))
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 filed
asExhibit 5)
24* Power of Attorney (set forth on page II-6)
27* Financial Data Schedule
</TABLE>

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

* Filed herewith

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 497h)
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 person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlled 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-4

<PAGE>

SIGNATURES

Pursuant to the requirement 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 May, 1997.

dELiA*s Inc.

By: /s/ Stephen I. Kahn
----------------------------------

Stephen I. Kahn

Chairman of the Board,

Chief Executive Officer and

President

SIGNATURES AND POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appear below hereby constitutes and appoints Stephen I. Kahn,
Christopher C. Edgar and Evan Guillemin, or any of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf individually and in any and all capacities (until revoked in writing),
any and all amendments (including post-effective amendments) to this
Registration Statement on Form S-1, and any registration statement relating to
the same offering as this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) and the Securities Act of 1933, to file the same
with all exhibits thereto and all other documents in connection therewith with
the Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of the, full power and authority to do all such other acts and
things requisite or necessary to be done, and to execute all such other
documents as they, or any of them, may deem necessary or desirable in connection
with the foregoing, as fully as the undersigned might or could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, may lawfully do or cause to be done by virtue hereof.

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.

<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- -------------------------------- --------------
<S> <C> <C>
/s/ Stephen I. Kahn Chairman of the Board, May 20, 1997
- ----------------------- Chief Executive Officer,
Stephen I. Kahn President and Director
(principal executive officer)

/s/ Evan Guillemin Chief Financial Officer and May 20, 1997
- ----------------------- Treasurer (principal financial
Evan Guillemin and accounting officer)

/s/ Christopher C. Edgar Executive Vice President, May 20, 1997
--------------------- Chief Operating Officer
Christopher C. Edgar and Director

/s/ S. Roger Horchow Director May 20, 1997
---------------------
S. Roger Horchow

/s/ Sidney S. Kahn Director May 20, 1997
---------------------
Sidney S. Kahn

/s/ Geraldine Karetsky Director May 20, 1997
---------------------
Geraldine Karetsky

/s/ Joseph J.Pinto Director May 20, 1997
---------------------
Joseph J. Pinto

</TABLE>

II-5

<PAGE>

EXHIBIT INDEX

<TABLE>
<S> <C>
Number
- -------
1.1 * Form of Underwriting Agreement
2.1 Bill of Sale and Contribution and Assumption Agreement between dELiA*s LLC and the
Company (incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-15153))
3.1 Certificate of incorporation of the Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
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 (incorporated
by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.2 Employment Agreement between the Company and Christopher C. Edgar (incorporated by
reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.3 Employment Agreement between the Company and Evan Guillemin (incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.4 Form of Family Stockholders Agreement among the Company, Stephen I. Kahn and the
persons listed on exhibit A thereto (incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
10.5 1996 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
10.6 Restricted Stock Plan (incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
10.7 Stock Option Agreement between the Company and Evan Guillemin (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1
(Registration No. 333-15153))
10.8 Agreement dated April 11, 1996 between the Company and The Jay Group, Inc. (the "Jay
Group Agreement") (incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (Registration No. 333-15153))
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
(incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on
Form S-1 (Registration No. 333-15153))
10.10 Form of Restricted Stock Agreements between the Company and holders of Common Stock
subject to the Restricted Stock Plan (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Registration No. 333-15153))
10.11 Amendment dated March 31, 1996 to the Jay Group Agreement (incorporated by reference
to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1997).
10.12 Lease Agreement dated April 25, 1997 between the Company and Keystone Distribution
Center, Inc. (incorporated by reference to Exhibit 10.12 to the Company's Annual Report
on Form 10-K for the fiscal year ended April 30, 1997).
10.13 (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1997).
16 Letter from Richard A. Eisner & Company, LLP respecting change in certifying accountant
(incorporated by reference to Exhibit 16 to the Company's Registration Statement on
Form S-1 (Registration No. 333-15153))
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 filed as Exhibit 5)
24* Power of Attorney (set forth on page II-6)
27* Financial Data Schedule
</TABLE>

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

* Filed herewith

EXHIBIT 1.1

dELiA*s Inc.

2,000,000 Shares(1)

Common Stock

UNDERWRITING AGREEMENT
----------------------

May __, 1997

HAMBRECHT & QUIST LLC
Oppenheimer & Co., Inc.
Montgomery Securities
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104

Ladies and Gentlemen:

dELiA*s Inc., a Delaware corporation (herein called the Company), proposes
to issue and sell 1,000,000 shares of its authorized but unissued Common Stock,
$ .01 par value per share (herein called the Common Stock), and the stockholders
of the Company named in Schedule II hereto (herein collectively called the
Selling Securityholders) propose to sell an aggregate of 1,000,000 shares of
Common Stock of the Company (said 2,000,000 shares of Common Stock being herein
called the Underwritten Stock). The Company and the Selling Securityholders
propose to grant to the Underwriters (as hereinafter defined) an option to
purchase up to 300,000 additional shares of Common Stock (herein called the
Option Stock and with the Underwritten Stock herein collectively called the
Stock). The Common Stock is more fully described in the Registration Statement
and the Prospectus hereinafter mentioned.

The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and
warrant that you have been authorized by each of the other Underwriters to enter
into this Agreement on its behalf and to act for it in the manner herein
provided.

