ITURF INC
10-Q, 1999-12-14
CATALOG & MAIL-ORDER HOUSES
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<PAGE>



     FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1999


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


     [X]                        QUARTERLY REPORT

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

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                 FOR THE QUARTERLY PERIOD ENDED OCTOBER 30, 1999



                         Commission file number 0-25347

                                   ITURF INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

    DELAWARE                                                13-3963754
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

                   435 HUDSON STREET, NEW YORK, NEW YORK 10014
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                   (ZIP CODE)

                                 (212) 742-1640
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO

         Number of shares of Class A Common Stock outstanding as of December 14,
         1999: 7,493,132
         Number of shares of Class B Common Stock outstanding as of December 14,
         1999: 11,425,000

                                   -----------

<PAGE>

     STATEMENTS CONTAINED IN THIS DOCUMENT, INCLUDING, WITHOUT LIMITATION,
INFORMATION APPEARING UNDER "PART I - ITEM 2 - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," MAY BE
FORWARD-LOOKING STATEMENTS (WITHIN THE MEANING OF SECTION 27A OF THE AMENDED
SECURITIES ACT OF 1933 AND SECTION 21E OF THE AMENDED SECURITIES EXCHANGE ACT OF
1934). WHEN USED IN THIS DOCUMENT, THE WORDS "BELIEVE," "PLAN," "INTEND,"
"EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS REPORT.
THESE STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN THE FORWARD-LOOKING
STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO:
FLUCTUATIONS IN CONSUMER PURCHASING PATTERNS AND ADVERTISING SPENDING; TIMING
OF, RESPONSE TO AND QUANTITY OF OUR PARENT'S CATALOG MAILINGS AND OUR OWN
ELECTRONIC MAILINGS; CHANGES IN THE GROWTH RATE OF INTERNET USAGE AND ONLINE
USER TRAFFIC LEVELS; ACTIONS OF OUR COMPETITORS; THE TIMING AND AMOUNT OF COSTS
RELATING TO THE EXPANSION OF OUR OPERATIONS AND ACQUISITIONS OF TECHNOLOGY OR
BUSINESSES AND THEIR INTEGRATION; GENERAL ECONOMIC AND MARKET CONDITIONS; AND
OTHER FACTORS OUTSIDE OUR CONTROL. THESE FACTORS, AND OTHER FACTORS THAT APPEAR
IN THIS REPORT OR IN OUR OTHER SECURITIES AND EXCHANGE COMMISSION FILINGS,
INCLUDING OUR REGISTRATION STATEMENT (NO. 333-90435) ON FORM S-1, COULD AFFECT
OUR ACTUAL RESULTS AND COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY US OR ON OUR BEHALF.

     ALL REFERENCES IN THIS REPORT TO A FISCAL YEAR PRIOR TO FISCAL 1999 REFER
TO THE YEAR ENDED JANUARY 31 FOLLOWING THE PARTICULAR CALENDAR YEAR (E.G.,
"FISCAL 1998" REFERS TO THE YEAR ENDING JANUARY 31, 1999). EFFECTIVE FEBRUARY 1,
1999, WE CHANGED OUR FISCAL YEAR TO END ON THE SATURDAY CLOSEST TO JANUARY 31
FOLLOWING THE CALENDAR YEAR (E.G., "FISCAL 1999" REFERS TO THE FIFTY-TWO WEEKS
ENDING JANUARY 29, 2000).

                                     PART I
                              FINANCIAL INFORMATION

     ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       2

<PAGE>


                                   ITURF INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                  JANUARY 31, 1999  OCTOBER 30, 1999
                                                                  ----------------  ----------------
                                                                                    (UNAUDITED)
                                     ASSETS
<S>                                                                    <C>         <C>
CURRENT ASSETS
 Cash and cash equivalents .........................................   $     375   $  19,700
 Short-term investments ............................................        --        48,482
 Prepaid expenses - related party ..................................        --         1,152
 Other current assets ..............................................        --         3,565
                                                                       ---------   ---------
     Total current assets ..........................................         375      72,899

DEFERRED OFFERING COSTS ............................................         110        --
PROPERTY AND EQUIPMENT, NET ........................................         414       3,067
INTANGIBLE ASSETS, NET .............................................         317      18,672
                                                                       ---------   ---------
TOTAL ASSETS .......................................................   $   1,216   $  94,638
                                                                       ---------   ---------
                                                                       ---------   ---------
                  LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 Accounts payable and other current liabilities ....................   $     263   $   3,728
 Due to dELiA*s ....................................................         573        --
                                                                       ---------   ---------
     Total current liabilities .....................................         836       3,728


STOCKHOLDERS' EQUITY
 Preferred stock, $.01 par value, 1,000,000 shares authorized;
      no shares issued or outstanding ..............................        --          --
 Class A common stock, $.01 par value, 67,500,000 shares authorized;
      no shares issued or outstanding at January 31, 1999;
      6,418,132 shares issued and outstanding at October 30, 1999 ..        --            64
 Class B common stock, $.01 par value, 12,500,000 shares authorized,
      issued and outstanding .......................................         125         125
 Additional paid-in capital ........................................        --       116,388
 Investment in common stock of dELiA*s Inc. ........................        --       (17,734)
 Retained earnings (deficit) .......................................         255      (7,933)
                                                                       ---------   ---------
     Total stockholders' equity ....................................         380      90,910
                                                                       ---------   ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .........................   $   1,216   $  94,638
                                                                       ---------   ---------
                                                                       ---------   ---------

</TABLE>


       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       3

<PAGE>

                                   ITURF INC.