1. Registration Statement. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1 (No. 333-____), including the related preliminary prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
Securities Act) of the Stock. Copies of such registration statement and of

- -----------
(1) Plus an option to purchase from the Company and the Selling Securityholders
up to an aggregate of 300,000 additional shares to cover over-allotments.

<PAGE>

each amendment thereto, if any, including the related preliminary prospectus
(meeting the requirements of Rule 430A of the rules and regulations of the
Commission) heretofore filed by the Company with the Commission have been
delivered to you.

The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended (including any Rule 462(b) registration
statement). The term Prospectus as used in this Agreement shall mean the
prospectus relating to the Stock first filed with the Commission pursuant to
Rule 424(b) and Rule 430A (or if no such filing is required, as included in the
Registration Statement) and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or the effectiveness of such amendment)
such prospectus as so supplemented or amended. The term Preliminary Prospectus
as used in this Agreement shall mean each preliminary prospectus included in
such registration statement prior to the time it becomes effective.

The term Principal Selling Securityholders shall mean Stephen I. Kahn and
Christopher C. Edgar.

The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.

2. Representations and Warranties of the Company and the Selling
Securityholders.

(a) Each of the Company and the Principal Selling Securityholders hereby
represents and warrants as follows:

(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in New York and Pennsylvania which are the only
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, properties, financial condition or results of operations of the
Company taken as a whole). The Company has no subsidiaries.

<PAGE>

(ii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any material
adverse change in the business, properties, financial condition or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, the Company has not entered into any material transaction
not referred to in the Registration Statement and the Prospectus.

(iii) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option Stock
is to be purchased, the Prospectus will comply, in all material respects, with
the provisions of the Securities Act and the rules and regulations of the
Commission thereunder; on the Effective Date, the Registration Statement did not
contain any untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date the Prospectus did
not and, on the Closing Date and any later date on which Option Stock is to be
purchased, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that none of the representations and warranties in this
subparagraph (iii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in conformity
with information herein or otherwise furnished in writing to the Company by or
on behalf of the Underwriters for use in the Registration Statement or the
Prospectus.

(iv) The Stock is duly and validly authorized, is (or, in the case of
shares of the Stock to be sold by the Company, will be, when issued and sold to
the Underwriters as provided herein) duly and validly issued, fully paid and
nonassessable and conforms to the description thereof in the Prospectus. No
further approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to be sold
by the Selling Securityholders or the issuance and sale of the Stock as
contemplated herein.

(v) The Stock to be sold by the Selling Securityholders has been
approved for listing on the Nasdaq National Market, and prior to the Closing
Date the Stock to be issued and sold by the Company will be approved for listing
by the Nasdaq National Market upon official notice of issuance.

(b) Each of the Selling Securityholders hereby represents and warrants as
follows:

(i) Such Selling Securityholder has good and marketable title to all
the shares of Stock to be sold by such Selling Securityholder hereunder, free
and clear of all liens, encumbrances, equities, security interests and claims
whatsoever, with full right and authority to deliver the same hereunder,
subject, in the case of each Selling Securityholder, to the rights of the
Company, as Custodian (herein called the Custodian), and that upon the delivery

3
<PAGE>

of and payment for such shares of the Stock hereunder, the several Underwriters
will receive good and marketable title thereto, free and clear of all liens,
encumbrances, equities, security interests and claims whatsoever.

(ii) Certificates in negotiable form for the shares of the Stock to be
sold by such Selling Securityholder have been placed in custody under a Custody
Agreement for delivery under this Agreement with the Custodian; such Selling
Securityholder specifically agrees that the shares of the Stock represented by
the certificates so held in custody for such Selling Securityholder are subject
to the interests of the several Underwriters and the Company, that the
arrangements made by such Selling Securityholder for such custody, including the
Power of Attorney provided for in such Custody Agreement, are to that extent
irrevocable, and that the obligations of such Selling Securityholder shall not
be terminated by any act of such Selling Securityholder or by operation of law,
whether by the death or incapacity of such Selling Securityholder (or, in the
case of a Selling Securityholder that is not an individual, the dissolution or
liquidation of such Selling Securityholder) or the occurrence of any other
event; if any such death, incapacity, dissolution, liquidation or other such
event should occur before the delivery of such shares of the Stock hereunder,
certificates for such shares of the Stock shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such death,
incapacity, dissolution, liquidation or other event had not occurred, regardless
of whether the Custodian shall have received notice of such death, incapacity,
dissolution, liquidation or other event.

(c) Each of the Selling Securityholders, except the Principal Selling
Securityholders who made certain representations and warranties in subparagraph
2(a) above, hereby represents and warrants as follows: as of the Effective Date,
the information with respect to such Selling Securityholder in the Registration
Statement did not contain any untrue statement of a material fact and did not
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the Effective Date
the Prospectus did not and, on the Closing Date and any later date on which
Option Stock is to be purchased, will not contain any untrue statement of a
material fact or omit to state any material fact with respect to such Selling
Securityholder necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