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

<TABLE>
<CAPTION>

                                                                                 THREE MONTHS     THIRTEEN WEEKS
                                                                                     ENDED             ENDED
                                                                               OCTOBER 31, 1998   OCTOBER 30, 1999
                                                                               ----------------   ----------------
                                                                                          (UNAUDITED)
<S>                                                                              <C>                 <C>
    NET REVENUES:
        NET PRODUCT SALES....................................................... $    715            $   4,602
        ADVERTISING AND OTHER...................................................      349                  699
                                                                                 --------            ---------
    TOTAL NET REVENUES..........................................................    1,064                5,301
    COST OF PRODUCT SALES.......................................................      359                2,639
                                                                                 --------            ---------
    GROSS PROFIT................................................................      705                2,662
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................      497                9,329
    GOODWILL AMORTIZATION EXPENSE...............................................       17                  652
    INTEREST EXPENSE (INCOME), NET..............................................        9                 (965)
                                                                                 --------            ---------
    INCOME (LOSS) BEFORE INCOME TAXES...........................................      182               (6,354)
    PROVISION FOR INCOME TAXES..................................................       83                   --
                                                                                 --------            ---------
    NET INCOME (LOSS)........................................................... $     99            $  (6,354)
                                                                                 ========            =========
    BASIC AND DILUTED NET INCOME (LOSS) PER SHARE............................... $   0.01            $   (0.35)
                                                                                 ========            =========
    SHARES USED IN THE CALCULATION OF BASIC AND DILUTED
        NET INCOME (LOSS) PER SHARE.............................................   12,500               18,360
                                                                                 ========            =========

</TABLE>

<TABLE>
<CAPTION>

                                                                              NINE MONTHS   THIRTY-NINE WEEKS
                                                                                ENDED             ENDED
                                                                           OCTOBER 31, 1998 OCTOBER 30, 1999
                                                                           ---------------- ----------------
                                                                                     (UNAUDITED)
<S>                                                                             <C>        <C>
NET REVENUES:
    NET PRODUCT SALES ......................................................... $  1,437   $  9,627
    ADVERTISING AND OTHER .....................................................      456      1,241
                                                                                --------   --------
TOTAL NET REVENUES ............................................................    1,893     10,868
COST OF PRODUCT SALES .........................................................      733      5,622
                                                                                --------   --------
GROSS PROFIT ..................................................................    1,160      5,246
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ..................................    1,017     15,096
GOODWILL AMORTIZATION EXPENSE .................................................       51        690
INTEREST EXPENSE (INCOME), NET ................................................       31     (2,066)
                                                                                --------   --------
INCOME (LOSS) BEFORE INCOME TAXES .............................................       61     (8,474)
PROVISION (BENEFIT) FOR INCOME TAXES ..........................................       39       (161)
                                                                                --------   --------
NET INCOME (LOSS) ............................................................. $     22   $ (8,313)
                                                                                --------   --------
                                                                                --------   --------
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE ................................. $   0.00   $  (0.51)
                                                                                --------   --------
                                                                                --------   --------
SHARES USED IN THE CALCULATION OF BASIC AND DILUTED
    NET INCOME (LOSS) PER SHARE ...............................................   12,500     16,368
                                                                                --------   --------
                                                                                --------   --------

</TABLE>

       See Notes to Unaudited Condensed Consolidated Financial Statements

                                       4

<PAGE>

                                   ITURF INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                               NINE MONTHS    THIRTY-NINE WEEKS
                                                                                  ENDED             ENDED
                                                                             OCTOBER 31, 1998 OCTOBER 30, 1999
                                                                             ---------------- ----------------
                                                                                            (UNAUDITED)
<S>                                                                             <C>         <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
 Net income (loss) ..........................................................   $     22    $ (8,313)
 Adjustments to reconcile net income (loss) to net cash provided by (used in)
   operating activities:
   Depreciation and amortization ............................................         80         929
   Amortization of premiums and discounts on investments, net ...............       --          (318)
   Changes in operating assets and liabilities:
          Prepaid expenses - related party ..................................       --        (1,152)
          Other current assets ..............................................       --        (3,565)
          Other assets ......................................................        (18)       --
          Other current liabilities .........................................        228       3,178
                                                                                --------    --------
Net cash provided by (used in) operating activities .........................        312      (9,241)
                                                                                --------    --------
                                                                                --------    --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
 Purchase of dELiA*s stock ..................................................       --       (17,734)
 Capital expenditures .......................................................       (201)     (2,158)
 Acquisitions ...............................................................       --          (444)
 Purchase of held-to-maturity investment securities .........................       --       (65,158)
 Proceeds from the maturity of held-to-maturity investment securities .......       --        16,994
                                                                                --------    --------
Net cash used in investing activities .......................................       (201)    (68,500)
                                                                                --------    --------
                                                                                --------    --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 Net proceeds from issuance of common stock .................................       --        97,639
 Loan from dELiA*s ..........................................................      1,570       1,001
 Repayment to dELiA*s .......................................................     (1,670)     (1,574)
                                                                                --------    --------
Net cash provided by (used in) financing activities .........................       (100)     97,066
                                                                                --------    --------
                                                                                --------    --------
INCREASE IN CASH & CASH EQUIVALENTS .........................................         11      19,325

CASH & CASH EQUIVALENTS--BEGINNING OF PERIOD ................................         31         375
                                                                                --------    --------
CASH & CASH EQUIVALENTS--END OF PERIOD ......................................   $     42    $ 19,700
                                                                                --------    --------
                                                                                --------    --------

</TABLE>

Supplemental disclosure of noncash financing and investing activity: April 1999
issuance of common stock for the acquisition of TSISoccer.com domain name. See
Note 1. September 1999 issuance of common stock for the acquisition of
[email protected], Inc. See Note 3.

       See Notes to Unaudited Condensed Consolidated Financial Statements


                                      5

<PAGE>


                                   ITURF INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   BUSINESS

        iTurf Inc. is an Internet community and marketer of apparel, related
    accessories, home furnishings and soccer merchandise that is focused
    primarily on young men and women between the ages of 10 and 24, an age group
    known as "Generation Y." We are a subsidiary of dELiA*s Inc. The
    accompanying financial statements of iTurf, which was incorporated in August
    1997, include all of dELiA*s Internet operations from that date of
    incorporation, as well as the Internet operations of TSI Soccer Corporation
    prior to that date. We utilize dELiA*s business relationships,
    infrastructure and brand names and relied on dELiA*s to provide financing
    for our operations until April 14, 1999, when we completed an initial public
    offering of our Class A common stock.

        On April 1, 1999, our certificate of incorporation was amended and
    restated such that the authorized capital stock of iTurf consists of
    67,500,000 shares of Class A common stock, par value $.01 per share,
    12,500,000 shares of Class B common stock, par value $.01 per share and
    1,000,000 shares of Preferred Stock, par value $.01 per share. In addition,
    exchange of the 100 shares of common stock previously outstanding and held
    by dELiA*s into 12,500,000 shares of Class B common stock was approved. All
    share information in these financial statements and notes has been adjusted
    to reflect these changes.

        In our initial public offering, we issued 4,830,000 shares of our Class
    A common stock to the public at a price of $22 per share to receive net cash
    proceeds of approximately $97,409,000 after expenses. Holders of Class A
    common stock have voting rights identical to holders of Class B common
    stock, except that holders of Class A common stock are entitled to one vote
    per share and holders of Class B are entitled to six votes per share. In
    connection with the initial public offering, iTurf acquired the
    TSISoccer.com domain name from TSI Soccer Corporation, a wholly-owned
    subsidiary of dELiA*s, for 1,136 shares of Class A common stock (valued at
    $25,000 at the initial public offering price). dELiA*s continues to own all
    outstanding shares of iTurf's Class B common stock, each share of which is
    convertible into one share of Class A common stock under certain
    circumstances. At October 30, 1999, dELiA*s owned approximately 92% of the
    voting power and 66% of the value of iTurf common stock.

        iTurf used approximately $17,700,000 of the initial public offering
    proceeds to purchase 551,046 shares of dELiA*s common stock from dELiA*s.
    This purchase has been recorded as a reduction to iTurf's stockholders'
    equity. In June 1999, we used $1,574,000 of the initial public offering
    proceeds to repay our May 1, 1999 indebtedness to dELiA*s.

        iTurf is subject to seasonal fluctuations in our merchandise sales and
    results of operations. We expect our revenues and operating results
    generally to be lower in the first half of each fiscal year than in the
    second half of such year.

        Effective February 1, 1999, we changed our fiscal year from the year
    ending January 31 to the 52 weeks ending on the Saturday closest to January
    31.

                                       6

<PAGE>

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

        PRINCIPLES OF CONSOLIDATION--The condensed consolidated financial
    statements include the accounts of iTurf Inc. and subsidiaries, all of which
    are wholly owned. All significant intercompany balances and transactions
    have been eliminated in consolidation.

        BASIS OF PRESENTATION--For periods prior to our initial public offering,
    the financial statements include expenses which have been allocated to iTurf
    by dELiA*s on a specific identification basis plus the allocated share of
    the costs associated with resources we shared with dELiA*s. Allocations from
    dELiA*s for such shared resources were made primarily on a proportional cost
    method based on related revenues. While management believes these
    allocations are reasonable, the financial statements of iTurf for periods
    prior to our initial public offering do not necessarily reflect the results
    of operations or financial position that would have existed had iTurf been
    an independent company. Since our initial public offering, similar expenses
    are recorded in accordance with intercompany agreements. At October 30,1999,
    a portion of our fourth quarter intercompany expenses were prepaid, which is
    reflected as a related party asset on our balance sheet.

        UNAUDITED INTERIM FINANCIAL STATEMENTS--The accompanying unaudited
    condensed consolidated financial statements have been prepared in accordance
    with the requirements for Form 10-Q and in accordance with generally
    accepted accounting principles for interim financial reporting. In the
    opinion of management, the accompanying condensed consolidated financial
    statements are presented on a basis consistent with the audited financial
    statements and reflect all adjustments (consisting of normal recurring
    items) necessary for a fair presentation of results for the interim periods
    presented. The financial statements and footnote disclosures should be read
    in conjunction with iTurf's January 31, 1999 audited financial statements
    and the notes thereto, which are included in iTurf's Form S-1, as amended
    and filed with the Securities and Exchange Commission. Results for the
    interim period are not necessarily indicative of the results to be expected
    for the year.

        INCOME TAXES--For periods prior to our initial public offering, our
    results were included in dELiA*s consolidated federal and state income tax
    returns and our income tax provision was calculated as if we had operated as
    an independent company. As a result of our initial public offering, we are
    required to file a separate return. We do not expect to have net income for
    fiscal 1999 and expect to fully reserve deferred tax assets. Therefore, we
    estimate our effective rate for the period since our initial public offering
    to be zero.

        CASH EQUIVALENTS-- We consider 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.

        RECLASSIFICATIONS-- Certain amounts have been reclassified to conform to
    the current period presentation.



3.  ACQUISITION

        On September 1, 1999, iTurf Inc. acquired [email protected], Inc. The merger
    consideration consisted of 1,586,996 shares of our Class A common stock. In
    accordance with the purchase method of accounting, the results of Taponline
    have been included in our consolidated financial statements since the date
    of merger. The excess of the aggregate purchase price over the fair market
    value of net assets acquired of $19.0 million was allocated to goodwill
    based upon preliminary estimates of fair values and is being amortized over
    five years. On a pro forma basis, assuming the merger had been completed on
    the first day of each fiscal year, net sales, net loss and loss per share
    would have been approximately $2.1 million, $3.0 million and $0.21,
    respectively, for the nine months ended October

                                       7

<PAGE>

    31, 1998 and $11.0 million, $14.1 million and $0.78, respectively, for the
    thirty-nine weeks ended October 30, 1999. These results are presented for
    informational purposes only and do not necessarily represent results which
    would have occurred, and they may not be indicative of future results of
    combined operations.