4
<PAGE>

3. Purchase of the Stock by the Underwriters.

(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
1,000,000 shares of the Underwritten Stock to the several Underwriters, each
Selling Securityholder agrees to sell to the several Underwriters the number of
shares of the Underwritten Stock set forth in Schedule II opposite the name of
such Selling Securityholder, and each of the Underwriters agrees to purchase
from the Company and the Selling Securityholders the respective aggregate number
of shares of Underwritten Stock set forth opposite its name in Schedule I,
totaling an aggregate of 2,000,000 shares of Common Stock. The price at which
such shares of Underwritten Stock shall be sold by the Company and the Selling
Securityholders and purchased by the several Underwriters shall be $______ per
share. The obligation of each Underwriter to the Company and each of the Selling
Securityholders shall be to purchase from the Company and the Selling
Securityholders that number of shares of the Underwritten Stock which represents
the same proportion of the total number of shares of the Underwritten Stock to
be sold by each of the Company and the Selling Securityholders pursuant to this
Agreement as the number of shares of the Underwritten Stock set forth opposite
the name of such Underwriter in Schedule I hereto represents of the total number
of shares of the Underwritten Stock to be purchased by all Underwriters pursuant
to this Agreement, as adjusted by you in such manner as you deem advisable to
avoid fractional shares. In making this Agreement, each Underwriter is
contracting severally and not jointly; except as provided in paragraphs (b) and
(c) of this Section 3, the agreement of each Underwriter is to purchase only the
respective number of shares of the Underwritten Stock specified in Schedule I. .

(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for
the number of shares of the Stock agreed to be purchased by such Underwriter or
Underwriters, the Company or the Selling Securityholders shall immediately give
notice thereof to you, and the non-defaulting Underwriters shall have the right
within 24 hours after the receipt by you of such notice to purchase, or procure
one or more other Underwriters to purchase, in such proportions as may be agreed
upon between you and such purchasing Underwriter or Underwriters and upon the
terms herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the

5
<PAGE>

two preceding sentences, the Company and the Selling Securityholders shall have
the right, within 24 hours next succeeding the first 24-hour period referred to
above, to make arrangements with other underwriters or purchasers satisfactory
to you for purchase of such shares and portion on the terms herein set forth. In
any such case, either you or the Company and the Selling Securityholders shall
have the right to postpone the Closing Date determined as provided in Section 5
hereof for not more than seven business days after the date originally fixed as
the Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company and the Selling Securityholders shall make arrangements within the
24-hour periods stated above for the purchase of all the shares of the Stock
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company or the Selling Securityholders to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or the Selling Securityholders.
Nothing in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
and the Selling Securityholders grant an option to the several Underwriters to
purchase, severally and not jointly, up to 300,000 shares in the aggregate of
the Option Stock from the Company and the Selling Securityholders, in the
respective aggregate number of shares of Option Stock set forth opposite the
Company and each such Securityholder's name on Schedule III, at the same price
per share as the Underwriters shall pay for the Underwritten Stock. Said option
may be exercised only to cover over-allotments in the sale of the Underwritten
Stock by the Underwriters and may be exercised in whole or in part at any time
(but not more than once) on or before the thirtieth day after the date of this
Agreement upon written or telegraphic notice by you to the Company setting forth
the aggregate number of shares of the Option Stock as to which the several
Underwriters are exercising the option. Delivery of certificates for the shares
of Option Stock, and payment therefor, shall be made as provided in Section 5
hereof. The number of shares of the Option Stock to be purchased by each
Underwriter shall be the same percentage of the total number of shares of the
Option Stock to be purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten Stock, as adjusted by you in such manner as you
deem advisable to avoid fractional shares.

6
<PAGE>

4. Offering by Underwriters.

(a) The terms of the initial public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.

(b) The information set forth in the last paragraph on the front cover page
and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
that the statements made therein are correct.

5. Delivery of and Payment for the Stock.

(a) Delivery of certificates for the shares of the Underwritten Stock and
the Option Stock (if the option granted by Section 3(c) hereof shall have been
exercised not later than 7:00 A.M., San Francisco time, on the date two business
days preceding the Closing Date), and payment therefor, shall be made at the
office of Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New
York, at 7:00 a.m., San Francisco time, on the fourth business day after the
date of this Agreement, or at such time on such other day, not later than seven
full business days after such fourth business day, as shall be agreed upon in
writing by the Company, the Selling Securityholders and you. The date and hour
of such delivery and payment (which may be postponed as provided in Section 3(b)
hereof) are herein called the Closing Date.

(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of Proskauer Rose Goetz &
Mendelsohn LLP, 1585 Broadway, New York, New York, at 7:00 a.m., San Francisco
time, on the third business day after the exercise of such option.

(c) Payment for the Stock purchased from the Company shall be made to the
Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by one or more certified or official bank check or
checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and shall be in
such denominations as you may request at least one business day before the
Closing Date, in the case of Underwritten Stock, and at least one business day
prior to the purchase thereof, in the case of the Option Stock. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New
York, New York 10004 on the business day prior to the Closing

7
<PAGE>

Date or, in the case of the Option Stock, by 3:00 p.m., New York time, on the
business day preceding the date of purchase.

It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.

6. Further Agreements of the Company and the Selling Securityholders. Each
of the Company and the Selling Securityholders respectively covenants and agrees
as set forth in subparagraphs (i), (j), (k) and (l) below. The Company covenants
and agrees as set forth in subparagraphs (a), (b), (c), (d), (e), (f), (g), (h)
and (m) below, and the Selling Securityholders agree to take all reasonable
actions in cooperation with the Company to cause the Company to perform its
covenants and agreements under such subparagraphs.

(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) a Prospectus containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A and (ii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.

(b) The Company will promptly notify each Underwriter in the event of (i)
the request by the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company and
the Selling Securityholders will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time be issued,
to obtain the withdrawal thereof at the earliest possible moment.