4.  COMMITMENTS AND CONTINGENCIES

        In May 1999, we entered into a strategic marketing alliance with America
    Online, Inc. Over the two-year term of the agreement, we have agreed to pay
    America Online a total of approximately $8.1 million, of which approximately
    $4.0 million was paid as of October 30, 1999. The total expected payment is
    being recognized as advertising expense on a straight-line basis over the
    life of the marketing program.

        In August 1999, we entered into a strategic marketing alliance with
    Microsoft Corporation. Over the one-year term of the agreement, we have
    agreed to pay Microsoft a total of at least $4.6 million, of which
    approximately $775,000 was paid as of October 30, 1999. The total expected
    payment is being recognized as advertising expense on a straight-line basis
    over the life of the marketing program.

        In connection with the Taponline transaction, MarketSource Corporation,
    which is owned by certain of the shareholders of Taponline, including Martin
    Levine, who was recently elected as a member of our board of directors,
    entered into an arrangement to purchase advertising and other inventory on
    our network of sites for resale to MarketSource's clients. Separately, we
    have agreed to enter into a marketing alliance with MarketSource to promote
    our network of sites through MarketSource's offline marketing channels. We
    committed to purchasing approximately $6.5 million in promotional
    opportunities through these channels over the next three years.



5.  SUBSEQUENT EVENTS

         On November 17, 1999, 325,000 shares of our Class B common stock were
     converted to Class A common stock and sold by dELiA*s to Kistler Joint
     Venture. On November 29, 1999, 1,675,000 shares of our Class A common
     stock, to be issued upon conversion, were registered for future sale. On
     December 6, 1999, 750,000 shares of our Class B common stock held by
     dELiA*s were converted to Class A common stock and sold by dELiA*s pursuant
     to the registration statement. As a result of these transactions, our
     parent's interest in iTurf was reduced to 90% of vote and 60% of value.

                                       8

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

        THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
    OUR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED
    ELSEWHERE IN THIS REPORT. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING
    STATEMENTS THAT REFLECT ITURF'S PLANS, ESTIMATES AND BELIEFS. OUR ACTUAL
    RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING
    STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
    INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS
    REPORT. AS USED IN THIS REPORT, THE TERM "PARENT" MEANS DELIA*S INC., A
    REPORTING COMPANY UNDER THE SECURITIES EXCHANGE ACT OF 1934. OUR PARENT OWNS
    ALL OF THE SHARES OF OUR CLASS B COMMON STOCK WHICH ENTITLES OUR PARENT TO
    SIX VOTES PER SHARE, AS COMPARED TO ONE VOTE PER SHARE OF OUR CLASS A COMMON
    STOCK. AS OF OCTOBER 30, OUR PARENT HELD APPROXIMATELY 92% OF THE VOTING
    POWER OF OUR OUTSTANDING CAPITAL STOCK.

    OVERVIEW

        We are a leading online teen network providing Internet community,
    content and e-commerce services focused primarily on young men and women
    between the ages of 10 and 24, an age group known as "Generation Y." We
    provide Generation Y with a network of Web sites that addresses this
    demographic group's concerns, interests, tastes and needs. Our sites offer
    interactive web/zines with proprietary content, chat rooms, posting boards,
    personal homepages and e-mail, as well as online shopping opportunities.

        Our historical financial statements for periods prior to our April 1999
    initial public offering include allocations for administrative, distribution
    and other expenses incurred by our parent for services rendered to iTurf.
    While we believe such allocations to be reasonable, they are not necessarily
    indicative of, and it is not practical for us to estimate, the levels of
    expenses that would have resulted had iTurf been operating as an independent
    company. Following our initial public offering, the provision of such
    services and other matters between the two companies, including use of our
    parent's trademarks, has been governed by intercompany agreements.

        Prior to our initial public offering, we relied on our parent to provide
    financing for our operations. Therefore, our cash flows were not necessarily
    indicative of the cash flows that would have resulted had we been operating
    as an independent company.

        We believe that our continued growth will depend in large part on our
    ability to increase our brand awareness, provide our customers with superior
    Internet community and e-commerce experiences and continue to enhance our
    systems and technology to support increased traffic to our Web sites. We
    intend to invest heavily in marketing and promotion, including advertising
    in our parent's print catalogs, and to further develop our Web sites,
    technology and operating infrastructure. As a result, we expect to record
    substantial net losses for the foreseeable future.

        In view of the rapidly changing nature of iTurf's business and our
    limited operating history, as well as the changes in our relationship with
    our parent and our expected seasonality, iTurf believes that
    period-to-period comparisons of our operating results, including our gross
    profit margin and operating expenses as a percentage of sales, are not
    necessarily meaningful. You should not rely on this information as an
    indication of future performance.

        On September 1, 1999, iTurf Inc. acquired [email protected], Inc. The merger
    consideration consisted of 1,586,996 shares of our Class A common stock. In
    accordance with the purchase method of accounting, the results of Taponline
    have been included in our consolidated financial statements since the date
    of merger.

                                       9

<PAGE>

    RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                                  THREE MONTHS    THIRTEEN WEEKS   NINE MONTHS     THIRTY-NINE WEEKS
                                                       ENDED         ENDED            ENDED            ENDED
                                                OCTOBER 31, 1998 OCTOBER 30, 1999 OCTOBER 31, 1998   OCTOBER 30, 1999
                                                ---------------- ---------------- ----------------   ----------------
<S>                                                  <C>              <C>              <C>                <C>
Net product sales                                     67.2%            86.8%            75.9%              88.6%
Advertising and other revenues                        32.8             13.2             24.1               11.4
                                                     -----            -----            -----              -----
Total net revenues                                   100.0            100.0            100.0              100.0
Cost of product sales                                 33.7             49.8             38.7               51.7
                                                     -----            -----            -----              -----
Gross profit                                          66.3             50.2             61.3               48.3
Selling, general and administrative expenses          46.7            176.0             53.7              138.9
Goodwill amortization                                  1.6             12.3              2.7                6.4
Interest expense (income), net                         0.9            (18.2)             1.6              (19.0)
                                                     -----            -----            -----              -----
Income (loss) before income taxes                     17.1           (119.9)             3.3              (78.0)
Provision (benefit) for income taxes                   7.8              --               2.1               (1.5)
                                                     -----            -----            -----              -----
Net income (loss)                                      9.3%          (119.9)%            1.2%             (76.5)%
                                                     -----            -----            -----              -----
                                                     -----            -----            -----              -----
</TABLE>

        COMPARISON OF THIRTEEN WEEKS ENDED OCTOBER 30, 1999 AND THREE MONTHS
        ENDED OCTOBER 31, 1998

        NET REVENUES. Net revenues increased from $1.1 million in the third
    fiscal quarter of 1998 to $5.3 million for the same period in fiscal 1999.
    The increase was principally due to increased traffic as a result of our
    marketing efforts and growth in Internet usage, as well as to sales derived
    from Web sites launched or acquired subsequent to the third fiscal quarter
    of 1998, including droog.com, dotdotdash.com, StorybookHeirlooms.com,
    contentsonline.com and OnTap.com. Advertising, subscription and licensing
    revenues increased to $699,000 for the third quarter of fiscal 1999 from
    $349,000 for the same period of fiscal 1998 primarily as a result of the
    Taponline acquistion.

        GROSS PROFIT. Gross profit increased from $705,000 for the third quarter
    of fiscal 1998 to $2.7 million for the same period in fiscal 1999 as a
    result of increased sales. Gross margin decreased from 66.3% in the third
    quarter of fiscal 1998 to 50.2% in the third quarter of fiscal 1999. The
    decrease was principally due to a decrease in advertising and other revenues
    as a percent of total revenues.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
    administrative expenses are comprised of:

- -       sales and marketing expenses, which include advertising costs, credit
        card fees and distribution costs;

- -       product development expenses, which include site development, editorial
        content and systems costs; and

- -       general and administrative expenses, which include depreciation but
        exclude goodwill amortization expenses.

        Total selling, general and administrative expenses, including direct
    expenses, expenses allocated from our parent for periods prior to our
    initial public offering and expenses charged by our parent in connection
    with intercompany agreements after our initial public offering, increased
    from $497,000, or 46.7% of revenues, in the third quarter of fiscal 1998 to
    $9.3 million, or 176.0% of revenues, in the third quarter of fiscal 1999 due
    to a substantial increase in advertising, product development and overhead
    costs to support the continued expansion of iTurf. During the third quarter
    of 1999, we incurred approximately

                                       10

<PAGE>

    $2.5 million of expenses in connection with services provided to us by our
    parent.

        In the third quarter of fiscal 1999, selling, general and administrative
    expenses were comprised of approximately $6.7 million of selling and
    marketing expenses, $1.8 million of product development costs and $800,000
    of general and administrative expenses.

        GOODWILL AMORTIZATION. Goodwill amortization increased significantly
    from $17,000, or 1.6% of revenues, for the third quarter of fiscal 1998 to
    $652,000, or 12.3% of revenues, for the same period in fiscal 1999 as a
    result of the Taponline acquisition.


    COMPARISON OF THIRTY-NINE WEEKS ENDED OCTOBER 30, 1999 AND NINE MONTHS ENDED
    OCTOBER 31, 1998

        NET REVENUES. Net revenues increased from $1.9 million in the first
    three quarters of fiscal 1998 to $10.9 million for the same period in fiscal
    1999. The increase was due to the launch of the dELiAs.cOm and
    discountdomain.com Web sites in May 1998, the contentsonline.com and
    droog.com sites in November 1998, the dotdotdash.com site in March 1999 and
    the StorybookHeirlooms.com site in April 1999, the acquisition of OnTap.com
    in September 1999 as well as increased traffic as a result of our marketing
    efforts and growth in Internet usage. Advertising, subscription and
    licensing revenues increased to approximately $1.2 million for the first
    three quarters of fiscal 1999 from $456,000 for the same period of fiscal
    1998 as a result of both increased advertising on gURL.com and the Taponline
    acquisition.

        GROSS PROFIT. Gross profit increased from $1.2 million for the first
    three quarters of fiscal 1998 to $5.2 million for the same period in fiscal
    1999 as a result of increased sales. Gross margin decreased from 61.3% in
    the first three quarters of fiscal 1998 to 48.3% in the first three quarters
    of fiscal 1999. The decrease was principally due to increased sales of
    lower-margin products on our discountdomain.com and TSISoccer.com sites as
    well as seasonal promotional offers. The change also reflects a decrease in
    advertising and other revenues as a percent of total revenues.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Total selling, general and
    administrative expenses increased from $1.0 million, or 53.7% of revenues,
    in the first three quarters of fiscal 1998 to $15.1 million, or 138.9% of
    revenues, in the first three quarters of fiscal 1999 due to a substantial
    increase in advertising, product development and overhead costs to support
    the continued expansion of iTurf. During the first three quarters of 1999,
    we incurred approximately $5.1 million of expenses in connection with
    services provided to us by our parent.