(c) The Company will (i) on or before the Closing Date, deliver to you a
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at

8
<PAGE>

such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.

(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.

(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.

(f) The Company will cooperate and take all reasonable actions, when and as
requested by you, in the qualification of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate and,
during the period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, in keeping such qualifications in good standing under
said securities or blue sky laws; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to qualify as
a foreign corporation in any jurisdiction in which it is not so qualified. The
Company will, from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for distribution of
the Stock.

9
<PAGE>

(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission (including the Report on Form SR required by Rule 463 of the
Commission under the Securities Act).

(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.

(i) The Company and the Selling Securityholders jointly and severally agree
to pay all costs and expenses incident to the performance of their obligations
under this Agreement, including all costs and expenses incident to (i) the
preparation (excluding costs and expenses of the Underwriters and fees, costs
and expenses of their counsel), printing and filing with the Commission and the
National Association of Securities Dealers, Inc. ("NASD") of the Registration
Statement, any Preliminary Prospectus and the Prospectus, (ii) the furnishing to
the Underwriters of copies of any Preliminary Prospectus and of the several
documents required by paragraph (c) of this Section 6 to be so furnished, the
printing of this Agreement and related documents delivered to the Underwriters,
(iv) the preparation (excluding costs and expenses of the Underwriters and fees,
costs and expenses of their counsel), printing and filing of all supplements and
amendments to the Prospectus referred to in paragraph (d) of this Section 6, (v)
the furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing and
issuance of stock certificates, including the transfer agent's fees. The Selling
Securityholders will pay any transfer taxes incident to the transfer to the
Underwriters of the shares the Stock being sold by the Selling Securityholders.

(j) The Company and the Selling Securityholders jointly and severally agree
to reimburse you, for the account of the several Underwriters, for blue sky fees
and related disbursements (including counsel fees and disbursements and cost of
printing memoranda for the Underwriters not exceeding $5,000 in the aggregate
for blue sky fees and related dispersements) paid by or for the account of the
Underwriters or their counsel in qualifying the Stock under state securities or
blue sky laws and in the review of the offering by the NASD.

(k) The provisions of paragraphs (i) and (j) of this Section are intended
to relieve the Underwriters from the payment of the expenses and costs which the
Company and the Selling Securityholders hereby agree to pay and shall not affect
any agreement which the Company and the Selling Securityholders may make, or may
have made, for the sharing of any such expenses and costs.

(l) The Company and each of the Selling Securityholders hereby agrees that,
without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, the Company or such Selling Securityholder, as the case may be,
will not, for a period of 90 days following the commencement of the public

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<PAGE>

offering of the Stock by the Underwriters, directly or indirectly, (i) sell,
offer, contract to sell, make any short sale, pledge, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exchangeable or exercisable
for or any rights to purchase or acquire Common Stock or (ii) enter into any
swap or other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (A) the Stock to be sold to the Underwriters pursuant to this
Agreement, (B) shares of Common Stock issued by the Company upon the exercise of
options granted under the stock option plans of the Company (the "Option
Plans"), or the stock option agreement between the company and Evan Guillemin,
all as described in footnote (i) to the table under the caption "Capitalization"
in the Prospectus, and (C) options to purchase Common Stock granted under the
Option Plans; and each of the Company and Stephen Kahn hereby agrees that,
during the Lock-Up Period without the prior written consent of Hambrecht & Quist
LLC, such party shall not consent to, or waive any restriction(s) relating to,
any lock-up commitment(s) with respect to the Company, Mr. Kahn or any other
person or entity under any agreement;

(m) The Company is not, and upon receipt and pending application of the net
proceeds from the sale of the Stock to be sold by the Company in the manner
described in the Prospectus will not be an "investment company" a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.

7. Indemnification and Contribution.

(a) Subject to the provisions of paragraph (f) of this Section 7, the Company
and the Selling Securityholders jointly and severally agree to indemnify and
hold harmless each Underwriter and each person (including each partner or
officer thereof) who controls any Underwriter within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Securities Exchange Act of
1934, as amended (herein called the Exchange Act), or the common law or
otherwise, and the Company and the Selling Securityholders jointly and severally
agree to reimburse each such Underwriter and controlling person for any legal or
other expenses (including, except as otherwise hereinafter provided, reasonable
fees and disbursements of counsel) incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or

11
<PAGE>

necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company and the Selling Securityholders
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto, (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Stock which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof, and (3) each Selling
Securityholder (other than the Principal Selling Securityholders) shall not be
liable under this paragraph other than with respect to (A) information
pertaining to such Selling Securityholder furnished by or on behalf of such
Selling Securityholder expressly for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or (B) facts that would constitute a breach of any
representation or warranty of such Selling Securityholder set forth in Sections
2 (b) or 2 (c) hereof. The indemnity agreements of the Company and the Selling
Securityholders contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Securityholders contained in Section 2
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.

(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Securityholders from and against any
and all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with

12
<PAGE>

any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) registration statement) or any post-effective
amendment thereto (including any Rule 462(b) registration statement) or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus (as amended or as supplemented if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of such
indemnifying Underwriter for use in the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto. The indemnity agreement of
each Underwriter contained in this paragraph (b) shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Stock.

(c) Each party indemnified under the provision of paragraphs (a) and (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (herein called the Notice) of such service or notification to the
party or parties from whom indemnification may be sought hereunder. No
indemnification provided for in such paragraphs shall be available to any party
who shall fail so to give the Notice if the party to whom such Notice was not
given was unaware of the action, suit, investigation, inquiry or proceeding to
which the Notice would have related and was prejudiced by the failure to give
the Notice, but the omission so to notify such indemnifying party or parties of
any such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there may
be a conflict between the positions of the indemnifying party or parties and of
the indemnified party or

13
<PAGE>

parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding,
except that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred to
in clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.

(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or (b) of
this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Stock or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Securityholders on the one hand and the Underwriters on the other shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Stock received by the Company and the Selling
Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.

14
<PAGE>

The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.

Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).

(e) No indemnifying party will, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such indemnified
party or any person who controls such indemnified party within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to
such claim, action, suit or proceeding) unless such settlement, compromise or
consent includes an unconditional release of such indemnified party and each
such controlling person from all liability arising out of such claim, action,
suit or proceeding.

(f) The liability of each Selling Securityholder under such Selling
Securityholder's representations and warranties contained in subparagraphs (a)
(b) and (c) of Section 2 hereof and under the indemnity, contribution and
reimbursement agreements contained in the provisions of this Section 7 and
Section 11 hereof shall be limited to an amount equal to the initial public
offering price of the stock sold by such Selling Securityholder to the
Underwriters less Underwriters' discounts and commissions. The Company and the
Selling Securityholders may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts of
such liability for which they each shall be responsible.

15
<PAGE>

8. Termination. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company and the Selling
Securityholders if after the date of this Agreement trading in the Common Stock
shall have been suspended, or if there shall have occurred (i) the engagement in
hostilities or an escalation of major hostilities by the United States or the
declaration of war or a national emergency by the United States on or after the
date hereof, (ii) any outbreak of hostilities or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, calamity, crisis or change in economic or political conditions
in the financial markets of the United States would, in the Underwriters'
reasonable judgment, make the offering or delivery of the Stock impracticable,
(iii) suspension of trading in securities generally or a material adverse
decline in value of securities generally on the New York Stock Exchange, the
American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such exchange or system, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the securities
markets in the United States. If this Agreement shall be terminated pursuant to
this Section 8, there shall be no liability of the Company or the Selling
Securityholders to the Underwriters and no liability of the Underwriters to the
Company or the Selling Securityholders; provided, however, that in the event of
any such termination the Company and the Selling Securityholders agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.

9. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:

(a) The Registration Statement shall have become effective; and no
stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.

(b) The legality and sufficiency of the sale of the Stock hereunder
and the validity and form of the certificates representing the Stock, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to

16
<PAGE>

the financial statements contained herein), shall have been approved at or prior
to the Closing Date by Sidley & Austin , counsel for the Underwriters.

(c) You shall have received from Proskauer Rose Goetz & Mendelsohn
LLP, counsel for the Company and the Selling Securityholders, an opinion,
addressed to the Underwriters and dated the Closing Date, covering the matters
set forth in Annex A hereto, and if Option Stock is purchased at any date after
the Closing Date, an additional opinion from such counsel, addressed to the
Underwriters and dated such later date, confirming that the statements expressed
as of the Closing Date in such opinions remain valid as of such later date.

(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company does not have any material contingent obligations which are not
disclosed in or expressly contemplated by the Registration Statement and the
Prospectus, (v) there are not any pending or known threatened legal proceedings
to which the Company is a party or of which property of the Company or any of
its subsidiaries is the subject which are material and which are not disclosed
in the Registration Statement and the Prospectus, (vi) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required,
(vii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Option Stock is to be purchased, as the case may be, and (viii) there has
not been any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably foreseeable as
to render it impracticable in your reasonable judgment to make a public offering
of the Stock, or a material adverse change in market levels for securities in
general (or those of companies in particular) or financial or economic
conditions which render it inadvisable to proceed.

(e) On the Closing Date and on any later date on which Option Stock is
purchased (i) you shall have received a certificate, dated the Closing Date or
such later date, as the case may be, and signed on behalf of the Company by the
President and the Chief Financial Officer of the Company, stating that the
respective signers of said certificate have carefully examined

17
<PAGE>

the Registration Statement in the form in which it originally became effective
and the Prospectus contained therein and any supplements or amendments thereto,
and that the statements included in clauses (i) through (vii) of paragraph (d)
of this Section 9 are true and correct; and (ii) the Company shall have
furnished to you such further information, certificates and documents as you
reasonably may request.

(f) You shall have received from each of Deloitte & Touche LLP and
Richard A. Eisner & Company, LLP, a letter or letters, addressed to the
Underwriters and dated the Closing Date and any later date on which Option Stock
is purchased, confirming that they are independent public accountants with
respect to the Company within the meaning of the Securities Act and the
applicable published rules and regulations thereunder and based upon the
procedures described in their letters delivered to you concurrently with the
execution of this Agreement (herein called the Original Letters), but carried
out to a date not more than three business days prior to the Closing Date or
such later date on which Option Stock is purchased (i) confirming, to the extent
true, that the statements and conclusions set forth in the Original Letters are
accurate as of the Closing Date or such later date, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letters which are necessary to reflect any changes in the
facts described in the Original Letters since the date of the Original Letters
or to reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in your sole judgment, makes it impractical or inadvisable to
proceed with the public offering of the Stock or the purchase of the Option
Stock as contemplated by the Prospectus.