        GOODWILL AMORTIZATION. Goodwill amortization increased significantly
    from $51,000, or 2.7% of revenues, for the first three quarters of fiscal
    1998 to $690,000, or 6.4% of revenues, for the same period in fiscal 1999 as
    a result of the Taponline acquisition.


    QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY

        Our revenues and operating results may vary significantly from quarter
    to quarter due to a number of factors, many of which are outside of our
    control. These factors include:

- -       seasonal fluctuations in consumer purchasing patterns and advertising
        spending;
- -       mix of product and other revenues;
- -       timing of, response to and quantity of our parent's catalog mailings and
        our own electronic mailings;

                                       11

<PAGE>

- -       changes in the growth rate of Internet usage;
- -       actions of competitors;
- -       the timing and amount of costs relating to the expansion of our
        operations and acquisitions of technology or businesses; and
- -       general economic and market conditions.

        Our limited operating history and rapid growth make it difficult to
    ascertain the effects of seasonality on our business although we believe our
    revenues and operating results generally to be lower in the first half of
    each fiscal year than in the second half of such year. We believe that
    period-to-period comparisons of our historical results are not necessarily
    meaningful and should not be relied upon as an indication of future results.

    INCOME TAXES

        Since our initial public offering, we are no longer consolidated with
    our parent's taxpayer group. For periods prior to such event, we owed our
    parent our proportionate share of the consolidated tax liability computed as
    if iTurf were filing a separate return. Any tax loss benefits attributable
    to us were used by our parent. To the extent that our parent used our tax
    benefits, we reduced our debt due to our parent, which was repaid in the
    third quarter of fiscal 1999.

        Now that we are no longer consolidated with our parent's taxpayer group,
    we may not be able to realize the tax benefit of future losses. Losses
    generated subsequent to deconsolidation will be available to us to offset
    any future taxable income for twenty years. However, deferred tax assets
    recorded to reflect such future benefits are likely to be fully reserved
    when recorded based on our limited operating history.

    LIQUIDITY AND CAPITAL RESOURCES

        Operating activities provided net cash of $312,000 for the first three
    quarters of fiscal 1998 and used $9.2 million during the first three
    quarters of fiscal 1999. This significant cash usage during fiscal 1999
    reflects higher operating expenses as well as prepayments of marketing and
    other costs.

        Net cash used in investing activities of $68.5 million for the first
    three quarters of fiscal 1999 relate primarily to our investments in
    marketable securities and purchase of shares of dELiA*s common stock from
    our parent in connection with our initial public offering. During the first
    three quarters of fiscal 1999, our investing activities, which used
    approximately $201,000, relate to purchases of property and equipment. We
    expect to make additional capital expenditures of approximately $250,000 in
    the fourth quarter of fiscal 1999, including investments in technology and
    physical infrastructure. In addition, a portion of our resources may be used
    to fund acquisitions or investments in businesses, products and technologies
    that are complementary to our current business.

        We also expect to spend significant amounts for marketing and other
    alliances. In May 1999, we entered into a strategic alliance agreement with
    America Online, Inc. under which we committed to cash payments of
    approximately $4.0 million in fiscal 1999 and $4.1 million in fiscal 2000.
    In August 1999, we entered into a strategic marketing alliance with
    Microsoft Corporation under which we agreed to pay Microsoft a total of at
    least $4.6 million over the one-year term of the agreement. In connection
    with the September 1999 Taponline transaction, we agreed to purchase
    approximately $6.5 million in promotional opportunities through these
    MarketSource's offline marketing channels over the next three years.

        Financing activities provided net cash of $97.1 million for the first
    three quarters of fiscal 1999 and used $100,000 for the same period of
    fiscal 1998. The significant amount of cash provided by financing

                                       12

<PAGE>

    activities during the first three quarters of fiscal 1999 relates to the
    initial public offering of our common stock. Prior to our initial public
    offering, financing activities were related primarily to loans from our
    parent.

     Our capital requirements depend on numerous factors, including:

    - the rate of market acceptance of iTurf's online presence;

    - our ability to expand iTurf's customer base;

    - the cost of upgrades to our online presence; and

    - our level of expenditures for sales and marketing.

        The timing and amount of such capital requirements cannot accurately be
    predicted. Additionally, we will continue to evaluate possible investments
    in businesses, products and system technologies and to develop plans to
    expand our sales and marketing programs and conduct more aggressive brand
    promotions. We believe that the net proceeds of our initial public offering,
    together with our cash from operations, will be sufficient to meet
    anticipated cash needs at least through fiscal 2000.


    YEAR 2000 COMPLIANCE

        We are heavily dependent upon complex computer software and systems for
    our operations, including, to a significant extent, our parent's computer
    systems. Many existing computer programs and systems use only two digits to
    identify a year in the date field. These programs and systems were designed
    and developed without considering the impact of the upcoming change in the
    century. If not corrected, many computer applications could fail or create
    erroneous results by or at the Year 2000.

        STATE OF READINESS. All of iTurf's material operating software and our
    information technology systems and other systems, including
    telecommunications and warehouse systems, were developed by and are
    supported by third party vendors. Each of the third party vendors of iTurf's
    mission-critical operating software has provided a written warranty or
    assurance to iTurf or our parent that such software will not be affected by
    the change in the century. The majority of the third party vendors of
    iTurf's other material operating software and systems have also provided
    warranties or assurances that such software and systems would be compliant.
    iTurf has prepared a Year 2000 compliance program, which involves:

        - identifying the material operating software and systems on which iTurf
          depends, whether used by iTurf or by iTurf's service providers;

        - obtaining written warranties or assurances from third party software
          and system vendors and service providers;

        - monitoring the compliance efforts of such vendors and service
          providers; and

        - testing our material operating software and systems.