(g) You shall have received from Deloitte & Touche LLP a letter
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as at January 31, 1997, did
not disclose any weakness in internal controls that they considered to be
material weaknesses.

(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.

(i) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.

(j) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of more than 5% of the outstanding
Common Stock, agreements, in form reasonably satisfactory to Hambrecht & Quist
LLC, stating that without the prior written consent of Hambrecht & Quist LLC on
behalf of the Underwriters, such person or entity will not, for a period of 90
days following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer,

18
<PAGE>

contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (ii) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise; provided however, that
such directors, officers and beneficial holders (the "Signatories") shall be
permitted to transfer any shares of Common Stock or securities convertible into
or exchangeable or exercisable for the Company's Common Stock either during such
Signator's lifetime or on death by will or intestacy to such Signator's
immediate family or to a trust the beneficiaries of which are exclusively such
Signator and/or a member or members of such Signator's immediate family;
provided, however, that prior to any such transfer each transferee shall execute
an agreement, satisfactory to Hambrecht & Quist LLC, pursuant to which each
transferee shall agree to receive and hold such shares of Common Stock, or
securities convertible into or exchangeable or exercisable for the Common Stock,
subject to the provisions thereof, and there shall be no further transfer except
in accordance with the provisions thereof. For the purposes of this paragraph,
"immediate family" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor.

All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Sidley & Austin, counsel for the Underwriters, shall
be satisfied that they comply in form and scope.

In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Securityholders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.

10. Conditions of the Obligation of the Company and the Selling
Securityholders. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order

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<PAGE>

suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.

In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.

11. Reimbursement of Certain Expenses. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Securityholders hereby jointly and severally agree to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim
or action brought in or by any foreign, federal, state, local or other court or
tribunal (a "Court") or any foreign, federal, state, local or other governmental
authority or regulatory body (a "Regulatory Entity") , or any investigation or
inquiry by or at the direction of any Court or Regulatory Entity, or any other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in paragraph (a) of Section 7 of this
Agreement, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this Section 11 and the
possibility that such payments might later be held to be improper; provided,
however, that (i) to the extent any such payment is ultimately held to be
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the Company, upon request, reasonable
assurances of their ability to effect any refund, when and if due.

12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.

13. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104; and if to the Company, shall be

20
<PAGE>

mailed, telegraphed or delivered to it at its office, 435 Hudson Street, New
York, New York 10014, Attention: Stephen I. Kahn with a copy to Jeffrey A.
Horowitz, Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway New York, New
York 10036-8299; and if to the Selling Securityholders, shall be mailed,
telegraphed or delivered to the Selling Securityholders in care of Stephen I.
Kahn at 435 Hudson Street, New York, NY 10014 with a copy to Jeffrey A.
Horowitz, Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway New York, New
York 10036-8299. All notices given by telegraph shall be promptly confirmed by
letter.

14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or the Selling Securityholders or their respective directors or
officers, and (c) delivery and payment for the Stock under this Agreement;
provided, however, that if this Agreement is terminated prior to the Closing
Date, the provisions of paragraphs (l)(m) and (n) of Section 6 hereof shall be
of no further force or effect.

This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California.

Please sign and return to the Company and to the Selling Securityholders in
care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding agreement among the Company, the Selling
Securityholders and the several Underwriters in accordance with its terms.

21
<PAGE>

Very truly yours,

dELiA*s Inc.

By ______________________________________
Name:
Title:

SELLING SECURITYHOLDERS:
Stephen I. Kahn
Christopher C. Edgar
Sidney S. Kahn
Geraldine Karetsky
Robert Karetsky
The Ruth Kahn Trust f/b/o Sidney Kahn
Robin Kahn
Jeffrey Kahn
Anne Kahn
Andrew Karetsky
Jennifer Karetsky
Elizabeth May
Maxine Kahn
Arlene Epstein
Joanna Bober
Bear Partners
Andrew Block, Jr.
Elizabeth Higgins
Kent Trowbridge
Karen Christensen
Seth Walter
Evan Guillemin

By ______________________________________
Individually and as Attorney-in-Fact

The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.

22
<PAGE>

HAMBRECHT & QUIST LLC
Oppenheimer & Co., Inc.
Montgomery Securities
By Hambrecht & Quist LLC

By __________________________
Managing Director

Acting on behalf of the several Underwriters, including themselves, named in
Schedule I hereto.

23
<PAGE>

SCHEDULE I

UNDERWRITERS

Number of
Shares
to be
Underwriters Purchased
- ------------ ---------

Hambrecht & Quist LLC
Oppenheimer & Co., Inc.
Montgomery Securities

Total 2,000,000

24
<PAGE>

SCHEDULE II

SELLING SECURITYHOLDERS

Number of
Name and Address Shares
of Selling Securityholders Sold
-------------------------- ---------

Stephen I. Kahn 405,438
435 Hudson Street
New York, New York 10014

Geraldine Karetsky 134,402
1660 Silver King Drive
Aspen, Colorado 81611

Sidney S. Kahn 69,792
14 East 60th Street
New York, New York 10022

The Ruth Kahn Trust f/b/o Sidney Kahn 50,000
c/o Sidney S. Kahn
14 East 60th Street
New York, New York 10022

Christopher C. Edgar 79,364
435 Hudson Street
New York, New York 10014

Robert Karetsky 67,190
975 Park Avenue
New York, New York 10028

Robin Kahn 18,334
114 Mercer Street
New York, New York 10014

Anne Kahn 18,334
307 Henry Street
Brooklyn, New York 11201

Andrew Karetsky 18,334
Waverly Reds Baseball Club
28 Miles Street, Mulgrave
Victoria, Australia 3170

Jennifer Karetsky 18,334
4203 Tuscany Court
Baltimore, Maryland 21213

25
<PAGE>

Elizabeth May 2,500
1120 Park Avenue
New York, New York 10128

Maxine Kahn 7,500
1120 Park Avenue
New York, New York 10128

Arlene Epstein 1,000
74 Mill Glen Road
Upper Saddle River, New Jersey 07076

Joanna Bober 1,000
138 West 11th Street
New York, New York 10011

Bear Partners 12,500
c/o Andrew Block, Sr
1245 Astor Street
Chicago, Illinois60610

Andrew Block, Jr 12,500
1412 Summit Avenue
Seattle, Washington 98122

Elizabeth Higgins 18,856
435 Hudson Street
New York, New York 10014

Kent Trowbridge 21,550
435 Hudson Street
New York, New York 10014

Karen Christensen 10,775
435 Hudson Street
New York, New York 10014

Seth Walter 2,694
435 Hudson Street
New York, New York 10014

Evan Guillemin 11,269
435 Hudson Street
New York, New York 10014

---------
Total 1,000,000

26
<PAGE>

SCHEDULE III

OPTION SHARES

Number of Shares
Option Stock
------------

The Company...................................................... 0
Stephen I. Kahn.................................................. 121,611
Christopher C. Edgar............................................. 23,805
Sidney S. Kahn................................................... 35,932
Ruth Kahn Trust f/b/o Sidney Kahn................................ 0
Geraldine Karetsky............................................... 40,314
Robert Karetsky.................................................. 20,154
Robin Kahn....................................................... 5,499
Jeffrey Kahn..................................................... 5,499
Anne Kahn........................................................ 5,499
Andrew Karetsky.................................................. 5,499
Jennifer Karetsky................................................ 5,499
Elizabeth May.................................................... 750
Maxine Kahn...................................................... 2,250
Arlene Epstein................................................... 300
Joanna Bober..................................................... 300
Bear Partners.................................................... 3,750
Andrew Block, Jr................................................. 3,750
Elizabeth Higgins................................................ 5,656
Kent Trowbridge.................................................. 6,464
Karen Christensen................................................ 3,232
Seth Walter...................................................... 857
Evan Guillemin................................................... 3,350
-------
Total.......................................... 300,000
=======

27
<PAGE>

ANNEX A

Matters to be Covered in the Opinion of
Counsel for the Company
and the Selling Securityholders

(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified as a foreign corporation and in good standing
in New York and Pennsylvania, and has full corporate power and authority to own
or lease its properties and conduct its business as described in the
Registration Statement;

(ii) the authorized capital stock of the Company consists of 1,000,000
shares of Preferred Stock, of which there are no shares outstanding, and
50,000,000 shares of Common Stock, $.01 par value, of which to the knowledge of
such counsel there are ___________ shares outstanding (including the
Underwritten Stock plus the number of shares of Option Stock issued and
outstanding on the date hereof); all necessary corporate proceedings have been
taken validly to authorize such authorized capital stock; to the knowledge of
such counsel all of the outstanding shares of such capital stock have been duly
and validly issued and are fully paid and nonassessable; all of the outstanding
shares of Underwritten Stock and the shares of Option Stock issued, if any, when
issued and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will be duly and validly issued and fully paid and
nonassessable; any Option Stock purchased after the Closing Date, when issued
and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will have been duly and validly issued and be fully paid
and nonassessable; and no preemptive rights of, or rights of refusal in favor
of, stockholders exist with respect to the Stock, or the issue and sale thereof,
pursuant to the Certificate of Incorporation or Bylaws of the Company and, to
the knowledge of such counsel, there are no contractual preemptive rights that
have not been waived, rights of first refusal or rights of co-sale which exist
with respect to the Stock being sold by the Selling Securityholders or the issue
and sale of the Stock;

(iii) the Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;

(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Securities Act and
with the rules and regulations of the Commission thereunder;

(v) in the course of the preparation of the Registration Statement and the
Prospectus, such counsel has participated in conferences with officers and
representatives of the Company and with the Company's independent public

28
<PAGE>

accountants, at which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Registration
Statement and the Prospectus and (without taking any further action to verify
independently the statements made in the Registration Statement and the
Prospectus and, except as stated in the foregoing opinion, without assuming
responsibility for the accuracy, completeness or fairness of such statements)
nothing has come to such counsel's attention that causes such counsel to believe
that either the Registration Statement in the form it originally became
effective and as of the Closing Date contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus as of its date or at the Closing Date (or any later date on
which Option Stock is purchased), contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that such counsel does not
express any opinion with respect to the financial statements, schedules and
other financial and statistical data included in or omitted from the
Registration Statement or the Prospectus);

(vi) the information required to be set forth in the Registration Statement
in answer to Items 9, 10 (insofar as it relates to such counsel) and 11(c) of
Form S-1 is to such counsel's knowledge accurately and adequately set forth
therein in all material respects or no response is required with respect to such
Items, and, the description of the Company's stock option plan and, to such
counsel's knowledge (i) the options granted and which may be granted thereunder
and (ii) the options granted otherwise than under such plan set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to said plan and options to the extent required by the Securities
Act and the rules and regulations of the Commission thereunder;