        During the third quarter, we began to perform tests of some of our
    material operating software and systems to verify the assurances given by
    third party vendors and ensure Year 2000 compliance. The testing, which has
    since been completed, has not identified any material software or systems as
    requiring remediation or replacement. However, we cannot assure you that all
    of our material operating software and systems will be Year 2000 compliant.

        In addition to the operating systems and software iTurf uses directly,
    our operations are also dependent upon the performance of operating software
    and systems used by our significant service providers, including our parent
    and providers of financial, telecommunications and parcel delivery

                                       13

<PAGE>

    services. Our parent has provided us with assurance that its Year 2000
    compliance program is consistent with ours and the status of its efforts is
    the same as ours. We have contacted each of iTurf's other significant
    service providers and have obtained written assurances from the majority of
    such providers that the providers' relevant operating software and systems
    are or would be in Year 2000 compliance. We are monitoring the status of all
    iTurf's significant service providers' Year 2000 compliance efforts to
    minimize the risk of any material adverse effect on iTurf's operations
    resulting from compliance failures. However, there can be no assurance that
    iTurf's service providers have, or will have, operating software and systems
    that are Year 2000 compliant.

        RISKS. The failure of our software or systems to be Year 2000 compliant
    could prevent us from being able to process or fulfill orders from our
    customers, could cause users of our Web sites to consider alternative Web
    community and content providers and could disrupt our financial and
    management controls and reporting systems. Any such worst-case scenario, if
    not quickly remedied, would have a material adverse effect on iTurf.
    Therefore, we are developing contingency plans with respect to such systems
    and software.

        In addition, a significant portion of our merchandise sales are made
    with credit cards, and iTurf's operations may be materially adversely
    affected to the extent our customers are unable to use their credit cards
    due to Year 2000 issues that are not rectified by the customers' credit card
    vendors.

        iTurf has not identified significant exposure to Year 2000 problems
    outside of the information technology issues identified above.

        COSTS. To date, we have spent less than $5,000 on Year 2000 compliance.
    We expect that our incremental costs of addressing Year 2000 issues may be
    as much as $50,000. We believe that the proceeds of our initial public
    offering budgeted for investment in technology infrastructure and
    maintenance will be sufficient to fund our Year 2000 compliance program and
    contingency plan. However, given iTurf's dependence on third party software
    and system vendors and service providers and on our customers' vendors,
    there can be no assurance to that effect.


                                     PART II
                                OTHER INFORMATION

    ITEM 1. LEGAL PROCEEDINGS
        We are not involved in any legal proceedings that management believes
    would have a material adverse effect on our financial position or results of
    operations.


    ITEM 2. CHANGES IN SECURITIES

    USE OF PROCEEDS FROM REGISTERED SECURITIES
        On April 8, 1999, the Securities and Exchange Commission declared
    effective our registration statement (No. 333-15153) on Form S-1, as then
    amended, relating to our initial public offering of 4,830,000 shares of
    Class A common stock, 630,000 shares of which were issued upon exercise of
    an overallotment option granted by us to the underwriters. The managing
    underwriters for the offering were BT Alex. Brown Incorporated and Hambrecht
    & Quist LLC (the "Underwriters"). In connection with the offering, we
    registered the Class A common stock under the Securities Exchange Act of
    1934, as amended.

                                       14

<PAGE>

        The public offering commenced on April 9, 1999 and terminated upon the
    sale of all of the 4,830,000 shares of Class A common stock which were
    registered for sale. The offering was completed on April 14, 1999. The
    aggregate offering price of the securities sold was $106,260,000. All of the
    securities registered were sold for the account of the Company.

        Prior to October 30, 1999, the Company incurred the following expenses
    in connection with the issuance and distribution of the Common Stock
    registered:

        Underwriting discounts and commissions                        $7,438,000
        Other expenses (legal and accounting fees and expenses,
        printing and engraving expenses, filing and listing fees,
        transfer agent and registrar fees and miscellaneous)           1,413,000


        The net offering proceeds to the Company after deducting the foregoing
    expenses were $97,409,000. Other than the amounts set forth for underwriting
    discounts and commissions, the foregoing represent reasonable estimates of
    expenses.

        The Company did not make, in connection with the offering and sale of
    the Common Stock registered, any direct or indirect payments to directors or
    officers of the Company or, to the Company's knowledge, their associates,
    persons owning 10% or more of any class of equity securities of the Company,
    or affiliates of the Company.

        From April 14, 1999 until October 30, 1999, approximately $5.8 million
    of the net offering proceeds was used for general corporate purposes and
    $17,734,000 was used to purchase 551,046 shares of common stock of dELiA*s
    Inc.



    CHANGES IN SECURITIES
        None.


    ITEM 3. DEFAULT UPON SENIOR SECURITIES
        None.


    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        None.


    ITEM 5. OTHER INFORMATION

    SALES OF UNREGISTERED SECURITIES

        On September 1, 1999, we issued 1,586,996 shares of our Class A common
    stock to the shareholders of [email protected], Inc. in a transaction which was
    exempt from Section 5 of the Securities Act pursuant to Section 4(2) of the
    Securities Act.

                                       15

<PAGE>

    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
        (a)  Exhibits

             See "Exhibit Index" following the signature page.

        (b) We filed the following reports on Form 8-K during the fiscal
 quarter:

            (i)   current report on Form 8-K, dated August 11, 1999, reporting
                  Item 5. This report contained information about our agreement
                  to acquire [email protected], Inc.

            (ii)  current report on Form 8-K, dated September 7, 1999, reporting
                  Item 2. This report contained information about our
                  acquisition of [email protected], Inc.