(vii) such counsel do not have knowledge of any franchises, contracts,
leases, documents or legal proceedings, pending or threatened, which in the
opinion of such counsel are of a character required to be described in the
Registration Statement in the form it originally became effective or the
Prospectus or to be filed as exhibits to the Registration Statement, which are
not described and filed as required;

(viii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;

(ix) the Underwriting Agreement has been duly executed and delivered by or
on behalf of the Selling Securityholders and the Custody Agreement between the
Selling Securityholders and the Company , as Custodian, and the Power of
Attorney referred to in such Custody Agreement have been duly executed and
delivered by the several Selling Securityholders;

(x) the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not conflict with, or
result in a breach of, the Certificate of Incorporation or Bylaws of the Company
or any agreement or instrument contained as an exhibit to the Registration
Statement known to such counsel to which the Company is a party or

29
<PAGE>

any applicable law or regulation, or so far as is known to such counsel, any
order, writ, injunction or decree, of any jurisdiction, court or governmental
instrumentality;

(xi) to the knowledge of such counsel, all holders of securities of the
Company having rights to the registration of shares of Common Stock, or other
securities, because of the filing of the Registration Statement by the Company
have waived such rights or such rights have expired by reason of lapse of time
following notification of the Company's intent to file the Registration
Statement;

(xii) upon delivery to the Underwriters, the ownership of the shares of
Stock sold by the Selling Securityholders under the Underwriting Agreement will
be transferred, free and clear of any adverse claims within the meaning of ss.
8-302 of the New York Uniform Commercial Code, to the Underwriters who have
severally purchased such shares of Stock under the Underwriting Agreement,
assuming for the purpose of this opinion that the Underwriters purchased the
same in good faith without notice of any such adverse claims; and

(xiii) based insofar as factual matters with respect to the stock to be
sold by the Selling Securityholders are concerned solely upon certificates of
the Selling Securityholders, the accuracy of which such counsel have no reason
to question, no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Stock by
the Underwriters.

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

Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the State of Delaware, upon
opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representative and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel. In addition, counsel
rendering the foregoing opinion may utilize a customary definition of
"knowledge".

Exhibit 5

PROSKAUER ROSE GOETZ & MENDELSOHN LLP
1585 BROADWAY
NEW YORK, NEW YORK 10036-8299

May 20, 1997

The Board of Directors
dELiA*s Inc.
435 Hudson Street
New York, NY 10014

Ladies and Gentlemen:

You have requested our opinion in connection with the filing
by dELiA*s Inc., a Delaware corporation (the "Company"), with the Securities and
Exchange Commission (the "Commission") of a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to 2,300,000 shares of common stock, par value $.01 per
share, of the Company ("Common Stock"). The Registration Statement relates to
the proposed issuance of 1,000,000 shares of Common Stock by the Company (the
"Company Shares") and the proposed sale of 1,300,000 shares of Common Stock by
certain stockholders (the "Selling Stockholder Shares").

We have examined such records, documents and other instruments
as we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth. We have also assumed without investigation the authenticity of any
document submitted to us as an original, the conformity to originals of any
document submitted to us as a copy, the authenticity of the originals of such
latter documents, the genuineness of all signatures and the legal capacity of
natural persons signing such documents.

Based upon the foregoing, it is our opinion that (a) the
Company Shares (to the extent issued and sold by the Company) have been duly
authorized and, when issued and delivered in accordance with the underwriting
agreement as described in the Registration Statement, will be legally issued,
fully paid and non-assessable and that (b) the Selling Stockholder Shares have
been duly authorized and are legally issued, fully paid and non-assessable.

<PAGE>

The foregoing opinion relates only to matters of the General
Corporation Law of the State of Delaware and does not purport to express any
opinion on the laws of any other jurisdiction.

We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the prospectus contained in the Registration Statement. In so
doing, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission thereunder.

Very truly yours,

/s/ PROSKAUER ROSE GOETZ &
MENDELSOHN LLP

EXHIBIT 23.1

We consent to the use in this Registration Statement of dELiA*s Inc. on Form S-1
of our report dated March 12, 1997 appearing in the Prospectus, which is part of
this Registration Statement.

We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

New York, New York
May 20, 1997

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the inclusion in this Registration Statement on Form S-1 of
our report dated August 14, 1996 (with respect to the share issuance in Note 1,
December 18, 1996) on our audits of the financial statements of dELIA*s Inc. as
at January 31, 1996 and the related statements of operations, stockholders'
equity and cash flows for each of the years in the two-year period then ended.
We also consent to the reference of our firm under the captions "Experts" and
"Selected Financial Data" in the Prospectus.

Richard A. Eisner & Company, LLP

New York, New York
May 20, 1997

<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 15,269
<SECURITIES> 911
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 5,605
<CURRENT-ASSETS> 23,573
<PP&E> 2,022
<DEPRECIATION> (187)
<TOTAL-ASSETS> 29,822
<CURRENT-LIABILITIES> 7,680
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 21,961
<TOTAL-LIABILITY-AND-EQUITY> 29,822
<SALES> 12,928
<TOTAL-REVENUES> 12,928
<CGS> 6,392
<TOTAL-COSTS> 11,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,551
<INCOME-TAX> 623
<INCOME-CONTINUING> 928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 928
<EPS-PRIMARY> 008
<EPS-DILUTED> 008

</TABLE>