                                       16

<PAGE>

                                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                   iTurf Inc.
                                   (Registrant)
Date: December 14, 1999

                                   By: /s/ STEPHEN I. KAHN
                                       -----------------------------------------
                                           Stephen I. Kahn
                                           Chairman of the Board, President and
                                           Chief Executive Officer


                                   By: /s/ DENNIS GOLDSTEIN
                                       -----------------------------------------
                                           Dennis Goldstein
                                           Chief Financial Officer and Treasurer
                                           (principal financial and accounting
                                           officer)

                                       17

<PAGE>

                                  EXHIBIT INDEX

3.1      Restated Certificate of Incorporation of iTurf (incorporated by
         reference to Exhibit 3.1 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
3.2      By-laws of iTurf (incorporated by reference to Exhibit 3.2 to the iTurf
         Inc. Registration Statement on Form S-1 (Registration No. 333-71123))
10.1     Form of Intercompany Services Agreement (incorporated by reference to
         Exhibit 10.1 to the iTurf Inc. Registration Statement on Form S-1
         (Registration No. 333-71123))
10.2     Form of Trademark License and Customer List Agreement (incorporated by
         reference to Exhibit 10.2 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
10.3     Form of Intercompany Indemnification Agreement (incorporated by
         reference to Exhibit 10.3 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
10.4     Form of Tax Allocation Agreement (incorporated by reference to Exhibit
         10.4 to the iTurf Inc. Registration Statement on Form S-1 (Registration
         No. 333-71123))
10.5     Form of iTurf Common Stock Registration Rights Agreement (incorporated
         by reference to Exhibit 10.5 to the iTurf Inc. Registration Statement
         on Form S-1 (Registration No. 333-71123))
10.6     Form of dELiA*s Common Stock Registration Rights Agreement
         (incorporated by reference to Exhibit 10.6 to the iTurf Inc.
         Registration Statement on Form S-1 (Registration No. 333-71123))
10.7     Form of Customer Service Agreement (incorporated by reference to
         Exhibit 10.7 to the iTurf Inc. Registration Statement on Form S-1
         (Registration No. 333-71123))
10.8     Form of Letter Agreement between dELiA*s and iTurf (regarding a sale of
         control by dELiA*s) (incorporated by reference to Exhibit 10.8 to the
         iTurf Inc. Registration Statement on Form S-1 (Registration No.
         333-71123))
10.9     1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to
         the iTurf Inc. Registration Statement on Form S-1 (Registration No.
         333-71123))
10.10    Employment Agreement between iTurf and Stephen I. Kahn (incorporated by
         reference to Exhibit 10.10 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
10.11    Employment Agreement between iTurf and Alex S. Navarro (incorporated by
         reference to Exhibit 10.11 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
10.12    Employment Agreement between iTurf and Oliver Sharp (incorporated by
         reference to Exhibit 10.12 to the iTurf Inc. Registration Statement on
         Form S-1 (Registration No. 333-71123))
10.13    Employment Agreement between iTurf and Dennis Goldstein (incorporated
         by reference to Exhibit 10.13 to the iTurf Inc. Registration Statement
         on Form S-1 (Registration No. 333-71123))
10.14    TSISoccer.com Asset Transfer Agreement, dated April 1, 1999, between
         iTurf Inc. and TSI Soccer Corporation (incorporated by reference to
         Exhibit 10.14 to the iTurf Inc. Registration Statement on Form S-1
         (Registration No. 333-71123))
10.15    Subscription Agreement, dated April 1, 1999, between iTurf Delaware
         Investment Company and dELiA*s (incorporated by reference to Exhibit
         10.15 to the iTurf Inc. Registration Statement on Form S-1
         (Registration No. 333-71123))
10.16    Advertising Agreement between iTurf and America Online, Inc., dated May
         4, 1999 (incorporated by reference to Exhibit 10.16 to the iTurf Inc.
         Quarterly Report on Form 10-Q for the fiscal quarter ended May 1,
         1999)**
10.17    Online Advertising Authorized Reseller Agreement between iTurf,
         Taponline and MarketSource Corporation, dated September 1, 1999
         (incorporated by reference to Exhibit 99.1 to the iTurf Inc. Current
         Report on Form 8-K dated September 7, 1999)
10.18    Offline Advertising Purchase Agreement between iTurf and MarketSource
         Corporation, dated September 1, 1999 (incorporated by reference to
         Exhibit 99.2 to the iTurf Inc. Current Report on Form 8-K dated
         September 7, 1999)
10.19    Registration Rights Agreement between iTurf and Marketsource
         Corporation (incorporated by reference to Exhibit 10.19 to the iTurf
         Inc. Registration Statement on Form S-1 (Registration No. 333-90435)

                                       18

<PAGE>

27.1*    Financial Data Schedule

*      Filed herewith
**     Confidential treatment requested as to certain portions, which portions
       have been omitted and filed separately with the SEC.

                                       19

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          JAN-29-2000
<PERIOD-START>                             FEB-01-1999
<PERIOD-END>                               OCT-30-1999
<CASH>                                          19,700
<SECURITIES>                                    48,482
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                72,899
<PP&E>                                           3,356
<DEPRECIATION>                                     289
<TOTAL-ASSETS>                                  94,638
<CURRENT-LIABILITIES>                            3,728
<BONDS>                                              0
                                0
                                          0
<COMMON>                                           189
<OTHER-SE>                                      90,721
<TOTAL-LIABILITY-AND-EQUITY>                    94,638
<SALES>                                          9,627
<TOTAL-REVENUES>                                10,868
<CGS>                                            5,622
<TOTAL-COSTS>                                    5,622
<OTHER-EXPENSES>                                15,786
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             (2,066)
<INCOME-PRETAX>                                (8,474)
<INCOME-TAX>                                     (161)
<INCOME-CONTINUING>                            (8,313)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (8,313)
<EPS-BASIC>                                     (0.51)
<EPS-DILUTED>                                   (0.51)


</TABLE>



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